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00:00The Fed had told us that they were gonna give us advance notice before announcing a taper and I would argue they pretty much done that. It makes sense to do quantitative easing and asset purchases. As long as you're doing this independently fine. Fed does not taper in Jackson form but we know that tapering is inevitable. The Fed will raise rates when it has to raise rates. The Fed is a little bit more dumb today and allows for this generation of growth and inflation. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz. Good morning everyone. Jonathan Ferro Lisa Abramowicz and Tom Keene. Another week of Bloomberg Surveillance on radio and television. The doldrums of August. Not Taylor Riggs darkens the door for John Farrell out on his book. Leave her book sabbatical if you will. Lisa Abramowicz. I don't know where to go. Do you go to Friday and the jobs report or do I go to the effervescence of Friday rolling over here. Brent crude near 73 dollars a barrel. Well they're connected right. The effervescence of Friday as Fed Chair Jay Powell managing to communicate a dovish taper. Basically saying yeah we're going to taper. But guess what. It won't matter because we're not going to follow it up by a rate hike and we're gonna go so slowly you won't even be able to tell. Markets rally we saw the biggest drop in the dollar going back to May. But my question is why are we not seeing a bigger steepening in the yield curve. Why are we not seeing inflation expectations go up. If people believe that the Federal Reserve is going to let the economy run hot tariffs are dead on in the two cents for a 108 basis points for those who don't keep score at home. Lisa's right. It's gone absolutely nowhere. Lisa looking at 73 dollar brand and you look at the VIX sixteen point six four and that goes to Friday early jobs report folks. In September the August report 5.2 percent unemployment rate 750000 non-farm payrolls. Those are better than good trends. They're better than good trends. However people do expect a softening in the labor market on the heels of the delta variance sort of the push pull here particularly in crude. Not only do you have Hurricane Ida and the potential ramifications of that you have the OPEC meeting coming up on Wednesday. They may potentially increase production. But then also you do have the fact people are traveling less. People are canceling vacation Eric Balchunas glue. I mean honestly it's not necessarily that everything's stymied. This is a question though. How much of it is this going to eat into economic momentum Tom. I mean how many times did you go out to eat this weekend. You really want to know. It was sort of that like week. I found a great new Greek Greek restaurant tailor. I found a great new Greek restaurant this weekend. And I found an Italian thing downtown. You know in the land of pharaoh I mean you know we're out there. But Taylor this goes to the Delta variant and the mystery out there of September in this horrific pandemic. Yeah really interesting. I just pull back to Jim KERIN comments of 6:00 a.m. last Friday talking about maybe yields maybe folding it into that yield curve flattening the lack of yield curve steepening of course that you mentioned. If you taper early there is going to be lower growth and lower inflation in the long run because the Fed won't hit that terminal limit by 2025 let's say of about two and a half percent. So yields are reacting as we saw on Friday. Typically the opposite of what is I guess intuitive but he's really explaining the math meanness of it all. I mean the math is this. What do you see Lisa. To me I see hospitalizations. One hundred thousand. That says all. Well yeah I think that the math genius of it is a question about the covered pandemic. But there also is this question of what the long term growth rate is basically. Are some of these inflationary pressures transitory. Is the market just buying what Powell is selling. Or is the market getting it wrong and perhaps underestimating how willing the Federal Reserve will be to let inflation and growth run hot. Now the Greek restaurant I went to Lisa was well the reason I went was they had a complimentary. So everyone entering hipster seven up bar sort of couldn't get to the bar. Let me save it with a market chip Taylor Riggs route rumor to help out Taylor. I see an equity lift in Taylor. Volumes are said with a VIX under 17. The Dow thirty five thousand four hundred twenty on futures. Yeah. What was really interesting is some of the record highs that we continue to see again and again and really led in part to Tom some of that reflation free trade. But it's interesting that the Dow the Russell 2000 not making those fresh record highs even though technology is. How much of that is that low rate story. You've a 130 which was Jim Cairns base case call. If there is indeed a taper that is fair value. That is indeed a boost to technology lives of Wedbush. Out with a big note this morning. Same technology we're just at the early stages Tom. Well it's interesting to see other cells. So does sort of mid-quarter or I don't want to sell the end of the quarter September 30. We're really not there yet. But nevertheless it'll be interesting to see what the sell side does in the final week of the summer. Lisa Abramowicz at the board. Lisa what do you have this morning. Well let's just talk. What's going on in Washington D.C.. It is not infrastructure talks. It is not. These discussions about fiscal support fiscal stimulus. Instead it's discussion about Afghanistan at 10 a.m.. President Biden and Vice President Kamala Harris are going to meet with their national security team to try to figure out the path ahead in Afghanistan. There were those drone strikes. There is some disagreement and frankly pushback from the Taliban on that. How much does this fear sort of increase the U.S. presence from a drone attack perspective in Afghanistan. How could they stay on schedule to remove troops by the end of tomorrow. All of these things really come amid a backdrop of international relations. How do they plan to deal with the diplomatic strains that are emerging as a result of this entire situation than 10:00 AM. The economic data of the day pending July home sales. The expectation is for an ongoing deceleration and ongoing decline. Prices so high and inventory nonexistent. It seems to be suppressing the ability to get momentum there. And then today the U.S. CDC I think this is fast day will begin a two day meeting talking about the booster shots and how much they are important to get out there whether perhaps they should speed up the rollout of this. I want to say Anthony Fauci over the weekend on the Sunday talk shows talking about how he would like to see a school mandate for vaccinations for kids. And I do wonder if that's where we're looking at heading into your end Tom. Well it's going to be interesting to see. Let us get started a week. We've got the perfect guest for you. Kit UK's society general we spoke to his people last night and they said he would make an appearance with us even though his arsenal struggles here. Kit let me start with the first important question of the week. If Harry Kane and Renaldo joined Arsenal. Would that help. No we can't defend the goal scorer is less of a problem unless one of them plays fullback. It's been sport to say the least kid. Let's get started on the serious matter here. It is the summer doldrums but it's not. What are you looking for. How do you frame a set up to maybe a more active September in October. I think you know we have to get away from being driven just by the Fed type taper story. So you know that the the other currents will take over. I'll be interested almost what's happening outside the United States only in the sense that things change if other parts of the world start to see a recovery. If you started to get better data in Europe coming through roads into the states that could change things a little bit. But but while we're bogged down with this idea of not even when does the Fed start to to slow its asset purchases down but what does that mean about when they're done and what does that mean about when rate rises come and they're not going to come to 2023. So hey what are we going to do in 2022. Now we have to we have to get past that that whole story. But I think you know there's geopolitics coming up. The college situation as is. Is either going to improve or it's going to become a real economic factor again. So that that's not static. And you know the range of forecasts for Friday's payroll numbers over on your side of the pond is huge. Right. So we will get surprised by this. We have we don't have a handle on the pace of job creation really. We just I guess kept taking a step back. It seems like the market is saying that the taper is a non event. Is that what we're seeing. That basically Fed Chair Jay Powell has successfully made tapering the 120 billion dollars of monthly bond purchases an entirely non event for markets. It should be. I mean in a sense the whole idea of the taper was the you know the Fed slows down its asset purchases at the same time as the government spends less money and the needs to issue fewer bonds. So who cares. Right. Because what what we've done is is the United States financed pandemic with the government handing out checks paid for by issuing debt that was bought by the Fed just unwind the process just stop paying out checks and stop stop buying the bonds. And then then and then we can get back to discussing important stuff which is did all these checks create savings that all these checks create demand that all these checks create inflation somewhere out there with all these bottlenecks and things like that. And I think that's what we're going to find out. But the focus is on CAC. Can. Can the U.S. government have spent this much money getting the economy to recover this fast from the pandemic without without some inflation. That's stickier than than they get than the Fed is going to feel comfortable with. And we're going to find that out over the next six months in a big way. I think you know CAC speaking have been this far from the pandemic. It is interesting. The people are saying that when we taper we have to go faster. Given how far into this we are 18 months or so how are you thinking about a piece of a taper. Well you know the consensus view on tapering is you reduce you reduce the pace by 10 billion each FOMC meeting instead of the 5 billion for treasuries that they did in 2013 14. And that takes a year. Now you could go every month. You could try more. In a sense it should be possible to go fast because the Treasury is going to be issuing less debt into it. So you're you know you've got you've got things lined up. The only difficulty would be if we started to get seriously worried about inflation data and the strength of the economy at the same time as that tapering and then the bond market is going to struggle. And that kind of catches us where we are. It's really easy. It's really easy to taper without yields going up. If inflation's low and the economy is not growing too fast. But if you if you lose control of the story while you're doing it it can get pretty messy. So I think though I would go as fast as the market. Let me go once I'd started because it buys me a degree of freedom. But you have to be market led. You know if you if you cut back your your purchases by 10 billion one month and yields back up 30 basis points in the first week you know you're kind of you're going to have a scratch your head pretty quickly. Could you. Thank you so much. Greatly appreciate it. Good conversation has started the week for me society general and the chief foreign exchange strategist. Talk about range and round trip Lisa. The euro from a 116 handle through 117. Almost back to the edge of 118. Stronger euro right now. Yeah. What happened on Friday I think is remarkable with the dollar. And this is of course the bleed through to the euro into all of other potential pure currencies. It had the biggest sell off the biggest weakening going back to May. I mean really this idea that perhaps I don't know no global recovery but just right up against record futures highs as Standard and Poor's 500 other ones were points right now again I'm watching the VIX sixteen point six two after that big move on Friday. Please stay with us. An eventful week jobs day and Friday. This is Bloomberg on radio. On television. With the best ideas I could get to Hurricane Ida battered New Orleans and the Louisiana coast overnight with heavy rain and some of the strongest winds to ever hit the state. The storm has lost some of its strength but it's expected to unleash a potentially catastrophic amount of rain as it slows slowly moves north. More than a million homes and businesses in Louisiana are all without power and some may say in the dark. For weeks the United Nations says that North Korea may have resumed operations at its Bertone Newtonian producing nuclear reactor in recent months. That could help Kim Jong un's regime add to its stockpile of material needed to make nuclear weapons. The reactor is due to churn out enough plutonium each year for one atomic bomb. In recent years though Korea has used uranium enrichment for nuclear warheads. President Biden's national security adviser is signaling that the US will keep targeting Islamic State in Afghanistan. Jake Sullivan told Fox News that two members killed in an air strike on Friday had been planning additional attacks. Meanwhile the president was at Dover Air Force Base in Delaware for the arrival of 13 service members killed last week in Afghanistan. They were at the airport in Kabul when a suicide bomber struck. Toyota has reported record sales for July. Strong demand to achieve these and hybrids in the U.S. boosted the Japanese automakers deliveries by 15 percent from a year ago. Twitter is planning to cut production by 40 percent in September due to parts shortages. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts in more than a hundred and twenty countries on which you get to. This has been back. These are individuals who are planning additional attacks and we believe that by taking them out we have disrupted those attacks. They are part of the larger network of ISIS CAC that is seeking to target both Americans at the airport and ultimately to try to represent a greater threat to our interest both in Afghanistan and beyond. Jake Sullivan the U.S. national security adviser managing the message with Jake Tapper and CNN over the weekend. There is a managing of the message. And of course we saw all the images of the president and the first lady at Dover Air Force Base over the weekend. It is a sober Washington Annmarie Horden reports this morning. Our Washington correspondent Emory I think it's something that needs to be clarified worldwide around the many time zones and I believe the eight and a half hour time zone difference to Kabul. What happens after August 31 and on tomorrow. Is there like a date a time a moment or not. We don't know that exact moment where we finally get the U.S. military saying goodbye to the Kabul airport after 20 years. We did Tom have a final RAAF flight out of Kabul back to United Kingdom over the weekend. What happens next. We really don't know yet. And this is where the discussions are going to be focused on today. The United States is hosting a meeting virtually with NATO members also Qatar and Turkey. Keeley will be there. And this is about the operation of the airport post August 30. First because there's about 250 Americans or so the State Department thinks right now in Kabul. But what about those remaining Afghans. How are they going to get out after the U.S. military withdraw. Ambassador Bolton is scheduled to be with us later this week. We're thrilled by that. And he is focused on Pakistan. Whenever I talk to any Marine nobody discusses the nation to the east. Is Pakistan part of the Biden discussion. That's a very good question. This is something I hear a lot from former senior intelligence officials about what happens in terms of making sure the U.S. can keep an eye on Pakistan's very large nuclear arsenal. Also the U.S. relationship with Pakistan the president. I'd say it's has yet to call Imran Khan since he's been elected. The U.S. has this very precarious situation with Pakistan following September 11 those attacks in 2001 on the United States. Pakistan is probably the closest it's ever been to the United States. But after the capture and kill Osama bin Laden things got very difficult with Pakistan. And part of that was is because he was one hiding in Pakistan. And where he was captured and killed was very close to a key Pakistani military base. So there's a lot of animosity between these two. They have to trust each other at some points due to due to security concerns. But the same time there's a there's a lot of distrust between these two countries. Meanwhile as we approach the deadline for the U.S. removing troops and as the into remaining a U.S. or citizens get out of that nation the U.S. is saying that they are going to continue with drone strikes. The Taliban has condemned this. Where does the visibility come from as the U.S. continues with potential airstrikes or drone strikes. You don't exactly need boots on the ground per say. The strike that hit that car that hit that the U.S. officials say it was carrying several suicide bombers came from our base and United and United Arab Emirates. So you could do this all through agencies in the region. But anyway forgive me Yemen point is how do we know that those are people who are other operatives. How do we even have that visibility into the machinations on the ground if we are coming at it with drones and it's harder to tell exactly who's planning what. Yeah it's a good question. Paul you have to rely on a lot of our partners potentially like I mentioned Pakistani intelligence services to understand where these people are. Also the tell the Taliban if the Taliban does not want ISIS K which for the most part is an enemy of the Taliban they could potentially cooperate with the United States in terms of where they have these breeding grounds for their militants and the likes. Anne-Marie that brings up a very good point. We are now partnering I guess with the Taliban who I guess as of two weeks ago we were at war with. Do we trust them. Is there an incentive to continue to trust their intelligence. It's a great question. I think you know the U.S. military at the moment thinks that what's happening at the airport they can trust the Taliban. General Mackenzie said that they believe that the Taliban are any security checkpoints have actually thwarted some attacks but no one in Washington trust the Taliban. And as you as you mentioned Taylor this the Taliban was harboring al-Qaeda. They would not give them up. And this is why we went to a 20 year war in Afghanistan. There's also a statement over the weekend the United States and 97 other countries missing notably China and Russia. But this statement says that they will want to make sure these countries that Afghans can leave civilians can leave after August 30 first and they have quote assurances from the Taliban. My question is what are those assurances. And that's where a lot of people want to know. Another question here from me. A lot of concern by Central Command hasn't told us who was killed in that air drone strike that you mentioned. Why are we confirming. Because there are reports that they were civilians and children were waiting for CENTCOM for that report. What you've said is reports on the ground is that there are Afghan civilians including a few children that could have been casualties potential deaths due to this drone SRE drone strike. CENTCOM has yet to affirm this. Remember CENTCOM also the Pentagon did say that there were two attacks at the Kabul airport surrounding that airport on Thursday. There was only one. So I think there's just a little bit of they have to really brief through the information on the ground before they give us the final update. Rulers a four star general with three years running the Central Command. His name is Austin and I believe he's the secretary of defense. Has he been invisible. He hasn't publicly been speaking as you've seen from Jake Sullivan this weekend or Secretary of State Anthony Blinken or General Mackenzie at the Pentagon but he has certainly been briefing the president and that's what they're going to be convening with this morning. The president will be convening his national security team. What's going on Afghanistan during these final hours. You guys make a great point. At what point does the U.S. say good goodbye. It's you know after 245 something p.m. in Kabul right now is it midnight Kabul time. Is it midnight U.S. time. But then also the president is going to also be speaking his national security team on what's going on in Louisiana because the U.S. is also facing mass destruction when it comes to the hurricane that made landfall this weekend and certainly with the power out in New Orleans. Annmarie Horden thank you so much for the morning brief here is well in the markets. There is a persistent equity lift. It bears note Lisa doesn't it. It does burn out especially with the backdrop of some of these issues. I want to pick up on Hurricane Ida and the fact that it was a big test for the fourteen point five billion dollars that was put into fortifying the levees down in New Orleans. And Tom. This is interesting to me at a time when we're talking about infrastructure discussions infrastructure needs especially as the climate changes. I do wonder how much that's going to be on the table this week in Washington Tom. So we saw the levees and you know the infrastructure after Katrina. But it's interesting to me how it's all been pushed aside by all these all these different moments of this different and unique August as well. Futures up for Dow futures up 17. The VIX is a huge story to me. It finally breaks 18 down to 17 and sixteen point six one no on the. That will bear close scrutiny this morning. As Lisa mentioned yield not giving us much one point three one percent on a 30 year bond. I do know this gives me the 10 year note and I know the 30 year bond a one point ninety two percent is Will. Please stay with us on radio and television. Gregory DAX Oxford Economics next. This is Bloomberg. Bloomberg Surveillance. Good morning everyone. We look at equities bonds currencies commodities we do that staggering to the jobs report on Friday. We start strong with Taylor Riggs this morning. I still see futures up five. I guess that's a lift. I'll start with the first two equities bonds in your sequence Tom. And it really has been a story of continual record highs particularly if you like run numbers at forty five hundred. We saw this on Friday and that left as you say continues today. What's interesting it's a technology driven market here. It's hard to get that reflation free trade with 10 year bond notes as you mentioned at a 130. So not getting sort of records that you have within a Russell within the Dow. It really has been tech in big tech. And of course the S & P 500 we changed the board and really how that folds into some of these bond yield dynamics with that 131 on the 10 year fair value. You start that taper soon according to Jim Karen of course we heard from Morgan Stanley the two year yield goes on says we're not getting a rate hike we're just getting a taper. A 30 year old you try to get a lift up to a one 92 but we're still not near some of those 2 percent levels that we were at earlier this year. Tom I'll just make this quick. China. Yeah maybe we care. Maybe we don't. Liberty Minor suggests three hours of online gaming a week. Now you could argue that is down 7 percent 10 percent. Do we react or not. The problem is you wake up every Monday and there's the new China headline of new restrictions. How do you invest when you don't know how they change the rules with the stroke of a pen. We will see to it. Thank you so much. And we got much more. A look for Taylor first this afternoon helping out in the clothes as well. Right now my sum total knowledge of hurricanes is 1948. Key Largo Edward G. Robinson Bogart and what's her name. Lauren Bacall. Stealing the show from Carolyn saw Key Largo as well. Except he decided to become the best meteorologist I know. And Rob joins us this morning our Bloomberg meteorologist Rob. There seems to be more hurricanes. Am I right. You are. And there's a reason behind that Tom of the classification for the storms has kind of changed a bit over the last 30 years. The hurricane center's been naming some storms like over the weekend. They named Julie in the central Atlantic. That sea back in the 80s or 90s wouldn't have been named as a storm. So that's one of the reasons we've seen the number of named storms come up during the season. So Rob we've seen this storm actually hit as a Category 4 and this has been a question about testing the levees that were newly enforced after Katrina. What do we know in terms of how well they held up how well the protections that were put into place actually succeeded in fortifying the city. Well Lisa the testing is going to continue because the problem is not only the storm surge that accompanied Ida as she made her way inland. But the problem with Katrina back in 2005 in New Orleans was not the storm surge. It was the rainfall that occurred with Katrina going into Lake Pontchartrain. Lake Pontchartrain coming up in height. And then that caused flooding into the city in New Orleans. That rain is continuing right now with IDA. Flash flood warnings are in effect for southeastern Louisiana northeastern Louisiana and much of Mississippi. So we're going to see that system tested not only today but tomorrow and through the rest of the week as that rainfall works its way into Lake Pontchartrain from the North Shore north in New Orleans brings the lake levels up that we're going to have to see how those levees handle that. Increased pressure from Lake Pontchartrain to the north. And given the timeline that you just laid out. When do we start to get an assessment of the damage the recovery that follows. Well in regards to the wind damage that's probably going to take place later today and tomorrow the winds with the system are down from one hundred and fifty miles an hour yesterday afternoon. They're now 60 miles an hour. The storm's about 50 miles north northeast of Baton Rouge. So as the winds diminish the power line crews can get out there. They'll assess how long it's going to take to restore power. From what I can understand in some of the reports there's been some transmission damage to the city in New Orleans. So that's going to take time to replace. But in regards to some of the other damage in regards to water runoff flash flooding that type of stuff that's probably going to continue right on into Wednesday and Thursday Carol. Anthony Mills in thanks for listening to us. Some Bloomberg radio from Sparta New Jersey. Anthony in Rob Caroline Hyde he says he's driving from Philadelphia to Nashville this weekend which is like the heart of all the follow on rain. Is the follow on rain. Normal rain or not it's going to be excessive. The good news is it should be out of the continental United States by the weekend. This system later today will be a tropical depression moving to the west of Jackson Mississippi probably by tomorrow afternoon. It's about 200 miles to the south of Nashville. By the time we get to Wednesday afternoon it's in central West Virginia. And then by early Friday morning it's south of New England along that path. This week though we're expecting anywhere from four to eight inches of rain into the Tennessee. River Valley over the next 36 hours. And then it's two to four inches of rain from West Virginia to southern New England between Wednesday and Friday morning. Rob Carolyn thank you so much. Greatly appreciate it. We'll have more reports on Bloomberg Radio and Bloomberg Television on this hurricane. Love is lack of hysteria to say the least hysterical on the American economy. Gregory DAX joins us with Oxford Economics right now there chief U.S. economist. Greg you are acclaimed for the acuity of your work. What's your 12 month GDP estimate forward. Well we're looking for growth that is still fairly strong. We're expecting the average growth this year to be about 6 percent and then moderate to about four and a half percent in 2022. I think there's still a lot of momentum in the economy. But we are seeing some headwinds from the Delta variant that is putting a bit of a damper on consumers optimism. But still consumers are spending. The latest data that we have for the month of July still showed consumers spending on services on face to face activity. So not excessively concerned about the consumer going into reverse. But I still think that we will see a bit of a slowdown over the next next few months. And that will be largely a reflection of the health situation. The slowdown has been described as temporary and pretty much everything comes in. The show talks about that. Are there no longer term consequences to the fact that the Delta variant is slowing down. How quickly the services sector in particular is getting back up to speed. Well I do think it is the case that we have to come to the realization that this covered virus and this cold crisis is likely to linger for some time. There were high hopes that we essentially were past the worst at the early start of the summer and that essentially things would go quite well. Going forward we've saw what we've seen in the latest consumer sentiment data that consumers are revealing a mix of emotions and reason. They are seeing the situation as something that is not excessively concerning but they are tired. There is a lot of virus fatigue. I think as we look into next year that will be a key determinant as to how much people do spend and how much they plan ahead for vacations next year. I still again fairly optimistic about the outlook for the economy but I do think there are downside risk especially in the places where vaccination rates are the lowest. Fast forward to Friday. We get the August July August report for the labor market. What does full employment mean to the Fed right now. Well I think it means a lot of things a lot of different things. We're all often talking about how many jobs are being created on a monthly basis. We're actually expecting a job figure that is likely on the upside towards around six hundred seventy five thousand jobs being created over the past month. Part of that will be seasonal factors which have been driving growth over the past couple of months. But it's not just jobs it's unemployment rates across different types of of of groups income groups of different types of ethnic groups. It's participation in the labor force which is very important. And we've seen that stall over the last couple of months. So that will be a key guide as to how strong the economy is. It's the employment ratio. It's wage growth in particular wages for the lower income categories. All those factors are going to be key in driving household finances and in turn driving consumer spending and the economy over the next year. So those are all going to be key factors that the Fed is going to pay attention to. Is stagflation a risk for you. Now I think stagflation is really a misnomer in this environment. Stagflation is an environment where you have high inflation and low growth. That's not what we're gonna see. If anything what we've seen over the past few months is indications that consumers are reacting negatively to higher prices. The higher prices are deterring growth and in turn inflation is falling back. We've seen it even in the most recent data. The sectors that we're seeing the highest inflation because they were in high demand are now seeing less inflation. So we're not going to be in an environment of stagflation. We're going to be in an environment where inflation actually cools over the next few months and that will be reflective of the US economy being passed peak growth. So again I don't expect to see any type of stagflation area environment in the US interest in the taper. A lot has been talked about the pace. It is going to be a faster taper than the 2013 environment. Do you see that. Not necessarily I think Paul struck a fairly balanced tone at his Jackson Hole symposium speech. I think he hinted at the possibility of an announcement around November and the onset of tapering either at the end of this year or early next year depending on the health situation. But I would expect it to take about eight months for the Fed to taper its asset purchases about 10 billion a month on the Treasury's front about 5 billion on the MVS front. So a fairly gradual approach. I don't foresee the Fed running much faster than that. And I think the other key signal from Paul's speech is that rate hikes are not tied immediately to QE speed tapering or QE tapering in itself. So the first rate hikes I don't expect before the onset of of 2023. Greg day growth greatly appreciate. Thank you so much. Thank you. Over the weekend there was a bombshell announcement which goes to the optimism of Gregory Daco that corporations will adapt and adjust. A firm has come to an agreement with Amazon to affect what a firm does which is you sign up and you get like six months or 12 months interest rate free or non-interest rate free of how to finance your consumer purchases. What's interesting on this this morning is Bloomberg first word summarizes is to see a firm go at Barclays from a price target of 85 to a price target of 115. It truest from 82 to 120. And the good troops over at Mizuho go from 76 to 110. Morgan Stanley from 73 to 120. While Lisa. Well I mean you're looking at the shares that are up 38 percent in premarket trading and how this gives them that much bigger of an addressable market. It also though raises an issue about Amazon as a finance company. Exactly. Talking about that again this is a huge deal. Taylor Riggs you know the failure of non non banking to become banking. And you wonder if this is the way for Amazon to completely adjust how they boost consumer finance. And what was so interesting from the firm's perspective was Friday afternoon shares were much lower because of the financing related to peloton slowdown at first given the Palatine slowdown and then the Amazon lift higher. That's. What's great is Lisa's got a proton and a kitchen. She's got one in the life. The bike is cheaper now. Living room there. They're all over the Abramowitz house. Yeah. Stay with us. This is Bloomberg. Good morning. With the first one these numbers could get to New Orleans is in the dark and large parts of it may stay without power for weeks. Hurricane Ida pounded the city and Louisiana coast with heavy rain and some of the most powerful winds ever to hit the state. More than a million homes and businesses are without electricity. Meanwhile Ida is expected to unleash a potentially catastrophic amount of rain as it slowly moves north. Hurricane prompted oil and natural gas explorers in the Gulf of Mexico to shut down. Refiners in Louisiana also closed. Almost 20 percent of US refining capacity has been affected by the storm. Still local rigs may have escaped significant damage. Anthony she said the door is open to administering booster shots in the US sooner than the eight months after a completed coronavirus. Vaccination. President Biden's chief medical adviser told NBC the administration would base his decision on the data. But she also said he favors requiring shots at school to bring Ali Baba is moving to resolve a sexual assault case that has rocked China's tech establishment. The e-commerce giant has fired 10 staffers for publicizing an employee's account of assault allegations against a former manager Ali Baba. CEO Daniel Saying has said the company's handling of the complaint was a humiliation factor. International reportedly is in talks to buy medical equipment maker Hill Wan Holdings according to Dow Jones. The price will be about ten billion dollars. A month ago Hill One rejected Baxter's nine point six billion dollar offer. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts say more than a hundred and twenty countries members could get to this Sonali Basak. We are open to data as they come in. This will have to go through the FDA process and then the Advisory Committee on Immunization Practices that advises the CDC. So right now we're sticking with eight but we're totally open to any variation in that based on the data. Anthony Fauci on Meet the Press this weekend with an update. Here again is so many things in Washington managing the message. There's only one message. Get out the calendar. It's August 30th. Joshua Sharfstein joins us with Johns Hopkins Bloomberg School of Public Health. Mr. Bloomberg of course this radio and TV facility and a philanthropist to his John Hopkins University. Dr. Sharfstein. It's August 30th. I am thunderstruck by what appears to be the nakedness of the under age 12 crew when a 9 year old gets covered. What happens. Well generally speaking it's not a particularly severe infection. It can feel like a cold. The nine year old. There are more rare cases which are now in general more common because so many 9 year olds were getting sick. Where the kids can be sick like adults and get quite ill. And for that reason because there's so many cases overall we're seeing more kids very sick. We're seeing the hospitals filling up in the south and a real crisis in intensive care unit beds in some places like New Orleans. What is your anticipation of what back to school will look like in the heavily covered hospitalized areas and then away from that as well. Well in some of those areas schools already started. And what we're seeing is that there's a lot of infection in the community like there is. It's going to come into the schools. It's going to start spreading unless there is a lot of protections. And in many cases there aren't. So we're seeing huge numbers of kids being quarantined and school is basically shutting down as teachers are getting sick. You know we have to try to avoid that. If we're going to have a successful school year I think in other places where first of all they have the advantage of the community not having as much of it because there's more vaccination then also they're going to be putting in place different mitigation measures including testing and masks. I think that there's a good shot at a pretty reasonable start to the school year but we're going to have to learn based on what we see. Dr. Sharfstein what's the message now from the United Kingdom. What we did see the number of cases come down and then start to tick back up giving people perhaps some sense of pause with respect to some sort of herd immunity or how the trajectory of the Delta variant may differ from the previous one. Well the message is you don't exactly know what's going to happen because I was doing some interviews with some people in the UK who said there is no chance that it comes down. And then it comes down you know and now it's going back up a little. So you know it's really hard to be locked in to being sure what is going to happen. But the UK has a higher vaccination rate in the United States. It has a much higher vaccination rate than some parts of the United States. So I think it's a pretty fair about to say that you know we're going to see this virus burn through the population unless people are vaccinated and precautions are taken. Meanwhile there are some new variants that are being spotted in South and in South Africa in particular. Is there anything that's catching your eye that we should be aware of that potentially could hit yet again. Not particularly although it is definitely possible. The biggest issue of course will be if there is a variant that really can make people who are vaccinated sick. And I have not heard at this point about that emerging. It's going to obviously be a big deal if that happens particularly if you it particularly if it starts to spread steam globally there for a minute. There has been some concern that we're all talking about boosters here when other countries can't even get their hands on one shot. How do you respond to that. Well it's hard to keep both things in our mind. We are sharing an enormous amount of vaccine. It's extremely important to scale up vaccine production around the world. And one of the best pieces of news at least for me was the news that Pfizer and Biogen Tech are starting a factory in South America a continent that has just really been hit hard. There are many countries that are realizing that the delivery parts of the vaccination effort are extremely difficult. And I think it's going to be important for us to do both to make vaccine available here because we have now one of the worst outbreaks again in the United States. But at the same time just continue just to scale up and distribute vaccines around the world. Just bringing this full circle. We started the conversation talking a lot about schools and back to school. And I think this pandemic has reminded us that being doctors and being in public health it's not only physical health it is very much mental health. And not being in school is really hit some of the low income communities the most. How do you balance that knowing that they have to be in school. I think that there are a lot of kids of every background who have suffered from not being in school in different ways. But it's certainly true that there has been a tremendous amount of academic challenges facing kids who haven't been in school and don't have good access to remote learning for example. We've got to balance these things. And I think that the basic formula is we bring kids back to school and we do everything we can within reason to protect them. We don't pretend the virus doesn't exist. We don't pretend that it's a big deal. But we do you know put in place reasonable mitigation measures. I think the first phase of this pandemic was about older adults and people with chronic illness. The second phase is about trying to get young people vaccinated meaning young adults. And I'm thinking it's quite possible that this next phase for the United States is going to be a lot about school protecting children and all of us thinking about how well we can do to make sure that that's successful. Dr. Shery Ahn thank you so much. Greatly appreciate it. Joshua Sharfstein at Johns Hopkins University Lisa. Mr. Stauffer is over IBEX years enjoyed this bull market and he reaffirms a barbell approach to the equity market value that grows from growth stocks. And I love this phrase. Lisa reminds me of your growth. Your value is worst offices. Yeah it tells you a lot. I think honestly though this barbell approach is something that a number of strategists have been talking about. Mike Wilson on Sunday. Yesterday came out in his notes also saying a barbell approach. I mean it goes to sort of this uncertainty not knowing which outcome would prevail or this feeling that big tech isn't going anywhere. You know rates aren't going to necessarily rise all that much and stymie the potential growth there. They're just making so much money. I mean you don't look at this Taylor and it goes back to CFA level four where we're really looking for is growth year growth. Right. You know Dan ISE of Wedbush would argue that low interest rates are helping to boost that. I think my big question is how do you get a value or rotation in a cyclical trade with oil can't break 70 and bond yields. It can't break 130 on the 10 year. I love that you just glossed right over that. You're just like you know like I'm not going to sell these growth year value friendly and pro athlete Taylor thrice yield down. Thank you. Low priced. Okay. Lisa that's our Taylor Riggs Bond Clinic this morning. All right fabulous. Well looking ahead we're going to be talking about a growth year growth clinic with also Taylor Riggs. I got to say these expectations going forward are getting more certain and they are more certain to the bullish. And that has not dimmed despite everything Tom. Yeah. And I would note a humbling weekend for the Bears as well. They will recalibrate its hallways. Jobs report humbling. And we see that we will drive forward your stock market conversation. Thrilled that Robert Doll will join us from Cross Market Global Investments. We need to recalibrate on this Monday. Futures up 3 Dow futures up 13. On radio on television this is Bloomberg. The Fed had told us that they were gonna give us advance notice before announcing a taper. And I would argue they pretty much done that. It makes sense to do quantitative easing and asset purchases. As long as you're doing this independently fine. Fed does not taper a Jackson form but we know that tapering is inevitable. The Fed will raise rates when it has to raise rates. The Fed is a little bit more dumb today and allows for this generation of growth and inflation. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz. Good morning everyone. Jonathan Ferro. Lisa Abramowicz. Tom Keene. On radio on television on Monday. Bloomberg Surveillance. Always interesting and more so this fun day Lisa as we set up for Jobs Day. On Friday the jobs day on Friday may be more important than the Jackson Hole confab that was online. That was last Friday. How much will it affect the Fed's role. How much will it be. Frankly a more tradeable event Tom that last Friday was the estimate down to 5.2 percent unemployment rate 750000 non-farm. Who knows. But Lisa 5.2 percent is nicely on the way to a better an American current although still very much a question of what full employment means to the Federal Reserve. Whether some people say we are tighter than it looks economy or whether other people are saying we still have a lot of slack that labor market uncertainty very much not cleared up on Friday and very much unclear with some of the with the jobless data the jobless filings that do seem to be coming down at a time when there still are millions of people out of work. Taylor Riggs just an interesting news flow over the weekend and in the quiet of the last week of August. Is this where equity strategies would tweak up words their reports as they've been wrong. S P ex Taylor 4 5 0. I'm reading that correctly with my new glasses for 9 0 9 forty five hundred if you like run numbers. I believe UBS yearend 2022 migrates northward up to a 5000. So you've really seen some of the bulls come out although I would you know sort of mentioned it's sort of been a tech rally as we've been talking a lot about. Hard to get a reflation free trade with 10 year yields at a 130. Maybe Bob Dole has the answer to that question but it hasn't been a dollar Russell 2000 that matches some of the record highs that we've seen within the tech heavy S & P 500. And Lisa the walls worry out there. The pendulum of worry as they say the wall is really out. There are countable this morning. We shouldn't make light of it after a difficult weekend in Kabul and at Dover Air Force Base a set of worries we have is tangible. And the idea of the international backdrop coming with the national backdrop of Hurricane Ida what it has done completely taking power out of New Orleans is unclear if they will regain power potentially of four a month meaning no air conditioning. And this really raises some issues. But yeah I mean talking about the potential risks not bleeding in the market expectations in any way shape or form but still out there for some. Yeah. Let me get to the markets right now Taylor. Help me out here. Futures up three Dow futures up 10. The VIX sixteen point six five nine down to the recent optimism of under 16. But nevertheless boy they made a lot of movement from the Powell speech. Well and what is the complacency of a VIX under 20. Tell you Abigail Doolittle. She joins us always in the afternoons. What is that telling you about some of that complacency even though you get. Well dare I say it the skew index. Tom can we do that at 7:00 a.m. until 7:00 a.m. show some of the hedging going on that you see underlying these equity markets looking at the courtesies choices of the 10 year yield one point 3 0 0 3. It's well fractionally lower yield this morning a dollar bit weaker. Listen I noticed the euro stronger with the 1 18 print about a half an hour ago. Lisa at the wall to summarize the weekend and stagger to September staggered this September. I will just speak speaking English for one second. The idea that crude is lower today is fascinating because people heading into the hurricane thought that it could potentially disrupt supplies over in the Gulf of Mexico. And it has been a little bit less than expected when it comes to potential damage there. So you're seeing crude get a little bit of a decline from where we were on Friday. So today 10:00 I am President Biden Vice President Kamala Harris are meeting with their national security team to discuss the road ahead in Afghanistan. How do we get traction. How do we do drone strikes if we don't have intelligence. How do we maintain our alliances with other countries that are dismayed at how the rollout of the exit really went. How far are we in getting everybody out before the deadline which could be as soon as later tonight based on Kabul time that we already are to the August 30 first deadline 10:00 a.m. We have pending July home sales. The expectation is a bit of a decline. The idea here is prices are just really high and there just isn't that much inventory. So people are slowing the activity there. And then today the U.S. CDC the. Disease control and prevention are gonna begin a two day meeting to talk about boosters. Do we need them. When do we need them. Do we get them sooner than eight months after we are fully vaccinated. What is the path for under 12 that set. You mentioned this. I mean honestly we're setting kids back to school without any sense of when the youngest are gonna get vaccinated at a time when we've got this really contagious Delta variant Tom. I mean honestly this is something that all my friends are talking about and had to school. I have to admit there's no other topic on August 30th for most families out there. Then exactly what happens at school this time around right now is the most important conversation of the day. And even of the week for those that are saying you know lose the fancy talk just give me some courage. Robert Doll for decades has done just that. A storied career in equity markets with Cross Smart Global Investments and Bob Dole. I love within your research note. You say look we've got to invest in a quote a still good economy. What does stocks do in a still good economy. They generally go up. Tom you know a good economy means good earnings and so the path of least resistance has been and likely will continue to be to the upside. That does not mean the answer lies in the ointment. I can give you a list but the path of least resistance is still higher. Tom you know that Bob the fly in the ointment. Let's go right there because that's how I roll. I mean honestly what material fly in the ointment are you looking at that potentially could disrupt things in a way that people are not expecting. Well they're all at the margin. You all just talked about Corona virus and the Delta variant. That is one but inside the market. Earnings estimates for the third quarter peaked in early August and they're off a little bit. That's after four quarters were right during the quarter. The earnings estimates kept going up breaths. The average stock peaked in June. What's that telling us. Tell us. The markets get a little tired so I can flop. Finds lies in the ointment are the material ones. Great question. Bob can answer the question for me. Can we get a reflation very cyclical trade if bond yields don't rise. That's the million dollar question. If you dropped me on the planet and told me everything except where the 10 year and asked me to guess I'd guess a lot higher than 130 something going on the bond market when the S & P has the same yield as a 10 year treasury. We need to watch that carefully. That has that yield has to go up in my view to have this cyclical trade come back on. Bob Dole you have fought against the pendulum of flies in the ointment for decades and decades. You said you have to participate in the foundation of that. Bob Dole is a corporations will adjust. Do you observe and in what way do you observe corporations adjusting into two thousand twenty two. Well for a start look in the rearview mirror first. If you had told me are more companies in the S & P 500 that would benefit from covered than would be hurt. I want to believe you wanted to get. But that's exactly what's happened. Corporations are figure out how to morph. They're dealing with very low interest rates. They've learned how to raise prices an environment where pricing power is coming back. They've kept costs down. Labor I think will be a fly in the ointment on that one. But corporations have morphed in lots of ways that caused them to print these excellent earnings reports. Let's talk about another fly in the ointment just to keep repeating that image on this Monday morning for everybody. Yes I do wonder going forward Bob about the potential for higher taxes. I look to Washington D.C. pulling together some sort of infrastructure plan. What have you accounted for in your projections and what isn't accounted for right now. Yeah I still think the path of least resistance for that legislation is that we do have a Democrat reconciliation package following the bipartisan infrastructure plan but a much watered down one let's call it 2 trillion with up to a trillion dollars of tax increases kind of the plain vanilla ones prior for higher wage earners for corporations and higher capital gains. Well you know the Afghanistan thing does not raise President Biden's political capital to get that through. So whatever you thought the probability there it is lower now. Bob Dole what's your target on S & P 500. I'm embarrassed to say 40 to 50 is the thing just keeps going up I've not revised my target. Let's revise it right now to slow Monday we had to get rigs on the show for Taylor Riggs. Do your revision right now. All right. Forty five hundred. We end. There we go. We're making news. Bob Dole thank you so much. I love it Taylor. Don't cross Mark. Forty five hundred. Pretty cool. I'll take it. Yeah you do that Taylor. Thank you. Drag the news out of them. I love that you said it's such a slow Monday that I had to come on to his general counsels. Like what did he choose to call. At forty five or nine. Remember Taylor your thundering silence. Taylor we see everybody upgrading to say the least. We make jokes about it but it is that sell side chasing after this market. And I think you'd really good point sort of answered my question. It's hard to get some of that reflation free trade with yields so low that if you dropped him on the planet and you told him where the S & P 500 would be he would have thought yields were a lot higher. I've consistently heard you're on price targets on the 10 year yield. They migrate northward until 175 a 2 percent. Hard to get there though with some of the technical factors under way. Lisa that's true. As we heard from John John Farrell. That strategy viewed from John Farrell says if you don't get a wicked low yield stocks go up. And there we are with a feral like one point 3 0 percent. That's the really that's one question that I continue to have. Stocks don't care about tailoring what John comes back to and what is what his book is going to come out as he found the Dalai Lama. ISE. He finds his meditative spirit internally. Really. Go to Tibet. I'm going to spread that rumor. Yeah. Straight to Tibet on a camera. Very cool. Yeah. Now I honestly have no idea. But honestly going for it it'll be interesting if Tabor actually gets more of a concern from me. It is jobs day. On Friday we'll have full coverage of course on radio and television. Thirty Friday morning. Stay with us. Much more to come. This is Bloomberg. With the past one years armors CAC Gupta Hurricane Ida. Battered New Orleans and the Louisiana coast overnight with heavy rain and some of the strongest winds ever to hit the state. The storm has lost some of its strength but it's expected to unleash a potentially catastrophic amount of rain as it slowly moves towards the north. More than a million homes and businesses in Louisiana are all without power and some may stay in the dark for weeks. President Biden's national security adviser is signaling that the US will keep targeting Islamic State in Afghanistan. Jake Sullivan told Fox News that two members killed in an air strike on Friday had been planning additional attacks. Meanwhile the president was at Dover Air Force Base in Delaware for the arrival of 13 service members killed last week in Afghanistan. They were at the airport in Kabul when a suicide bomber struck. United Nations says that North Korea may have resumed operations at its plutonium producing nuclear reactor in recent months. That would help Kim Jong un's regime add to its stockpile of material needed to make nuclear weapons. The reactor used to churn out rough enough plutonium each year for one atomic bomb in recent years. Korea's used uranium enrichment for nuclear warheads. In China regulators are cracking down on the games industry. Miners will now be limited to just three hours a week. Online gaming the new rules are aimed at curbing excessive indulgence in games and protecting minors physical and mental health. And Toyota reporting record sales for July. Strong demands for those SUV and hybrids in the U.S. boosting the Japanese automaker deliveries by 15 percent from a year earlier. Toyota is planning to cut production by 40 percent in September due to those parts shortages. Global news 24 hours a day on air and on Bloomberg. Quicktake umbrage. Could get to this if Bloomberg. As soon as this storm passes we're going to put this thing to put the country's full weight behind the rescue and recovery. Be here to help the Gulf region get back on its feet as quickly as possible as long as it takes. The president managing the message over the weekend. There will be important meetings at the White House today. And of course all having a mystery a collective mystery of a deadline of August 31. That would be to morrow. And his Annmarie Horden states that it comes closer eight and a half hours forward in Kabul as well. Taylor Riggs in for Jonathan Ferro Lisa Abramowicz and Tom Keene. Futures up for this morning. Yields not giving me much higher yields. I'm going to call it a churn in flat Annmarie Horden in the last tower on Afghanistan and now Annmarie Horden on her Washington. I try to envision off Greg Villiers note this morning. Ann Marie the idea of Speaker McCarthy perhaps and President Biden in January of 2023 is your Washington planning for that. Just not yet. I would say Tom but there is obviously talk of the midterm elections and the very very slim majority that the Democrats hold that they could lose potentially seats in the House. And as you rightfully say this would elevate the congressman from California. MCCARTHY And this would then mean for the Democrats very much so an absolute pause on trying to get anything they have done which is why the next few months for their fiscal agenda is crucial. Is it really crucial the linkage of these two bills or is that where Biden blinks to take the moderates back. What remains to be seen at the moment what we saw from Speaker Pelosi is that it is crucial linking these two bills because she had to then make sure that she both to keep the progressives happy make sure that reconciliation and that resolution went forward that procedural rule today so they could start preparing those details for that budget at the same time putting in print that she promises to have a vote by September 27 when it comes to bipartisan infrastructure. There's a lot of talk that there's just too much back and forth in Democratic Party. I think people also lose sight of the fact that the Democrats know this is their moment and they are going to do everything they can to not squander it. Anne-Marie. Let's move away from the political machinations and talk about what's happening on the ground. And I'm thinking of New Orleans. I'm thinking of Louisiana and what is going on with Hurricane Ida. There is a feeling that perhaps this region was fortified from the advancements to the levees. How much additional work like that is being put into the infrastructure bill or has already been passed so that additional storms that are slated to come will not have as harmful of an effect. Yeah this is the biggest test we've seen to this area since Katrina. And very eerie on the fact that it's to the day the 16th anniversary. There's a lot of things in this bipartisan infrastructure agreement that goes towards fixing of bridges etc.. I think Louisiana specifically is very specific in the sense that there's a lot of work done immediately to that area following the hurricane but also in the reconciliation package that the Democrats are focused on. There is a number of advancements. We don't know all the details yet but we do know that they want to make a lot of put a lot of money and advancements when it comes to climate change initiative. Yeah. And many people following this hurricane are going to say it is worse and potentially these things could get worse and these weather elements and effects can happen more quickly and swiftly than we've ever seen before because of climate change. And you'll see a lot of that. That's why I wanted to go. And Thomas good question. How unusual are storms like this going to become. Yes you did ask a great question Tom. And there is really an issue. How much is this a bipartisan issue in Washington D.C. versus a partisan one when it comes to the green agenda. It's complicated because you will have of course a lot of these places like Louisiana where there is Hurricane Katrina where we have this new fresh hurricane Category 4 making landfall more than a million people losing power. But of course this is a place we have a lot of oil and gas refineries. And you have a lot of Republicans in this state. So they are going to want to make sure that they are keeping a hold on and making sure that there's those incentives for these companies to continue operating which sometimes goes against the green agenda because you see even some of the language already coming out from some of these committees about wanting to put more money toward the environment and conservation ism. That would mean more taxes and royalties on oil gas and pipeline companies. So it's a tricky situation when you look at a specific place like Louisiana and where I'm trying to fold in the two between the conversations that we keep having about New Orleans. The president of course is down there. And then reporters when asked follow up questions and he says I'm not taking questions on Afghanistan and walks away. Why isn't the president answering more questions. That is a good question. Well he was asked by our very own Jennifer Jacobs about Afghanistan but he was at an event with FEMA talking about the hurricane. So potentially the president didn't want to divert from what is going on at home here and making sure that these thousands of people that are evacuating losing their homes. Also to note Louisiana is dealing with a surge of Kovac cases in their hospitals. This situation could come very dire. Maybe he didn't want to distract from that talk about Afghanistan. But there is a lot of criticism about this moment from the president on Sunday because obviously a lot of people's hearts and minds right now on what's going on in Kabul. When do we get an update on the victims of that drone attack and real names of who was targeted. Don't know yet. Taylor are waiting for when potentially the Pentagon may brief today. So potentially we could get Press Secretary Kirby giving us an update. But what we know from Afghan reports is that there were civilians that were struck including children protect. There are casualties. That means injured or fatalities. We just don't know yet. And the Pentagon has yet to confirm. But those are the reports coming out of Afghanistan. And I imagine at some point today we will get a briefing on that. Emery thank you so much. Really. We got all these other diversions folks. Early front center right now Afghanistan as well. Lisa let's bring it back to oil right now 70 to 71. I mean there is a bid to it. All in all yeah I'm looking right now. Robert Jagger actually had this great insight where he was saying that crude oil is lower because refineries are down. If you don't have the gasoline to make then you can't have the demand for crude. How much is this going to be a temporary thing. How long will this go on. To me it all gets it solved. I mean a way underplay it. But at the same time there are reports folks of serious transmission issues around New Orleans stuff that we'll hear about in the day tomorrow as well. Taylor I've got to go back to the F the Affirm Amazon transaction which really goes to the new technology. And I mean you can take a broader on the American economy is everybody's adapting to this strange thing called technology even if it's off somebody's cell phone. And this strange thing called by now pay later pay eventually I guess is what we're all doing here. What I liked about a firm time is of course the dynamics that we fold in to play time. When a firm was down four or five six seven percent whatever it was given the slowdown that you've seen in the checkpoints that analysts had seen coming with Peloton given that they've seen the slowdown in a firm. It goes the other way today of course is they get a boost from Amazon and the payment center and the financing aspect of the software. Let me run through the data. We will start with oil with West Texas 68 48. Brent crude 72 72. Gold with a nice lift over eighteen hundred. I note 32. Team 8 19 18 19 the ounce. I've got nothing in the yield space 123 1 percent of the 10 year the 30 year bond one point nine two percent equities. Give me a lift. A fractional lift. Futures up for Dow. Futures up 15. Stay with us. This is Bloomberg. Good morning. Bloomberg Surveillance Monday the last week of August is supposed to be dead. Nothing going on. We'll forget about that huge international relations and politics this week. And we go on to an early jobs report this Friday. We'll give you full coverage of that up to it. ADP claims add up to the jobs report is well all of that means we were hitting on each and every day to check. We start strong Taylor Riggs in for John Farrell. We like round numbers. Forty five hundred. It is. Correct me if I'm wrong. It is Bob Dole of Cross Mark who says that he has a price target of forty two hundred and told me get it out of him and he migrates north or into a forty five hundred. Exactly. Really where we are on the S & P 500. Now also been seeing how do you get that re inflationary cyclical trade that's leading if you take a look at the Russell 2000 when bond yields won't move higher. That is sort of the disconnect that we continue to follow within the tech heavy S & P 500 that tries to lead the way here as well. We change the board. We talk a lot about those bond yields because we got maybe a firm taper by year end. That is the news out of Jackson Hole. How do you push forward to Friday. A big range of anywhere from four hundred to one point one million jobs. What does that mean for bond yields. If we're not going to get an increase or a lift off for what could be another year or so or Northport out from that. So you've got a 10 year. It's not doing anything. It's a one point three one and a 30 year even below a one point nine two. That does nothing to get us anywhere closer to a 2 percent. How does this impact TAC. How does it impact. We're really Romain what are the stocks of the morning that we've been following. A firm. You get a reversal from the negative peloton news to the positive news of Amazon. Yeah. I mean I was on this program on Friday. We were talking about a firm. Those shares were under pressure. That was largely because its largest customer peloton of course has seen a sales slowdown. Well the firm now has a new largest customer. It's Amazon and there is no larger customer than that. The share is getting a 40 percent pop here in the pre market. Basically when you go to Amazon now if you want to buy something that's more than 50 bucks you're going to see a little button there that allows you to click on that affirmed by now pay later offense effectively an installment loan plan. You've seen this button on other Web sites. It will now be featured on Amazon. And if you're a company like a firm there's no better news than that. You're seeing a lot of other payment stocks and fintech stocks get a bit off this. Keep an eye on market of this company. The shares right now up about 13 percent here in the premarket. Its largest customer is square. More than half of its revenue comes from square and that eco system. But a lot of talk now about that. Companies buy now pay later service and that that could be in play here for other partnerships. You're seeing PayPal up as well. Flip of the board. A few other interesting things to keep an eye on here. Keep an eye on the vaccine stocks. Maddern a biotech lower here on the day that CDC advisory panel meeting today on those booster shots. But here's the problem. Matthew Harrison over at Morgan Stanley points out the government has already committed to buy more than six hundred and thirty million of these shots already through 2022. That's been announced. That order reflected in the company's earnings and forecasts as well as in the stock price and that it's unlikely that even with an approval of these booster shots the government would need to buy more of these. That's the problem. The other other problem here and if there are any kids listening. Cover your ears. You may not want to hear this but regulators over in China say you're only allowed to play three hours per week of video game. Oh my word. I know that there would be a revolt in the Bostick household if the US did that. But over in China that's what you're dealing with. You're seeing a lot of the Chinese gaming stocks the ones listed here in the U.S. like Billy Billy Net is down pretty significantly on the day 8 9 10 percent pretty much across the board. You're actually seeing some weakness here. And some of the U.S. gaming stocks like Activision as well as take two and a Activision are down about seven tenths of a percent here in the preview. This is really and this is a crisis of the ISE level. You get to you know you look at you look at Minecraft and the ability to get to those new levels. You can't do that in three hours. Don't start. I think my son's still playing Amanda Lang as well. Romaine Bostick thank you for the gloomy the pendulum Minecraft use today. Right now. And this is an important conversation. Michael Schumacher is essentially seen it all. Wells Fargo and their global head of macro strategy. He's trying to synthesize all. And I love Michael what your economic team said in the recent days that we have to dovetail confidence and sentiment. And I would suggest we have to do that into the markets as well. How do you synthesize our confidence in our sentiment into the autumn. Time one data point is really interesting. It relates to confidence is what Taylor mentioned. When you think about the range of forecasts for the upcoming non-farm payrolls its huge 700000. And just to put that in context if you look at 2019 the average range in the Bloomberg survey was about a hundred and fifty thousand. So once again people are still sort of groping around in a really have strong conviction in terms of where these numbers come out. I suspect that's going to require another month or maybe two until there's a lot more confidence on the economic side. So translating that to markets what does it mean. Yields probably stay pretty low. Volatility sort of perversely stay somewhat high. Equities I'll leave that to the equity pros but seem to be doing awfully well. But I suspect it is a month or two until there's a lot more confidence in the markets with reserves. Irrational exuberance right now. I mean price up yields miniscule real yields etc. You know the story. Equity markets so strong Friday. How do you gauge our irrational exuberance. Yeah it's funny Tom when you think about let's say the tried and true Fed model. I suspect it's been a while since anyone's mentioned that on your show. But if you look at that. So thinking about the ratio of earnings to price minus 10 year Treasury yield or the corporate bond index yield it's actually pretty fair. So a couple hundred basis points it's in historical norms. So that would tell you that markets are not irrationally exuberant. Perhaps yields are way too low. And that's really the point of quantitative easing. So the Fed is just sitting on the yield curve like a big Goliath and until Goliath gets off. I think markets are probably in a pretty happy place. Mike this is exactly why I wanted to go. Goliath is gonna get off right. I mean that's we learned on Friday is that the tapering probably will begin later this year as people had expected. Yeah it might be slower than people had previously expected but it's going to happen. Bond markets shrugged. They'll do it. Not only shrugged but real yields went even more negative. How do you understand this. The way we think about the wells is that Chairman Powell basically said yeah well we'll get off eventually but not yet. And that gives markets probably a couple of months of runway. If you think about the calendar from a Fed perspective it's almost certain the Fed will announce tapering in an FOMC meeting. There are free money left this year. There is a meeting Sept 22. Is that in play. We doubt it. So then you've got November 3rd. What could happen. But that coincides unfortunately with the crunch time for the debt ceiling. So that may get knocked out as well. That leaves us with December 15th. So there aren't too many opportunities left for the Fed. And the market I think looked at it and said all right so we've got probably a couple more months. That sounds pretty good. What's really right. I was just about that simple. I remember back in the day when the Fed would be dovish you'd see longer term yields rise. And the explanation was that if they stay for longer it means longer term growth. We're not seeing that anymore. Now we're seeing the yield curve flatten. And I don't understand that. Can you help me. Yes. It's a it's been pretty strange I have to say LEIGH. So having seen a few cycles it does seem like it's completely counterintuitive. But it strikes me now that what the market really is focused on is one thing tapering and any hint that tapering is going to be a little bit more distant. That tends to be bullish for bonds. The yields fall. And if tapering comes a bit nearer and you see yields back up what we got from the chairman at Jackson Hole is tapering will happen but not any time soon. So yields sat and actually dropped a little bit. So it's all hinged on tapering at the moment. Interesting you talk about the path forward for 10 year yields migrate northward into a 160 to a 190. Is that path smooth. Probably not. So we think Captain Sir Taylor is you see just a little bit of an uptick in yields over the next month or two. And then we think you'll see much more of a move high let's say late this year. So perhaps mid-November through the end of the year I wouldn't be surprised during that time frame. The fields rise 20 30 basis points perhaps more. So not too much until then. But then quite a bit toward the end. Sticking on the old conversation what is a negative real yield of more than 1 percent on the 10 year telling you that tells me the market's giving us very little projected economic return if you want to think about it that way. So if you're a long term holder of a treasury and you say oh I want to buy a five or a 10 year security and hold it to maturity what do I expect to earn after inflation. You lose money. So there's really very little motivation for long term players to be in treasuries. We always think of treasuries as adding ballast to a portfolio. From that standpoint they're good or for professional investors more of a tactical ploy. But for a longer term holder let's say a retail investor someone might be watching your show or listening not the right time to get it. Mike Schumacher thank you so much. With Wells Fargo a little bit distant from bills notes and bonds is. Well Lisa I love the idea of the big Goliath. And you wonder do we overemphasize the big Goliath at our peril. That is has been the theme. And yet it seems like taper does not concern people. I mean the idea that you could push it back and then people take a sigh of relief and say well then we don't have to price it in is not market behavior. Typically people bring forward what the potential ramification is. That's why it's so strange that people knowing yes they're going to taper you know would seem to think that the Goliath taking perhaps some of its thumb off the market really will have any impact at all which is really what we were hearing earlier on the show. Tom Taylor 12 months trailing Dow up 24 percent aspects up 29 percent. Nasdaq composite up 29 percent. I'm afraid that brings up the I hate to say it. Tina there is no alternative. How do you buy bonds when after inflation you are losing money and that's pushing everyone into some of these risk assets. I do wonder though if we talk about the big Goliath how much of that is also foreign investors. Average Jersey said he was stunned. It was one of the best auctions he's seen in my rear. Given the massive foreign buy that has spiked massively in the Taylor Riggs lobbying to be on the show permanently simply is a touch upon the auctions. Miss Riggs. Are they not. What's also keeping sales low pan and a negative. Just want to give you a tip immediately shuts down when you start talking about paradox. Okay Lisa here's the window. Go for it honestly. Taylor you nailed it. I think that this really is one of the biggest issues the fact that it's an international market. When you're hearing internationally is we're not getting out of the zone for a long time. That said once the Fed moves how much to open the door to the other central banks. I'm thinking of for example ECB talking about still getting negative 30 basis points on the German bond. Tom how do you compete with those that can't get a word in edgewise. I mean you know it's like you don't care about the auctions. You're an auction this week. JAGOW Well actually they start up again pretty soon. How do you do. Kevin asks. I'm worried about the 100 year Austrian auction. That's the one I'm really focused on. Coming up at Annmarie Horden conversation Jeffrey Lacker will join us from formerly with the Richmond Fed. This is Bloomberg. Good morning. With the first lady's answers could get to New Orleans is in the dark. Large parts of it may stay without power for weeks. Hurricane Ida pounded the city and Louisiana coast with heavy rain and some of the most powerful winds ever to hit the state. More than a million homes and businesses are without electricity. Meanwhile Ida is expected to unleash a potentially catastrophic amount of rain as it slowly moves north. 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It's not again the hallmark. This week an early jobs report which we'll see on Friday right now on the mystery of Q3 Q4 and quite frankly into the summer of next year. We're already planning. Lisa. No but seriously important here is use of cash in the stock market. David Wilson considers dividends right. It's something that the folks over day attracted. Nick Cole US strategist there. Yeah. And what he did is take a look at some exchange traded funds that track various stock indexes and see where their dividend yield is now relative to what it was in 2090 before the pandemic kicked in because we saw a lot of companies either cutting or eliminating payouts or come up with the prices come up as well. Yeah. Oh absolutely. There's no doubt that you know there are two sides to the equation. But he's basically saying that you know if you look at the S & P 500 and he focused in on ISE shares ETF if you look at the 1 ivy that tracks the S & P 500 that you that you've got a dividend yield of roughly one point three percent in a couple of years back it was one point four percent. Not that far to go to get back to where it was historically. And you know you look around the world you see wider gaps especially true in emerging markets. As he points out you know Chinese companies biggest piece of that index and we know their earnings power or not is not what it was a couple of years ago. Is thanks to the government based on your work as a cash flow out there is give a sustained dividend increases. Well I mean it sure looks that way when you consider what's going on with companies. I mean earnings up 90 plus percent in the second quarter in anticipation of further growth in the third and fourth quarters. And you know companies did pile up a lot of cash whether they were selling shares or raising money in the bond market. And you know now that business is a bit more normal for a lot of them. You know they don't necessarily need all the cash and they have room to pay it back to shareholders. But Lisa what's so important to me here is do you go for dividends which are sort of codified as a board decision and all that. Heaven forbid we'd ever cut the dividend or the easy route is to share buybacks. Right. And actually it goes through exactly what I was going to ask. Just because they necessarily have the cash to increase dividends doesn't mean that they will. And I do wonder Dave how much they have to cater to stock investors who are looking at stocks as the new bonds that want to see that yield that sort of fixed payment as a way to get in. Are they rewarded for dividends above say a stock buyback. Well it looks that way at this point. I mean consider what's going on with the S & P dividend achievers. And there you're talking about aristocrats I should say. You know they're the ones that have been raising their pay outs for 25 years or more. I mean they beat the S & P 500 the last couple of years. So you can see there is at least some reward for delivering cash back. Now you know buybacks you could argue more flexible. So if companies not necessarily sure how things are going to pan out over time they might rely more on buybacks. But no dividends are certainly part of the mix. And when you think about you know bond holders if stocks are the new bonds you're going to want that deal kind of payout you know to to justify you know making the move in the equities and turning them for income. Dave what do you make then of this rotation between equities and bonds bonds and equities when you've a 10 year yield and a dividend yield that are both at one point three one percent. Yeah I mean that's right. It's pretty close. I mean you do have to bear in mind that you know stocks tend to have more room for if you will capital appreciation. So that's something that works in their favor. You know that said if you're not necessarily getting more income in equities it's perhaps an incentive to go with a relatively safe payout at least in the bond market. Ness is not necessarily relatively safe in terms of where you know prices go over time. But at least you know having that dividend or the interest payments I should say really kind of paying off perhaps for some investors. So Dave where are we now. It's going to be a 50 third 50 fourth record high today. If the gains end up 50 third Taylor Riggs like me. Fifty third. And we're looking at continuing momentum despite the fact that we're likely going to get a taper later this year. Throughout the show there seems to be some disagreement among people have come on about whether it matters when the Fed starts tapering. But from equity analysts. Who arguably have to track this just as much as bond traders do right now. What's the word on the street in terms of the ramifications of starting the taper even if it is later that next. That later this year or early next. I mean it's kind of a hard one to get a read on because there's enough optimism at this point. You know you've seen a number of firms raising their projections into year end. Some of them looking ahead all the way to 2022. And you know 5000 has become a really popular number in some quarters for where the S & P 500 is headed. So does the timing of the taper matter. I mean perhaps in terms of you know how things unfold from here. You have to remember I mean you go back to October the last time you saw the S & P pullback 5 percent or more from a high. But you know there is still confidence that things are moving forward from here and earnings are going to keep moving the market along. David Rosen thank you so much. Certainly with the bull tone there as we hear from different strategist John Stauffer was really reaffirming his optimism. Today's release I think we really neglected bonds today 131 in the 10 year yield. I mean it just hasn't driven back down has it. No. I'm just still laughing about your bold call with reaffirming forty five hundred in terms of year on target from forty five hundred today. One thing that Bob Dole was also talking about in his notes about how you get to when you're in the triple lovers. I mean honestly when do you find an entry point yet or not yet. Now I've got a limit buy order and it speaks 5000 OK. I'm getting there. Yeah I was actually looking at talking about the bond market. The high yield bond sector had been selling off just a bit over the past few weeks to come in. And basically people were take note of this basically saying is this a precursor to something more. Is it stemming from the Delta variant. Is it stemming from lower oil prices. Is it stemming from concerns that earnings as Dave was saying that have to power through before the markets are slowing down at least in terms of the pace of gains. And these are all legitimate questions but they were all basically stamped out when the bid hearing back and those spreads are coming in. Taylor haven't touched it today. We've got to go to it. Seriously the mean stocks do we care. No not today. Sorry. I'm just trying to get invited back in tomorrow. You know the people on the couch who've taken the month off as. Oh got interesting. Can I go back to bond yields and spreads. Can we do that. You don't ask. You just know that I'm going to go back to spreads Tom because I know that we like meme stocks here. But I think Lisa made a good point. Investment grade in high yield spreads had been rising for seven straight weeks. That's the longest streak since 2013. Everyone said it was a buying opportunity. Triple sees the biggest out performer last week. Indeed it is the buying opportunities. We take a look at spreads and we're still what north of 300 least. I think we are on high yield but well to 94 and downward. Yeah. We could also do means GameStop to the moon. He's just absolutely glad to have another decaf tea. I did a lot of research this weekend. Decaf chi tea. It's a coffee chai. It's why I thought it was a fraternity. This is Bloomberg. Good morning. We are seeing some wind from the Delta variant but still consumers are spending. We don't have a handle on the pace of job creation really because it gets fine. Fed does not t for a Jackson form but we know that tapering is inevitable. The Fed is a little bit more dovish today and allows for this generation of growth and inflation. And corporations are figuring out how to morph. They're dealing with very low interest rates. They've learned how to raise prices. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz jumbo to a pivotal payrolls Friday. Good morning from New York City for audience worldwide. This is Bloomberg Surveillance. John Ferro. Tom Keene Lisa Abramowicz. John Farrell off Taylor Riggs. Being so kind to put up with us time this morning. I do have to say is this going to be the most important jobs report ever that we get on Friday. Well she gets more bond talk and that's how we're going to head here in the next 15 minutes folks. An important conversation for global Wall Street. No I don't think it is. It was important with a 10 percent unemployment rate. It was important at least in the early months off of the horrific pandemic. But what it is is a an unemployment rate that will allow everyone to recalibrate their recalibrate in particular the Federal Reserve. You were expecting a Jackson Hole meeting that might not be so newsworthy. Will evidently the markets think that it was newsworthy. Now it can go off and meditate with John Farrow. But I do wonder what does matter for this market Tom if we're looking at international tensions if we're looking at a hurricane if we're looking at the potential for such a wide range of figures on Friday what are markets looking for. Markets are looking for the September 22nd Fed meeting and critically soon. I've said this from the get go. I get there's a focus on it but I'm way way more focused on the labor economy and the lack of wage inflation after November 3rd December 15th and that late January meeting next year. Taylor what happened to this idea that tapering bond purchases would end up taking some of the steam out of stocks. Yeah really interesting. I mean I think stocks can go higher because the 10 year yelled at for thinking about a basic discount cash flow rate and the discount rate of what that means it pushes equities higher. What I do keep hearing though is that we are nowhere near the levels of yields rising and that turning into being a headwind for equities used to be a lot higher on yield for there to be any headwind of that discount rate to the equity markets. Donna I just wondered Tom is everyone just going to be off heading to vacation at what do we get it 35 right after the jobs report. Right. I'm glad you bring that up. The tradition here at any Friday jobs report is boom it's done. Out we go. You know maybe 1 2 7 1 in 8. There's an exception this time around. I think that there's so much to mark that yeah they may head out the door mentally but everybody is going to be glued to their cell phone. And frankly the history is that. Where you going to bid equities. Well I think that they're all going to already be at the beach working remotely anyway. Right. I mean that's the key issue. We like Bloomberg folks. This revolutionized Bloomberg or not. Good morning Tom Su Keenan and the team that developed it. Don't kid yourself. I'm working a 12 hour workweek because I've got the Bloomberg terminal on my cell phone. We twelve hour workweek. Is that so. Yeah. Well I used to be 15 but I was able to kind of IBEX really looking right down at what's going on ahead of the market action that we're headed for our 50 third record high in the S & P. I mean Taylor helped us out. The idea here that we're heading with you know 45 12 now and it just keeps creeping upward despite the sort of pressure that we're getting from potential a strong stimulus and the pressure as you talk about the push pull. That's Dan Ives of Wedbush out earlier this morning saying tech leads the rally heading into year end. And then you lo and behold in the last 10 minutes opened the inbox is Stuart Kizer of UBS saying you could use the jobs Friday as a buying opportunity except that don't forget that September seasonality very weak the three worst average return weeks of the year 1980. That happens and it happens in September. Riggs channeling Abramowitz this morning in the pendulum of gloom mood to a day to check to save us. Right now we do have a live. Futures up 6 an improvement in the last hour. Futures up a fraction on 35 points. Not while small caps leading the way. Actually I stand corrected. The VIX sixteen point five six off of that terrific Friday. The Dow level 35000 439. As we send greetings to John Farrell the 10 year yield one point three 1 percent to 10 spread to 1 0 9 as well. Lisa. Yes. And right now we're looking at what's going to happen in the bond space. I hey it we have been talking about bonds all morning and yet it seems like the interconnectedness of bonds and stocks are getting closer and closer. Matt Brown no says he has been in the market for a very long time and. To me maybe you can ask him why auctions matter and talk about auctions. We're going to have Matt Brill joins us right now as we focus on bonds right now. Matt I want to go to your wheelhouse and I'll let Lisa do the full faith and credit auctions as well. I G is about chief financial officers turning to their CEOs and say do this. What does CFO saying to the CEOs in the September October and November issuance is going to be nuts isn't it. Good morning Tom. You're hearing from the CEOs. They're saying don't don't miss this opportunity to add that at low interest rates. So they're basically saying tap the market get rid of our near-term debt maturities anything to three years go ahead and try to buy that back if you can and issue out 10 30 40 year bonds and lock in these low yields for a long time. That's what they're doing. I mean look Lisa I don't mean to interrupt Lisa because I know you want to go to auctions and I'm trying to delay it as long as I can. Microsoft has a dead weight of three point nine percent. They're just overweighted in debt. Yeah. Yeah. That is comical. They are not overweighted in debt. In fact Hans Mickelson over a Bank of America pointed out that the debt load of S & P 500 companies is actually the lowest it's been in years relative to the equity valuations. Here you go. I'm just saying that they could actually sell a lot more debt and keep that ratio at par. Matt is that a bullish signal or perhaps a sign that equity valuations have just gotten way ahead of where companies are at in terms of what they could use their money for. In general we've kind of look things versus cash flow so versus cash flow. And actually the debt loads look reasonable. So versus cash flow. Companies have pared down debt and really they've more grown out of it. So in that regard you know the equity valuations are probably warranted. That's that's not my expertise the way we always look at things in the worst case scenario. Companies could issue more equity to pay down debt. So that's good that they have equity valuations that are that are much bigger now. We don't expect them to do that. They'll do the opposite probably which is borrow more to grow into that. But all in all it's supported by the cash flow. These companies are making a lot more money than they did in 2019. So they can take on more debt. OK. With us now what is the environment telling you that the minute you get a little bit of spread widening buyers come in and we migrate back down to just 88 basis points over treasuries on your investment grade spreads. Yeah the market's telling you buy the dip. And we've been trying to get position in our portfolios for September we're going to see as Tom mentioned a lot of issuance out of out of corporations. So we wanted to have dry powder to take advantage of this recent sell off in the last few days. And I'll just sort of reverse itself and evaporated. So we didn't even really have the chance to take advantage of it as much as we would have liked to. It tells you there's a lot of cash on the sidelines people in these triple levered cash. Big deal there. We think they're trying to get the guy to get out of that cash and get something more than that. And that's forcing them to buy more investment grade. And that return is forcing them to buy more high yield. And then even after that they have to go buy more equity. So it's all a domino effect. But at the end of the day it tells you there's still a lot of cash that needs to find a place in the market. And that's why it's gonna be very hard to see significant sell offs. Has the Fed killed the credit cycle. Matt. They've certainly extended it. I mean it's always tough to say if they've killed it. I mean I still think at some point down the road that you know we as investors or hopefully our competitors will do something very silly in that regard to to overextend and corporations might do something that gets themselves in trouble. But the Fed has told you that they are the put and they're going to be there for a long time. And Paul said I wasn't talking about corporations on Friday but he was telling you that he has the markets back and he's going to be as dovish as possible. So from that regard I certainly think that the credit cycle is a very very long one at this point Matt. Oh the equity guys are trying to become bond strategists now. What are the equity guys on the desk next to you coming to you and asking for what do they want to know. They honestly want to know is this sustainable. Is this just because the Fed. They're asking us is this real meeting. Are there real buyers or is it only the Fed. So if the Fed pulls away and they take their hundred twenty billion dollars a month purchases. Does that mean that there's nobody left buying any bonds. And we say no. We wake up every single day just about with an email from Japan stating you know here's how much we want to buy in the U.S. investment market today. So we get pension plans in the U.S. We get large insurance companies abroad mainly in Japan that are buying a lot of U.S. credit right now. So that debt is not going to go away once the Fed stops. So that's a really good comforting thing for these equity managers to know that they're not just really just it's not just the Fed buying. There's just a whole wave of money. And certainly it helps to have 120 billion dollars bought by the Fed but they're not the only buyer. And there's a lot of very very big purchases out there that are going to keep this market afloat no matter what. Hugely hugely valuable. Matt Brill thank you so much. Really really appreciate that this morning Lisa. I'm bringing up the overnight repo is just one measurement of liquidity out there. And I guess I constructively say it sustains it. One point one trillion for that to breakout to one point two trillion would be another indicator of the wall of money that's out there. And it's a wall of money that's coming from everywhere. And just to give a little bit more cash into this ball that just rolls from one place to another China is expected to cut rates again later this year injecting more liquidity overnight. The idea that this had been one economy a major economy that was sort of trying to tighten or reduce the credit impulse having reversed. Just shows you how much this wall of money will perpetuate itself for the foreseeable future. Taylor Friday afternoon to go back to you know you're squeezing in a few more hours. Friday afternoon. Taylor I'm sorry. It was a unique equity market. There was a bid to it. Indeed there is bad. And you're seeing a lot of these round numbers I know in the media. That's all we talk about. But it is the migration higher. Now Dave Wilson I will say had a good point that when you talk about Brett than the size and scope and the commitment to this market the number of stocks above that 50 day moving average not nearly as high as it was months ago. We'll see you in a little bit of lift to the market. Your own oversold. But we've done better in the last hour. Futures up six Dow futures up 28. The VIX sixteen point five. Stay with us. This is Bloomberg. Good morning. With the first one these numbers could get to Hurricane Ida battered New Orleans and the Louisiana coast overnight with heavy rain and some of the strongest winds ever to hit the state. The storm has lost some of its strength but it's expected to unleash a potentially catastrophic amount of rain as it slowly moves up north. More than a million homes and businesses in Louisiana are without power and some may stay in the dark for weeks. President Biden's national security adviser is signaling that the US will keep targeting Islamic State in Afghanistan. Jake Sullivan told Fox News that two members killed in an airstrike on Friday had been planning additional attacks. Meanwhile the president was at Dover Air Force Base in Delaware for the arrival of 13 service members killed last week in Afghanistan. They were at the airport in Kabul when a suicide bomber struck. The United Nations says that North Korea may have resumed operations as its plutonium producing nuclear reactor in recent months. That could help Kim Jong un's regime add to its stockpile of material needed to make nuclear weapons. The reactor used to churn out rough enough plutonium each year for one atomic bomb in recent years. North Korea's used uranium enrichment for nuclear warheads. In China regulators are cracking down on the games industry. Minors will not be limited to just three hours a week of online gaming. The new rules are aimed at curbing excessive indulgence in games and protecting minus physical and mental health. Toyota has reported record sales for July. Strong demand for SUV and hybrids in the U.S. boosted the Japanese automakers deliveries by 15 percent from a year earlier. Toyota is planning to cut production by 40 percent in September due to parts shortages. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than a hundred and twenty countries I can get to. This is Bloomberg. We believe that we're down to a population of 300 or fewer American citizens who have yet to get out. We have evacuated more than 5000. We evacuated well more than 300 just yesterday. So we believe there's still an opportunity for American citizens to get to the airport get on planes and get home. Jake Sullivan the U.S. national security adviser and CNN this weekend managing the message for this morning or I should say for the weekend. Annmarie Horden in Washington makes clear it will be an eventful morning for the White House. And there's a mystery over what August 31 actually means on this 30th of August. Taylor Riggs in for John Farah Lisa Abramowicz and Tom Keene. And joining us now Peter true words from the London School of Economics with all of his good work over the years at the University of Texas at Austin and Professor Tribe which we talk to Afghan experts. I want to talk to you about United States experts. And I go back to your landmark politics and strategy. Do we have a strategy in foreign policy that gets us out to say 2023 a year before a next election. Well Tom it's good to be with you. I would say we have the beginnings of a of a strategy. I mean really what's been going on for well over 10 years is that the United States is in the process of reassessing and adjusting strategically and internationally. What that means is moving more of its energy its time its energy and its assets to East Asia. And domestically I think the principal challenge that has dogged three administrations is rebuilding or renewing the social contract which has really been badly damaged by the country's failure to keep international openness and social protection in balance. This is the challenge. Afghanistan doesn't really change that. But I think it kind of draws our attention to it in a kind of more focused way as we wind down this chapter. And and hopefully the United States begins a new one. I looked Peter at a new strategy and it just seems to be all the ghosts that the looking back. We look back one year we look back two decades. We look back three wars. Which are you looking back to to find perspective. I'm not actually looking back at wars. What I think about is I think about me. I really do think we're in a period where the national interest is being redefined and it's not being done in the news cycle. It's being done over an extended period of time. So I look back at periods for the historians out there like the 18 nineties in the 1920s and the 1940s and the 1970s where the United States readjusted recalibrated changed the balance between international and domestic interest. And that's what I think we're in the middle of. And I think it's very hard to see. You have to be able to kind of bracket it step outside of it and get some distance looking at it from 10000 feet rather than from from one hundred feet. And right when you're in the middle of something like what's going on in Afghanistan right now. It's very hard to see that. But I do think that's what Biden was perhaps trying to get out. Peter is having trouble. That's why I want him to go because right now we're looking at an agenda in Washington D.C. that is almost solidly Afghanistan. I mean I was watching the Sunday talk shows and the political shows are all. Afghanistan at a time when we're heading up into the debt ceiling debate. We're heading up until this question about infrastructure and getting it passed. I mean did this just accomplish the opposite. Yes I think that's you know Lisa that's the great irony in all of this. One of the reasons that Biden was so keen to get out of Afghanistan was to focus more attention on domestic problems and the messy costly withdrawal from Afghanistan. It's basically only increased the political risks of failing to deliver on that front and the difficulties of getting it done because he's now open and vulnerable to attacks over Afghanistan. You heard it yesterday people calling for impeachment. Lindsey Graham calling for impeachment of Joe Biden. You know and we'll hear more of that in the coming days. And I think Professor are our allies rethinking our commitment to them. And I have Taiwan specifically in mind. So you know I think that is going on although frankly Taylor it's mostly on my side of the Atlantic over here and I don't mean the U.K. but also in Europe. There's a lot of people who are very pissed off about not being sufficiently consulted about the operations with respect to the withdrawal. I hear much less of it actually from our allies in East Asia. So why is that the case. I think it's because they know that the goal behind this at least the international goal is to shift the focus to East Asia to China and more broadly. And that's a concern on this side of the Atlantic. You know in the European. Peter are we actually going to see the U.S. remove involvement from that region or are these drone attacks that we're seeing going to be ongoing. And then the need to put more personnel on the ground in order to get intelligence then all of a sudden did we really get out in the first place. Well I mean you know who knows. But I think we're gonna see now because of the terrorist strike again that killed you U.S. service men and women. We're gonna see the Biden administration invest more time and energy in this. I think they really can not afford to see this kind of thing happen. It really can't happen on their watch whether or not it can be done over the horizon that is with drones and some special forces. I think that's the goal. I do not think there is a huge push anywhere for more kind of boots on the ground big time with nation building the United States American people when you look at the polls. They're pissed off about how the withdrawal was handled but they are not upset about getting out of Afghanistan. Peter thank you so much. Peter troubles with. The London School of Economics professor of international relations there as Israel. Lisa these are really difficult conversations. The idea to me that he was illuminating that we're looking at a president that wants to shift the focus back to the domestic agenda and wanted to withdraw focus from the international agenda particularly the Afghanistan conflict did the exact opposite. Over the past few weeks. And to me this is going to be a political misstep for a lot of people are going to be talking about. To what degree could it have been avoided. I know we've got it out in the Bloomberg Surveillance Twitter feed. I'll try to repurpose it this morning on that. General Kimmitt was just outstanding Friday as well. Taylor we've got a bit to the markets. I don't know what else to say about it. Maybe it's your appearance this morning. You know we can always find blame where blame is due. And indeed we can call it a migrate northward. If we weren't really coming after some strong buying that we saw at the end of the last week we know that if the Fed tapers there's a big disconnect between that of course and left off. And so you're seeing really a decent bit into the market. Lisa you're right. Fifty three now. Record highs if today holds. It is unbelievable how quickly we have come fast. And as we've been talking about all morning the strategist Tom that attempt to keep up the S & P 500 on futures up three point eight percent off the bottom of August 19. That's a wild move to say the least. Coming off Michael McKee providing leadership. He's talked to every other president. He said I need to talk to more Fed presidents. We went out and got a former Fed president to keep McCain happy. Lacker of Richmond next. Good morning everyone. Bloomberg Surveillance thank you for being with us on a Monday morning we migrate to jobs report on Friday we do so the continued lift in the equity market much as we saw on Friday the VIX sixteen point six five hundred seventeen a big deal there. Futures are up for Dow futures up eleven and bond market not much giving us much today. I would note Euro 1 18 0 1 gets my attention. It was an extraordinary surveillance that we saw on Friday with Jackson Hole Michael McKee with weeks of planning speaking to different presidents the geography of this nation as we struggle with our worries of the moment. Maybe the focus on the chairman's speech and taper is well we continue and focus on one Federal Reserve. It is the Richmond Fed which has a fabulous history from black to brought us to Lacker and now to Barkin who Richmond fed one of my favorites with the wonderful Tom Humphreys on the history of our economy. It's had a wonderful leadership including under Jeffrey Lacker the former Richmond Fed president joins us now. Michael it's a different Fed isn't it. Well it's a different Fed. It's a different economy. And we have learned a lot. And now we have a new reaction function for the Fed which is where I'd like to start jabbing. You have expressed some reservations about this new policy of letting the economy run a little hot till we can average inflation because you've expressed concern that that could unmoored inflation expectations. Do you think that the Fed in particular Jay Powell over the last couple of weeks and with his address on Friday maybe put a little bit of those concerns to rest by emphasizing the fact that the Fed is going to stay focused on inflation. Somewhat but I think I think the feds in a tough spot that the danger that they face from this inflation surge. We have inflation on a six month basis higher than it's been since 1983. The danger is that that persists. Rob Kaplan who was talking on Friday about the extent to which businesses were reporting that they expect these supply constraints to continue. But then beyond that getting embedded in inflation expectations and I think that's the real key risk that that the Fed is running these days. So I was glad to see that Powell addressed that in his remarks on Friday. He's and he's done that elsewhere as well trying to reassure the public that yes if inflation persists at a high level we have the tools to deal with that. But it's it's somewhat like a friend of mine likened it to you know a doctor telling you you have gangrene in your leg. And don't worry we have the tools to deal with it. But it's you know the tools are the amputation kit and they include a big sore. So what we went through in the early 80s to get inflation down was exceptionally painful. And that's what motivated those of us who over time advocated more preemptive policy. The Fed's moved away from that in its strategy statement last year. The risk it runs is that that shift last year is sort of akin to going off Bretton Woods. And in that it gives people the license to believes that there's an entirely new regime in place now with regard to inflation in terms of tools. One of the papers presented on Friday at Jackson Hole suggested that our star the level of interest rates that would be neutral is much lower than it had been. So does the Fed really have tools. Can they raise rates and cut off inflation without sending the economy into recession. And I think they very clearly can. You know more to the point I think they can nudge up the polity expected policy passed. You know over the coming year. And I expect you're going to have to do that to keep inflation expectations contained. So I think they have the tools to combat it. I mean it's they're blunt. We haven't used them in a long time. But yeah I think the Fed has the tools to do that. If a. Well let me put it this way. Can they go back to jaw. Jaw. To paraphrase Winston Churchill and Jawbone the economy into place or is it going to take action to get Wall Street's attention. Now I think I think actions have always spoken louder than words in this throughout the 70s. The Fed loudly proclaimed its opposition to inflation and its desire to have inflation be lower. It just didn't take the actions to back that up until Volcker in 1980 81 started letting interest rates rise and engineered the recession that it brought inflation expectations down just like Tom Keene. Good morning to you. You mentioned the pre-emptive nature of a theory that Richmond is let on that I think of the late Marvin Goodfriend with a cause for concern over inflation the whole Shadow Open Market Committee. What we saw out of Carnegie Mellon as well. Where did the inflation is does get it wrong on your watch. So I think that the stability of inflation expectations coming out of the recession was a bit of a surprise. I mean a bit. They were bit more strongly anchored than I and several others expected. So the upside risk to inflation didn't emerge. I'd point out at the same time that inflation doves were also also missed that they were afraid of dramatic sag and inflation. Jeff. Jeff this came up over the weekend and this is a critical question in defense of the inflation is. The idea that the reason we didn't see the inflation is we just move the inflationary impulse over to an increased our asset allocation and an asset balance sheet in equities in real estate all the summer properties Michael McKee can't afford. Sorry about that Mike. Good to be with you Tom. So I think what people lost sight of the huge increase in the Fed's balance sheet is that the monetary liabilities it was pumping into the economy were being absorbed by a tremendously tremendously large demand for liquid assets by the banking system driven by the banks natural reaction to what happened in 2008 but also regulatory you know impetus provided for them to hold larger liquid buffers. And that means that demand for money is essentially flat at the interest rate on reserves. And we could increase the money supply a lot. Until we start forcing banks to hold more liquidity than they want more. We were a ways away from that. So the size of the balance sheet wasn't really doing much for the economy. On the flip side of the inflation debate Jeff is the employment picture and we're gonna get a better read on that perhaps on Friday. If you were still on the Fed what would you be looking for to determine just how much slack or how tight the labor market really is. It's a really good question. You know we we had all these debates about what maximum employment matter what that number was. It's really a a long run long horizon kind of thing. It's like after all the sectoral reallocation has occurred after all the matching that has to go on between people looking for another job what kind of career is it going to be. I want a different occupation. I want to be the restaurant anymore. And firms looking for where they're going to find someone with the skills that I need after that process plays out. Yeah maximum employment might be a lower unemployment rate. We have now but that takes time and maximum employment. In September of twenty twenty one is really close to where we are right now. We're really close to September 20 21 maximum employment. We can't we can't get maximum employment much up above where it's going to be in September. So I think that you have to keep in mind a dynamic process in which labor markets heal. Some recent research by Bob Hall and Marianna crudely ask in that regard is painting a very different picture of labor markets. You think of the unemployment rate is shooting up in a a recession coming down. But you know it looks like it just comes down at the same pace every every expansion. Jeff you were very much in inflation is still when you were on the board. And I'm wondering if you've seen what the current Fed seems to be arguing that inflation dynamics have changed. And there is as Jay Powell said on Friday a natural disinflation in the global economy. I'm not sure I buy it. What people have been increasing the weight they place on inflation expectations and inflation dynamics over the last couple of decades. I know in the early 2000s people thought it was all sort of a backward looking process. The important thing to remember and I think people neglect about inflation expectations people talk about it as if it's some exaggerate is external force of nature or some collective psychological whim or something. It's really expectations about what the Fed is going to do in the near future. And so when you look inflation expectations that's really credibility in the Fed and that can change. And the process by which that shifts and changes over time is is not one that's deeply deeply understood in the economics profession. Jeffrey Lacker thank you so much. Was VCU and of course a former president of the Richmond Fed. Thank you. Thank you so much Mike. Very quickly here. This is really a huge debate the idea of the impulse of our system to higher prices or did it go through assets to higher prices. Yeah but we don't know. We don't know mechanism at this point. They think they know and it's a gamble. Jackson will you wrap up. What do you think. I thought it was very interesting. Powell obviously laid things out for the markets and the markets seem to have accepted his timetable which is good. No disruptions there. But there were some interesting papers some concerning papers. The idea that our star is significantly lower and also that income inequality may have driven some of the slowdown in the economy as opposed to the other way around. Lisa that's really interesting isn't it. Yeah we were talking about that last week and we'll continue the conversation coming up on the open. I will parlay over there. Joanne Feeney is joining us Advisors Capital Management. Honestly it's a fascinating market. And frankly markets are taking everything that Jay Palisade so in stride. You have to think is he taking a victory lap or is he holding his breath. Stock futures up for Dow. Futures up 12. We continue to stay with us this week on Friday jobs. This is Bloomberg. Good morning. With the first one these numbers could get to New Orleans is in the dock. And large parts of it may stay without power for weeks. Hurricane Ida pounded the city and Louisiana coast with heavy rain and some of the most powerful winds ever to hit the state. More than a million homes and businesses are without electricity. Meanwhile Ida is expected to unleash a potentially catastrophic amount of rain as it slowly moves up north. The Pentagon reportedly knew of an imminent threat at the Kabul airport just hours. That suicide bombing took place. According to Politico military officials were told to prepare for a quote mass casualty attack. Defense Secretary Lloyd Austin was quoted as saying he didn't believe people were getting the incredible amount of risk on the ground. The attack killed almost 200 people including 13 U.S. service members. More problems for China's Evergreen Group. The company's electric car startup says mass production of vehicles may have to be delayed if the business lacks capital in the short term. Everybody's struggling with debt. The company is taking the rest step of announcing that it will not hold a briefing after putting first half earnings tomorrow. And Ali Baba is moving to resolve a sexual assault case that has rocked China's tech establishment. The e-commerce giant has fired 10 staffers for publicizing an employee's account of assault allegations against a former manager. Alibaba CEO Daniel Son has said the company's handling of the complaint was a humiliation. Baxter International reportedly is in talks to buy medical equipment maker Hill Holdings according to Dow Jones. The price will be about 10 billion dollars just a month ago. Iran rejected Baxter's nine point six billion dollar offer. So it comes back to the table. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts in more than 120 countries. NYSE. This is Bloomberg. At the FOMC is recent July meeting I was of the view as were most participants that if the economy evolved broadly as anticipated it could be appropriate to start reducing the pace of asset purchases this year. That was Fred the chairman of the Fed Reserve System. An important speech you just heard our Michael McKee speaking with Jeffrey Lacker former president of Richmond fed on the path forward after this Jackson Hole. It'll be interesting. The meeting September 22nd is the next hallmark there for the Fed if you will. Taylor Riggs in for John Farrell's rule that she could join us warning Lisa Abramowicz will migrate to a 9:00 presentation. Interesting markets with a little bit of taper improvement. We'll see how that goes through the day right now. And the hurricane in Hurricane Ida. We will talk about refineries including in Baton Rouge back in 1989 a refinery of a ginormous size. Brian Sullivan Europe and Boston My fondest hope is it either turns a sharp right goes over to Tampa Bay and the rain cancels four games or the Red Sox. That would be the best outcome. That's not going to happen. There is a lot of rain there's a lot of damage. There's a lot of rain that's actually heading right to you. In fact in a couple days you know this there's a lot of power outages especially in New Orleans but the levees in New Orleans seem to be holding outside the city. There have been some massive flooding from some overtopped levees. But right now as the sun is coming up down there people are assessing the damage. We're still trying to get a handle on just how bad this storm is. And as always in the case of these storms it usually takes a couple of days to really figure things out. We don't understand this the scope and scale of DAX in Baton Rouge. These refineries are Jane enormous aren't they. They are especially the one in Baton Rouge. You know as you're approaching Baton Rouge you think you're actually looking at a city skyline but you're not. You're looking at the refinery. The city is actually a little further down the river. It will be good to play yet no brain continue about what we can learn. Given years past two previous hurricanes the impact on nat gas the impact on some of the energy markets that you're looking at now. That's absolutely right. So in 2008 Gustaf and Ike went through this area. Ike actually hit Texas but Gustaf hit in southern Louisiana. Gasoline prices especially across the U.S. South jumped quite a bit. You know and there was a possibility that this might happen again. And this this hurricane the eye wall the strongest winds of this hurricane went over the terminal just offshore and also over three major refineries as it it moved up into Louisiana. So those facilities probably suffered some damage maybe a lot of damage. And then you know this tertiary damage all the way up up. We know they call it the rule of America. Brian you know what's interesting. We think about wind we think about the flooding we think about the rain when we're thinking about assessing the damage in the coming days. What to you is going to be the most severe barring a major loss of life or some kind of massive infrastructure collapse which is still possible. I think the big story here is going to be the economic impact on the energy markets and the U.S. economy as a whole. You know you know there's inflation pressure on the U.S. economy right now. And that's just going to get worse if gasoline prices go up by dollars at the pump. Well what's your prediction Brian. I don't want to pin you down and get you in trouble but can you give us five dollar a gallon gas. You know what happened last time. So I don't I don't think it's out of the question. It was a regional shortages that drove the prices up. It was especially across the U.S. south up here in the northeast we were we were spared mainly because of the facilities in New Jersey. But across the south they did see five six dollars a gallon gas. I remember correctly. I thought oil was one. Prices are really a regional difference in the price of a gallon of gas. It's happened before you know. So I would suspect it could happen again. And it was mainly because of shortages. They just weren't getting the product into the gas stations. So it became a primary premium. Brian big picture here. As you think about infrastructure the investments after Katrina as you said for now at least the levees thankfully holding up. Does it become more important and more urgent given climate change given the fact that we think there are more hurricanes on the way. It absolutely is. I mean you know you have the oceans are rising. The oceans in the Gulf are actually rising quite rapidly compared to some of the rest of the country. You also have the storms that are coming out much stronger. You know this storm here set a record. As the strongest storm to hit southern Louisiana since 1851 last year another storm set that same record tied that record but record had been set originally in 1856. So between 1856 and 2020 there hadn't been a storm that strong. And now we've had two in two years. Because of warmer waters. That's a big part of it. You know the warmer waters of gasoline into an engine and the water out in the Gulf of Mexico right now is between 85 and 90 degrees. So you know you only want to swim in it. Well I wouldn't. Brian Sullivan thank you so much. You know Taylor's trying to see me in my swimsuit. On my float is the Gulf of Mexico. Brian Sullivan in Boston truly expert on linking in all the energy products into these disasters. You know we make jokes about it Taylor but I remember at least a decade ago talking to a guy from M.I.T. who said watch the Gulf of Mexico. Yeah. Yeah. Don't even get me started on California where we have fires and droughts and you name it we can't even get water or electricity. So it is certainly not regional exclusively to the Gulf. We mentioned Kevin McCarthy maybe a speaker of the House here with a Republican majority and just very quickly are out of Bakersfield. And that goes tailored to the idea of water in California as big a deal as water in Louisiana. Tom water is the only commodity we aren't pricing in the markets right. I can't figure it out. Water policy is a huge debate in California. I have studied it and studied it. We did three years of Bloomberg on the economy on this. And Taylor it's truly the great great mystery the pricing of microeconomics I should say the price theory of water. Taylor Riggs always surprising folks. We should have it back tomorrow. That would be a great idea. Then futures up six. Dow futures up 20. Please stay with us. An important conversation. The gentleman from Stanford and over Michael Barr in the twelve o'clock hour. This is Bloomberg. Good morning. I'm Jamie Maggio with an exclusive update for Bloomberg TV and Radio from Tennis Channel New York will be at the center of the tennis world for the next two weeks as the 20 21 U.S. Open kicks off Monday at Flushing Meadows. All eyes will be on number one Novak Djokovic as the Serb tries to make history and complete the calendar grand slam. He can also become the most successful male player ever at the majors if he wins his 21st title and breaks his tie with Roger Federer and Rafael Nadal in the all time list on the women's side. Wimbledon champ Ash Barty heads into New York. Many people's pick to lift the trophy. The Aussie has been in sensational form in 20 21. She's lost just one of her last 10 matches and is fresh off her first career win in Cincinnati. And don't forget you can watch all the action from the final slam of the year every night on Tennis Channel. I'm Jamie Maggio.

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