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00:00> > THERE ARE ENDLESS REASONS FOR OP MS. HIM AND -- FOR OPTIMISM. > > POWERFUL GROWTH WILL CONTINUE INTO NEXT YEAR AND IT IS TOO EARLY TO GET BEARISH ON THE MARKET. > > RIGHT NOW, WE ARE WELL PAST THE CRISIS. THE RECOVERY IS UNDERWAY. > > THIS CAN BE EXTENDED AS WE CONTINUE TO DEAL WITH THE PUSH BELOW COVERED. > > THE BIG PROBLEM IS WE DO NOT START TAPERING IS THE PRESSURE OF INFLATION. > > THIS IS "BLOOMBERG SURVEILLANCE" WITH TOM KEENE JONATHAN FERRO, AND LISA ABRAMOWICZ. MATT: GOOD MORNING, EVERYONE. -- TOM: GOOD MORNING, EVERYONE. IT IS JOBLESS CLAIMS DAY AND WE LOOK AT THAT AT 8:30. SOMETHING DIFFERENT THIS MORNING, LISA ABRAMOWICZ AND TOM KEENE AND JOINING US FROM LONDON , I GET EMOTIONAL, LISA, FRANCINE LACQUA JOINING THE FOLD THIS MORNING HERE IN THE AMERICAN EARLY MORNING. FRANCINE, THRILLED TO HAVE YOU PARTICIPATE IN AN EVENTFUL WEEK. FRANCINE, LET ME GO TO YOU FIRST. WHAT A DIFFERENT RESPONSE TO ALL GOING ON IN KABUL IN THE UNITED KINGDOM. JUST READING THE NEWS FLOW OVERNIGHT, THE WORRY ABOUT ISIS ATTACKS POTENTIALLY AT THE AIRPORT. THE BRITISH TAKE A DIFFERENT APPROACH. FRANCINE: I MEAN THE BRITISH -- THE FOREIGN MINISTER HAS COME UNDER SO MUCH PRESSURE BECAUSE HE WAS ON HOLIDAY WHEN THE TALIBAN TOOK KABUL. A LOT OF THE CONVERSATION WAS WHERE WAS HE, WHAT WILL THE U.K. DO? DO THEY HAVE ENOUGH SUPPORT FROM ALLIES TO TAKE OVER THIS POLITICAL VACUUM THE U.S. LEFT? THOSE ARE MANY ANSWERS BUT VERY FEW -- MANY QUESTIONS AND VERY FEW ANSWERS. TOM: WE ALL HAVE OUR POLITICAL BAGGAGE OF THE GREAT DAY. BACK TO THE 19TH CENTURY, DIFFERENT THEN IN AMERICA. THE ANTICIPATION IS FOR THE CHAIRMAN'S SPEECH TOMORROW. LISA: WHEN EQUITY MARKETS KEEP GRINDING HIGHER. YESTERDAY WAS THE 51ST RECORD HIGH OF 2021. 51 RECORD HIGHS. WE ARE LOWER, BUT TO GIVE YOU A SENSE OF THE MOMENTUM, PEOPLE CANNOT GET BULLISH ENOUGH. MY ISSUE IS, WHAT COULD THE FED CHAIR SAY ON THAT WHEN THE DELTA VARIANT IS WIDELY EXPECTED TO CRIMP GUIDANCE AS TO WHEN THEY WOULD TAPER, AT LEAST NOW. TOM: WE HAVE THE CLAIMS DATA AND WILL GIVE US A JOBLESS TREND. I DO NOT THINK THAT WILL UPSET THE CARD. THE MARKET HAS THE AUGUST FEEL TO IT, A LITTLE TURNING GOING ON TO SAY THE LEAST. WHAT IS YOUR OBSERVATION LINKING ALL OF THIS TOGETHER INTO WHAT WE WILL HEAR FROM POWELL TOMORROW? LISA: I THINK IT IS FASCINATING RIGHT BEFORE HIS SPEECH THE BANK OF KOREA BECAME THE FIRST MAJOR ASIAN BANK TO RAISE RATES. THEY RAISE THEM FROM 0.5% TO 0.75% YESTERDAY OVERNIGHT. HERE'S THE REASON WHY THIS IS INTERESTING. THEY ARE SEEING INFLATION. IT IS REAL. THE FINANCIAL INSTABILITIES THAT COULD ENSUE IS CONCERNING ENOUGH FOR THEM TO MAKE A MOVE. I AM CURIOUS TO HEAR FROM FED OFFICIALS, PERHAPS NOT FED CHAIR JAY POWELL, WHAT THEIR TAKE IS ON THE MARKET RESPONSE AND HOW THEY REALLY SEE PRESSURE FROM OVERHEAD CENTRAL BANKS. TOM: I ASKED PHARAOH THIS BUT HE IS ON THE THREE DAY WITH GILLIGAN'S ISLAND. DID YOU HAVE THE SAME INFLATION OVER THERE AND SAME SUPPLY CONSTRAINTS WE HAVE? LISA: OF COURSE. FRANCINE: HERA STILL HAS THAT BUT THERE IS MILKSHAKE SHORTAGE FOR MCDONALD'S AND THAT HAS HAD A LOT OF U.K. PEOPLE UP IN ARMS. IT IS THE SAME SUPPLY CONSTRAINTS YOU HAVE IN THE U.S. AND ELSEWHERE COUPLED WITH LABOR SHORTAGE THAT WAS BECAUSE OF BREAK THAT. I THINK THERE ARE 12,000 FRUIT PICKERS NOT IN THE COUNTRY BECAUSE OF BREXIT. 14,000 TRUCK DRIVERS ARE NO LONGER HERE BECAUSE THEY WENT BACK TO THE EU. THE DYNAMIC IN THE U.K. IS TRICKIER THAN OTHER PARTS OF THE WORLD. TOM: I KNOW TEAR THE MCDONALD'S IN LIVERPOOL STATION LLOYD STREET IN LONDON IS A PLACE I FREQUENT OFTEN WHEN I TRAVEL TO LONDON. IT DOES HAVE A MILKSHAKE SHORTAGE. LISA, HELP ME HERE, NEGATIVE FOUR, NEGATIVE ON THE SCREEN. THE VIX HAS DONE NOTHING SINCE TIME BEGAN. LET ME CONTINUE WITH THE YIELD, 135 -- 1.35 IS A HEADLINE. WE HAVE HIGHER YIELDS OVER THE LAST THREE DAYS AND THE 30 YEAR BOND GETTING UP TO THE DUE PERCENT LEVEL, 1.96%. THERE IS CURVE STEEPENING AT A MODEST LEVEL. THE REAL YIELD DOES NOTHING. LISA, AT THE WALL, AND IT IS NOT THE WALL IN LONDON, WHAT DO YOU HAVE? LISA: TO FOLLOW UP ON THE 10 YEAR YIELD REAPING HIGHER, I WASN'T GOING TO DO IT BUT 1:00 P.M., WE WILL GET THE SEVEN YEAR OPTION NOTE. TOM: I WILL STICK AROUND. LISA: ABSOLUTELY. IT DEFINITELY STAY UP FROM YOUR SURVEILLANCE NAP TO FIND OUT WHETHER THIS WILL BE THE KEY OPTION THAT EXPERIENCES VOLATILITY. TODAY, A CURRENT RATIO OR ON THE JACKSON HOLE. IT WAS GOING TO BE A DINNER OF PEOPLE GETTING TOGETHER AND MARVELING AT THE BEAUTY BUT TODAY EVERYONE WILL BE STARING AT THE RESUME SCREENS AND PREPARE FOR WHAT THE POTENTIAL REACTION IS. NOT OUR OWN MICHAEL MCKEE BECAUSE HE IS BUSY AND HE WILL BE INTERVIEWING ESTHER GEORGE THE, THE KANSAS CITY -- GEORGE, THE KANSAS CITY FED PRESIDENT, THE ONE HOSTING THE EVENT. KEY QUESTION FOR HER, HOW MUCH IS THE DELTA VARIANT WEIGHING ON THE DECISION AUGUST 20? HOW DOES THIS COLOR THIS CONFERENCE? 8:00 A.M., WE GET JOBLESS CLAIMS AND THE EXPECTATION IS FOR AN ONGOING DECLINE. ELIZA WINGER AT BLOOMBERG INTELLIGENCE POINTING OUT THE FACT WE CONTINUE TO SEE A DOWNTREND IN THIS ELEGANT CHART HIGHLIGHTS THE MAIN PROBLEM FINDING THE WORKERS. WILL THEY COME? THAT THROWS THE EMPHASIS ON THE FRIDAY AND THE LABOR MARKET REPORT WE GET THEN. AT 12:00 P.M., WE HAVE GENERAL MOTORS CEO JOINING OUR OWN DAVID WESTIN IN CONVERSATION ON BLOOMBERG TELEVISION. I AM INTERESTED IN THIS CONVERSATION FOR A COUPLE REASONS. FIRST, THE SUPPLIES CHAIN DISRUPTIONS -- SUPPLY CHAIN JUST RUCTIONS. YOU SEE AUTO COMPANIES ACTING LIKE TECH COMPANIES. YOU SAW FOR DELAYING PLANS TO WORK FROM THE OFFICE. THEY ARE COMPETING WITH BIG TECH FOR EMPLOYMENT, FOR SOME OF THE WORKERS WHO CAN PROGRAM THEIR CARS. ARE CAR COMPANIES GOING TO TRANSFORM THEMSELVES INTO TECH COMPANIES? IF SO, WHAT WILL BE THE SIGNALS SHOWING UP SUPPLY CHAINS AND WHAT THEY SEE FOR THE FUTURE? TOM: THANK YOU SO MUCH. WE START STRONG WITH THIS HOUR OF SURVEILLANCE, WITH SOMEONE WHO CAN SYNTHESIZE THE MOMENT. ROSS, WHY DO I WANT TO OWN BONDS? I DON'T GET IT. WHERE I SEE WHERE YIELDS ARE, SHORT DURATION, I GET THAT'S. WHAT IS THE WAITING A BONDS -- THAT. WHAT IS THE WEIGHTING OF BONDS? ROSS: IF YOU'RE TALKING ABOUT TRADITIONAL TREASURY BONDS, THERE ARE NOT A LOT OF REASON. THE INCOME IS NOT THERE AND WHILE WE THINK YIELDS WHAT BACKUP BY YEAR-END, YOU ARE GETTING A POULTRY YIELD. THE REASON YOU HELD THEM FOR MUCH OF THE LAST 10 TO 20 YEARS WAS THEY ACT AS A RISK MID AGAIN. THEY HAD A RELIABLY NEGATIVE CORRELATION WITH STOCKS, PROVIDED DOWNSIDE PROTECTION ON THE PORTFOLIO. YOU KNOW THEY ARE NOT DOING THAT RIGHT NOW. WE HAVE SEEN THE CORRELATION HAS BEEN SOMEWHERE BETWEEN POSITIVE AND ZERO. -- ZERO MUCH OF THE LAST 69 MONTHS AND THERE OTHER WAYS TO LOOK AT RISK MITIGATION, WHETHER IT IS LONG AND THE DOLLAR, USING VOLATILITIES AND ASSET CLASS. THE SHORT QUESTION OTHER THAN BOND MARKET WHERE THEY ARE TALKING ABOUT EM DEBT OR SECURITIZE THAT OFFER YIELD, YOU HAVE MORE BONDS THAN YOU USED TO. LISA: 10 EQUITY MARKETS CONTINUE TO RALLY. IF 10 YEAR TREASURY YIELDS GO UP TO 1.5%, 1.7 5% IN SHORT ORDER? ROSS: ABSOLUTELY. I THINK THIS IS THE BIG QUESTION. IF YOU LOOK AT HISTORY, YOU HAVE SEEN CONTRARY TO WHAT A TEXTBOOK WOULD TELL YOU THAT MULTIPLES IN REAL RATES IN THE U.S. HAVE TEND TO MOVE TOGETHER. THERE'S A SIMPLE REASON FOR THAT. WHEN YOU SEE MODEST RISE IN REAL YIELDS PARTICULARLY FROM THESE LOW LEVELS, IT IS IN THE CONTEXT OF BETTER ECONOMY, BETTER EARNINGS GROWTH, AND THAT IS AN ENVIRONMENT WHERE EQUITIES AND MULTIPLES TEND TO BE SOLID. I DON'T THINK THE 10 YEAR AT 15 -- 1.5, 1.6, 1.7 IS NOT A BIG DEAL. I THINK IT TELLS YOU MONETARY POLICY IS GETTING A BIT MORE RATIONAL AND EARNINGS GROWTH IS LIKELY TO REMAIN STRONG. LISA: WHAT DOES A POLICY MISTAKE LOOK LIKE FROM THE FED? THERE WAS AN INTERESTING HSBC THAT WAS SAYING INFLATION IS TRANSITORY BUT THE BIGGEST DANGER NOW THAN AT ANY POINT WHEN CENTRAL BANKS BECAME INDEPENDENT IN THE 1990'S. ROSS: I THINK THERE IS THIS QUESTION ABOUT INFLATION I BELIEVE IS TRANSITORY BUT AS WE SPOKE IN THE PAST, TRANSITORY CAN BE A LONG TIME. IT CAN LAST 6, 9, 12 MONTHS GIVEN THE INFLATIONARY PRESSURES YOU HAVE. SO GETTING SOME CLARITY ABOUT TAPERING, GETTING CLARITY ABOUT HOW LONG THAT WILL LAST, I THINK THE FED WOULD DO WELL TO START SOON, GIVE THEMSELVES THE OPTIONALITY TO BE ABLE TO RAISE RATES IN 2020 TWO IF INFLATION REMAINS MORE PERSISTENT AND THEY THINK THAT WOULD BE HEALTHY AND THE CYCLE. TOM: I HAVE LOST TRACK AND I'M FASCINATING WITH WHAT YOU -- FASCINATED WITH WHAT YOU THINK. WHAT IS THE BETTER OF THE STREET RIGHT NOW? ARE WE WAY OVERWEIGHTED IN EQUITIES? OUR HEDGE FUNDS LOADING ABOUT ON EQUITIES? WHAT IS THE TONE IN THE MALAISE OF AUGUST? ROSS: IT IS TOUGH. WE SPENT A LOT OF TIME ON THIS END YOU COME TO DIFFERENT CONCLUSIONS. CLEARLY PEOPLE HAVE BEEN BUYING STOCKS, LOWS HAVE BEEN STRONG, BUT THERE WAS A LONG PERIOD WHEN FLOWS WERE PERSISTENTLY NEGATIVE IN STOCKS AND PEOPLE WERE BUYING BONDS. WE LOOK AT OTHER MEASURES, WE LOOK AT SOME OF THE SURVEYS, SOME OF THE RETAIL SURVEYS. THEY ARE NOT THAT BULLISH. I THINK PEOPLE ARE LONG EQUITIES, IT IS NOT OBVIOUS YOU HAVE THE EXTREME CROWDING YOU HAD EARLIER IN THE YEAR. THE REASON IS WE HAVE SEEN THESE VIOLENT ROTATIONS. IN MOST OF 2020 WHEN STOCKS ARE REBOUND, IT IS ALL ABOUT SECULAR GROWTH. THEN IT MOVED TO CYCLICALS AND NOW IT HAS TILTED BACK TOWARD GROWTH. THE MARKETS CONTINUE TO GRIND HIGHER IN THIS STEADY FASHION AS YOU WELL KNOW UNDER THE SURFACE HAVING VIOLENT ROTATIONS. WHICH IN MY OPINION CAPPED PARTS OF THE MARKET FROM GETTING AS CROWDED AS THEY MIGHT BE. LISA: HOW CONCERNED ARE YOU WE SAW THE FIRST DECLINE IN LEVERAGE IN BORROWED MONEY TO BUY STOCKS GOING BACK TO THE BEGINNING OF THE PANDEMIC, THE IDEA SUDDENLY PEOPLE ARE REDUCING THEIR RISKINESS OR HOW LEVERAGED THE SPECULATIVE POSITIONS ARE? ROSS: I THINK IT IS HEALTHY. I WAS PROBABLY MORE CONCERNED IN THE YEAR WHERE LEVERAGE OF WERE HIGH, WHERE YOU HAD THESE ENORMOUS SURGES IN VOLUME FOR SMALL AND MID-CAP NAMES THAT WERE TRADING NOT ON FUNDAMENTALS BUT PURELY ON MOMENTUM. WHEN YOU SAW MEME STOCKS ERUPTING HIGHER WITHOUT ANY GOOD REASON. IF ANYTHING, THE MARKET HAS CALMED DOWN A BIT. ONE OF THE INTERESTING THINGS, IF YOU LOOK AT WHAT HAS BEEN WORKING SINCE FEBRUARY, SINCE MARCH SINCE YIELDS PEAKS, YOU MOVED AWAY FROM SOME OF THE MORE SPECULATIVE PARTS OF THE MARKET AND HAVE MOVED TOWARDS QUALITY. WHAT HAS WORKED IN THE LAST SIX MONTHS HAS BEEN COMPANIES THAT ARE PROFITABLE, CONSISTENT EARNINGS WITH MODEST LEVERAGE. THAT IS A HEALTHY SIGN FUNDAMENTALS ARE ALREADY ASSERTING THEMSELVES. TOM: THANK YOU SO MUCH. THIS GOES TO THE HEART OF THE MATTER. WE GOT A LOT OF HEAT THE OTHER DAY FOR SO MANY PEOPLE BULLISH PARTICIPATING IN THE MARKETS. THE BEARS HAVE A CERTAIN LEVEL OF RIGHTNESS -- FRIGHTENEDNES S. THAT IS A WORD. THE BEARS ARE SCARED STIFFLY. LISA: SCARED OR LOSING MONEY? THAT I THINK IS THE ISSUE. TOM: WELL SAID. LISA: IN FAIRNESS, I THINK WHAT HE WAS SAYING WAS THE INNATE -- THE INFLATION ALLOWED PEOPLE TO DO WELL BY GOING INTO OTHER SECTORS. YOU HAVE SEEN DECLINE. IT IS A NUANCED MARKET. YOU CAN SEE THE BEARS EXPRESSING THEMSELVES IN THE STOCK MARKET. WHERE ARE THEY IN THE BOND MARKET? TOM: THE BEAR EXPRESSING HIMSELF IS LONELY AT THE JACKSON HOLE LODGE. LISA AND I, WE ARE ON MEDICATION. I AM MISSING THE ACCLAIMED SNAKE RIVER LAGER SWISS BURGER AT THE PIONEER GRILL. FRANCINE: I WILL SEND ONE OVER. I WAS LOOKING AT THE STORY WHICH BLEW MY MIND. YOU NEED TRADING HAS NOT BEEN THIS LOW SINCE THE START OF THE CENTURY. THINK ABOUT THAT, DOWN 34%. TOM: WHICH CENTURY? LISA: THIS ONE. TOM: IT'S A LONG CENTURY. YES, FOLKS. > > IT WAS APPROXIMATELY 1000 AND WE LEAVE THE NUMBER OF AMERICANS ACTIVELY SEEKING TO LEAVE AFGHANISTAN IS LOWER SIGNIFICANTLY. IT IS HARD TO OVERSTATE THE COMPLEXITY AND DANGER OF THIS EFFORT. WE ARE OPERATING IN A HOSTILE ENVIRONMENT IN CITY AND COUNTRY NOW CONTROLLED BY THE TALIBAN WITH OF THE VERY REAL POSSIBILITY OF AN ISIS-K ATTACK. TOM: THE SECRETARY OF STATE WORKING OVERTIME FOR HIS PRESIDENT, CHANGEABLE STORY IN KABUL. YOU WAKE UP EVERY MORNING I LOOK AT THE BREAKING HEADLINES AND WE DO THE SAME THING AND THANK OUR TEAM IN EUROPE AND THE GRADE HIM -- AND THE GREATER MIDDLE EAST FOR THEIR REPORTING. FRANCINE LACQUA IN FOR JOHN AND THIN FAIR A. LISA BRAHM -- JONATHAN FERRO. LISA ABRAMOWICZ HERE AS WELL. EMILY, WE DO NOT NEED A CLINIC ON ISIS BUT WE ALSO NEED TO LOOK AT WHAT IN KABUL IS THE EARLY AFTERNOON AND TODAY HI THREAT. THE HIGH THREAD IS ISIS, BUT IT IS NOT THE ISIS WE KNOW FROM THE LABONTE, IS IT? EMILY: NO. WHAT WE ARE SEEING IN AFGHANISTAN, HERE IN D.C., THERE IS STILL THE PRIMARY FOCUS RIGHT NOW ON GETTING AMERICAN CITIZENS IN AFGHANISTAN -- AND AFGHANISTAN ALLIES OUT OF THE COUNTRY. YOU HEARD FROM ANTONY BLINKEN SAYING THERE ARE 1500 AMERICANS LEFT. THEY ARE IN CONTACT WITH ABOUT 500 OF THEM. HE POINTED OUT THERE SEEM TO BE SOME AMERICANS WHO DO NOT WISH TO LEAVE AFGHANISTAN AT THIS TIME, THAT THEY WANT THIS DAY. HE SAID THEY WILL CONTINUE TO OFFER THE OPTION TO THEM TO LEAVE BUT IT IS UNCLEAR HOW THAT WILL HAPPEN IF U.S. IS GOING TO NOT HAVE A FUNCTIONAL EMBASSY OR ARMED SERVICES CURRENTLY AFTER AUGUST 31. TOM: IS THERE ANY DISCUSSION IN YOUR WORLD OF A TWO FRONT AFGHANISTAN, OF THE TALIBAN, WHAT TO DO WITH THE TALIBAN BUT ALSO WITH THE ISIS-K OR IS THAT EVEN UNDER DISCUSSION? EMILY: I GUESS THIS IS SOMETHING THAT SOME PEOPLE IN D.C. ARE BEGINNING TO TALK ABOUT, HOW TO WORK WITH THE NEW GOVERNMENT, IF TO WORK WITH THIS NEW GOVERNMENT, WHAT ARE THE THREATS THE U.S. NEEDS TO BE AWARE OF, AND HOW DOES OUR OUTLOOK NEED TO CHANGE IN RESPONSE TO THAT. WHEN YOU TALK TO LAWMAKERS ON CAPITOL HILL, WHEN YOU LISTEN TO WHAT THE PRESIDENT AND CABINET MEMBERS ARE SAYING, IT IS FOCUSED AT THIS POINT ON THE WITHDRAWAL. WE ARE STILL IN THE MIDDLE OF THIS AND THERE'S A POTENTIAL AT THIS POINT FOR SOMETHING TO GO WRONG, FOR AMERICAN CITIZEN TO DIE, FOR AMERICAN CITIZENS TO BE LEFT BEHIND. WE WERE TALKING ABOUT THE AUGUST 31 DEADLINE BUT IT IS GOOD TO KEEP IN MIND THAT FOR THE CITIZENS, THEY REALLY ONLY HAVE A COUPLE DAYS. THE LAST FEW DAYS, THE LAST 72 HOURS BEFORE THE END OF THE MONTH, THAT WILL HAVE TO BE SPENT GETTING TROOPS OUT OF AFGHANISTAN AND EQUIPMENT. LISA: WHEN THIS FIRST HAPPENED AND THE U.S. STARTED TO WITHDRAW, IT WAS NOTABLE RUSSIA CONTINUED TO MAINTAIN ANY EMBASSY IN AFGHANISTAN. THERE WAS QUESTIONS ABOUT THE INTERVENTION FROM RUSSIA, FROM CHINA. WHAT IS THE LATEST ON THAT? EMILY: I THINK THAT IS ANOTHER THING THE U.S. IS KEEPING A CLOSE EYE ON. THE RELATIONSHIP BETWEEN RUSSIA, CHINA, AS WELL AS AFGHANISTAN. AS CONGRESS CONTINUES TO INVESTIGATE, AS LAWMAKERS CONTINUE TO LOOK INTO THINGS, THEY WILL BE GETTING ANSWERS AND CLARITY ON THOSE RELATIONSHIPS. I DO THINK FOR THE MOST PART THE MAIN FOCUS IS THAT WITHDRAWAL BECAUSE THERE IS A SENSE THERE'S POTENTIAL FOR SOMETHING -- OBVIOUSLY THERE'S AGREEMENT ACROSS THE BOARD THAT THIS HAS BEEN A MESSY WITHDRAWAL BUT THERE IS POTENTIAL TO GET WORSE. I THINK THAT IS WHAT EVERYONE, AT LEAST IN D.C., THAT IS THEIR PRIMARY FOCUS. LISA: THERE WAS ALSO A LOT OF TALK ON HOW PRESIDENT BIDEN WAS LOSING POPULAR SUPPORT AND HOW THIS WOULD IMPACT HIS DOMESTIC AGENDA. HAD THAT PRESSURE ENDED AT THIS POINT? HAVE WE SEEN THE BULK OF THE POTENTIAL DECLINE IN HIS POPULARITY AND ANY PRESSURE THAT MIGHT HAVE OTHERWISE RESULTED ON THE BILLS HE IS TRYING TO GET PAST? EMILY: I WILL SAY BIDEN'S RATING COULD GO LOWER OR HIGHER AND IT WILL PROBABLY WAIVER A LOT IN THE NEXT THREE YEARS. I THINK THE KEY THING TO THINK ABOUT WHEN THINKING ABOUT AFGHANISTAN'S IMPACT ON THE DOMESTIC AGENDA, EVEN THOUGH DEMOCRATS WITHIN BIDEN'S OWN PARTY HAVE CRITICIZED THIS WITHDRAWAL, THEY WANT TO SEE HIS DOMESTIC AGENDA PAST. WHEN YOU TALK TO LAWMAKERS IN THE HALLS OF CONGRESS, THEY TALK ABOUT THE ISSUES AS TWO SEPARATE THINGS, THAT THEY ARE DOING INVESTIGATION OVERSIGHT AND BRIEFINGS ON AFGHANISTAN BUT IT IS ALMOST COMPLETELY SEPARATE FROM THE WORK THEY ARE DOING AS THEY GET THE DETAILS ON THE BUDGET RECONCILIATION TOGETHER AND PREPARED TO PUT IT TOGETHER IN SEPTEMBER. ACCORDING TO DEMOCRATS PLAN, PASS IT BEFORE THE END OF THE MONTH. TOM: DO WASHINGTON -- FRANCINE: DO WASHINGTON INSIDERS THINK THE TALIBAN WANT POLITICAL RECOGNITION? DO THEY NEED AID FROM FOREIGN STATES AND THEREFORE DO THEY THINK THEY CAN TALK THEM AND HAVE REDLINES THEY WOULD ADHERE TO? EMILY: I THINK THAT'S A BIG QUESTION ON EXACT WHAT THAT LOOKS LIKE. THERE ARE NUMBER OF COUNTRIES THAT CAME OUT THE OTHER WE CAN SAY THEY WOULD NOT HAVE NEGOTIATIONS WITH THE TALIBAN IT WOULD NOT RECOGNIZE THE TALIBAN-LED GOVERNMENT. THE QUESTION IS WHAT HAPPENS NEXT. YOU SAW THE TALIBAN SAYING THERE WAS GOING TO BE NEW RESTRICTIONS ON WOMEN, THAT THEY WOULD BE ABLE TO GO TO SCHOOL AND WORK BUT THERE IS SKEPTICISM AROUND THAT, LIKE WHAT DOES THAT LOOK LIKE. PART OF THIS WILL BE WHAT DOES THAT GOVERNMENT BECOME, HOW LENIENT ARE THEY, AND IS THIS SOMETHING OTHER NATIONS ARE WILLING TO WORK WITH THEM. FRANCINE: AND BIDEN MEETING WITH THE ISRAELI PRIME MINISTERS TODAY. HOW MUCH TALK WILL BE AFGHANISTAN AND IRAN? EMILY: I THINK BOTH ARE ABSOLUTELY ON THE TABLE. DEFINITELY IN REGARDS TO IRAN, THE NUCLEAR AGREEMENT, THERE IS GROWING RECOGNITION IN THE U.S. GOVERNMENT THAT THEY MIGHT HAVE TO TAKE A DIFFERENT TACT IN THESE NEGOTIATIONS BECAUSE YOU HAVE THE NEW GOVERNMENT THAT IS A LITTLE MORE HARD LINED AND TRYING TO FIGURE OUT A WAY TO GET WITH THEM WILL BE DIFFERENT THAN HOW TO GET TO YES WITH THE FORMER GOVERNMENT. TOM: EMILY WILKINS IN WASHINGTON. I WANT TO GO TO THE BOND MARKET, LET'S DO SHORT DURATION FIRST. NEW HIGHS, WELL OVER 1.1 TRILLION. I'M SORRY, THAT TELLS ME SOME INFORMATION FROM .20 TO 0.24 IN THE TWO-YEAR. LISA: THIS IS A BIG QUESTION WITH RESPECT TO TAPIRS, HOW LONG WILL IT LAST, WHAT IS THE PLAN, WHAT IS THE CONNECTION BETWEEN THE TAPERING OF BOND PURCHASES WITH THE SCHEDULE TO WIN A RAISE RATES. IT SEEMS PEOPLE ARE UP EATING THEIR FORECAST FOR THAT TOUCH BUT HONESTLY, IT HAS BEEN ALL BUT A FLAT LINE. THE THRESHOLD FOR THE FED TO MOVE TO RAISE RATES, TO TIGHTEN THAT'S LEVEL IS SO HIGH, SO AGAIN, THE KEY QUESTION TOMORROW WITH FED CHAIR JAY POWELL, HOW MUCH WILL HE DISASSOCIATE TAPER FROM THE RATE HIKE THAT MANY DON'T EXPECT? TOM: THAT WILL BE EASY LANGUAGE FOR HIM BUT IF YOU GO 1.12 TO 1.3 4, 15 TO 20 BASIS POINTS, AND YOU ADD ANOTHER 20 TO THAT AND DO IT AGAIN, 1.50-1.60, THEN THE MARKET TELLS HIM WHAT TO DO VERSUS HIM TELLING THE MARKET WHAT TO DO. LISA: BOB MICHELE OF JP MORGAN YESTERDAY SAYING ONE THING GIVING MARKETS CONFIDENCE IS THE FED WILL RESPOND IF THERE IS A HICK UP. A HICCUP COULD BE A SELLOFF. WE HAVE SEEN THAT. I WHAT POINT ARE THEY BACKSTOPPING THE MARKET INDEFINITELY? TOM: FRANCINE IN LONDON SAYS DO CURRENCY DATA. WE WILL DO CURRENCY DATA FOR FRANCINE. STERLING RIGHT NOW, 1.3744. FRANCINE IN LONDON, NOTTING HILL DEMANDS I DO STERLING. IT IS .856 MICHAEL SPENCE. TOM: GOOD MORNING, EVERYONE. JONATHAN FERRO OFTEN FRANCINE LACQUA IN FOR JOHN. -- JON. READING GREEN ON THE SCREEN, NOT MUCH IS GOING ON. THE VIX HASN'T MOVED. YIELDS ARE HIGHER. YOU NOTICE THE TWO YEAR YIELD ROUNDED UP TO 1.35. THAT IS A SUBSTANTIAL THREE-DAY MOVE INTO THIS THURSDAY. WE WILL SEE WHAT HAPPENS OFF OF CLAIMS AT 8:30. EURO-DOLLAR, WE ARE WATCHING REALLY LEGGING OUT TO THE 1.6 PRINT -- 1.1 -- 1.16. RIGHT NOW, SOMEONE WHO HAS WONDERFUL OPTIMISTIC CAST ON THE AMERICAN ECONOMIC EXPERIMENT, DREW MATTIS JOINS US. THANK YOU SO MUCH FOR JOINING. YOU HAVE SUCH AN OPTIMISTIC VIEW. WHAT IS YOUR VIEW ON JD T SAY 12 MONTHS OUT. AS THE GLOOM CREW OVERWROUGHT? > > THEY ARE NOT. IT IS THE PEOPLE GETTING EXCITED ABOUT THINGS OVERDOING IT. IF YOU LOOK AT EVERYTHING WE HAVE BEEN THROUGH, IT IS NOT CLEAR WE WENT THROUGH A RECESSION SO IT IS NOT CLEAR WE ARE GOING INTO A RECOVERY. I MEAN A GLOBAL RECESSION, NORMAL RECOVERY. WE'RE WATCHING WATCHING A FEW THINGS CAREFULLY. OBVIOUSLY THE RESTART OF SCHOOLS WILL BE IMPORTANT TO THE LABOR MARKET. IF YOU LOOK AT ALL OF THE PEOPLE WHO LEFT THE LABOR FORCE, THEY ARE HEAVILY WEIGHTED TOWARD SINGLE PEOPLE. WHAT IS KEEPING THEM OUT OF THE OFFICE IS HEALTH CARE CONCERNS, CHILDCARE ISSUES, AND PROBABLY TO SOME EXTENT THE GOVERNMENT BENEFITS NOW EXPIRING. WE NEED TO SEE HOW THOSE PEOPLE REENGAGE, SEE THE SUPPLY CHAINS FUNCTION WELL AGAIN, AND NONE OF THESE THINGS HAVE HAPPENED YET. PEOPLE WHO HAVE CAME INTO THIS YEAR THINKING WE WILL SEE 7% GDP GROWTH, THEY HAVE TAKEN THEIR NUMBER DOWN. THE BLOOMBERG CONSENSUS IS DOWN TO 6.2%. WE ARE NOW 5.5% AND WE HAVE BEEN THERE AND I'M HAPPY TO STAY THERE BAY AREA -- STAY THERE. TOM: MY BASIC TAKE IS CHAIRMAN POWELL DOES NOT HAVE ENOUGH INFORMATION TO MAKE A SPLASH IN THIS SPEECH TOMORROW. ISN'T HE LIKE EVERYONE ELSE WAITING FOR THE JOBS REPORT SEPTEMBER 3? DREW: I THINK THAT IS RIGHT. I ALSO THINK IF YOU LOOK BACK AT THE MINUTES OF THE LAST FOMC MEETING, YOU HAD THE STAFF TELLING HIM THERE WERE DOWNSIDE RISKS TO GROWTH AND UPSIDE RISKS TO INFLATION. THAT IS NOT SOMETHING HE WILL WARM TO AND SOMETHING HE WILL WANT CONFIRMATION ON BEFORE MOVING FORWARD WITH ANY TAPERING TALK AND THE LIKE. I WOULD ALSO ADD THE FED HAD ABOUT EXPERIENCE LAST TIME TAPERING JACKSON HOLE. I THINK THIS IS NOT THE PLACE THEY WILL FLOAT THE TAPER MORE EXACT -- MORE AGGRESSIVELY SIMPLE BECAUSE OF THE HISTORY. LISA: WHEN YOU TALK ABOUT INFLATION, I WANT TO GO BACK TO SUPPLY CHAIN DISRUPTIONS AND HOW IT'S BEEN FRAMED AS A TRANSITORY EVENT. IT IS NOT GOING ON FOR MUCH LONGER AND PEOPLE EXPECTED TO CONTINUE -- IS GOING ON FOR MUCH LONGER AND PEOPLE EXPECTED TO CONTINUE INTO NEXT YEAR. IF YOU LOOK AT HOW MUCH IT COSTS TO SHIP GOODS FROM ONE PLACE TO ANOTHER, IT HAS INCREASED SOME PLACES TENFOLD. I WILL POINT DO THIS BECOME NOT TRANSITORY INDUSTRY -- TRANSITORY AND A STRUCTURAL INFLATION WE HAVE NOT SEEN IN DECADES. DREW: IT IS A STRUCTURAL PRESSURE ON GROWTH. IF YOU DON'T HAVE THE PRODUCTS, YOU CAN'T SELL IT SO IT DOES NOT SHOW UP IN GDP. PART OF WHAT GDP IS UNDERPERFORMING IS BECAUSE OF THE SUPPLY CHAIN ISSUES. ON THE INFLATION SIDE, I THINK THAT IS WHAT YOU ARE SEEING IN CONSUMER SENTIMENT INFLATION READINGS. IF YOU THINK ABOUT INFLATION, YOU CAN THINK ABOUT IT TWO WAYS, PRICES ARE GOING UP ON THINGS I WANT TO BUY. THE OTHER SIDE IS CAN I GET THE THINGS THAT I WANT TO BUY? IF YOU TAKE IT MORE HOLISTICALLY AS A STANDARD OF LIVING APPROACH, STANDARD OF LIVING IS GOING DOWN BECAUSE SUPPLY CHAIN DISRUPTIONS MEAN YOU CANNOT BUY WHAT YOU WANT TO BUY WHEN YOU WANT TO BUY IT. LISA: THIS GOES TO THE STAGFLATION LIGHT DISCUSSION AND HOW THE FED PARTICIPATES IN THIS. IF THIS IS SOMETHING OUT OF THE PURVIEW OF THE FEDERAL RESERVE, OUT OF THE PURVIEW OF LABOR MARKETS, HOW DOES THE FED RESPOND TO SOMETHING PRESSURING GROWTH BECAUSE OF INFLATION THAT THEY SUPPOSEDLY HAVE A MANDATE OVER? DREW: SO I THINK THAT'S AN INTERESTING QUESTION FOR POWELL, PARTICULARLY AS HE GOES TOWARD HIS REAPPOINTMENT OR POTENTIAL REAPPOINTMENT. THAT IS ONE OF THE THINGS PEOPLE ARE BEING PUSHED TO BUY, GOODS AND SERVICES, HAD BEEN A LOT OF THE FISCAL SUPPORT THEY RECEIVED FROM THE FEDERAL GOVERNMENT. THAT IS CREATING MORE DEMAND WHEN WE ARE UNABLE TO FILL THE DEMAND WE HAVE. IT IS A BIG QUESTION FOR POWELL AND ONE HE WILL PROBABLY TAKE A PASS ON FRANKLY. HE WILL WAIT THIS ONE OUT AND SEE HOW THINGS DEVELOP. STAGFLATION LIGHT, IT'S A LITTLE MUCH TO ARGUE. WE ARE 6% GDP GROWTH. WE ARE EXPECTING 5.5% AND MARKET IS EXPECTING 6.5%. LET'S SPLIT THE DIFFERENCE. 6% IS NOT STAGFLATION LIGHT. THAT IS A STRONG ECONOMY WITH A LOT OF INFLATION. IF YOU GET HALF THAT IN YOU SEE THESE INFLATION READINGS, THEN POP OFF. LISA: LET ME TAKE THE OUTLIER CALL. THE EU IS THINKING ABOUT STOPPING AMERICANS COMING OVER WITHOUT HAVING TO SHOW VACCINATION STATUS BECAUSE THE DELTA VARIANT IS GETTING SO MUCH WORSE IN THE U.S.. HOW CAN JAY POWELL NOT ADDRESS THAT? DREW: THE QUESTION IS ARE PEOPLE BEGINNING TO LIVE WITH THAT? THIS IS WHERE THE ULTIMATE QUESTION HAS ALWAYS BEEN, WHAT IS THE END GAME FOR COVID? I'M NOT AN EXPERT BUT A LOT OF THE EXPERTS SAY IT IS THE PANDEMIC. IT IS NOT THE FLU, BUT IT WILL BE LIKE THE FLU AS WE SEE WAVES AND ALL OF THESE KINDS OF THINGS AND YOU PROBABLY GET VACCINATIONS FOR IT AND WILL BE ABLE TO FIGHT IT OFF. ONCE WE ALL START PAYING ATTENTION TO HOSPITALIZATION NUMBERS INSTEAD OF CASE NUMBERS, THAT IS WHEN WE WILL KNOW IT IS OVER FROM A CONSUMER STANDPOINT. WHAT WE ARE LOOKING FOR IN THE NEAR TERM IS DO THEY REOPEN AND HOW LONG DO THEY STAY OPEN? IF SCHOOLS DO NOT REOPEN AND STAY OPEN, WE WILL HAVE ISSUES WITH PULLING BACK POTENTIALLY MILLIONS OF WORKERS ASSOCIATED WITH THAT HAVING OTHER ISSUES THAT REQUIRE SCHOOLS TO BE OPEN FOR THEM TO GO TO WORK. THAT WILL IMPROVE THE LABOR MARKET SITUATION AND THE OVERALL HELP FOR THE ECONOMY -- HEALTH FOR THE ECONOMY. LISA: I DON'T KNOW IF THIS APPLIES TO TOM AND LISA BUT IT SAYS IF YOU WORK FROM HOME ONE DAY A WEEK, YOUR PRODUCTIVITY INCREASES BY 4.8%. HOW WILL THAT CHANGE IF WE HAD THIS HYBRID MODEL WORKING FROM HOME A COUPLE OF DAYS A WEEK? HOW DOES IT CHANGE OUR ECONOMIES GOING FORWARD? DREW: I HAVE NOT SEEN THE STUDY. I DID READ THE STORY ON IT. I WILL TELL YOU FROM MY OWN PERSPECTIVE, I'M NOT REALLY SURE HOW MUCH I BELIEVE PEOPLE ARE THAT MUCH MORE PRODUCTIVE AT HOME. MAY BE AS PRODUCTIVE I CAN BELIEVE THAT. I'M NOT SURE THEY GET A GIANT BOOST FROM IT. I THINK THE IDEA OF HAVING TIME TO YOURSELF TO THINK ABOUT THINGS IS GREAT BUT HAVING TIME TO COMMUNICATE WITH OTHER PEOPLE AND THINK ABOUT THINGS COLLECTIVELY CAN BE HELPFUL FROM A PRODUCTIVITY STANDPOINT. IT IS NOT EVERYTHING IS A WIN-WIN . IF YOU'RE WINNING SOMETHING, YOU MIGHT BE GAINING SOMETHING AND MAYBE THE NET IS POSITIVE BUT YOU ARE POTENTIALLY LOSING SOMETHING ON THE OTHERS OF IT. I THINK THAT IS WHY A LOT OF FIRMS ARE LEANING TOWARD THIS HYBRID MODEL OR TRYING TO GET THE BEST OF BOTH WORLDS. I THINK THERE'S A REASON FOR IT. MY GUESS IS IF THEY THOUGHT THEY COULD DOUBLE PRODUCTIVITY BY EVERYONE STAYING HOME, I THINK EVERYONE IN THE WORLD -- EVERY FIRM IN THE WORLD WOULD SAY STAY HOME. TOM: YOU HAVE A LEGENDARY CAREER AT UBS. JUST QUARTER AFTER QUARTER NAILING THE STATISTICS. YOU ARE NOW AT METLIFE INVESTMENT AND THEY LEAN FORWARD AND SAY, DREW, BONDS. HOW DO YOU ADVISE INSTITUTIONAL BOND PORTFOLIO MANAGERS IN THIS CRAZY BOND MARKET WITH NO COUPON, WITH NEGATIVE YIELDS? WHAT DO YOU TELL THESE PEOPLE? DREW: THERE'S ALWAYS A PLACE TO LOOK AND ALWAYS SOMETHING YOU ARE TRYING TO ACHIEVE. IT IS A MATTER OF WHAT YOU'RE TRYING TO ACHIEVE. I DO NOT THINK WE ARE STONE SEE AT ALL. TOM: EXPLAIN THAT. THE STEREOTYPE AIR, TELL US WHY METLIFE, A WONDERFUL COMPANY, WHY'S IT NOT STODGY? DREW: IF YOU LOOK AT THE BREATH OF ASSETS WE HAVE INVESTED, EVERYONE THINKS INSURANCE COMPANIES AND INVESTMENT ARMS RELATED TO THEM IS FIXED INCOME ONLY AND THERE IS TRUTH TO THAT BUT OUR FIRM DOES A HECK OF A LOT ON A REALISTIC, IN PRIVATES AND DOING STRUCTURED FINANCE. YOU ARE GETTING A MUCH BROADER VIEW OF INVESTMENTS. IN INVESTMENT BANK, YOU GET RID OF ONE ASSET AND BY ANOTHER. LISA: THAT IS HOW WE CALL A DIPLOMATIC ANSWER TO TOM'S VERY RUDE QUESTION. HOW ARE YOU NOT STODGY? YOU'RE JUST A STODGY PERSON. LISA: NO I'M NOT, I DO A LOT OF INTERESTING THINGS. TOM: MATUS IS TALKING ABOUT REAL ESTATE AND METLIFE. IF YOU GO OVER THE BENEFITS OF METLIFE, THEY HAVE YANKEES TICKETS. [LAUGHTER] LISA: OH DEAR LORD, TOM. TOM: REALLY APPRECIATED WITH METLIFE INVESTMENT. I WOULD LOVE TO SEE -- LISA: SAVE DREW. TOM: I WOULD LOVE TO SEE RED SOX DREW AT THE END OF THE YEAR. KIDDING. [LAUGHTER] THIS IS REALLY INTERESTING. THE INSTITUTIONAL PRESSURE, NOT THE RETIREMENT PRESSURE, BUT WHY DO YOU DO WITH GAZILLIONS OF DOLLARS IN THIS ODD BOND MARKET IS NOT A SMALL QUESTION. LISA: THE PATH OF YIELDS IN SUCH AN AREA OF -- ERROR OF CONFUSING INFLATION. I'VE NEVER BEEN MORE CONFUSED ABOUT INFLATION. THE MORE I STUDY IT, THE MORE I GET CONFUSED. WHEN WE LOOK AT SUPPLY CHAIN DISRUPTIONS, THE CHANGING ECONOMY IN CHINA VERSUS THE U.S. AND LOOKING AT WHAT IS GOING ON WITH VICE PRESIDENT, THE HARRIS IN VIETNAM TALKING ABOUT -- KAMALA HARRIS IN VIETNAM TALKING ABOUT SHIFTING. HAS THE FED ENGAGED WITH ANY OF THIS? TOM: DREW MATTIS IS TALKING ABOUT EVERYBODY GETTING BACK TO WORK. IS THE CITY PICKING IT UP AGAIN? FRANCINE: THE CITY IS OPEN. WE USED TO HAVE SOMETHING CALLED THE PINGDEMIC. WHEN SOMEONE HAD POSITIVE, ANOTHER 10 PEOPLE THAT HAD INTERACTION WENT HOME. NO TOURISTS BECAUSE OF THE TRAVEL RULES, BUT I THINK THERE IS LIKE 40% OCCUPANCY AT THE MOMENT IN CITY LIMITS. TOM: WE WILL CONTINUE HERE. THE YIELD 1.35%. THIS IS BLOOMBERG. ♪ RITIKA: I AM RITIKA GUPTA. THE U.S. AND U.K. ARE WARNING THEIR CITIZENS IN AFGHANISTAN NOT TO TRAVEL TO THE KABUL AIRPORT. THEY SAY THEY ARE THREATS OF A TERROR ATTACK. THE BIDEN ADMINISTRATION SAYS IT KNOWS ABOUT -- KNOWS OF ABOUT 1500 AMERICANS IN THE COUNTRY. MATERNAL VIRUS VACCINE HAS BEEN HALTED, SEVERAL SITES REPORTED FOREIGN -- THERE HAS BEEN NO SAFETY CONCERNS TIED TO THE VILE SO FAR. MODERNITY SAID THE MANUFACTURING ISSUES ROSE AT A SITE IN SPAIN. LOWERED EXPECTATIONS FOR A RETURN TO OFFICE NEXT MONTH. CASES OF THE DELTA VARIANT ARE ON THE RISE IN NEW YORK. EMPLOYERS NOW SEE 41% OF OFFICE WORKERS RETURNING BACK SEPTEMBER THE 30TH DOWN FROM AN ESTIMATE OF 62% IN MAY. -- ASSAULTS QUARTERLY SALES BOOSTED THE FORECAST FOR ANNUAL REVENUE. IT'S A SIGN BUSINESSES ARE SPEEDING UP SPENDING AND BUYING PRODUCTS. CELL FORCES THE TOP MAKER OF CONSUMER RELATIONS SOFTWARE. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON "BLOOMBERG QUICKTAKE," POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I AM RITIKA GUPTA. THIS IS BLOOMBERG. ♪ > > THE CHALLENGE WITH BOOSTERS IS KNOWING WHO YOU ALREADY VACCINATED, WHERE THEY ARE, AND HOW YOU ADMINISTER A SECOND DOES OF VACCINATIONS. IT REQUIRES MICRO PLANNING. WHAT IS WEARING TOO MANY OF US WILL BE THAT BY THE TIME WE NEED THE BOOSTER, THE INFRASTRUCTURE WILL NOT BE THERE. TOM: THAT IS A JOHNS HOPKINS EXPERT IN MEDICINE. THERE IS THE SIMPLICITY OF THE DAY AFTER DAY GRIND OF THIS PANDEMIC, AND IT IS TIME NOW TO TALK ABOUT THE LITTLE CRITTERS THAT WE ARE SCARED OF. STUART RAY IS MORE THAN INTERESTING. HE IS AN INFECTIOUS DISEASE EXPERT AT JOHNS HOPKINS, SOMEONE FAMILIAR WITH HIV, HEPATITIS C, BUT FAR MORE THE PATH FROM CALTECH TO VANDERBILT AND RESEARCH IN ALL OF THESE LITTLE CRITTERS. WHEN YOU HEAR THE SIMPLICITY OF THE MEDIA AND POND AND TREE TALKING ABOUT THIS PANDEMIC, WHAT IS THE OBSERVATION YOU WANT TO TELL US ABOUT THIS ODD AND UNIQUE VIRUS? > > IT IS GREAT TO BE WITH YOU AND I HAVE TO SAY WE HAVE LEARNED A LOT. THE THING I THINK WE SHOULD UNDERSTAND IS WE NEED TO USE THAT LEARNING. WE KNOW VACCINES ARE THE FACTOR THAT SEEMS TO BE CONTROLLING DEATHS AND HOSPITALIZATIONS IN PLACES WHERE YOU HAVE HIGH VACCINATION RATES. YOU LOOK AT ICELAND, WHERE THEY HAVE HAD A BIG SPIKE IN VERY FEW DEATHS. WE ALSO KNOW MASKS OR RESPIRATORS ARE EFFECTIVE THINGS. -- THINGS WE HAVE UNDERUTILIZED. IF HE USED -- WE USED THE TOOLS AT HAND, WE COULD HAVE A BIG IMPACT ON GETTING BACK TO NORMAL. TOM: THE HALLMARK OF YOUR WORTH IS THE MATHINESS OF IT. THESE ARE ALL DIFFERENTIAL EQUATIONS, SMOOTH, DYNAMIC CURVES. WHICH OF THE CURVES IS THE GREATEST MYSTERY TO YOU RIGHT NOW? DR. RAY: I THINK WHEN WE SEE THE DOWNTURN OF CASES IN DEATHS IN INDIA, WE HAVE TO ASK WHAT CAUSED THAT NEGATIVE INFLECTION AFTER THE SPY. I DON'T THINK IMMUNITY WAS THE REASON FOR THAT. I THINK WE UNDER APPRECIATE HOW IMPORTANT BEHAVIORAL CHANGES -- AND WHEN THE SHOCK AND ALL OF A BIG SPIKE HAPPENS, PEOPLE CHANGE THEIR BEHAVIOR. WE NEED TO REALIZE THAT WE NEED TO USE THAT BEHAVIOR STRATEGICALLY AND WE NEED TO REINFORCE IT BY MAKING SURE THAT GOOD PROTECTIONS LIKE VACCINE AND MASKS, RESPIRATORS, ARE AVAILABLE TO PEOPLE EVERYWHERE THEY NEED TO GO. WE NEED RAPID TESTS TO HELP THAT SPREAD. LISA: ARE WE EVER GOING TO PUT OUR MASKS AWAY OR WEARING MASKS IN PERPETUITY AS WE DEAL WITH AN ONGOING COVID VIRUS THAT REMAINS IN CIRCULATION? DR. RAY: I THINK WE WILL BE ABLE TO TAKE THE MASKS OFF MUCH OF THE TIME IN THE FUTURE ONCE WE GET TO A POINT WHERE WE ARE SORT OF IN THE STEADY STATE AND WE HAVE PEOPLE PROTECTED AGAINST SEVERE COMPLICATIONS. RIGHT NOW, WE STILL HAVE 20% OF AMERICANS OVER 65 WHO HAVE NOT BEEN FULLY VACCINATED. THAT IS A BIG GAP WE NEED TO CLOSE. THOSE PEOPLE ARE VERY VULNERABLE. WITH THE DELTA VARIANT, WE SEE MORE COMPLICATIONS IN YOUNGER PEOPLE. WE ARE NOT AT A PLACE WHERE WE COULD BE SURPRISED WE NEED MASKS BECAUSE WE HAVE NOT DONE A GOOD ENOUGH JOB WITH THE FIRST LAYER OF PROTECTION, THE ONE THAT LASTS FOR MONTHS AND YEARS. LISA: THE OTHER SIDE OF THIS IS THERAPEUTICS, HOW EFFECTIVE THESE ARE THROUGH THE L. AN ECONOMIST HAD THIS TO SAY, WHEN WE TALK ABOUT HOSPITALIZATIONS AND NOT DEATHS, THAT IS WHEN WE KNOW IT IS OVER ON A CONSUMER LEVEL. HOW FAR AWAY ARE WE FROM TALKING ONLY ABOUT HOSPITALIZATIONS FROM COVID AND NOT DEATHS? DR. RAY: I THINK THAT WE ARE GETTING CLOSER, BUT WE CAN PREVENT THOSE HOSPITALIZATIONS WHICH ARE REALLY THE STEP TOWARD DEATH WITH BETTER PREVENTION. THE THERAPEUTICS WE HAVE OUR EFFECTIVE ONCE PEOPLE ARE GETTING SICK, BUT PREVENTION -- ANY OUNCE OF PREVENTION IS WORTH A POUND OF CURE. WE ARE USING RESOURCES. YOU CAN SEE THE OXYGEN SHORTAGES IN ORLANDO AND OTHER PLACES, AND WE KNOW WE ARE NOT IN A PLACE WHERE HOSPITALIZATIONS ARE SOMETHING WE CAN LIST OUT. THE THERAPEUTICS ARE EFFECTIVE. WE HAVE NEW ONES COMING OUT THAT WILL PROBABLY BE MORE EFFECTIVE SO WE CAN HAVE THINGS WE CAN DO FOR SICK PEOPLE BUT WE NEED TO BE PREVENTING ILLNESSES AND ALSO HAVE TO APPRECIATE THERE ARE A LOT OF PEOPLE SUFFERING LONG-TERM COMPLICATIONS AFTER COVID THAT WE STILL HAVE NOT REALLY GOTTEN A GOOD HANDLE ON. LISA: -- FRANCINE: DR. RAY, I KNOW VACCINES SAVE LIVES BUT ARE THEY WORKING THE WAY THEY ARE SUPPOSED TO HAVE SO MANY PEOPLE STILL CATCH IT? MAYBE LESS DEADLY BUT STILL CATCH IT THREE TO FIVE MONTHS AFTER THEY HAD BOTH SHOTS. DR. RAY: VACCINES HAVE MULTIPLE FACTS. ONE OF THEM THAT IS HARDEST TO KEEP THE BUG FROM GETTING ON YOU. WE THINK ABOUT STAPH'S AND EVERYONE CARRIES STAFF ON THEIR SKIN. OUR IMMUNE SYSTEM CANNOT KEEP STAFF UP WITH US. IT IS WORTH THINKING ABOUT THAT THIS VIRUS, WHEN IN YOUR NOSE, IS ON YOU BUT NOT SO MUCH IN YOU. I DO NOT KNOW WE WILL BE ABLE TO PREVENT INFECTIONS ON US BUT PEOPLE VACCINATED HAVE THE VIRUS IN THE RESPIRATORY SYSTEM FOR A SHORT PERIOD OF TIME COMPARED TO THOSE ON VACCINATED OR IMMUNE. IF WE CAN PROTECT PEOPLE AGAINST SEVERE COMPLICATIONS, WE WOULD BE IN A BETTER PLACE. GETTING THE VIRUS TO STOP SPREADING REALLY MEANS GETTING PEOPLE TO SHED FOR SHORTER PERIODS OF TIME BEING IMMUNE AND VACCINATED, BECAUSE VACCINATED PEOPLE PRODUCE VIRUS FOR SHORTER PERIODS OF TIME AND HAVE FEWER COMPLICATIONS. FRANCINE: IS WINTER DANGEROUS BECAUSE OF FURTHER MUTATIONS WE COULD SEE? DR. RAY: I THINK THAT COUPLE OF QUESTIONS IS RIGHT ON POINT. THIS IS SUMMER, AND WE CAN EXPECT THINGS TO BE WORSE IN WINTER. THEY HAVE BEEN IN THE PAST AND THAT SEEMS TO BE THE PATTERN. WE HAVE TO UNDERSTAND THE DELTA VARIANT IS EVOLVING. WE HAVE SEEN DATA FROM ELSEWHERE THAT MUTATIONS ARE ACCUMULATING IN DELTA. IT HAS BEEN NEW PATH -- BEEN FINDING NEW PATHWAYS. NONE OF THEM HAVE BEEN A BIG JUMP. UNLESS WE CONTAIN THE SPREAD OF THE VIRUS, EVERY TIME A PERSON IS INFECTED, WE ROLL THE DICE. THE RANDOM CHANGES THAT HAPPEN OCCASIONALLY GIVE IT AN ADVANTAGE. AS LONG AS WE GIVE IT THE ROLES, IT WILL HIT A NUMBER A BIGGER PROBLEM FOR US. WE DO NOT KNOW IF THAT WILL OCCUR. IT HAS A CERTAIN LOCK AND KEY FUNCTION THAT IS CONSTRAINED BUT WE HAVE SEEN IT CHANGE A LOT. WHERE WE THOUGHT WE WERE IN THE SPRING BEFORE DELTA SURGED, WE THOUGHT WOULD BE MORE NORMAL. NOW DELTA HAS CHANGED THAT GAME. TOM: DR. RAY WITH JOHNS HOPKINS, GREATLY APPRECIATED HIS WORK IN INFECTIOUS DISEASES WORLD. LISA, I LEARNED A LOT THERE, TAKING IT FROM BACTERIA AND STAPH OVER TO THE VIROLOGY OF THIS. THE GRANULAR OF WHAT IS WORKED ON IS NOT CAPTURED IN THE MEDIA. LISA: HOW MUCH DO WE HAVE TO HAVE ON US TO BE INFECTED? I WANT TO DO A CORRECTION, WHEN WE TALK ABOUT HOSPITALIZATIONS AND NOT DEATHS, IT IS HOSPITALIZATIONS NOT CASES. THIS GOES TO THE HEARTS OF ALL CLEAR AND WHAT DOES ALL CLEAR MEAN IF WE ARE STILL WEARING MASKS AND STILL SOCIAL DISTANCING SO WE DO NOT GET THE VIRUS ON US? TOM: LET ME DO A MARKET CHECK. THE VIX IS 17.4%. IT HAS COME INTO A 13 LULL. THAT IS BEFORE THE POLICY AS WELL. CURVE STEEPENING, 110 BASIS POINTS SOMEBODY EMAILED IN AND SAID ARE YOU HAVING A DECAF CHAI TEA? FRANCINE, LISA, AND I, THERE IS NO DECAF CHAI TEA ON SURVEILLANCE. LISA: NO DECAF ANYTHING. ♪ > > THERE'S ENDLESS REASONS FOR OPTIMISM. > > POWERFUL GROWTH WILL CONTINUE INTO NEXT YEAR, AND IT IS STILL TOO EARLY TO GET POSITIONS BEARISH ON THE MARKET. > > RIGHT NOW WE ARE WELL PAST THE CRISIS AND THE RECOVERY IS UNDERWAY. > > THIS GROWTH CAN BE EXTENDED AS WE CONTINUE TO DEAL WITH COVID. > > THE PROBLEM IF WE DON'T START TAPERING IS THE PRESSURE OF INFLATION. > > THIS IS "BLOOMBERG SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. TOM: GOOD MORNING, EVERYONE. JONATHAN FERRO, LISA ABRAMOWICZ, AND TOM KEENE. FERRO ON SABBATICAL. THRILLED THAT YOU CONSIDERED HIS NEW BOOK COMING OUT. WE LOOK FOR THAT SUMMER 2022. AND FOR -- IN FOR FER RO, FRANCINE LACQUA AND LONDON. LISA, CHAIRMAN POWELL IS GOING TO WATCH CLAIMS. LISA: VERY MUCH TRYING TO GET A GAUGE OF THIS ECONOMY AHEAD OF HIS SPEECH TOMORROW AT 10:00 A.M. EASTERN. I DO THINK THERE'S A CHANGE IN THE TONE IN MARKETS. WE WENT FROM OPTIMISM TO PESSIMISM TO NOW FULL ON BULL. EVERYONE CANNOT GET BULLISH ENOUGH. IT IS UNCLEAR WHAT CHAIR POWELL WOULD DO WITH THAT. TOM: WHAT IS THE TONE ON THE BANK OF ENGLAND, FRANCINE? IS THERE A TAPER FRENZY THERE? WHAT IS THE BATTLE WITH GOVERNOR BAILEY RIGHT NOW? FRANCINE: THERE'S TALK ABOUT A TAPER, BUT IT PROBABLY WOULD NOT COME BEFORE THE FED. IT IS VERY DIFFERENT HERE BECAUSE WE ARE CONTENDING WITH BREXIT AND THERE'S A SEVERE SHORTAGE OF WORKERS FOR ALMOST ALL INDISCREET -- ALMOST ALL INDUSTRY GROUPS. IT IS A SMALL OPEN ECONOMY, SO IT KIND OF COMES AT THE U.K. FROM ALL SIDES. THE BANK OF ENGLAND IS IN A TRICKY SITUATION, A BIT LIKE THE FED, BUT EVEN MORE DIFFICULT BECAUSE IT NEEDS TO FINE-TUNE ITS MESSAGE. TOM: WE STOP THE SHOW RIGHT NOW TO INFORM YOU OF NEWS THAT MATTERS. YOU MENTIONED LAST HOUR, THERE'S A CHICKEN SHORTAGE? FRANCINE: THERE IS, THERE'S A CHICKEN SHORTAGE BECAUSE OF THE LACK OF DRIVERS. I NEVER GET NANDO'S BECAUSE I KNOW YOU USUALLY GET FANCIER PLACES, TOM, BUT IT IS ONE OF THE MORE POPULAR CHICKEN PLACES HERE IN THE U.K., AND THEY HAD TO CLOSE ABOUT 104 STORES BECAUSE THERE'S A SHORTAGE OF CHICKEN. TOM: WHY DID WE HAVE FRANCINE ON TODAY? THERE YOU ARE, CHICKEN UPDATES FROM THE UNITED KINGDOM. VALUABLE FOR RADIO AND TELEVISION, COAST-TO-COAST IN AMERICA. WHAT WE ARE LOOKING TO IS THE ONE CHANGE THIS WEEK. THE FACT IS, YIELDS ELEVATE. LISA: THAT'S TRUE, THEY DO ELEVATE TO ONE POINT 35%. THAT TO ME AS A NOTABLE MOVE. -- ELEVATE TO 1.35%. THAT TO ME IS A NOTABLE MOVE. 51 RECORD HIGHS IN 2021, WITH THE MOST RECENT ONE COMING YESTERDAY. THE FACT THIS JUST KEEPS HAPPENING, IT MIGHT BE A SLEEPY MARKET, BUT IT KEEPS GOING HIGHER. TOM: 17.43 ON THE BICS. I'M USING THAT AS A CASUAL BELLWETHER. THE PROS ARE LOOKING AT OTHER FANCIER MESSAGES OF VOLATILITY, BUT IT IS A VIX THAT MAY BE SHOULD BE 16, AND IT IS NOT. IT GOING UNDER $47,000. IT IS A DRAWDOWN ON BITCOIN. THAT WILL BE CHAPTER 14, I THINK, FOR JON FERRO. CURVE STEEPENING SLIGHTLY WITH THESE NEW ELEVATED YIELDS. BRENT, $72 A BARREL. FRANCINE BREAKS INTO TEARS OVER THAT STATISTIC. IN THE CURRENCY MARKET, FINALLY A LITTLE BIT A FRACTIONAL GIVEBACK. I'M STRUGGLING WITH THE DATA CHECK BECAUSE IT IS AUGUST. LISA WILL SAVE US AT THE WALL. LISA: WE WERE SUPPOSED TO GET A THREE-DAY CONFAB IN JACKSON HOLE. BASICALLY, WE GET ONE HOUR. WE GET JAY POWELL SPEAKING TOMORROW AT 10:00 A.M.. PEOPLE ARE NOT GATHERING IN JACKSON HOLE TODAY. IS VIRTUAL. BUT TODAY, WE HEAR FROM THE KANSAS CITY PRESIDENT OF THE FEDERAL RESERVE, ESTHER GEORGE, JOINING OUR OWN MICHAEL MCKEE IN ABOUT A HALF AN HOUR. INTERESTING TO SEE HOW SHE FRAMES THIS IN LIGHT OF THE QUICK TRANSITION TO VIRTUAL, THE INCREASE IN DELTA CASES, AND HOW THAT MIGHT AFFECT POLICY DISCUSSIONS AT THIS MEETING. AT 8:00 A.M. WHICH GET INITIAL JOBLESS CLAIMS. INTERESTING THAT BLOOMBERG INTELLIGENCE PUT OUT AN ECONOMICS PIECE TALKING ABOUT HOW THE CLIENT AND JOBLESS CLAIMS PUTS -- THE DECLINING JOBLESS CLAIMS , HOW DO WE GET WORKERS? HOW DO WE GET CHICKENS? IF YOU WANT CHICKEN NUGGETS AND A MILKSHAKE AT A MCDONALD'S, IT IS GOING TO BE A PROBLEM. TOM: THANK -- LISA: THANK YOU, TOM. THEN WE HEAR FROM GENERAL MOTORS' CEO, MARY BARRA, TO DISCUSS THE PATH FORWARD FOR A COMPANY THAT HAS SEEN THE PRICE OF THEIR CARS GO UP DRAMATICALLY EVEN THOUGH THERE SEEMS TO BE A SUPPLY CHAIN DISRUPTION. TOM: BUT LISA, SHE'S GOT TO TALK ABOUT THE ELECTRIC CAR. YOU'VE GOT TO TAKE THEM INTO THE SHOP BECAUSE THE BATTERY IS GOING TO BLOW UP THING. LISA: THE IDEA OF SOME OF THE REGULATORY SCRUTINY FROM THE U.S. GOVERNMENT, THE IDEA OF WHAT THAT BAR IS, AND WHAT THE COMPETITION IS LIKE AT A TIME WHEN ANY TYPE OF REGULATORY SCRUTINY REALLY DAMPENS POTENTIAL INTEREST. TOM: WE WELCOME ALL OF YOU ON RADIO AND TELEVISION. THIS IS THE IMPORTANT CONVERSATION TODAY OF THE EMOTION OF WHAT TO DO. YOU KNOW THE CLICHE. THERE IS A WALL OF WORRY, AND DARRELL CRONK IS ESTEEMED AND ABLE TO WRITE ABOUT IT AT WELLS FARGO. HE'S THEIR CHIEF INVESTMENT OFFICER. I LOVE YOUR NOTE BECAUSE YOU GO TO THE EMOTION OF THIS. FORGET ABOUT THE TEXTBOOKS. FORGET ABOUT ALL OF THE FANCY STUFF. YOU SAY HERE ARE THE WORRIES. YOU'VE GOT TO FEED THESE. YOU'VE GOT TO FOLLOW CLOSELY THESE, AND YOU'VE GOT TO FEAR THESE. WHAT DO I FADE HERE ON THE WORRIES I CAN IGNORE? DARRELL: GOOD MORNING. I THINK THERE'S A NUMBER OF THEM THAT YOU CAN ACTUALLY FADE. THIS ONE MAY BE A LITTLE CONTROVERSIAL, BUT I THINK FROM AN ECONOMIC AND CAPITAL MARKETS STANDPOINT, DELTA IS ONE OF THOSE. YOU CAN'T FADE IT FROM A HEALTH STANDPOINT, BUT I THINK YOU CAN FADE IT FROM AN ECONOMY NOTE, JUST OF 51 NEW HIGHS THAT WAS JUST DISCUSSED. THERE'S SOME VIOLENCE ROTATION UNDER THE SURFACE FROM GROWTH TO CYCLICALS TO BOND PROXIES AND BACK AGAIN. BUT BEYOND THAT, MARKETS STILL MOVE HIGHER. I WOULD WATCH THE DEBT CEILING. I THINK YOU'VE GOT TO FEAR THE DEBT CEILING. SEPTEMBER IS GOING TO BE A WHITE KNUCKLE EVENT. YOU'VE GOT A WHOLE BUNCH OF THINGS GOING ON THERE, WITH THE BUDGET RESOLUTION, PERHAPS SERVING THE DEBT CEILING AND ASK ORDINARY MEASURES. YOU'VE GOT THE REINSTATEMENT OF POWELL. LISA: SEPTEMBER IS GOING TO BE A WHITE KNUCKLE MONTH AT A TIME WHEN WE HAVE ALL BEARS EASILY BLOWN OUT OF THE WATER AND EVERYONE TRYING TO GET MORE BULLISH ON ABSOLUTELY EVERYTHING. USING THIS IS THE PROBLEM, SETTING UP FOR KIND OF A PERFECT STORM IN THE NEXT FEW WEEKS? DARRELL: I DO THINK IT IS GOING TO BE A LOT OF HEADLINES, I GUESS IS WHAT I WOULD SAY. WE'VE GOT THE BIPARTISAN INFRA STRUCTURE PACKAGE, A $3.5 TRILLION SPENDING BUDGET LEGISLATION, POTENTIAL GOVERNMENT SHUTDOWN, AND THE REAPPOINTMENT OF FED CHAIR POWELL, ALL OF WHICH HAVE TO GET SOMEHOW RESOLVED AND PROGRESS IN SEPTEMBER. WE KNOW WHERE THE PARTISAN POLITICS ARE, SO THIS IS A REAL RISK. 10 YEARS AGO THIS MONTH, AUGUST 2011 WHEN WE DOWNGRADED THE U.S. DEBT AS A RESULT OF A STANDOFF, SO THAT HAD A 24% DECLINE IN CONSUMER CONFIDENCE AND A 17% DECLINE IN THE S & P. I THINK IN THE END, THEY DO FIND THE RESOLUTION, BUT IT IS NOT GOING TO BE WITHOUT SOME OF THOSE WHITE KNUCKLE EVENTS. I THINK IT IS GOING TO CREATE A SEPTEMBER TO REMEMBER OUT OF WASHINGTON. FRANCINE: I LIKE THAT, SEPTEMBER TO REMEMBER HARRIET -- TO REMEMBER. HOW MUCH OF THAT WHITE KNUCKLE EVENT WILL COME FROM VOLATILITY? DARRELL: WE ACTUALLY THINK THE DOLLAR IS IN A NEAR-TERM PEAK. WE THINK IT IS IN A LONGER-TERM KIND OF SIDEWAYS TREND WITH SOME WE GETTING HERE, WHICH IS PART OF THE REASON YOU'RE GETTING A LITTLE BIT OF THAT BULLISH SENTIMENT. PEOPLE ARE TURNING THINGS BACK ON. WHAT IS INTERESTING HERE IS IF YOU GET UNDER THE SURFACE, I AM PAYING ATTENTION TO HIGH YIELD SPREADS AND CREDIT OAS. THEY ARE UP 60 BASIS POINTS IN THE LAST TWO WEEKS. SO WE NEED TO PAY ATTENTION TO THAT. YOU'VE GOT EMERGING MARKETS NOW NEGATIVE YEAR TO DATE, AND COPPER AND OIL BOTH OFF DOUBLE DIGITS FROM THE PREVIOUS HIGHS. THERE ARE SOME THINGS WE'VE GOT TO PAY ATTENTION TO. TOM: DARRELL CRONK, THANK YOU SO MUCH. TOO SHORT A VISIT. WITH WELLS FARGO, THEIR CHIEF INVESTMENT OFFICER. FRANCINE, I KNOW YOU HAVEN'T BEEN DOING THIS WITH US, BUT THERE IS A PENDULUM OUT THERE. IT IS A PENDULUM OF A PERFECT STORM. FERRO IS DOING THE GILLIGAN'S ISLAND THING. HE’'S IN THE PACIFIC. WHERE IS HE, TAHITI, FIJI? LISA: HE'S WRITING HIS BOOK ON MEDITATION. TOM: I THINK HE'S IN FIJI OR SOMETHING LIKE THAT. LISA: THE IDEA HERE OF POTENTIAL POLITICAL RISK, THAT IS WHAT HE WAS TALKING ABOUT. THE IDEA OF A SEPTEMBER TO REMOVE OR, A PERFECT STORM. HE'S GOT GREAT CATCHPHRASES. HONESTLY, YOU LOOK OUT OVER THE NEXT COUPLE OF WEEKS, AND GIVEN HOW BULLISH PEOPLE HAVE GOTTEN, IS THERE THAT FRAGILITY? TOM: I KNOW WHAT FRANCINE IS GOING TO SAY. I'VE WORKED WITH HER FOR YEARS. HERE'S FRANCINE. LISA, HAVE AN ABRIL SPRITZ -- HAVE AN APEROL SPRITZ. FRANCINE: YOU KNOW WHAT HAVEN'T TALKED ABOUT? CHINA REGULATION. THIS HAS BEEN OVER THE LAST TWO WEEKS, BASICALLY CHINA SELLING OFF, EUROPEAN STOCKS KIND OF GETTING THEIR IMPETUS FROM CHINA AND THE ASIAN MARKETS, AND THEN YOU BUY THE DIP IN THE U.S.. I DON'T KNOW HOW LONG THIS LASTS INTO SEPTEMBER. TOM: LISA, AGAIN, THAT GOES TO THE POINT OF A WHITE KNUCKLE SEPTEMBER. TO FRANCINE'S POINT, WE'VE HEARD FROM INDA KAREN AND -- FROM END CURRAN AND OTHERS ABOUT CHINA THIS YEAR AND INTO NEXT YEAR. LISA: THE REACTION IN MARKETS IS, NAH. YOU CAN GET YIELDS. THE FED WILL COME IN. IT HAS NOT BEEN SIGNIFICANT. TOM: IT IS LIKE THE RED SOX PITCHING STAFF. LET'S JUST CUT TO THE CHASE. IT IS GOING TO BE THE ANDREA GAIL OF SEPTEMBERS. THE PERFECT STORM. FUTURES AT NEGATIVE FOUR, DOW FUTURES GO THE OTHER WAY, UP 10. LISA STAY WITH US. ON THE EQUITY MARKET, SAM STOVALL, CFRA. WE DO THAT NEXT. THIS IS BLOOMBERG. ♪ RITIKA: WITH THE FIRST WORD NEWS, I'M RITIKA GUPTA. THE U.S. AND THE U.K. ARE WARNING CITIZENS IN AFGHANISTAN NOT TO TRAVEL TO THE KABUL AIRPORT. THEY SAY THERE ARE THREATS OF A TERROR ATTACK. THE BIDEN ADMINISTRATION SAYS IT KNOWS OF ABOUT 1500 AMERICANS STILL IN THE COUNTRY. ISRAEL'S PRIME MINISTER PLANS TO DISCUSS STRATEGY ON IRAN TODAY AT THE WHITE HOUSE. THEY FEAR IRAN IS SPEEDING UP ITS NUCLEAR PROGRAM AT AN ALARMING RATE. ISRAEL HAS SAID IT MAY USE SECRET ATTACKS. THE LABOR SHORTAGE IN THE U.K. IS LEADING CONSUMER BUSINESSES TO BE PESSIMISTIC, ACCORDING TO A SURVEY. THE SURVEY FOUND OPTIMISM AT -17% THIS MONTH, DOWN FROM A POSITIVE READING OF 47% IN MAY. THIS IS AS RESTAURANTS AND BARS CAN'T FIND ENOUGH WORKERS TO FILL JOBS AFTER THE LOCKDOWN. WESTERN DIGITAL IS IN TALKS TO MERGE IN A DEAL INVOLVING TWO CHIP COMPANIES THAT COULD BE WORTH MORE THAN $20 BILLION. THE COMPANY'S ARE LONGTIME JOINT VENTURE PARTNERS. THE COMBINATION WOULD CREATE A BIGGER COMPETITIVE FORCE IN THE MARKET FOR MEMORY CHIPS. SHARES OF CHINA'S EVERGRAND ARE COLLAPSING IN HONG KONG. IT HAS WIPED ABOUT $80 BILLION FROM WHAT WAS THE COMPANY'S WAS VALUABLE LISTED ASSET. EVERGRAND IS THE WORLD'S BIGGEST PROPERTY DEVELOPER. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RICK AGRIPPA. -- I'M RITIKA GUPTA. THIS IS BLOOMBERG. ♪ > > AT THE END OF THE DAY, THERE'S GOT TO BE GOOD, RENEW MOTIVE JOB OPPORTUNITIES FOR MIDDLE CLASS AND LOWER INCOME AMERICANS PAYING RISING WAGES. THAT IS WHAT WE HAVE, WITH A ROBUST RECOVERY BEHIND US, STRONG TAILWINDS, STRONG JOB GAINS, WAGES GOING UP, AND VERY CLOSELY CONNECTED TO THE RESCUE PLAN. TOM: JARED BERNSTEIN OF THE COUNCIL OF ECONOMIC ADVISERS, SPEAKING OF DIVIDE AND PLAN, A $1 TRILLION OVERLAY EXPECTED THERE. WE SPOKE IN THE LAST HOUR ABOUT AFGHANISTAN, ABOUT AND -- ABOUT AN EVENTFUL DAY NEAR THE KABUL AIRPORT. WE TURN NOW TO ANNMARIE HORDERN. I LOOK AT THE INFRASTRUCTURE BILL, AND WHAT IS SO TELLING TO ME IT IS IT IS NOWHERE TO BE FOUND IN THE DEBATE OF THE ZEITGEIST. WE HAD A VOTE. POLICY -- PELOSI WON, AND IT IS GONE. HOW GONE IS THE INTRODUCTORY BILL UNTIL SEPTEMBER? ANNMARIE: YOU MAKE A GOOD POINT. THE IS REALLY PRIME MINISTER IS VISITING TODAY AND HAVING A MEETING WITH THE PRESIDENT, BUT WE ARE SEEING A LITTLE BIT OF SCOOP COME OUT IN TERMS OF WHAT THE HOUSE AND SENATE AND THESE COMMITTEES ARE STARTING TO DRAFT UP IN TERMS OF LANGUAGE. OVERNIGHT WE HEARD ABOUT ONE ABOUT CONSERVATIONISM WHEN IT COMES TO NATURAL RESOURCES. SOME HOUSE DEMOCRATS WANT TO SPEND SOME $30 BILLION. SOME OF THAT, THEY WOULD GET THAT MONEY BETWEEN ELEANOR PROTEINS AND ROYALTIES ON OIL AND GAS AND PIPELINE COMPANIES. AS WE LEAD INTO SEPTEMBER, YOU'RE GOING TO HEAR A LITTLE BIT ABOUT WHERE THESE DEMOCRATS ARE MOVING IN TERMS OF WHAT IS GOING TO BE THE DETAIL OF THAT 3.5 TRILLION DOLLAR PACKAGE. BUT NOTHING IS GOING TO BE SET IN STONE UNTIL SEPTEMBER. TOM: WE'VE GOT TO GET TO SEPTEMBER, AND PART OF THAT IS A CONSTITUENT REACTION. WHAT ARE THE POLITICIANS HEARING ABOUT AN OVERLAY OF $2 TRILLION, $3 TRILLION OF NEW IDEAS? ANNMARIE: WE JUST DON'T KNOW YET BECAUSE EVERY POLITICIAN IS SELLING IT AT HOME VERY DIFFERENTLY. THE PROGRESSIVES ARE SAYING WE HAVE ABOUT FIVE AGENDA ITEMS WE WANT TO BE IN AND A LOT OF THAT HAS TO DO WITH SOCIAL PROGRAMS AND CLIMATE INITIATIVES, WHILE YOU HAVE MORE CENTRIST MODERATES SAYING DON'T FREAK OUT JUST YET. WE ARE STILL NEGOTIATING THIS. $3.5 TRILLION IS A TOPLINE FIGURE. THIS BUDGET RESOLUTION IS JUST A FRAMEWORK OF POTENTIALLY WHAT WE COULD SEE. NO ONE THINKS, AND WE SPOKE ABOUT THIS YESTERDAY BECAUSE I KNOW YOU HAD GREG VALLIERE ON, NO ONE REALLY THINK THEY ARE GOING TO GET 3.5 TRILLION DOLLARS. THAT NUMBER IS LIKELY GOING TO COME DOWN. LISA: A LOT OF THIS DOES DOVETAIL INTO THE WHITE KNUCKLE SITUATION DARRELL CRONK WAS SAYING JUST RECENTLY. I AM CURIOUS HOW FAR WE HAVE GONE IN TERMS OF NEGOTIATIONS OF THE DEBT CEILING DEBATE, OF LIFTING IT OR PROLONGING IT TO ENABLE THE ECONOMY NOT TO DEFAULT IN THE UNITED STATES. ANNMARIE: IT IS AN EXCELLENT QUESTION BECAUSE IT IS ABOUT THE FISCAL HEALTH OF THE UNITED STATES, AND THESE CONVERSATIONS HAVE BEEN VERY MUTED. OF COURSE, THIS WEEK WAS ALL ABOUT THE DEBATE WITHIN THE DEMOCRATIC PARTY ABOUT MOVING FORWARD THAT RULE OF THE RESOLUTION AND PUTTING A FIRM DATE ON THE BIPARTISAN INFRASTRUCTURE. BUT WHEN IT COMES TO THE DEBT CEILING, THE REPUBLICANS JUST CONTINUOUSLY PUSH BACK AND BASICALLY CONSIDER THE CONVERSATION MOOT. THEY SAY IF THE DEMOCRATS ARE ALREADY GOING TO HAVE A BUDGET RECONCILIATION PROGRAM, THEY NEED TO PUT THE DEBT CEILING IN THAT. BUT THE DEMOCRATS ESPECIALLY LEADING UP TO THE MIDTERM ELECTIONS DON'T WANT TO BE THE ONES TO HAVE TO EDIT THAT INTO THEIR $3.5 TRILLION RECONCILIATION PACKAGE BECAUSE THEY DON'T WANTED TO BE SEEN THAT THEY ARE BEING RECKLESS WITH THE U.S. FINANCES. THEY WANT THIS TO BE A BIPARTISAN APPROACH. THERE'S GOING TO BE A LOT OF BACK-AND-FORTH ON THIS BETWEEN SEPTEMBER AND OCTOBER AND WHEN THE CBO SAYS THE U.S. COULD POTENTIALLY RUN OUT OF THOSE FUNDS, BUT THIS IS AT THE MOMENT JUST COMPLETELY MUTE BECAUSE FOREIGN POLICY HAS TAKEN CENTER STAGE IN WASHINGTON. FRANCINE: HOW MUCH IS THE PRESIDENT ALSO FOCUSING ON SOME OF THE CYBERATTACKS AND RANSOMWARE? ARE WE GOING TO SEE MORE OF AN EFFORT AFTER THE PRETTY DIFFICULT SUMMER MONTHS WE'VE HAD ON THAT FRONT? IS HE GOING TO STEP UP THE EFFORTS TO TRY TO DO A U.S. COUNTERATTACK? ANNMARIE: WE HAD THE EXECUTIVE ORDERS EARLIER THIS SUMMER DIRECTING THE AGENCIES TO REALLY STEP UP CYBERSECURITY, AND YESTERDAY WE HAD DOZENS OF EXECUTIVES COMING IN. THIS WAS REALLY MORE OF A SUMMIT , THE FIRST START OF HOW THE PRIVATE/PUBLIC SECTOR CAN WORK TOGETHER. WHAT WAS SO INTERESTING ABOUT HIS REMARKS YESTERDAY IS THAT HE DID CALL OUT RUSSIA. HE SAID WE KNOW THAT SOME OF THESE RANSOMWARE ATTACK'S COME FROM THE LIKES OF RUSSIA, AND THAT WAS IN MAY. WE KNOW WHEN THE COLONIAL PIPELINE ATTACK LAST YEAR WITH SOLARWINDS, HE SAID HE LOOKED PUTTING IN THE EYE AT THE GENEVA SUMMIT AND SAID WE WANT YOU TO TAKE CARE OF THESE GROUPS OPERATING IN RUSSIA "BECAUSE YOU KNOW WHO THEY ARE AND YOU KNOW WHERE THEY ARE." SO IT IS A LITTLE BUT OF A GEOPOLITICAL CONCERN AS WELL FOR THE PRESIDENT. LISA: THERE'S ALSO AN ISSUE OF AFGHANISTAN, JUST GOING BACK TO WHAT IS LARGELY THOUGHT OF AS A DEBACLE IN THE MANNER OF THE WITHDRAWAL. I AM CURIOUS, FROM YOUR PERSPECTIVE, HOW MUCH THE CYBERSECURITY ISSUE DOVETAILS INTO INCREASED TERRORISTIC THREATS, INCLUDING POTENTIALLY STEMMING FROM THAT NATION. ANNMARIE: I THINK THE FOREIGN POLICY TEAM IN WASHINGTON FOR THE SAID ADMINSTRATION WOULD SAY LEAVING AFGHANISTAN COME PART OF THAT WAS TO PUT MONEY TOWARDS WHERE THE FUTURE POTENTIALLY OF THOSE THREATS COULD COME, LIKE CYBERWAR FAIR. OVER THE PAST YEAR, WE HAVE SEEN A NUMBER OF ATTACKS FROM ACTORS, ESPECIALLY IN RUSSIA AND CHINA. THIS WITHDRAWAL, THOUGH, CERTAINLY CENTER STAGE AS WE HAVE ONLY A FEW DAYS TO GET THE CIVILIANS OUT, AND SECRETARY OF STATE ANTONY BLINKEN YESTERDAY SAYING ABOUT 1500 AMERICAN CITIZEN BLUE PASSPORT HOLDERS. THERE ARE A NUMBER OF OTHER PEOPLE THERE WHO ARE GREEN CARD HOLDERS. THESE PEOPLE NEED TO COME OUT BEFORE THE MILITARY STARTS TO WIND DOWN, AND RIGHT NOW, FROM WHAT I AM HEARING WITH PEOPLE WHO ARE ALSO TRYING TO EVACUATE AND JOURNALISTS ON THE GROUND WHO ARE TRYING TO GET FAMILY OUT, IT IS VERY DIFFICULT GET ANYWHERE CLOSE TO THE GATES AND FOR THE U.S. MILITARY TO GET ONTO THE TARMAC EVACUATE. OVERNIGHT, IN THE MIDDLE OF THE NIGHT LAST NIGHT, THE U.S. EMBASSY IN KABUL RELEASED A SECURITY ALERT SAYING IF YOU ARE ANYWHERE NEAR THESE GATES, PLEASE GO HOME AND WE WILL DIRECT YOU TO THE AIRPORT BECAUSE THEY ARE QUITE CONCERNED ABOUT A POTENTIAL TERRORIST ATTACK AT THAT AIRPORT. TOM: THANK YOU SO MUCH, ANNMARIE HORDERN IN WASHINGTON. ON THE MARKETS, ABOUT AN HOUR IN SIX MINUTES AWAY ON CLAIMS. WE WILL HAVE A LOT ON THIS AS WELL. WE'VE GOT SOME SERIOUS ANTICIPATION OF ONE OF THE MORE CONSERVATIVE PRESIDENTS OF THE FED. LISA: ESTHER GEORGE IS JOINING US IN ABOUT FIVE MINUTES WITH ERIN MICHAEL MCKEE. CURIOUS TO SEE -- WITH OUR OWN GIMMICKY. -- WITH OUR OWN MICHAEL MCKEE. CURIOUS TO SEE HOW SHE FRAMES OUT THIS CONFERENCE. THEY WERE PLANNING JACKSON HOLE, CANCELING ALL OF THOSE FLIGHTS, ALL OF THOSE HOTEL ROOMS, SAYING WE JUST CAN'T DO IT IN PERSON. TOM: IT IS CERTAINLY A DIFFERENT CONFERENCE FOR THE PHD PAPERS AND THE DISCUSSIONS AROUND THOSE PAPERS, WHICH AT TIMES, WHEN EVERYONE IS TOGETHER, CAN REALLY GET HEATED. I SAW SOMEONE ONCE ALMOST PUNCH THE GREAT SEVEN FOOT BEAR OUTSIDE THE LODGE. TOOK A SWING AT IT. [LAUGHTER] HE WAS SO ANGRY. FRANCINE: I WILL NEVER FORGET THAT IMAGE, TOM. MAYBE THEY WILL DO THAT WITH INFLATION. TOM: FOR THOSE OF YOU INTERESTED IN THE MONETARY STATE OF THE NATION, THE PRESIDENT OF THE KANSAS CITY FED NEXT, WITH OUR MICHAEL MCKEE. RED AND GREEN ON THE SCREEN. ♪ TOM: GOOD MORNING, EVERYONE. FRANCINE LACQUA IN FOR JON FERRO. TOM KEENE AND LISA ABRAMOWICZ. WE ARE WATCHING THE DATA, PARTICULARLY OF CLAIMS HERE IN EXEC LEE WHEN OUR. -- IN EXACTLY ONE HOUR. JOHN RYDING SCHEDULED TO BE AFTER MR. MCKEE. RIGHT NOW, MCKEE BEGINS HIS WORK IN JACKSON HOLE. THE NUMBER ONE ISSUE IS TAPER. NO, NOT THE ECONOMIC TAPER. THE TAPER OF MY WAIST AFTER THREE MEALS AT THE PIONEER GRILL. GUESS WHAT? IT IS NOT GOING TO HAPPEN BECAUSE WE'VE GONE VIRTUAL. MCKEE IS VIRTUAL, AND THE ESTEEMED ESTHER GEORGE IS VIRTUAL. LET'S LISTEN. ESTHER: WE HAD HOPED FOR AN IN-PERSON MEETING. WE KNEW IN THE BACK OF OUR MIND THAT WOULD BE A FUNCTION OF HOW THE VIRUS UNFOLDED, AND AS WE SAW LAST WEEK, RISK LEVELS WENT UP, AND IN THE INTEREST OF OUR GUESTS, WE PIVOTED TO A VIRTUAL PLATFORM. SO DISAPPOINTED, BUT STILL LOOKING FORWARD TO A GREAT CONFERENCE. WE'VE GOT A GREAT LINEUP OF SPEAKERS AND PAPERS THAT I THINK ARE GOING TO BRING INSIGHT TO IMPORTANT TOPICS. MICHAEL: YOU LEAD TO AN IMPORTANT QUESTION, THE LATEST COVID SPIKE. HOW DO YOU THINK THAT IS GOING TO AFFECT THE ECONOMY? ESTHER: I THINK IT IS A RISK TO THE OUTLOOK, BUT WHAT WE HAVE SEEN SO FAR IS THE ECONOMY CONTINUES TO GROW AT A STRONG RATE. CONSUMERS ARE STILL SPENDING. THE LABOR MARKET IS CONTINUING TO HEAL. WE SAW GOOD JOB GAINS LAST MONTH. SO THE OUTLOOK I THINK REMAINS A POSITIVE ONE. WE WILL HAVE TO SEE WHAT IMPACT THIS FLAREUP IN THE VIRUS MIGHT BRING. YOU CAN IMAGINE IT MIGHT SLOW DOWN SOME OF THE RETURNS TO THE LABOR MARKET, BUT EMERALD EXPECT AT THIS POINT THAT IT WILL DERAIL THE ECONOMY AS WE SAW LAST YEAR WHEN WE FIRST HAD TO DEAL WITH THE VIRUS. MICHAEL: DO YOU THINK IT SLOWS DOWN YOUR TIMETABLE FOR WHEN YOU MIGHT WANT TO TAPER BECAUSE YOU MIGHT WANT TO WAIT AND GET MORE DATA? MICHAEL: AS I LOOK AT THE PROGRESS -- ESTHER: AS I LOOK AT THE PROGRESS THE ECONOMY HAS MADE SO FAR, IT REALLY DOES SUGGEST THAT WE HAVE COME TO A POINT WHERE WE CAN BEGIN TO EASE UP ON THE AMOUNT OF ACCOMMODATION PROVIDED TO THE ECONOMY. THAT IS DIFFERENT THAN SUGGESTING THAT WE HAVE ARRIVED AT THE OBJECTIVES THAT WE HAVE IN TERMS OF FULL EMPLOYMENT AND PRICE STABILITY. SO I DON'T THINK THAT IT CHANGES MY OWN CALCULUS THAT IT IS TIME TO BEGIN TO MAKE THOSE ADJUSTMENTS, GIVEN THE GAINS WE HAVE SEEN SO FAR. MICHAEL: HAVE YOU GAINED ENOUGH ON THE EMPLOYMENT SIDE, ESPECIALLY IN THE DIVERSITY AREA ? HAVE WE SEEN ENOUGH PROGRESS, ESPECIALLY IN TERMS OF GETTING MINORITY AND EMPLOYMENT DOWN? MICHAEL: CLEARLY, WE HAVE NOT -- ESTHER: CLEARLY, WE HAVE NOT SEEN THE LABOR MARKET FULLY RECOVER. THERE IS STILL SLACK THERE, WHEN YOU LOOK AT MILLIONS OF PEOPLE THAT HAVE NOT COME BACK INTO THE WORKFORCE, HAVE NOT YET RESUMED WORKING YET. AS YOU NOTED, WHEN YOU BEGIN TO DRILL DOWN INTO WHO IS RECOVERING, WHO'S NOT RECOVERING, WE KNOW THAT THERE IS DISPROPORTIONATE OUTCOMES RIGHT NOW FOR BLACK AND HISPANIC WORKERS. THAT I THINK IS A FUNCTION AGAIN OF WATCHING HOW THE LABOR MARKETS HEAL AND HOW THE ECONOMY RECOVERS. TO THE EXTENT THAT SOME OF THOSE CONTACT INTENSIVE SECTORS CAN CONTINUE TO BRING JOBS BACK ON, WE SAW THAT LAST MONTH. WE SAW LEISURE AND HOSPITALITY COME IN PRETTY WELL. IF THOSE KINDS OF GAINS CAN CONTINUE AT A HEALTHY PACE, THAN MY EXPECTATION IS WE WILL CONTINUE TO SEE THE IMPACTS BEGIN TO NARROW ACROSS MANY DIMENSIONS OF THE LABOR MARKET, AND THAT WOULD BE A GOOD SIGN. MICHAEL: IS THERE ANY DIVISION ON THE OPEN MARKET COMMITTEE ABOUT WHEN TO TAPER? WALL STREET IS MAKING A LOT OUT OF THE FACT THAT SOME PEOPLE THINK WE SHOULD WAIT UNTIL THE END OF THE YEAR, AND SAY WE HAVEN'T SEEN ENOUGH PROGRESS, AND THEN THERE ARE PEOPLE LIKE YOU AND OTHER COLLEAGUES WHO SAY WE HAVE MADE ENOUGH PROGRESS. ESTHER: THIS IS A BIG COMMITTEE, AS YOU KNOW. ONE OF ITS REAL STRENGTH IS DIVERSITY OF VIEWS IT BRINGS TO LOOKING AT A COMMON SET OF DATA. THAT IS A HEALTHY DISCUSSION, AND YOU OFTEN SEE THOSE DIFFERENCES EMERGE AT THE POINT THAT THE ECONOMY IS TURNING. SO IT IS A HEALTHY SIGN FOR THE COMMITTEE TO BEGIN TO DEBATE THOSE ISSUES AS WE JUDGE WHEN WE HAVE MADE PROGRESS TOWARD THE OBJECTIVES WE HAVE SET UP FOR THE ECONOMY. MICHAEL: I AM JUST WONDERING IF WALL STREET IS MAKING TOO MUCH OF IT, THE IDEA OF WHETHER YOU SAY SOMETHING IN SEPTEMBER OR NOVEMBER. IS THAT CUTTING IT AS A POLICY TO FINALLY -- POLICY TOO FINELY? ESTHER: I THINK WHAT YOU'VE SEEN IS A COMMITMENT TO COMMUNICATE CLEARLY, TO MAKE SURE THAT WE ARE BEING TRANSPARENT ABOUT THE FACTORS BEING CONSIDERED FOR THAT TRANSITION AS IT RELATES TO ASSET PURCHASES, AND I THINK THAT IS WHAT HAS BEEN HAPPENING. THE MARKETS, THE PUBLIC HAS BEEN HEARING THOSE COMMUNICATIONS. OF COURSE, WE ARE COMING INTO A MEETING IN SEPTEMBER WHERE WE WILL CONTINUE TO TALK ABOUT HOW THE ECONOMY HAS UNFOLDED AND THE TIMING FOR ADJUSTMENTS TO THOSE MASSIVE PURCHASES. MICHAEL: INTERESTING STORY TODAY ABOUT HOW WALL STREET DOESN'T CARE AS MUCH ABOUT WHEN YOU BEGIN THE TAPER AS WHEN YOU ENDED. WHAT IS YOUR VIEW ON HOW FAST YOU WOULD WANT TO GET OUT OF THE QE BUSINESS. ESTHER: I THINK IT IS IMPORTANT TO GET STARTED, AND THE CONDITIONS OF PACE, THE TIMING OF WHEN WE END, I THINK I AM OPEN-MINDED TO LISTENING TO THE DEBATES AROUND THAT. BUT I AM LESS INTERESTED IN DEFERRING THAT DECISION. SO I THINK IT IS IMPORTANT TO RELAY CENTER ON WHEN WE BELIEVE THE PROGRESS IN THE ECONOMY IS SUFFICIENT TO START THAT PROCESS. THAT IS REALLY WHERE I AM FOCUSED. IN THAT SENSE, I THINK WE SHOULD GET STARTED THIS YEAR SO THAT WE CAN BEGIN TO PAIR BACK THE AMOUNT OF ACCOMMODATION, WATCH TO SEE HOW THE ECONOMY UNFOLDS AFTER THAT, AND THEN DOWN THE ROAD, BE IN A POSITION TO MAKE DECISIONS AS THE ECONOMY CHANGES ON WHAT WE NEED TO DO WITH OUR POLICY RATE. MICHAEL: I AM GOING TO GUESS YOU WOULD AGREE WITH CHAIRMAN POWELL THAT TAPERING IS NOT TIGHTENING, AND THAT THE TWO ARE NOT CONNECTED. BUT THE WAY TRADERS SEE IT, AT THIS POINT, YOU AREN'T GOING TO START TIGHTENING UNTIL YOU ARE DONE WITH TAPERING, SO THERE IS A BIT OF A CONNECTION ON THE BACKEND. I AM WONDERING IF YOU AGREE WITH THE NUMBERS OF THE COMMITTEE WHO SAY WE SHOULD GET IT DONE FASTER THAN WE DID LAST TIME. ESTHER: I THINK THERE'S GOOD ARGUMENTS FOR THAT. AGAIN, DEPENDING ON HOW THE ECONOMY UNFOLDS, THE ARGUMENTS THAT ENDING THE ASSET PURCHASES WILL GIVE THE COMMITTEE SOME FLEX ABILITY TO JUDGE THE PROGRESS IN THE ECONOMY, BUT I DON'T THINK THAT IS IN ANYWAY AND MECHANICAL POSITION, AND ONE THAT WE CAN LAY OUT TODAY, WHETHER IT IS A CERTAIN AMOUNT OF MONTHS, THE CONDITIONS REALLY THAT HAVE BEEN LAID OUT IN THE GUIDANCE FROM THE COMMITTEE HAS BEEN THAT WE WILL HAVE ACHIEVED MAXIMUM EMPLOYMENT AND PRICE STABILITY OBJECTIVES WHEN THAT RATE DECISION IS MADE. MICHAEL: WHATEVER DECISION YOU MAKE ABOUT THE PACE OF TAPERING, YOU ARE DOING $120 BILLION A MONTH RIGHT NOW. AT WHAT WOULD ANYBODY EVEN OTIS IN THE ECONOMY? -- EVEN NOTICE IN THE ECONOMY? ESTHER: I WILL BE WATCHING FOR THAT BECAUSE IT IS A TREMENDOUS AMOUNT OF ACCOMMODATION GOING INTO THE ECONOMY RIGHT NOW, AND ASSUMING COMMUNICATIONS HAVE BEEN LAID OUT AND TO COMMITTEE'S RESPONSE TO HOW THE ECONOMY IS UNFOLDING IS CLEAR, YOU WOULD EXPECT THE ECONOMY TO BE ABLE TO WORK THROUGH THAT. THAT IS MY EXPECTATION, THAT WITH GOOD COMMUNICATION, WITH CLARITY AROUND THE FACTORS THAT WE JUDGE THAT ARE PUSHING US TOWARD OUR MANDATES, THAT THAT WILL ALL WORK OUT IN TERMS OF THE ECONOMY'S ABILITY TO ABSORB THAT. MICHAEL: THE LAST COUPLE OF MEETINGS SUGGEST THAT YOU HAVE ALL ESSENTIALLY REACHED YOUR MANDATE ON THE INFLATION SIDE. I AM WONDERING WHERE ESTHER GEORGE THE INFLATION HAWK IS AT THIS POINT. WHAT DO YOU THING ABOUT THE PROGRESS OF INFLATION? DO YOU HAVE SOME CONCERNS THAT MAYBE BE IT IS NOT TRANSITORY? ESTHER: I THINK WATCHING THE LEVEL OF INFLATION RIGHT NOW CERTAINLY HAS GOTTEN MY ATTENTION. IT HAS GOTTEN THE ATTENTION OF MANY HOUSEHOLDS AND BUSINESSES IN MY REGION. THEY FRANKLY HAD NOT HAD TO THINK ABOUT INFLATION FOR MANY YEARS IN THEIR DECISION-MAKING. SO IT IS NOT SOMETHING TO IGNORE BY ANY MEANS. HAVING SAID THAT, I DO THINK IT IS REASONABLE TO ASSUME THAT WHAT WE ARE SEEING RIGHT NOW IS COMING FROM A COMBINATION OF ROBUST DEMAND RUNNING UP AGAINST SUPPLY CONSTRAINTS. THAT OF COURSE IS KEEPING UPWARD PRESSURE ON PRICES. OVER TIME, I WOULD EXPECT THAT TO MODERATE, AND THAT I THINK IS A REASONABLE ASSUMPTION TO MAKE. BUT THAT OF COURSE WILL DEPEND ON A VARIETY OF OTHER FACTORS. TO WHAT EXTENT DOES RISK FROM THE VIRUS AFFECT THOSE SUPPLY CHAINS? WILL THEY BECOME MORE PERSISTENT? WILL IT BEGIN TO BUILD INTO PEOPLE'S EXPECTATIONS IN A WAY THAT WILL CAUSE US TO HAVE TO RETHINK THAT POLICY ACCOMMODATION DIFFERENT THAN WE ARE TODAY? MICHAEL: YOU'VE ALWAYS BEEN ON THE LOOKOUT FOR INFLATION, AND ONE OF THE FIRST TO WARN ABOUT THE POSSIBILITIES, SO I AM WONDERING IF YOU THINK WE WOULD HAVE TIME, OR YOU WOULD HAVE TIME, SINCE I DON'T HAVE A BOAT, TO REACT IF INFLATION PROVED NOT TO BE TRANSITORY, AND THAT YOU ARE NOT BEHIND THE CURVE. ESTHER: IT IS HARD TO SAY TODAY, GIVEN WHERE WE ARE IN THIS RECOVERY. CERTAINLY THE COMMITTEE HAS THE TOOLS IT NEEDS TO RESPOND TO INFLATION. THAT OF COURSE IS ALWAYS A FUNCTION OF UNDERSTANDING WHAT IS GOING ON IN THE BROADER ECONOMY. IT IS HARD TO JUDGE, BUT I THINK NO ONE SHOULD QUESTION THAT THE COMMITTEE IS COMMITTED, THAT I AM COMMITTED TO A 2% INFLATION OBJECTIVE OVER THE LONG RUN FOR THE ECONOMY. WE WILL JUST HAVE TO SEE HOW THIS TRANSITION IN THE ECONOMY FROM A TERRIBLE PANDEMIC SHOCK TO BEGINNING TO RECOVER FROM THAT UNFOLDS. MICHAEL: I HAVE TO ASK YOU ONE LAST QUESTION ON THE FISCAL SIDE. LEAVING ASIDE THE MERITS AND THE PARTISAN ISSUES INVOLVED IN THE BUDGET THAT WAS JUST PASSED BY CONGRESS, DO YOU WORRY THAT BILLIONS MORE, HUNDREDS OF BILLIONS MORE IN SPENDING WOULD BE INFLATIONARY? ESTHER: I THINK THE QUESTION OF FISCAL SPENDING IS ONE I AM GOING TO DEFER TO FISCAL POLICY MAKERS TO JUDGE. I THINK AS A MONETARY POLICY MAKER, I WILL BE WATCHING CAREFULLY ANY NUMBER OF IMPACTS TO OUR ECONOMY, INCLUDING FISCAL SPENDING, TO UNDERSTAND HOW IT MIGHT CHANGE THE DYNAMICS FOR HOW WE ACHIEVE THE OBJECTIVES CONGRESS HAS GIVEN US. MICHAEL: I ACTUALLY HAVE ONE MORE QUESTION. YOU TALKED ABOUT THE GREAT GUEST LINEUP YOU HAVE. THERE'S ONE IN PARTICULAR THAT EVERYBODY WANTS TO HEAR FROM. THE MINUTES OF THE LAST MEETING SAID NO DECISIONS WERE MADE, SO I AM WONDERING WHAT WE SHOULD EXPECT FROM THE CHAIRMAN. IS HE GOING TO BE GIVING US GUIDANCE OR OPINION? ESTHER: WELL, THE CHAIRMAN HAS NOT SHARED HIS WERE MARKS WITH ME, SO I COULD NOT HONESTLY TELL YOU WHAT HE WILL BE OFFERING. BUT I AM SURE IT WILL BE WORTH LISTENING TO. TOM: FROM THE MIDWEST, ESTHER GEORGE OF THE KANSAS CITY FED AND A DECIDEDLY DIFFERENT PRESIDENT OF THE FED. SHE DOES NOT HAVE A PHD IN ECONOMICS, BUT JUST A SIMPLY DIFFERENT PATH, REPLACING, SONIC -- REPLACING THOMAS HONIG AT THE KANSAS CITY FED. I'VE GOT TO GET TO BREAKFAST AT THE PIONEER GRILL VIRTUALLY. MICHAEL MCKEE, I REALLY WANT TO GO TO THE VOICE AND PLACE OF ESTHER GEORGE IN A WASHINGTON FIXATED BY POWELL, BRAINARD, CLARIDA THEORY. IT IS DIFFERENT OUTING KANSAS CITY, ISN'T IT? MICHAEL: THIS IS ONE OF THOSE TIMES WHEN THE FED BANK PRESIDENTA ADD A LOT BECAUSE THEY ARE ON THE -- FED BANK PRESIDENTS CAN ADD A LOT BECAUSE THEY ARE ON THE GROUND IN THEIR DISTRICT. THEY CAN SEE THE COURSE OF THE ECONOMY THROUGH THE DISEASE, AND WHETHER OR NOT INFLATION IS GOING TO BE A MAJOR ISSUE. IF ESTHER GEORGE, WHO HAS ALWAYS BEEN AN INFLATION HAWK, ISN'T PARTICULARLY CONCERNED, THEN THERE'S PROBABLY NOT A LOT OF CONCERN OUT IN THE KANSAS CITY DISTRICT. TOM: THE INFLATION US TO -- THE INFLATIONISTAS ARE IN RETREAT, BUT DEFINE A HAWK RIGHT NOW. I DON'T THINK WE KNOW, DO WE? MICHAEL: IT IS ANGELS DANCING ON THE HEAD OF A PIN. TOM: THAT WAS ALMOST THE NAME OF THE SHOW. [LAUGHTER] MICHAEL: A HAWK IS SOMEONE WHO WANTS THE PAPER SOONER. RIGHT NOW WE ARE TALKING DECEMBER, NOVEMBER, SO IF YOU'RE TALKING ABOUT A SEPTEMBER ANNOUNCEMENT, IT DOESN'T MAKE THAT MUCH DIFFERENCE. THEY ARE ALL KIND OF IN THE SAME BOAT AT THIS POINT. THERE'S LESS DISAGREEMENT, AND YOU HEARD HER ANSWER MY QUESTION ON THAT, THEN WALL STREET WOULD THINK. LISA: TO YOUR QUESTION ABOUT LIKING THE CONFERENCE VIRTUAL, BASICALLY DISMISSING LONGER-TERM IMPLICATIONS ABOUT HOW THIS MAY AFFECT THEIR POLICY DECISION-MAKING. DO YOU HEAR THAT CONSISTENTLY FROM OTHERS ON THE FED, THAT BASICALLY THIS IS JUST A CIRCUMSTANTIAL ISSUE HAVING TO DO WITH AN IDIOSYNCRATIC PATCH OF VIRUS CASES IN THE REGION WHERE THIS CONFERENCE IS GOING TO BE HELD? MICHAEL: THAT IS WHAT YOU HEAR FROM FED OFFICIALS, ALTHOUGH THEY CAVEAT THAT WITH WE HAVE TO SEE BECAUSE NOBODY QUITE KNOWS WHERE THIS VIRUS WILL TAKE US NEXT. WE DIDN'T ANTICIPATE THIS CAME CITY FED SYMPOSIUM -- THIS KANSAS CITY FED SYMPOSIUM BEING CANCELED. SO THERE'S A FEELING THAT WE ARE GOING THROUGH ANOTHER WAVE, BUT THE COUNTRY HAS CHANGED. WE ARE NOT GOING TO LOCK DOWN AS MUCH, SOME AB THE ECONOMIC IMPACT IS NOT GOING TO BE A GREAT. FRANCINE: IN YOUR GREAT CONVERSATION WITH THE FED PRESIDENT THERE, HOW MUCH DID YOU FEEL THAT SHE WAS WAY DOWN -- SHE WAS WEIGHED DOWN ABOUT THE POSSIBILITY OF DOING A MISSTEP AT THIS POINT IN TIME? MICHAEL: I DON'T THINK SHE'S PARTICULARLY WORRIED ABOUT THAT. I THINK THE FOCUS WILL BE ON JAY POWELL AND WHAT HE SAYS, SO THE FED BANK PRESIDENTS AND WALL STREET UNDERSTANDS THEY ALL HAVE THEIR OWN OPINIONS, AND THEY'VE EXPRESSED THEM FOR MANY WEEKS NOW. THE IDEA IS LEAVE IT TO THE CHAIRMAN, AND WE WILL GET WHATEVER TAKEAWAYS FROM HIS VIEWS. THE REST OF THEM ARE JUST KIND OF REFLECTING WHAT THEY HAVE LEARNED IN THEIR OWN DISTRICT. TOM: MICHAEL MCKEE, GREATLY APPRECIATE IT THIS MORNING. MICHAEL MCKEE WILL BE HERE IN 44 MINUTES WITH JOBLESS CLAIMS AS WELL. LOOKING FORWARD TO JOHN RYDING AFTERWARDS. I FIND FASCINATING HERE AT JACKSON HOLE, AND I HAVE ALWAYS COMPLAINED ABOUT THIS, TOM HONIG WOULD HAVE PUNCHED ME, THEY DON'T RELEASE THE PAPERS UNTIL THEY COME OUT. LISA: I AGREE. TOM: WHICH I JUST CAN'T STAND. I WANT TO READ THE PAPERS. LET ME REPHRASE THIS. THERE'S LIKE EIGHT PAPERS, I GO TO MCKEE, AND I GO, WHICH ONE SHOULD I READ? HE TELLS ME WHICH ONE TO READ, AND I READ IT. LISA: DO YOU READ IT FRONT TO BACK, OR THE FIRST FEW PAGES? TOM: I READ IT AT THE PIONEER GRILL, PRINTED OUT, OVER THE PIONEER GRILL BREAKFAST. I READ IT ON A COUCH NEXT TO TOURISTS. LISA: IN PARTICULAR, HOW ESTHER GEORGE DODGED CERTAIN QUESTIONS SUCH AS THE FISCAL STIMULUS QUESTION, THE IDEA OF WELL, THAT IS NOT OUR JOB. WE LOOK AT EVERYTHING THAT COULD POTENTIAL HE COME UP HAS ANY RAMIFICATIONS. WE TAKE EVERYTHING INTO ACCOUNT. HOW MUCH CAN WE ABSOLUTELY LEARN AS THE FED LOOKS AT A SCENARIO WHERE THEY ARE STILL WEIGHING ALL RISKS? TOM: AND FRANCINE, THE PROCESS HERE IS SO DIFFERENT FROM THE BANK OF ENGLAND. OVER HERE, THE BANK OF ENGLAND HAS ALWAYS BEEN REMOVED FROM THE DEBATE. I KNOW THAT IS UNFAIR. FRANCINE: I DON'T THINK IT IS UNFAIR, ACTUALLY. WE LOOK AT THE DIFFERENCES BETWEEN THE BANK OF ENGLAND AND THE FED, YOU HAVE A LOT MORE TO CONTEND WITH. ONE OF THE THINGS WE KEEP ON HEARING FROM THE ECB IS THAT THEY WORRY ABOUT WHEN THE FED STARTS, AND THERE IS A GREAT PIECE SAYING THAT WE FOCUS SO MUCH ON WHEN TAPERING STARTS, WE FORGET WHEN IT ENDS, AND THAT WILL BE CRUNCH TIME FOR THE MARKETS. BUT THE ECB IS LOOKING AT SOME OF THE SPILLOVER EFFECTS OF WIND THAT STARTS IN THE U.S., SO EUROPE IS KINDA FOLLOWING AT THIS POINT. TOM: RED AND GREEN ON THE SCREEN RIGHT NOW. ON RADIO, ON TELEVISION, STAY WITH US. CLAIMS IN LESS THAN 45 MINUTES. THIS IS BLOOMBERG. GOOD MORNING. ♪ RITIKA: WITH THE FIRST WORD NEWS, I'M RITIKA GUPTA. RISING CORONAVIRUS CASES ARE LIMITING WHAT FED CHAIR JAY POWELL CAN SAY ABOUT WHAT IS NEXT FOR U.S. MONETARY POLICY. POWELL SPEAKS TOMORROW AT THE ANNUAL JACKSON HOLE SYMPOSIUM. THE CONFERENCE HAS BEEN TURNED INTO A VIRTUAL ONE THIS YEAR. POWELL IS EXCITED TO REINFORCE THE MESSAGE THAT IT WILL PROBABLY BEGIN APPROPRIATE TO BEGIN SCALING BACK THE FED'S BOND BUYING PROGRAM BY THE END OF THE YEAR. THE U.S. AND THE U.K. ARE WARNING CITIZENS IN AFGHANISTAN NOT TO TRAVEL TO THE KABUL AIRPORT. THEY SAY THERE ARE THREATS OF A TERROR ATTACK. BRITISH PRIME MINISTER BORIS JOHNSON DISCUSSED THE EVACUATION TODAY. PM JOHNSON: I THING WE HAVE TO BE TRANSPARENT ABOUT THE RISKS AND REALISTIC ABOUT WHAT IS GOING ON. YOU WILL APPRECIATE THAT THERE ARE TERRORISTS OUT THERE. RITIKA: THE U.S. SAYS THERE ARE STILL ABOUT 1500 AMERICANS IN AFGHANISTAN, BUT MANY APPARENTLY DON'T WISH TO LEAVE. OFFICES IN MANHATTAN HAVE LOWERED THEIR EXPECTATION FOR A RETURN TO OFFICES. A PARTNERSHIP NEW YORK CITY'S HAS THEY NOW SEE 41% OF OFFICE WORKERS RETURNING BY SOME TIMBER 30TH, DOWN FROM AN ESTIMATED 62% IN MAY -- BY SEPTEMBER 30, DOWN FROM AN ESTIMATED 60% IN MAY. SEVERAL VACCINATION SITES REPORTED FOREIGN PARTICLES FOUND IN VIALS. MODERNA SAID ISSUES AROSE AT A CONTRACT SITE IN SPAIN. SPECULATIVE THAT BITCOINRALLY'S DEBTS THAT BITCOIN'S RALLY -- THAT BITCOIN'S RALLY IS RUNNING OUT OF STEAM. BITCOIN AND OTHER CRYPTOS ARE LOWER TODAY. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. ♪ ♪ PRES. BIDEN: THE REALITY IS MOST OF OUR CRITICAL INFRASTRUCTURE IS OWNED AND OPERATED BY THE PRIVATE SECTOR, THE FEDERAL GOVERNMENT CAN'T MEET THIS CHALLENGE ALONE. TOM: GOOD MORNING, EVERYONE. WE GREATLY APPRECIATE YOUR ATTENDANCE. THE PRESIDENT OF THE UNITED STATES ADVANCING THE STORY FORWARD AS THEY SEE IT, AS WE HEARD FROM RITIKA GUPTA, ANNMARIE HORDERN, AND EMILY WILKINS. IT IS A REALLY DICEY TIME IN AFGHANISTAN. WE WILL BE FOLLOWING THAT THROUGH THE ENTIRE MORNING AS WELL. WHAT YOU NEED TO KNOW IS YOU TAKE THE SUBWAY, YOU DON'T TAKE THE NRBQ. YOU TAKE THE NQRW. IF YOU ARE UP BY CENTRAL PARK, YOU ARE BY NORDSTROM'S AND THEIR SWANKY NEW STORE THAT PRETTY MUCH EVERYONE SAYS HAS BEEN A COLOSSAL FAILURE. YOU WANDER DOWN ON THE NRBQ -- THAT IS A MUSIC JOKE, BEFORE LISA'S TIME. [LAUGHTER] YOU WANDER DOWN TO MACY'S. IN THE DISTANCE, 12 MINUTES ON A BUS HAS NEVER BEEN GREATER. IT IS STUNNING. DAVE: NOT ON THE STOCK MARKET, ANYWAY. I WAS STRUCK BY THE REACTION AMONG INVESTORS TO THOSE TWO COMPANIES' RESULTS. I THROUGH COALS INTO THE MIX JUST SO YOU COULD HAVE SOMETHING -- THREW KOHL'S INTO THE MIX TO SEE YOU COULD HAVE SOMETHING TO COMPARE TO. I'VE GOT TO TELL YOU, 37% DIFFERENT BECAUSE YOU SAW NORDSTROM'S GO WAY DOWN YESTERDAY AFTER ITS NUMBERS AFTER LAST WEEK. MACY'S WENT WAY UP. TOM: YOU LOOK LIKE DANA TALL SEE. GIVE US THE SECURITIES ANALYSIS ON THIS. WHY? DAVE: THEY ARE MUCH SMALLER COMPANIES NOW THAN THEY USED TO BE. TOM: ALL YOU DO IS MUCH IN A BRAND, AND THAT GETS THE DIFFERENCE. WHAT IS THE BRAND DIFFERENCE BETWEEN MACY'S AND NORDSTROM? VALENTINO? DAVE: I DON'T KNOW. I DON'T SHOP AT THOSE STORES ALL THAT MUCH TO KNOW THE BRANDS. IT REALLY COMES DOWN TO THE FACT THAT THESE ARE SMALLER COMPANIES NOW BECAUSE THE INDUSTRY HAS REALLY BEEN HIT BY THE RISE OF AMAZON AS MUCH AS ANYTHING, AND AS A RESULT, YOU HAVE STOCKS THAT BECOME MORE VOLATILE ALONG THE WAY. YOU GO BACK SEVEN QUARTERS, THE GAP WAS 30 POINTS TOP TO BOTTOM IN TERMS OF STOCK MARKET REACTION. THEY ARE JUST MORE VOLATILE COMPANIES NOW, GIVEN WHAT HAS HAPPENED TO RETAIL. AND OF COURSE, YOU THROUGH THE PANDEMIC IN, AND YOU COULD ARGUE THAT HAS REALLY HEIGHTENED VOLATILITY. LISA: DAVE WILSON IS NOT A NORDSTROM OR A MACY'S GUY. HE'S A LOUIS VUITTON KIND OF GUY, I THINK. THERE IS A QUESTION, THOUGH, OF HOW MUCH THERE HAS BEEN A SHIFT AWAY FROM BRICK-AND-MORTAR, AND NOW KIND OF BACK TO BRICK-AND-MORTAR, WITH EVEN AMAZON OPENING SOME STORES, DISTRIBUTION STORES, BUT ALSO THIS EMPHASIS ON A MULTIFACETED STOREFRONT THAT CAN ALSO DO EVERYTHING IN TERMS OF DELIVERIES AND PICKUPS. HOW MUCH HAVE THESE STORES ADAPTED TO THAT, AND WHAT KIND OF TRACTION ARE THEY GETTING? DAVE: I BELIEVE THE WORD YOU ARE LOOKING FOR IS ON THE CHANNEL -- IS ON THE CHANNEL. THAT IS -- IS OMNICHANNEL. THAT IS THE KIND OF JARGON OF THE INDUSTRY, BEING ABLE TO BUY ONLINE, PICK UP IN THE STORE, WHATEVER YOU WANT. THESE COMPANIES HAVE ADAPTED TO THAT , THEREFORE MAKING SHOPPERS HAPPIER. SO THEY HAVE ADAPTED TO SOME EXTENT, BUT THE IDEA OF AMAZON GOING IN THE OTHER DIRECTION TELLS YOU THAT THERE IS VALUE IN ACTUALLY BEING IN A LOT OF PLACES SO PEOPLE CAN PICK UP STUFF, EVEN IF THEY ORDERED ONLINE. TOM: DID YOU EVER SEE NRBQ, THE NEW RHYTHM AND BLUES QUARTET? DAVE: I CAN'T SAY I DID. TOM: THEY WERE PHENOMENAL. I SAW THEM IN NEWPORT, RHODE ISLAND. THESE GUYS WERE FROM KENTUCKY AND THEY ENDED UP WITH A RECORD PLAN IN NEW YORK. IT WAS LIKE AN ORIGINAL BLUES THING, NRBQ. DAVE: I AM SORTA FAMILIAR WITH THE MUSIC, NOT ENOUGH THAT I CAN SAY TITLES OF THE TOP OF MY HEAD. TOM: DID YOU LIKE I DID THE BEST FROM NORDSTROM DOWN TO MACY'S? DAVE: I LIKE THAT. LISA: HE NEEDS THE EGO BOOST, COME ON. DAVE: NOW YOU GOT TO MAKE OUT HOW TO GET THAT BUS TO STOP AT KOHL'S. TOM: I THINK SOME OTHERS WOULD SAY IT IS NOT WORKING. FRANCINE: TOM, IF ANYBODY BELIEVES THAT YOU TAKE THE BUS ANYWHERE, THEN THEY WILL BELIEVE ANYTHING. [LAUGHTER] TREASURIES AT 5%. LISA: I WILL SAY, YOU WERE TALKING ABOUT THE BAND, CAN WE TALK ABOUT HAVING A DRINK OF UZO ? TOM: UZO? FRANCINE: UZO AND DOING LUXURY SHOPPING. TOM: I WOULDN'T KNOW ANYTHING ABOUT THAT. LISA: IT IS INTERESTING TO SEE ALL OF THESE TRANSFORMATIONS, AND INTERESTING THAT DAVE ALSO POINTED TO RETAIL SALES COMING DOWN. WE WILL BE GETTING RETAIL SALES DATA TOMORROW, JUST AHEAD OF THE POWELL SPEECH. INTERESTING TO SEE IF WE WILL CONTINUE TO SEE MOMENTUM THERE. TOM: IN THE NEXT HOUR, SAM STOVALL WITH US. WE'VE DONE A LOT ON EQUITIES RECENTLY. WE ARE GETTING REAFFIRMATION, AND SAM STOVALL IS NEVER A SUPER BULL, SUPER BEAR. THAT WILL BE MUST LISTEN, MUST WATCH. CLAIMS IN HALF AN HOUR. THIS IS BLOOMBERG. GOOD MORNING. ♪ > > IF YOU LOOK AT EVERY THING WE'VE BEEN THROUGH, IT IS NOT CLEAR WE WENT THROUGH A RECESSION, SO THEREFORE IT IS NOT LIKELY WE ARE GOING INTO A RECOVERY. > > THERE'S ENDLESS REASONS FOR OPTIMISM IF INTACT GROWTH IS ACCELERATING. > > MONETARY POLICY IS GETTING A BIT MORE RATIONAL. > > THE BIG PROBLEM IF WE DON'T START TAPERING IS THE PRESSURE OF INFLATION. > > I WOULD WATCH THE DEBT CEILING. I THINK YOU'VE GOT TO FEAR THE DEBT CEILING. SEPTEMBER IS GOING TO BE A WHITE KNUCKLE EVENT. > > THIS IS "BLOOMBERG SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. LISA: COUNTDOWN TO JOBLESS CLAIMS. COUNTDOWN TO PERSONAL SPENDING. GOOD MORNING. THIS IS "BLOOMBERG SURVEILLANCE" ON BLOOMBERG RADIO, BLOOMBERG TELEVISION. JON FERRO OFF, FRANCINE LACQUA VERY MUCH IN. WE ARE ABOUT 30 MINUTES AWAY FROM THESE INITIAL JOBLESS CLAIMS. DOES ANY DATA AT THIS POINT MATTER? TOM: I THINK THE DATA MATTERS, FRANKLY. YOU GOT A DISPARITY BETWEEN THE SO-CALLED HARD DATA IN THE SOFT DATA, THE EMOTIONAL DATA, CONFIDENCE AND ALL OF THAT, WHICH SHOWS A LOT GRIMMER PICTURE. BUT THE TREND OF THE WEEKLY CLAIMS DATA, WHICH IS ITS OWN BEAST, I WOULD FOLDED IN WITH THE JOLTS DATA TO GET A BETTER PICTURE. BUT IT IS VERY CONSTRUCTIVE. WE HEAR THAT FROM THE EQUITY BULLS. LISA: I'M LOOKING AT SOME OF THESE SPEECHES, AND I HEARD WHAT ESTHER GEORGE SAID, AND THERE'S A WHOLE LOT OF WE ARE DOING A LOT OF WATCHING. IT IS NOT CLEAR WHAT THEY ARE GOING TO DO IN TERMS OF DOING. FRANCINE: NO, BUT IT WAS A FANTASTIC INTERVIEW THAT MICHAEL MCKEE HAD WITH ESTHER GEORGE BECAUSE IT IS VERY CLEAR SHE WAS READY TO GO. I KNOW THIS IS PARTLY BECAUSE SHE'S PRESIDENT OF THE FEDERAL RESERVE BANK OF KANSAS CITY, BUT IN GENERAL, SHE JUST SAYS POLICYMAKERS AT THIS POINT NEED TO GET STARTED, AND I DO FEEL THAT MAY BE THE LAST TWO TO THREE WEEKS, THERE'S BEEN MORE OF A TILT FROM POLICYMAKERS THAT THE BIGGER WORRY IS ACTUALLY A POLICY MISTAKE BECAUSE YOU DON'T ACT QUICKLY ENOUGH, RATHER THAN LEAVE ACCOMMODATION TOO LATE. LISA: THIS IDEA OF THE BALANCE OF RISKS AND WHERE ED LIES, IS IT MORE TOWARDS OVERSHOOTING INFLATION OR PERHAPS NOT BEING EASY FOR LONG ENOUGH? THIS ALL COMES AT A TIME WHEN THE STOCK MARKET CANNOT GO HIGH ENOUGH FOR ANYBODY. THIS TO ME I THINK IS THE KEY ASPECT. HOW DOES THE FED RESPOND TO A BUOYANT AND EVER MORE BUOYANT STOCK MARKET? TOM: I AM GOING TO STOP THE SHOW AND SAY IT IS REAL SIMPLE. THE DATA IS AS EX POST AS I HAD EVER SEEN IN MY LIFE. THERE ARE SOME NEW FANGLED THEORIES THAT ARE GOING TO BE IN THOSE PAPERS AT THE FED. YOU TRUMPETED THE INEQUALITY DEBATE, THE NEW MISSION FOR THE FED. THAT'S GREAT. BUT THEY ARE GOING TO DO ONLY ONE THING, WAIT FOR THE DATA. LISA: BUT FRANCINE'S POINT, THE DATA IS BIFURCATED. YOU ARE SEEING INFLATIONARY PRESSURES AND DATA THAT MIGHT SUPPORT WHERE THEY ARE GOING. THE IDEA IS IF THEY WAIT TOO LONG, DO THEY HAVE THE TOOLS TO COUNTER INFLATION? DO THEY HAVE THE TOOLS TO POTENTIAL HE TAMPED DOWN ON TRENDS THAT ARE INDEPENDENT OF THEIR PURCHASES? TOM: IT WILL BE INTERESTING TO SEE TOMORROW IF CHAIRMAN POWELL BRINGS IN ONE OF THE INFLATION SUMMARIES LIKE THE DALLAS TRENDS OR THE ATLANTA INFLATION DATA, AND MY FAVORITE, THE CLEVELAND FED AS WELL. LET'S DO DATA. FUTURES RED AND GREEN ON THE SCREEN. THE VIX BORING, 17.31. WE ROUND UP TO 1.36 PERCENT ON THE 10 YEAR YIELD. I'M SORRY, THIS IS A TREND THAT BEARS LOOKING AT INTO THURSDAY, INTO FRIDAY, INDEED INTO NEXT WEEK AS WELL, AS WE HAVE SEEN YIELDS COME BACK VERY NICELY. I AM GOING TO LEAVE IT THERE RIGHT NOW BECAUSE WHAT YOU WANT TO HEAR ABOUT IS THE EQUITY MARKET. DOW 35,405. SAM STOVALL A FEW YEARS AGO WAS CONSIDERING THE DOW AT 350 OR WHATEVER IT WAS BACK THEN COME UP WITH CR FORAY -- WITH CFRA, THEIR CHIEF INVESTMENT STRATEGIST. WHAT IS THE LEVEL OF YOUR BULLISH BELIEF RIGHT NOW? SAM: GOOD MORNING, AND THANK YOU FOR THAT INTRO. ANYWAY, THE FEELING IS THAT THE PATH OF LEAST RESISTANCE CONTINUES TO BE HIGHER, EVEN THOUGH WE HAVE SEEN A CREEPING UP OF THE 10 YEAR YIELD. WE ARE STILL SEEING INVESTORS GRAVITATING TOWARD THE GROWTH SIDE OF THE EQUATION, ALSO LOOKING TOWARDS REAL ESTATE, ETC. SO 4620 IS OUR TARGET. TOM: LISA, PLEASE, GO AHEAD. MY FAULT. LISA: NO WORRIES. I JUST GOT TO JUMP IN BECAUSE YOU TALK ABOUT 4600, YOU SOUND LIKE A BEAR. THIS IS A MARKET WHERE PEOPLE CAN'T GET BULLISH ENOUGH. ARE YOU ALSO THINKING 5000, 6000, 7000, AND PROJECTING OUT INCREDIBLE EARNINGS AND RETURNS FOR THE FORESEEABLE FUTURE? SAM: WHAT IS THE OLD SAYING? YOU TARGET A PRICE, BUT NOT A DATE, OR YOU FORECAST A DATE, BUT NOT A PRICE. BUT YES, THOSE NUMBERS YOU MENTIONED WILL BE OBTAINED SOMETIME DOWN THE ROAD. BUT I THINK WE ALSO HAVE TO MAKE SURE THAT WE ARE RISK MEDITATORS AT THE SAME TIME. WE HAVE GONE THREE TIMES AS LONG AS WE NORMALLY HAVE BETWEEN DECLINES OF 5% OR MORE. I THINK THAT THE MARKET IS VULNERABLE TO SOME SORT OF AN UPSET, WHERE IT COMES FROM A POLICY MISSTEP, FROM GEOPOLITICAL FACTORS, ETC. SO I THINK THAT WE REALLY HAVE TO JUST NOT ASSUME THAT THE SKY IS THE LIMIT. FRANCINE: HOW DO CURRENCIES ACTUALLY PLAY INTO SOME OF YOUR EQUITY CALLS? SAM: GOOD MORNING, FRANCINE. CURRENCY IS AN IMPORTANT PART. WE LOOK AT THE TECHNICALS OF THE EURO VERSUS THE U.S. DOLLAR, THE WE GETTING THAT HAS BEEN EXPERIENCED OVER THE INTERMEDIATE TERM IMPLIES THAT INVESTORS DO EXPECT INTEREST RATES HERE IN THE U.S. TO BE PICKING UP, POSSIBLY BECAUSE OF THE FED INITIATING THEIR TAPERING IN THE FOURTH QUARTER OF THIS YEAR, POSSIBLY BECAUSE OF THE CONTINUED IMPROVEMENT IN ECONOMIC ACTIVITY AND MAYBE EVEN THE PEAKING OF THE DELTA VARIANT. TOM: YOU ARE ACCLAIMED FOR UNDERSTANDING EVOKE OF THE MOMENT. THE FAD. THE WORLD STOPPED LIKE 14 TIMES A DAY TO LOOK AT THE TECH DATA, AND THERE WAS A PUT CALL RATIO PUT ON. WHAT IS THE FAD RIGHT NOW WHERE YOU SAY GET YOUR RADAR UP AND BE CAUTIOUS? SAM: NO PRESSURE THERE, HUH, TOM? TOM: NONE AT ALL. SAM: WELL, I THINK THE FED REALLY IS GROWTH VERSUS ASKED THE FAD -- THE FAD REALLY IS GROWTH VERSUS VALUE. INVESTORS ARE CHOCK-FULL OF GROWTH STOCKS ONCE AGAIN, WHETHER IS TECH, CONSUMER DISCRETIONARY, AND THE REAL QUESTION IS WHEN OR IF, AND I THINK IT IS MORE WIN, NOT IF, THAT WE SEE A ROTATION BACK INTO THE VALUE SIDE OF THE EQUATION BECAUSE THE ECONOMY IS EXPECTED TO BE IMPROVING. WE ARE LIKELY TO BE SEEING PASSAGE OF ONE OR BOTH INFRASTRUCTURE PACKAGES, AND WE WILL START TO SEE THE 10 YEAR YIELD CREEP UP ONCE AGAIN. LISA: JIM B UNCLE WAS ON BLOOMBERG -- JIM BIANCO WAS ON BLOOMBERG YESTERDAY, TALKING ABOUT THIS BELIEF IN STOCK INVESTMENTS THAT IF THERE IS A BIG DRAW DOWN, AND A BIG DRAWDOWN COULD BE 5% TO 10%, THE FED WILL STEP IN. THEY WILL DECELERATE THEIR TAPERING. THEY WILL BECOME EVEN MORE ACCOMMODATIVE. DO YOU AGREE THAT THERE IS THIS SORT OF IMPLICIT STOP BAKING TO VALUATIONS -- IMPLICIT BACKSTOP BAKED INTO VALUATIONS WHERE THEY ARE NOW? SAM: I THINK THE FED WILL BE STEPPING AND SHOULD WE SEE A 5% OR 10% DECLINE BECAUSE THOSE ARE FAIRLY NATURAL IN THE STOCK MARKET, AND I THINK IF WE DO START TO SEE THE STOCK MARKET FALL INTO BEAR MARKET TERRITORY AND THERE IS AN ACTUAL RISK TO OUR FINANCIAL SYSTEM, THEN BY ALL MEANS, THE FED WILL STEP IN. BUT I DON'T REALLY THINK THE FED IS GOING TO BE STEPPING IN IF WE TRIP AND FALL AND SCRAPE BARNEY -- SCRAPE OUR KNEE. TOM: WE SPOKE YESTERDAY OF THE ANNIVERSARY OF STEVE JOBS RESIGNING FROM APPLE. EVERYBODY, INCLUDING ME, GOT THAT WRONG. STEVE JOBS DIED TRAGICALLY ON OCTOBER 5 10 YEARS AGO, AND THIS GUY TIM COOK, HE CAN'T DO IT. YOU HAVE CHRONICLED APPLE TO THE MOON. HOW DO YOU KNOW WHEN TO GET OFF THESE STOCKS THAT JUST GO AND GO AND GO? SAM: WELL, YOU LOOK AT THE FUNDAMENTALS. YOU LOOK AT THE TECHNICALS, AND YOU LISTEN TO YOUR ANALYSTS. WHAT IS THE OLD SAYING? THE ANALYSTS DO THE WORK, BUT THE INVESTMENT STRATEGISTS TAKE THE CREDIT. TOM: LOVE THAT. SAM: I HEAR WHAT ANGELO ZENO SAYS ABOUT APPLE AND WAIT FOR HIS COMMENTARY FROM A FUNDAMENTAL PERSPECTIVE. TOM: WHAT DOES HE SAY RIGHT NOW? SAM: RIGHT NOW, STILL A FAVORABLE OUTLOOK FOR APPLE. WE HAVE IT RANKED FOUR STARS, SO WE ARE WILLING TO BET OUR BONUS ON IT. TOM: SO MUCH OF THIS IS NOT MAKING MONEY, IT IS NOT LOSING MONEY. WHEN I LECTURE ON THIS, AND STOVALL DOESN'T GET A ROYALTY, I SAY NOTHING HELPS YOU NOT LOSE MONEY LIKE THE STAR SYSTEM OF CFRA. IT IS A GREAT AND BEAUTIFUL THING. ESTHER STOVE ALL, GO AWAY. THANK YOU. THAT WAS A CLINIC. YOU SO MUCH. SAM STOVALL, I CAN'T SAY ENOUGH ABOUT HIS WORK OVER THE YEARS. THE STAR SYSTEM, EVERYBODY IS LIKE, BORING. IT IS DODGY. -- IT IS STODGY. IT IS LIKE WATCHING PAINT DRY. MAN, WHEN THEY FALL OUT OF LOVE WITH SOMETHING ON THE STAR SYSTEM, GET YOUR RADAR UP. LISA: THIS IDEA THAT PEOPLE TAKE NOTICE AND THERE IS RESPECT FOR THAT. I JUST WONDER HOW THE STAR SYSTEM ACCOUNTS FOR VALUATION AND HOW THE INPUT OF THE 10 YEAR INTO THAT. I'M GOING BACK TO DAVE WILSON'S CHART EARLIER IN THE WEEK, WHERE HE WAS LOOKING AT THE CORRELATION, THE INVERSE CORRELATION BETWEEN BOND YIELDS AND TECH STOCKS. I WONDER HOW MUCH THAT CAN CONTINUE. IF YOU HAVE THESE REVENUES AND THIS SECULAR STORY, HOW MUCH DO THESE HAVE TO BE LINKED, OR ARE THEY POTENTIALLY GOING TO TRY TO GO THEIR OWN WAYS THE WORLD BECOMES A ROSIER PLACE? TOM: IT IS GOING TO BE INTERESTING TO SEE. FRANCINE, QUICKLY HERE, THE EQUITY MARKETS, MANY PEOPLE SAYING GO LONG EUROPE, THAT YOU'VE GOT TO OWN EUROPE. FRANCINE:FRANCINE: A LOT OF PEOPLE, AND THAT IS ALSO A CURRENCY CALL. SO IF YOU WERE LISTENING TO SALMON SOME OF THE OTHERS, JANET HENRY THIS MORNING, IT IS ALSO A EURODOLLAR CALL. WHEN YOU LOOK AT SOME OF THE BUDGETS, IT COULD BE DISRUPTED BECAUSE OF ELECTIONS. IF YOU LOOK AT THE UNCERTAINTY OF THE ELECTIONS, BE IT GERMANY, FRANCE EIGHT MONTHS FROM NOW, YOU DON'T KNOW WHAT COMES NEXT. SO THAT COULD CHANGE THE TRAJECTORY FOR SOME OF THESE EUROPEAN EQUITIES, UNLESS EUROPEAN EQUITIES SKEW TOWARDS THE U.S. MARKET. TOM: IRA JERSEY WITH US. NO, NOT ON PREMIER FOOTBALL COME ON WHAT WE ARE SEEING IN LIQUIDITY AND THE WALL OF MONEY OUT THERE, PARTICULARLY OVERNIGHT REPO. REALLY LOOKING FORWARD TO CATCHING UP WITH IRA JERSEY. JOHN RYDING AFTER MICHAEL MCKEE AND CLAIMS. REALLY STRONG 40 MINUTES TO COME. STAY WITH US. THIS IS BLOOMBERG. ♪ RITIKA: WITH THE FIRST WORD NEWS, I'M RITIKA GUPTA. THE U.S. AND U.K. ARE WARNING CITIZENS IN AFGHANISTAN NOT TO TRAVEL TO THE KABUL AIRPORT. THEY SAY THERE ARE THREATS OF A TERROR ATTACK. DIVIDED IN ADMINSTRATION SAYS IT KNOWS ABOUT -- THE BIDEN ADMINISTRATION SAYS IT KNOWS ABOUT 1500 AMERICANS STILL IN THE COUNTRY. THE IS REALLY PRIME MINISTER PLANS TO DISCUSS STRATEGY ON IRAN -- THE ISRAELI PRIME MINISTER PLANS TO DISCUSS STRATEGY ON IRAN TODAY AT THE WHITE HOUSE. THE U.S. FAVORS A DOUBLE MEDIC AGREEMENT TO HALT NUCLEAR ACTIVITIES -- A DIPLOMATIC AGREEMENT TO HALT NEWS THE ACTIVITIES. VICE PRESIDENT KAMALA HARRIS SAID SHE BROUGHT UP THE ISSUE OF DISSIDENTS SERVING PRISON TERMS, BUT WHEN QUESTIONED, SHE DID NOT ASK PLANE HOW VIETNAM'S HUMAN RIGHTS RECORD IS DIFFERENT FROM THAT OF CHINA, ANOTHER COMMUNIST COUNTRY THAT DOES NOT TOLERATE DISSENT. THE BOEING 77 WAS GROUNDED MORE THAN ONE IT -- 737 WAS GROUNDED MORE THAN ONE YEAR AGO. I FEDERAL REGULATORS HAVE NOW CLEARED THE CHANGES IT HAS MADE. BLOOMBERG HAS LEARNED WESTERN DIGITAL IS IN TALKS TO MERGE WITH JAPAN'S KYOSHA. THE COMPANIES ARE A LONG TIME JOINT VENTURE PARTNER. IT WOULD CREATE A BIGGER COMPETITOR FOR SAMSUNG IN THE MARKET FOR MEMORY CHIPS. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. ♪ > > I THINK IT'S UNLIKELY. I DON'T THINK A LOT OF INFORMATION HAS COME OUT TO REALLY CHANGE THE FORECAST SINCE THEY HAD THEIR LAST MEETING. I DON'T THINK JAY POWELL WANTS TO TIP THE APPLE CARD. I DON'T THINK HE WANTS TO PUSH PEOPLE IN ONE DIRECTION OR THE OTHER. OBVIOUSLY A LOT OF DIFFERENT VIEWS AROUND THAT FED TABLE. I DON'T THINK HE'S GOING TO TRY TO SAY HERE IS MY VIEW AND EVERYBODY BETTER FOLLOW IN. TOM: THE MATHEMATICIAN FROM THE BOOTH SCHOOL, RANDALL KROSZNER, FIRST RATE FINANCIAL ECONOMICS, ALWAYS GOOD WITH THE BOOTH SCHOOL IN LONDON. WE ARE THRILLED TO GET HIS COMMENTS ON THE EVENTS FORWARD. WE WILL DIGRESS RIGHT NOW AND TALK LIQUIDITY. IRA JERSEY IS DEFINITIVE ON THIS. HE DRIVES FORWARD BLOOMBERG INTELLIGENCE RATE STRATEGY. HE'S LOOKING AT THE 30 YEAR BOND, THE AUSTRIAN 90 YEAR BOND. I JUST WANT TO KNOW ABOUT THE OVERNIGHT MONEY. I'M SORRY, IT IS INCHING $1 TRILLION, ONE $.1 TRILLION. HOW AND WHEN DOES THE OVERNIGHT REPO MARKET STOP ITS ASSENT -- STOP ITS ASCENT? IRA: THE OVERNIGHT REPO FACILITY IS GOING TO CONTINUE TO GROW BECAUSE THE ECONOMY DOESN'T NEED CASH AT THE MOMENT. ALL THAT THE FED IS DOING BY BUYING ALL THESE ASSETS IS CREATING MORE CASH, WHICH THEN PEOPLE SAY, WHAT ARE WE GOING TO DO WITH THIS? WE DON'T WANT TO MAKE ZERO BECAUSE OUR ALTERNATIVE IS THE REPO MARKET, AND THAT IS NOT MAKING ANY MONEY. SO THEY PUT THE MONEY TO THE FED FOR A WHOPPING FIVE BASIS POINTS. BUT IT IS ABOVE ZERO, RIGHT? SO PEOPLE ARE PUTTING THEIR MONEY THERE. OUR ESTIMATE IS IT IS GOING TO GET SOMEWHERE BETWEEN $1.7 TRILLION AND $1.8 TRILLION BEFORE IT IS ALL SAID AND DONE, BUT THAT IS ASSUMING THAT THE FEDERAL RESERVE STARTS TO REDUCE DEBT PURCHASES, THE DREADED TAPER IN NOVEMBER. TOM: A SMART GUY LIKE YOU WHO SAYS CALM DOWN, $1.7 TRILLION. OTHERS SAY TO TRILLION DOLLARS. WHATEVER. DO YOU HAVE ANY EXPERIENCE IN HOW WE COME DOWN FROM $1.7 TRILLION? IRA: WE DO HAVE A LITTLE EXPERIENCE BECAUSE AT THE END OF WHEN WE TAPERED LAST TIME, THE FEDERAL RESERVE HAD THE REVERSE REPO FACILITY OR HAD SOMETHING LARGELY SIMILAR, AND WHAT HAPPENS IS OVER TIME, THE ECONOMY CONTINUES TO GROW. MORE CASH IS DEMANDED. LESS AND LESS PEOPLE USE THE REPO FACILITY. THAT IS SOMETHING THAT I SUSPECT WILL HAPPEN AGAIN. OF COURSE, NOW IT IS SIGNIFICANTLY LARGER. THE FED PURCHASES HAVE BEEN SIGNIFICANTLY LARGER. THE MARKET IS JUST VIGOR. ONE OF THE ODDITIES THAT HAS OCCURRED OVER THE LAST DECADE AND A HALF OR SO IS WHEN YOU GO BACK AND LOOK AT 2005, 2006, WHEN I FIRST STARTED IN RATES AND MOVED FROM CREDIT, THE REPO MARKET, THE NONFEDERAL REPO MARKET IS ABOUT THE SAME SIZE NOW AS IT WAS THEN. MEANWHILE, THE TREASURY MARKET, WHICH THE REPO MARKET, THE REPURCHASE MARKET HELPS FUND, IS 5, 6 TIMES LARGER. SO THERE IS A FUNDING IN THE ECONOMIC GAP OUT THERE. TOM: LISA, DO YOU UNDERSTAND THAT IN THE FIXED INCOME BRACKET , TO MOVE FROM RATES TO CREDIT IS LIKE GOING TO THE DARKSIDE? LISA: BUT TO MOVE FROM CREDIT TO RATES IS TRADITIONALLY THOUGHT OF AS A DOWNGRADE COME OF IT IN THIS WORLD -- DOWNGRADE, BUT IN THIS WORLD, IT IS THE OPPOSITE. IT IS THE SAME STORY IN MANY CASES, APART FROM SOME OF THE SECURITIES SELECTION. WHEN YOU TALK ABOUT THE REPO MARKET, WE ARE TALKING ABOUT THE FUNCTIONING OF THE WORLD'S GUEST AND DEEPEST MARKET THAT IS ACTUALLY STARTING TO FUNCTION A LITTLE LESS WELL. YOU ARE SEEING LIQUIDITY DRY UP IN CERTAIN CORNERS OF THE TREASURY MARKET, AT A TIME WHEN PEOPLE SAY THERE IS POTENTIAL FOR SOME SORT OF DISRUPTION. WHAT IS YOUR VIEW ON THE FRAGILITY WE ARE SEEING UNDER THE SURFACE? IRA: THE ISSUE WITH THE TREASURY MARKET RIGHT NOW IS THERE'S WHAT I CALL AN ILLUSION OF LIQUIDITY. THERE'S LIQUIDITY, AND ALL SOMETIMES THERE IS NOT. YOU SO THAT LAST MARCH. THAT'S ONE OF THE REASONS WHY THE FED STEPPED IN AND DID THOSE MASSIVE $1 TRILLION WORTH OF TREASURY PURCHASES. YOU SAW IT AT OTHER POINTS OVER THE LAST DECADE OR SO, TOO. A BIG REASON FOR THAT IS THE BANK REGULATIONS. THE BATTLE WITH THREE REGULATIONS, SOME PEOPLE TALK ABOUT DODD-FRANK AND THE VOLCKER RULE. IT IS NOT AS MUCH THAT AS THE FACT THAT ANGST AND DEALERS OWNED BY BANKS IN LARGE PORTION CAN'T EXPAND THEIR BALANCE SHEET AND TRADE THEIR BALANCE SHEET AT WILL. THEY HAVE TO KEEP WITHIN CERTAIN LANES. BECAUSE OF THAT, WHEN THERE IS A SIGNIFICANT DEMAND OF SELLING OR BUYING, YOU CAN SEE THESE WILD SWINGS AND LIQUIDITY JUST DRIES UP. I THINK THAT IS GOING TO BE SOMETHING THAT ONCE OR TWICE A YEAR, IS GOING TO REAR ITS UGLY HEAD, YOU WILL GET OUTSIDE MOVES , AND PEOPLE WILL DO STUDIES AND EVERYTHING ELSE. BUT AT THE END OF THE DAY, THERE IS NO CIRCUIT BREAKER TO ALLOW DEMAND TO BE ABSORBED WHEN THERE IS A SIGNIFICANT AMOUNT OF SELLING OR BUYING. FRANCINE: WHY DO WE NOT HAVE THOSE CIRCUIT BREAKERS? IS ANYONE LOOKING AT PUTTING THEM IN PLACE? IRA: THE REGULATORS TALK ABOUT THIS AS SAYING THEY WANT INSTITUTIONS TO BE SAFE AND SOUND. IN ORDER TO DO THAT, YOU HAVE TO HOLD E-CIG AND AMOUNT OF CAPITAL. KEEP IN MIND, BEFORE BATTLE TO WAS IMPLEMENT INCOME OF THE TREASURIES HAD ZERO RISK WEIGHT UNDER THE BASEL REGULATIONS. SO BANKERS COULD HOLD AS MANY AS THEY WANTED AT ANY RATE THEY WANTED. A LOT OF INTEREST RATE EXPOSURE COULD BE BASICALLY TAKEN ON BALANCE SHEET. THEY CAN'T DO THAT ANYMORE BECAUSE THE BASEL REGULATIONS SO YOU HAVE TO HOLD A CERTAIN AMOUNT OF CAPITAL, EVEN AGAINST THE SAFEST ASSETS OUT THERE. THAT'S ONE OF THE REASONS WHY THE REPO MARKET HASN'T GROWN BECAUSE REPO, WHEN YOU DO REPO NOW, YOU HAVE TO HOLD EQUITY CAPITAL AGAINST THAT. EVEN THOUGH THE UNDERLYING IS SECURED BY A TREASURIES SECURITY. TOM: YOU KNOW, IT IS AUGUST. I AM WORRIED ABOUT TED LASSO HAVING A CHRISTMAS SHOW IN AUGUST. WHAT WAS THAT ALL ABOUT? DOES IT MATTER THAT YOU'RE COMING BACK TO COACH RICHMOND? DOES THAT REALLY WORK IN SOCCER? [LAUGHTER] IRA: PLAYER COACHES CAN WORK OUT VERY WELL. YOU LOOK AT SOME OF THE HIGHEST LEVEL COACHES, SOME OF THEM WERE PLAYERS, AND SOME OF THEM WERE NOT EVEN NECESSARILY SOME OF THE BEST PLAYERS. YOU LOOK AT A GUY AT LIVERPOOL WHO'S ONE OF THE BEST MANAGERS IN THE WORLD, AND HE NEVER PLAYED. HE NEVER WON A CHAMPIONS LEAGUE. YOU GO ACROSS THE OTHER SIDE AND LOOK AT SOMEONE AT MANCHESTER CITY, AND OF COURSE, HE WON EVERYTHING THERE WAS. SO I THINK IT IS IMPORTANT FOR SOMEONE TO KNOW THE GAME AND BE A STUDENT OF THE GAME, AND A LOT OF TIMES THOSE ARE PLAYERS. TOM: I MISS JON SO MUCH. LISA: OH MY GOD. I WAS JUST WRITING THAT. YOU ARE CLEARLY MISSING HIM A LOT. TOM: DID YOU SEE IRA JERSEY TOTALLY CHANGE THERE, TALKING ABOUT RICHMOND AND ALL OF THAT? FRANCINE: I STILL CAN'T BELIEVE YOU KNOW THE RULES. WHAT, 18 MONTHS AGO, YOU DIDN'T EVEN KNOW WHAT WAS. TOM: I CAN'T EVEN SPELL THAT RIGHT, RICHMOND. LISA: I THOUGHT YOU WERE SAYING SOCCER. [LAUGHTER] TOM: IRA JERSEY, THANK YOU SO MUCH ONYX PLANNING $1.1 TRILLION PLUS -- ON EXPLAINING $1.1 TRILLION PLUS. WE ARE FIVE MEN ITS WAY FROM CLAIMS. LISA: THIS IS IMPORTANT -- FIVE MINUTES AWAY FROM CLAIMS. LISA: THIS IS IMPORTANT. TO SEE ANOTHER POST-PANDEMIC FLOW IN THE NUMBER OF CLAIMS HIGHLIGHTS THAT THE PROBLEM IS NOT WITH PEOPLE LEAVING WORK OR GETTING FIRED. IT IS ABOUT GETTING PEOPLE HIRED, AND THAT IS WHAT THE FED IS TRYING TO GET THEIR HANDS AROUND. TOM: MICHAEL MCKEE WILL JOIN US, AND THEN WE ARE THRILLED TO BRING YOU JOHN RYDING OF BREAN CAPITAL, THEIR CHIEF ECONOMIC ADVISOR. STAY WITH US. THIS IS BLOOMBERG. TOM: THE YIELD 1.35% AS WE PREPARE FOR IMPORTANT ECONOMIC DATA. FRANCINE LACQUA, LISA ABRAMOWICZ, AND MYSELF. NOT ONLY THE GDP SECOND LOOK BUT THURSDAY CLAIMS DATA. WE ARE WAITING, AND WAITING, AND WAITING. MICHAEL MCKEE, WE ARE WAITING. THERE WE ARE. MICHAEL: WE HAVE THE NUMBERS YOU WANT TO SEE. THE JOBLESS NUMBERS FOR LAST WEEK. 353,000. THAT IS AN INCREASE OF 4000 FROM THE REVISED LEVEL BECAUSE WE HAVE TO LOOK AT THE REVISED LEVEL. THAT IS JUST NOISE. I WOULD NOT READ ANYTHING INTO THE MOVEMENT ABOUT DIFFICULTIES IN THE LABOR MARKET. ON THE BASIS OF HOW MANY PEOPLE IN TOTAL ARE GETTING CLAIMS, THIS IS INTERESTING. IT IS TWO WEEKS DELAYED. THIS WOULD INCORPORATE ALL THE STATES THAT STOPPED PAYING EXTENDED UNEMPLOYMENT BENEFITS, AND IT STILL RISES BY 182,000. A LITTLE OVER 12 MILLION. TOM: THE DELTA VARIANT? MICHAEL: IT IS IMPOSSIBLE TO SAY. I SUPPOSE IT COULD BE. YOU ARE LOOKING AT COMPANIES THAT DID NOT COME BACK RATHER THAN COMPANIES LETTING PEOPLE GO BECAUSE OF ALL OF THE ANECDOTAL EVIDENCE ABOUT HOW HARD IT IS TO FIND PEOPLE. TOM: THE THING I SEE ON THE BLOOMBERG TERMINAL IS GDP SECOND LOOK, 6.6%. ARE THERE ANY PAPERS AT JACKSON HOLE THAT WILL ADDRESS HOW AMERICA COMES OUT OF A BOOM ECONOMY DIFFERENT THAN THE LAST BOOM ECONOMY OF 1947? MICHAEL: IT DOES NOT LOOK LIKE THAT IS A TOPIC, HOW IT COMES OUT OF IT. THERE WILL BE TALK OF HOW MONETARY POLICY DEALS WITH THE NEW ENVIRONMENT WE FIND OURSELVES IN. YOU HAVE TO ESTABLISH WHAT YOUR NEW ENVIRONMENT IS. YOU MENTION 6.6%, WHICH IS .1% BETTER THAN THE INITIAL REPORT, .1% WORSE THAN THE FORECAST. PERSONAL CONSUMPTION .1% BETTER, 11.9% COMPARED TO 11.8%. NOT A MAJOR ADJUSTMENT. WHAT I WAS WONDERING ABOUT IS INVENTORIES. I WILL HAVE TO LOOK FOR THAT IN A SECOND. THAT WILL BE THE SWING FACTOR GOING FORWARD. LISA: IT IS INTERESTING TO ME THAT MARKETS ARE NOT MOVING MUCH ON THE DATA, EVEN THOUGH THERE IS SOME SURPRISED, ESPECIALLY THE DOWNSIDE CONSISTENTLY ACROSS THE BOARD. NOT JUST THE WRONG KIND OF UPSIDE SURPRISE, JOBLESS CLAIMS HIGHER, WHICH IS BAD, BUT IT IS ALSO PERSONAL CONSUMPTION COMING IN SOFTER THAN EXPECTED. I WONDER TO WHAT DEGREE MARKET SHRUG OFF ANY DATA AS SIMPLY BACKWARD LOOKING AT THIS POINT? MICHAEL: I THINK YOU HAVE TO WITH GDP FOR THE SECOND QUARTER BECAUSE THAT ENDED IN JUNE. WE WENT INTO JULY WITH SOME MOMENTUM. 11.9% IS NOT BAD. NOW WE DO NOT KNOW BECAUSE OF THE DELTA VARIANT IMPACT ON PEOPLE'S SPENDING HABITS. WE SAW IN THE RETAIL SALES REPORT FOR JULY A SURPRISING DROP IN THE NUMBER OF PEOPLE WHO ARE BUYING OR THE AMOUNT THEY BOUGHT ONLINE, WHICH IS WHAT YOU WOULD EXPECT THEM TO DO IF THE VARIANT WAS KEEPING THEM HOME. WE WILL HAVE TO SEE WHEN WE GET THE SPENDING NUMBERS TOMORROW ON WHAT SERVICES WERE LIKE FOR JULY. TOM: WE WILL SEE. MICHAEL MCKEE, THANK YOU SO MUCH . THE PAPERS RELEASED AT 7:00. THE YIELD IS 1.35%. NORWAY WITH NEWS. THE CENTRAL BANK -- TO STEP DOWN FEBRUARY OF NEXT YEAR. I ASSUME A MEASURED AND ESTEEMED ECONOMIST THAT IS SOMETHING ALONG THE CASE OF EXPECTATIONS. WE HAVE TO GET TO JOHN RYDING OF BREEN CAPITAL. THANK YOU SO MUCH FOR JOINING US. DO WE UNDERSTAND OR DO WE HAVE ANY INKLING OF HOW WE GET FROM BOOM ECONOMY TO 6.6% WITH A GLIDE PATH DOWN TO WHATEVER POTENTIAL GDP IS? THIS IS ORIGINAL, ISN'T IT? JOHN: IT WILL BE VERY DIFFICULT WITH MONETARY POLICY STILL IN FULL EASING MODE. THAT IS OBVIOUSLY GOING TO BE THE KEY THING PEOPLE ARE LOOKING FOR FROM THIS CONFERENCE IS WHAT HINT CHAIRMAN POWELL GIVES IN TERMS OF THE TIMING OF A TAPERING ANNOUNCEMENT. I WANT TO POINT OUT ONE THING YOU DID NOT PICK UP IN YOUR DISCUSSION OF GD REPORT -- OF GDP REPORT. THAT IS WE GET THE PROFIT SIDE OF THE ECONOMY FOR THE FIRST TIME. CORPORATE PROFITS WERE UP A NON-ANNUALIZED 4.2% IN THE QUARTER AND THAT IS IMPORTANT FOR DRIVING THE ECONOMY. ECONOMISTS LIKE TO THINK THEY ARE LOOKING AT THE DEMAND-SIDE CONSUMER SPENDING, BUT WE ALSO HAVE TO REMEMBER THE INCENTIVE TO INVEST, THE INCENTIVE TO HIRE. THE PROFIT DATA WERE VERY STRONG IN THIS REPORT. FRANCINE: OVERALL, DO YOU BELIEVE THE FED WANTS TO MOVE SO THEY DO NOT MISS THE BOAT? JOHN: I THINK THE FED IS DIVIDED AND I THINK CHAIRMAN POWELL HAS TO DECIDE WHICH SIDE OF THAT DIVISION HE WANTS TO COME DOWN ON. WE HAVE A SIGNIFICANT NUMBER OF PRESIDENTS AND AT LEAST ONE GOVERNOR WHO THINKS 2022 IS PROBABLY THE TIME TO LIFT ON RATES. TO LIFTOFF ON RATES, PRE-MUCH EVERYONE IS IN AGREEMENT YOU HAVE TO STOP BUYING TREASURIES, OTHERWISE IT GETS MESSY. I THINK IT IS DIVIDED. I DO THINK, COMING BACK TO TOM'S PERSPECTIVE, HOW DO YOU TRANSITION FROM A BOOM ECONOMY TO A MORE STABLE ECONOMY? YOU CANNOT DO IT WITH MONETARY POLICY IN FULL EASING MODE? LISA: JUST TO BRING HEADLINES FROM ONE OF THE FED OFFICIALS WHO HAVE THE IDEA THAT PERHAPS 2022 IS TIME FOR LIFTOFF, JIM BULLARD SPEAKING ON AN INTERVIEW ON CNBC SAYING THERE MORE INFLATION THAN EXPECTED, HE EXPECTS AT LEAST 2.5% INFLATION IN 2022 AND SAYS THE FED SHOULD GET ON WITH TAPERING. THIS ECHOES COMMENTS FROM ESTHER GEORGE THAT SHE DOES NOT SEE THE DELTA VARIANT AS POTENTIALLY DELAYING ANYTHING GOING FORWARD. BASED ON WHAT WE ARE SEEING, DO YOU THINK THERE IS MORE OF A LIABILITY FOR THE ECONOMY IF THEY HOLD OUT FOR LONGER AND DO NOT START TAPERING BY OCTOBER OF THIS YEAR? JOHN: I THINK THERE IS, AND FOR ONE REASON. THE FED CAN RAISE RATES WHEN IT HAS TO RAISE RATES. THE LATER YOU WAIT TO START TAPERING, THE FASTER YOU HAVE TO REDUCE THE PACE OF YOUR PURCHASES AT THE MORE DISRUPTIVE THAT MIGHT BE FOR MARKETS. THAT IS THE FIRST THING. AT A VERY LOW LEVEL OF YIELD, PREPARE THE MARKET FOR TAPER AND ASKED WHY ARE WE STILL USING WITH THE FEDERAL RESERVE? JIM BULLARD HAS 2.5% FOR NEXT YEAR'S INFLATION RATE, WE ARE AT 3%. WE ALL SEE THE RISK TO THE UPSIDE. A LOT OF THE SURVEYS CONTINUE TO COME OUT WITH VERY HIGH PRICE READINGS, THE KIND WE HAVE NOT SEEN SINCE THE EARLY 1980'S. IF YOU ARE MANAGING RISKS, THE GREATER RISK TO ME WOULD BE LOSING THE GAINS YOU MADE AGAINST INFLATION THAN THE RISK THE DELTA VARIANT IS GOING TO -- WE HAVE A VERY EFFECTIVE POLICY TOOL TO DEAL WITH THE DELTA VARIANT. IT IS CALLED VACCINATION. WE WILL GET BOOSTER SHOTS, AND STATES IN WHICH PEOPLE ARE NOT AS HIGHLY VACCINATED HAVE MUCH HIGHER BREAKOUT RATES. THAT IS REAL, PERSONAL, HUMAN TRAGEDY, UNNECESSARY DEATHS. MONETARY POLICY DOES NOT SPEAK TO THAT AND THE CLAIMS DATA DOES NOT SUGGEST THE DELTA VARIANT SEARCH IS HAVING A MATERIAL IMPACT ON THE ECONOMY. THE THIRD QUARTER MAY BE MUCH SLOWER THAN THE 6.6%. I DO NOT THINK THE CONSUMER, WITH EXCESS SAVINGS WILL BE A MAJOR FACTORY IN THE RECOVERY AND PUTTING THE BRAKES ON. TOM: JOHN RYDING, THANK YOU SO MUCH. TOO SHORT A VISIT. FRANCINE, YOU SIT IN LONDON AND YOU LISTEN TO THESE TALKS, AND IT HAS TO BE FOREIGN DISCUSSIONS , BUT YESTERDAY WE WERE TALKING ABOUT HOW JAY POWELL IS CENTRAL BANKER TO THE WORLD. IS HE A CENTRAL BANKER TO THE UNITED KINGDOM, THE TAPIR AND THE RATES AND ALL OF THE DYNAMICS. THE FISCAL STIMULUS. HOW DOES IT AFFECT GOVERNOR BAILEY AND THE REST OF THE UNITED KINGDOM? FRANCINE: EVERYTHING IS LATE. I WOULD SUGGEST IT AFFECTS THE ECB AND THE EUROZONE AS MUCH IF NOT MORE THAN THE U.K. BECAUSE THE U.K. IS A SMALL OPEN ECONOMY. EVERYTHING IS LINKED. YOU CAN SEE IT WITH THE COVID-19 SUPPLY CHAIN. WE ARE TALKING ABOUT THE BANK OF KOREA. WHENEVER THE FED DOES WILL TRANSLATE INTO POSSIBLY HIGHER INFLATION, TIGHTENING OF MARKETS. THE OTHER THING IS DO YOU STOP TAPERING AND RAISE RATES, IT IS VERY SIMILAR TO CONVERSATIONS THE ECB AND TRADERS IN EUROPE ARE HAVING. TOM: WE HAVE TO STOP AND DIGRESSED TO A TRANSACTION. LONG AGO AND FAR AWAY I WENT TO NEW HAMPSHIRE TO ONE OF THE PRIMARIES AND I SAT THERE WITH THE GUY FROM NEW JERSEY WHOSE NAME WAS AL, AND WE SAT IN THE LITTLE ROTUNDA OF PRIMARY NEW HAMPSHIRE, I BELIEVE IN NEW HAMPSHIRE THE RADISSON HOTEL. MSNBC WAS OVER THERE, BLOOMBERG DOING ITS THING. I WAS DOING INTERVIEWS. EVERYONE WAS ON THEIR CELL PHONES, AND EVERYBODY WAS LOOKING AT THE SAME THING. IT WAS A STRANGE THING CALLED POLITICO. LISA: YES. TOM: I AM LIKE, WHAT IS POLITICO. LISA: YOU'RE TALKING ABOUT THE HEADLINE THAT AXEL SPRINGER WILL BE BUYING POLITICO. I THINK TO MYSELF WHERE IS HE GOING WITH THIS? ARE WE GOING TO BE TALKING ABOUT GOING TO NEW HAMPSHIRE. ARE WE GOING TO BE TALKING ABOUT CELL PHONE USE? TOM: WHAT POLITICO INVENTED IS LINKAGE INTO HOW ALL OF BLOOMBERG LOOK AT THE CELL PHONE. ABSOLUTELY STUNNING. LISA: THE IDEA OF THE MEDIA AND THE ROLE AHEAD. WE WILL NOT BE DISCUSSING THAT IS MUCH AS MARKETS AHEAD ON THE OPEN. JOHN HANCOCK CO. CHIEF STRATEGIST EMILY ROWLAND JOINING US TO DISCUSS IT ALL. THIS IS BLOOMBERG. RITIKA: WITH THE FIRST WORD NEWS, I'M RITIKA GUPTA. RISING CORONAVIRUS CASES ARE LIMITING WHAT JEROME POWELL CAN SAY ABOUT WHAT IS NEXT FOR U.S. MONETARY POLICY. HE SPEAKS TOMORROW AT THE JACKSON HOLE SYMPOSIUM. THE CONFERENCE HAS TURNED INTO A VIRTUAL ONE. JAY POWELL IS EXPECTED TO REINFORCE THE MESSAGE IT WILL PROBABLY BE APPROPRIATE TO BEGIN SCALING BACK THE FED BOND BUYING PROGRAM BY THE END OF THE YEAR. WORKERS IN MANHATTAN HAVE LOWERED THEIR EXPECTATIONS FOR A RETURN TO OFFICES. A SURVEY BY THE PARTNERSHIP FOR NEW YORK CITY SAYS 41% OF OFFICE WORKERS ARE RETURNING. THAT IS DOWN FROM AN ESTIMATE. AUSTRALIANS ARE NOT EAGER TO TRAVEL OVERSEAS AFTER 18 MONTHS OF BEING CUT OFF FROM THE WORLD. DEMAND IS SO GREAT FOR BRINGING ITS -- THE AIRLINE CEO GIVES THE CREDIT TO THE AUSTRALIAN VACCINATION PROGRAM. > > WHAT YOU ARE SEEING HAPPENING AT THE MOMENT IS A RATE OF VACCINATIONS HIGHER THAN THE U.S. OR THE U.K. AT THE START THERE WAS OVERWHELMING DEMAND AND I EXPECT THAT TO CONTINUE. WE ARE COMFORTABLE WE SHOULD BE ABLE TO GET TO THE 70% OR 80% TARGET. RITIKA: FLIGHTS FROM AUSTRALIA TO THE U.S., SINGAPORE, JAPAN, THE U.K. AND CANADA WILL START IN DECEMBER. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON QUICKTAKE BY BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM RITIKA GUPTA. THIS IS BLOOMBERG. ♪ > > LIKE SO MANY OF THE PASSENGER AIRLINES ARE RIDERSHIP CONTRACTED SIGNIFICANTLY IN MARCH AND APRIL OF 2020. NOW WE ARE AT 65 TO 70% RECOVERY , WITH STRONGER BOOKINGS INTO THE FALL SEASON AND BEYOND. GOOD RIDERSHIP RECOVERY WHICH UNDERSCORES THE ESSENTIAL NATURE OF THE SERVICES WE PROVIDE. TOM: WILLIAM FLYNN OF AMTRAK, THE CHIEF EXECUTIVE OFFICER ON WHERE THEY STAND ON INFRASTRUCTURE AS WELL. WHAT HE KNOWS IS HE NEEDS PEOPLE FROM TRIBECA TO GO UP TO PENN STATION AND CLIMB ON BOARD AMTRAK, PARTICULARLY THE NEW AND WONDERFUL MORNING HAND DEVELOPMENT. THEY HAVE TO LIVE SOMEWHERE. WE SAW THAT YESTERDAY WITH STEVE ROSS COMING OUT WITH A HUGE ANNOUNCEMENT OF OPTIMISM ON NEW YORK CITY. WITH BLACKSTONE IT IS A QUARTER OF A BILLION DOLLARS TO REDO. TRUFFLES TRIBECA. WHAT KIND OF NAME IS THAT FOR A BUILDING? HONEST TO GOD. TRUFFLES TRIBECA IS WHAT THEY CALL IT. HE USED TO PLAY TRUFFLES IN AUSTRALIA. SCOTT CROWE JOINS US WITH CENTER SQUARE INVESTMENTS. BLACKSTONE, A QUARTER OF $1 BILLION. THAT IS OPTIMISM ON NEW YORK CITY REAL ESTATE. SCOTT: ABSOLUTELY, FROM A LIVE-IN STANDPOINT. NEW YORK CITY IS ALREADY BACK. RINSE ARE AT OR ABOVE -- RENTS ARE AT OR ABOVE PRE-COVID LEVELS. PEOPLE WANT TO LIVE IN CITIES. THEY LIKE THE EXCITEMENT, THE AMENITIES. THE BIGGER QUESTION IS WILL PEOPLE BE WORKING IN CITIES? THAT IS WHY THE OFFICE MARKET CONTINUES TO BE IN A FUNK. THE ESSENTIAL SIDE HAS COME ROARING BACK -- THE RESIDENTIAL SIDE HAS COME ROARING BACK. TOM: YOU HAVE BEEN RESEARCH-BASED. WHAT IS YOUR RESEARCH ON IF, HOW COME AND IN WHAT WAY WE WILL RETURN TO OUR OFFICES? SCOTT: OFFICE IS THE NEW RETAIL. THAT DOES NOT MEAN OFFICE IS THE NEW MALL, IT MEANS OFFICES THE NEXT MAJOR SECTOR THAT WILL BE DISRUPTED BY TECHNOLOGY. WE CAN SHOP FROM ANYWHERE AND NOW WE CAN WORK FROM ANYWHERE BECAUSE WE ARE LETTING TECHNOLOGY HELP DRIVE HOW WE WORK. WHAT IT MEANS IN A NUTSHELL IS WE ARE GOING TO GO BACK TO THE OFFICE, BUT IN A DIFFERENT WAY COME AND WE WILL USE OFFICE LESS THAN BEFORE BUT IT IS A DIFFERENT WAY. A LOT MORE COLLABORATION. IT WILL BECOME MORE OF A HOSPITALITY BASED MODEL WITH A LOT MORE FLEXIBILITY BUILT IN. EMPLOYERS WILL HAVE TO HAVE OFFICE SPACE THAT IS VERY ATTRACTIVE TO EMPLOYEES FROM AESTHETICS, FROM AMENITIES. THE WHOLE GAME WILL CHANGE. THINK OF THE APPLE STORE. IT IS BEAUTIFUL REAL ESTATE. APPLE'S IN 1000 MALLS ACROSS THE UNITED STATES. TOM: I AM LOOKING -- FRANCINE: I AM LOOKING AT PRICES IN MANHATTAN. IN SOHO IT IS $40,000 PER SQUARE FOOT. WHY WOULD I NOT LIVE OUTSIDE IN RENT SOMEWHERE A COUPLE OF DAYS A WEEK BECAUSE I'M WORKING THERE. SCOTT: IT IS A GREAT QUESTION. PEOPLE LIKE BEING AROUND PEOPLE. PEOPLE LIKE BEING IN SOHO, PEOPLE LIKE BEING IN MANHATTAN. THERE ARE MORE PEOPLE WHO LIKE BEING IN MANHATTAN THAN THERE ARE CONDOMINIUMS. THEY'RE PROBABLY NOT MORE COMPANIES THAT WANT TO BE IN MANHATTAN THAN THERE ARE OFFICE BUILDINGS. IF YOU LOOK AT DOLLAR PER SQUARE FOOT PRICING, IT IS $1800 FOR APARTMENTS AND $800 FOR OFFICE. THAT IS THE REASON FOR THAT. FRANCINE: ARE PEOPLE CHANGING WHAT KIND OF REAL ESTATE THEY WANT BECAUSE OF THE HYBRID WORKING FROM HOME MODEL? SCOTT: THERE HAS BEEN A VALUE TREND AWAY FROM COMMERCIAL REAL ESTATE THE RESIDENTIAL REAL ESTATE BECAUSE WE ARE DOING MORE OF ACTIVITIES AT HOME IN OUR RESIDENCES. THE KINDS OF REAL ESTATE, PEOPLE ARE INVESTING MORE IN RESIDENTIAL REAL ESTATE, THEY WANT THAT EXTRA BEDROOM. THAT WILL BE WHERE THEY ARE SPENDING A LOT OF TIME DOING WORK. TOM: TELL ME ABOUT THE MALLS IN THE SUBURBS. EVERYONE IS FOCUSED ON THE CITIES. IT MAKES FOR GREAT PRESS. BUT YOU HAVE SO MUCH EXPERIENCES OF NOT SO MUCH STRIP MALLS AND THE MEGAMALL, BUT THE IN BETWEEN MALLS THAT HAVE A STARBUCKS ON ONE QUARTER, CHIP OLE THE OTHER CORNER, HOW WILL THEY DO? SCOTT: THE MALL INDUSTRY IS GOING THROUGH HUGE CONSOLIDATION. ONE OF THE THINGS THAT IS HELPFUL FOR COMPANIES LIKE SIMON PROPERTY GROUP IS COVID ACCELERATED A RATIONALIZATION OF THE SUPPLY. LOTS OF MALLS CLOSE. WE ARE GETTING CLOSER AND CLOSER TO EQUILIBRIUM AS RELATED TO THE NUMBER OF MALLS WE HAVE IN THIS COUNTRY. IT IS A BIG EXCITING PART OF RETAIL IS DOING WELL RIGHT NOW AND WE ARE A BIG INVESTOR IN THE CENTER SQUARE SERVICE PROPERTIES. THAT IS BECAUSE SERVICES ARE TAKING UP A LARGER AND LARGER SHARE OF EVERYONE'S WALLET. WE ARE ALL GOING ONLINE. YOUR STARBUCKS, YOUR CHIPOTLE, YOUR HAIR SALON, YOUR DENTIST, YOUR MASSAGE PARLOR, WE ARE SPENDING MORE MONEY ON THESE THINGS. IT IS A VERY BRIGHT SPOT WITHIN RETAIL THAT NOT MANY PEOPLE ARE SEEING BECAUSE EVERYONE IS CONCENTRATING ON THE HEADLINES, THE LOCAL MALL CLOSING. TOM: SCOTT CROWE, THANK YOU SO MUCH. WITH CENTER SQUARE. WE DID NOT SPEND ENOUGH TIME ON COMMERCIAL REAL ESTATE AND THOSE DYNAMICS. FRANCINE, WHAT IS FASCINATING ABOUT THE FED SPEAK IS WE HAVE ESTHER GEORGE TALKING TO MICHAEL MCKEE, TIME TO GET TAPER STARTED. BULLET -- JIM BULLARD IS AROUND THE DEBT START SAYING TIME TO GET TAPER START -- IS OVER ON THE DEATH STAR TRYING TO GET TAPER STARTED. WHERE THE PEOPLE SAYING WAIT ON TAPER? FRANCINE: I DO NOT KNOW IF THAT WILL HAVE MUCH OF AN IMPACT. IT IS INTERESTING THAT JIM BULLARD TALKS ABOUT GETTING TAPER TO NON--- GETTING TAPER DONE EARLY SO THAT GIVES LITTLE BIT OF FLEXIBILITY TO THE FED AND OPTIONS ON RAISING RATES. THERE IS A BEAUTIFUL PIECE BY LIZ MCCORMICK ON OUR BLOOMBERG TERMINAL THAT ARGUED WE ARE SO FOCUSED ON TAPERING. WHAT THE MARKET IS WORRIED ABOUT IS WHEN YOU START RISING RATES. TOM: STRONGLY AGREE. FRANCINE: THAT IS WHAT USED TO BE WATCHING. JIM BULLARD JUST BROUGHT THAT UP MINUTES AGO. TOM: WE SAW THAT FROM IRA JERSEY AS WELL. THE PARTITION THAT IS OUT THERE. WE HAVE LOADS AND LOADS OF DATA TO COME OUT AS WELL. AS WE HAD THROUGH THE MORNING THERE'LL BE A LOT TO TALK ABOUT INCLUDING WASHINGTON. DISTRESSING NEWS OUT OF AFGHANISTAN. WE WILL WATCH THAT STORY, PARTICULARLY AROUND THE BELEAGUERED AIRPORT IN KABUL. A 6.6% AMERICAN GDP. THAT IS FOR THE SECOND QUARTER. MARKETS TAKING IT IN STRIDE BUT CRITICALLY, LOOKING AT THE TEA LEAVES, 1.36 61 ON THE 10 YEAR YIELD. THAT IS A HIGHER YIELD AND BEAR SCRUTINY AS WELL. THE VICKS 17.48 -- THE VIX 17.48. DAVID WESTIN WITH MARY BARRA, LOOK FOR THAT LATER TODAY. WE CONTINUE ON BLOOMBERG RADIO

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'Bloomberg Surveillance' Full Show (08/26/2021)

Tom Keene, Francine Lacqua and Lisa Abramowicz have the economy and the markets "under surveillance" as they cover the latest in finance, economics and investment, and talk with the leading voices shaping the conversation around world markets. This show is simulcast worldwide on Bloomberg Television and Radio. (Source: Bloomberg)

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