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00:00> > THIS IS A COURTESY AND BOND DRIVEN MARKET. > > MARKET CURRENCY IS ALREADY PRICING IN RATE CUTS NEXT YEAR, THAT MIGHT BE TOO SOON. > > THE GOLDILOCKS OUTCOME IS OFF THE TABLE. > > I WOULD BE SURPRISED IF WE WOULD INTO A NEW BULL MARKET ANYTIME SOON. > > THIS IS BLOOMBERG: SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. JONATHAN: GOOD MORNING, GOOD MORNING, THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO ALONGSIDE TOM KEENE AND SUPPER MODES, I'M TONGUE -- JONATHAN FERRO. EURO-DOLLAR IS BASICALLY AT PARITY. TAYLOR: STILL DOESN'T WANT -- TOM: THIS IS ONE OF THE MOST HISTORIC DAYS IN 20 YEARS. JONATHAN: HEATHROW AIRPORT ASKING AIRLINES TO STOP SELLING SUMMER TICKETS. THERE IS A HEADLINE I'M NOT SURE WE EXPECTED TO READ A COUPLE OF YEARS AGO. TOM: I HEFTED GO WAY OVER THERE TO BUY STUFF ON CARDI B STREET. THE GYRATIONS OF THE PANDEMIC, DUTCH ON BARNABY STREET. THE GYRATIONS ON THE PANDEMIC. THE CORRELATIONS RIGHT NOW ARE OFF THE CHART. IT IS JUMP CONDITIONS TUESDAY WHERE EM GIVES WAY ALONG WITH SILLINESS OVER THE EURO PARITY. KATHLEEN: JONATHAN: -- JONATHAN: IT IS OVER AN ENERGY CRISIS PEOPLE THINK CAN'T GET WORSE. LISA: THAT WAS MY REACTION, IS IT AN EFFORT TO CONSERVE DIESEL, GAS OR ENERGY OR IS IT WHAT YOU SAID, THESE PEOPLE SACRIFICED AND HOW MUCH DOES IT SHOW THE DUELING NATURE, AND IMPOSED RECESSION OR DOWNTURN, AND IMPOSED RETRACTION WE ARE SEEING SPECULATED ABOUT IN GERMANY IN ORDER TO AVOID AN ENERGY CRISIS? THIS IS A NEW ERA. KATHLEEN: -- JONATHAN: THIS IS NEW, THEY BROUGHT OUT FX INTERVENTION SIN. THE CURRENCY HAPPENING IN THE MARKET IS A LONG TIME, THESE COUNTRIES HAVE BEEN TRYING TO HIDE THEIR CURRENCIES AND NOW IT IS UNWANTED. TOM: COULDN'T COME UP WITH THE ASSUMPTION OF A -- PRUDEN -- PUTIN, WITH THE ASSUMPTION OF A STRONG DOLLAR, IT IS ABOUT HOARDING CASH. THE ENERGY WE ARE TALKING ABOUT, LET'S GO TO EUROPE. ROTTERDAM COAL UP IN A MOVING STUDY, AND NEWCASTLE UP 40%. PART OF THE ENERGY CRISIS IS IT IS DEAD. JONATHAN: I WILL NOT ASK YOU TO REPEAT THE ACCIDENT. IF YOU ARE FORECASTING FOR AN EXCHANGE, SPECIFICALLY THE EURO DOLLAR, AND YOU'RE MAKING A COMMODITY CALL. AND IF YOU'RE MAKING A COMMODITY CALL, YOU ARE MAKING A POLITICAL CALL IN EUROPE. RUSSIA, THE KREMLIN, A DECISION ABOUT GAS APPLY TO EUROPE. LISA: NO ONE CAN DO IT WHICH IS WHY RISK PREMIUM WILL STICK FOR A LONGER PERIOD OF TIME. PEOPLE WILL CHARGE IN TERMS OF A WEAKER EURO BECAUSE OF A DRAMATIC LACK OF CERTAINTY AND CONSISTENCY WITH RESPECT TO THE DECISION. JONATHAN: WE ARE LOWER, NEGATIVE .7% ON THE NASDAQ, THEY WERE DOWN BIG TIME YESTERDAY AND THIS MORNING, SEVEN OR EIGHT BASIS POINTS ON THE 10-YEAR. CAN'T TAKE IT RIGHT OFF THE EURO-DOLLAR, ONE 00.17, -.2%. LISA: IT IS BASICALLY AT PARITY AND IT HAS BEEN FLIRTING WITH THAT LEVEL. IT HIGHLIGHTS THE ENERGY CRISIS, WHICH IS WHY AM SO FOCUSED. THE MONTHLY OIL REPORT COMING OUT, THIS COMES AFTER THE IEA SAYS THERE IS THE POTENTIAL FOR A CRISIS WE HAVE NOT SEEN BEFORE BECAUSE OF SOME OF THE CONSTRAINTS AROUND RUSSIA. I WANT TO HEAR WHAT PEOPLE PLAN TO DO ABOUT IT. I TRIED TO GET THE CAPS ON RUSSIAN OIL PRICES OVER THE PAST WEEK AND IT WAS LESS ONE -- I WAS LEFT WANTING IN TERMS OF DETAILS AND OPTIONS. THE FED PRESIDENT SPEAKING AT A LUNCH HOSTED BY THE VERY CLUB OF CHARLOTTE, WHAT WILL HE SAY ABOUT HOW MUCH HIS DECISION TO RAISE RATES BY 75 BASIS POINTS THIS MONTH AND AGAIN BY ANOTHER 75 BASIS POINTS POSSIBLY IN SEPTEMBER HINGES ON THE CPI? IF THEY GO TO 8.8% AS BLOOMBERG EXPECT, DOES THAT GO -- HOW MUCH DOES THAT PUSH THEM AWAY FROM MAKING SUCH A SERIES OF RATE HIKES? TOM, THIS IS FOR YOU, I'M WATCHING TO SEE WHETHER THE DEMAND WE HAVE SEEN OVER THE PAST COUPLE OF SESSIONS CONTINUES. ESPECIALLY IN LIGHT OF THE INVERTED YIELD CURVE OF THE TWO TENS SPREAD. THIS IS A PERSISTENT YIELD CURVE INVERSION THROUGHOUT THE CURVE, NOT JUST TWO TENS, NOT 7/10, NOT JUST 5/10 BUT ALSO THE THREE-MONTH TENURE CURVE. JONATHAN: DO YOU WANT TO TALK ABOUT THE TWENTY-YEAR OR SHOULD WE MOVE ON? LISA: TWENTY-YEAR. JONATHAN: THANK YOU. FOR YOUR REVENUE PLUS 10%, BUT GET USED TO THE HEADLINE. THEY STILL SEE A TWO PERCENTAGE POINT EFFECTS TREND -- TRANSLATION WITH HEADLINES. TOM: EVERYBODY MAKES A BIG DEAL ABOUT IT. IT IS A ACCOUNTING REALITY, EARNINGS, CORPORATIONS AND MULTINATIONALS -- MULTINATIONALS WILL GET THROUGH. JONATHAN: LET'S TALK TO EQUITY STRATEGY AT BP POWER, HOW ABOUT ARE THINGS GOING TO GET IN EUROPE? > > THE REASON TENSION IN THE FX MARKET AND THE YIELD CURVE IS PROPRIETARY TO MORE RECESSIONARY PRICE ACTION. WHAT HAPPENS WITH GAS APPLY WHEN WE SEE RATIONING WILL BE WHETHER OR NOT WE DO HAVE THAT. TOM: THERE'S A WORRY, FIX 27.09, TO BE ALMOST 30 NOW. WHAT IS THE VALUE OF GOING TO CASH VERSUS FINDING THE RIGHT SPOT IN EQUITIES? GREG: TO TRADE OFF THIS VOLATILITY WE SEE IN THE EQUITY MARKET, VERSUS THE COST OF CARRYING AN ALLOCATION TO CASH, AFFECTIVELY THE PRICE OF INFLATION, SO WE WILL HAVE THIS LATER THIS WEEK WHICH WILL BE THE PEAK IN THE CYCLE. IT'S THE COST OF GOING TO CASH. SO FAR IT HAS PAID OFF. LISA: MEANWHILE, THE SAFETY TRADES AND EQUITIES ARE BEING A TURN OF THE HEAD. WE ARE SEEING OIL STOCKS COME OUT OF IT AS WE SEE OIL PRICES GO DOWN ON FEARS OF A LACK OF DEMAND. HOW MUCH IS THIS A HEAD FAKE AND HOW MUCH IS IT A REAL SHIFT IN TERMS OF THE LEADERSHIP WE HAVE SEEN FROM COMMODITIES? GREG: IT IS A GREAT QUESTION. IF SEEN CHANGES IN LEADERSHIP IN EQUITIES AND WE HAVE SEEN TECH NAME UNDERPERFORMERS AND IT HAS BEEN A MULTIPLE COMPRESSION STORY. AS WE MOVED TO THE EARNINGS SEASON AND THE MARKET IS GOING TO BE LESS FOCUSED ON WHAT RATES ARE DOING AND HOW THAT IS COMPRESSING VALUATIONS. IT'S GOING TO BE AN EARNINGS STORY. SOMETHING LIKE ENERGY IS UNIQUELY INTERESTING. YOU HAVE TO BE CAUTIOUS OF THE POTENTIAL FOR DEMAND DESTRUCTION WEIGHING ON THE OIL PRICE, WE HAVE HAD YEARS OF LOW CAPEX INVESTMENTS FROM SOME OF THESE OIL NAMES. WE HAVE SINGLE-DIGIT, KEEP MULTIPLE VALUATIONS FROM THESE STOCKS SO WE'VE GOT SOME SYMMETRY THERE. WE CAN SEE CRUDE STATE IN THE RANGE IT HAS BEEN IN RECENTLY, THERE IS POTENTIAL TO STILL SEE UPGRADES, WHEREAS WE ARE SEEING DOWNGRADES PRE-MUCH OF HER WELLS IN THE MARKET. IT MAKES IT UNIQUE IN THIS POINT IN THE CYCLE. TOM: VERY QUICKLY, WE ARE AIRING THIS OUT WITH A BEAUTIFUL PHRASE THAT CAPTURES THE CONDITIONS OF THE MOMENT, PLURAL. THAT IS LITTLE FIRES EVERYWHERE. THAT DESCRIBES THE BLOOMBERG SCREEN THIS MORNING. HOW DO YOU LOOK AT EQUITIES WHEN YOU SEE THE LITTLE FIRES IN FX AND CDS AND DEBT? GREG: UNDOUBTEDLY WE HAVE TO TAKE THESE WARNING SIGNALS CUMULATIVELY. AND WE HAVE ADJUSTED THIS. WE HAVE DESCRIBED THE PRICE ACTION WE HAVE SEEN THIS YEAR ALREADY AS RECESSIONARY. WE HAVE HAD MASSIVELY -- ABSOLUTELY MASSIVE VALUE COMPRESSION IN THIS MARKET, AT A TIME WHEN THE LABOR MARKET DATA IS STRONG. IT IS FAIR TO SAY THE U.S. EQUITY MARKET IS PART OF THE STORY. IT IS ALREADY SIGNALING THINGS ARE GOING TO GET WORSE. THE QUESTION IS HOW MUCH WORSE AND HOW QUICK. JONATHAN: DO YOU FLY BACK TO LONDON SOON? GREG: YES, AND IT IS MAKING ME NERVOUS ABOUT IT. JONATHAN: YES, HERE'S THE HEADLINE, BUT IT'S HEATHROW SAYS THAT WILL BE A CAP ON DAILY FLIGHTS OF 100,000 THROUGH THE TIMBER 11TH ACCORDING TO A STATEMENT JUST MOMENTS AGO. HUNDRED THOUSAND. -- AS MANY AS 4000 PASSENGERS OVER THE SUMMER. THE NEW RECRUITS WERE NOT UP TO FULL SPEED. CERTAIN FUNCTIONS INCLUDING GROUND HANDLERS FOR BAGGAGE WERE UNDER RESOURCED. THERE IS A LABOR CRUNCH AND WE HAVE SUPPLY CONSTRAINTS IN THIS INDUSTRY. TOM: HOW DO YOU SOLVE A LABOR PROBLEM, JON? PAY THE MORE. -- THEM MORE. JONATHAN: THEY NEED MORE TRAINING, TOM. TOM: HOW LONG DOES IT TAKE TO TRAIN BAGGAGE CLAIM? JONATHAN: IT CAN TAKE WEEKS OR MONTHS. THERE ARE SECURITY CONCERNS, THEY HAVE RAMP-UP, IT'S DIFFICULT. TOM: DO WE GO THROUGH COPENHAGEN OR MADRID? JONATHAN: WHAT YOU THINK LISA? LISA: THERE'S A BIGGER ISSUE. CAN'T INCREASE SUPPLIES OR CAPACITY BECAUSE OF THE STAFFING AND IT IS DIFFICULT. IT IS NOT SIMPLY PAY THEM MORE AND BRING MORE PEOPLE BECAUSE THE TURNOVER IS DRAMATIC. JONATHAN: A LOT OF PEOPLE WHO ALREADY LINED UP OUTSIDE OF CERTAIN TERMINALS AT HEATHROW TRYING TO GET THE TICKETS AND GET THROUGH, OBVIOUSLY THINKING IT IS ABOUT TIME. ONCE AGO WHEN THE TICKETS -- FUTURES, -.6% ON THE S & P, THIS IS BLOOMBERG. RITIKA: KEEPING YOU UP-TO-DATE WITH THE NEWS AROUND THE WORLD, RITIKA GUPTA. TWO DECADE LOW OF RISK AVERSION HAS LED TO A RALLY IN THE MARKET, CONCERNED THAT RECESSION IS WEIGHING ON THE OUTLOOK FOR THE EURO. THE PRICE OF OIL FALLING AGAIN, COVID RESURGENCE IN CHINA ADDING TO CONCERNS ABOUT THE ECONOMIC SLOWDOWN. THE WHITE HOUSE SAYS OPEC HAS MOVED TO RAISE PRODUCTION IF PRESIDENT BIDEN BOSKALIS TRIP TO THE MIDDLE EAST YIELDS AGREEMENT . THE CONSERVATIVE PARTY IN THE U.K. WANTS TO NARROW A WIDE FIELD OF CONTENDERS TO BE THE NEXT PRIME MINISTER. IT WOULD REQUIRE CANDIDATES TO HAVE THE INITIAL SUPPORT OF MANY PARTS OF THE DEPARTMENT, THIS WILL BE HELD ON WEDNESDAY. THE NEW LEADER AND THE NEXT PRIME MINISTER WILL BE ANNOUNCED SEPTEMBER 5. LONDON HEATHROW AIRPORT PUTTING AN END TO THE SUMMER TRAVEL CHAOS, TO QUIT SELLING TICKETS ALL THE SUMMER, A CAPACITY CAP OF 100,000 DAILY DEPARTING PASSENGERS UNTIL SEPTEMBER THE 11TH. THEY HAVE BEEN LONG LINES AND MISS PAGE -- MISPLACED LUGGAGE. GALAXY CLUSTERS THAT APPEARED MORE THAN 4 BILLION YEARS AGO IN VIVID DETAIL, PRESIDENT BIDEN RELEASED THESE FULL-COLOR IMAGES FROM THE DAMES WEBSPACE TELESCOPE -- JAMES WEBB SPACE TELESCOPE. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. ♪ > > THE REAL ECONOMY IS QUITE STRONG IN AMERICA RIGHT NOW. INFLATION IS OUR CHALLENGE. THE FED IS TAKING ACTION. THE ADMINISTRATION IS DOING ALL WE CAN DO AND A STRONG DOLLAR IS AS IT IS, WHICH I AM NOT WORRIED ABOUT. JONATHAN: I'M SURE THEY'RE NOT WORRIED ABOUT IT, GINA RAIMONDO, THE U.S. COMMERCE SECRETARY. THAT'S PART OF IT, GETTING INFLATION DOWN AND A STRONGER DOLLAR WILL HELP. TOM: TO A POINT, AND THEN IT IS AMBIGUITY. GEORGE OF DEUTSCHE BANK WAS WITH US YESTERDAY AND HE SAID EURO PARITY IS NOT SIGNIFICANT BUT WHAT IS SIGNIFICANT IS A LACK OF LIQUIDITY DUE TO A GLOBAL SLOWDOWN WE ARE LOOKING AT. AND GETTING OVER IN JONATHAN: THE YIELD SPACE. JONATHAN:12% -- THE YIELD SPACE. JONATHAN: 12% MOVE IN THE EURO-DOLLAR, NASDAQ DOWN WHAT 1.2%. -- YIELDS LOWER BY SEVEN BASIS POINTS, TO 92.07, AND 100.14. -- 1.0014. TOM: WITH ONE GRAIN OF SAND AT THE BEACH HOUSE IN CAPE COD, HE PUT THAT IMAGE IN THE SKY AND THERE IS AN IMAGE OF WHAT THE JAMES WEBB TELESCOPE HAS DONE. I KNOW NO ONE CARES, BUT THERE IS A SPECTACULAR IMAGE OF GALAXIES, 13 BILLION YEARS OLD. JOE MATHIEU KNOWS WHAT IS LIKE TO LOOK AT THESE IMAGES WHERE LIGHT TRAVELS AT THE SPEED OF MOLASSES. JOE: QUITE A WIND UP. TOM: QUITE A WIND UP BECAUSE DON'T WE WISH WASHINGTON REMLEY JAMES WEBB? JOE: SOMETIMES THE GOVERNMENT DOES COOL STUFF, THIS IS A NASA PRODUCT THAT GENERATED SOMETHING AS INCREDIBLE AS ANYONE SAID YESTERDAY. TOM: HOW SHUT DOWN IS THIS, IT IS 92 DEGREES, LOOKING AT NASA PICTURES OUT OF NOWHERE, LET'S LOOK AT INTERIOR WASHINGTON. WHAT ARE SOME LEVEL OF SHUTDOWN IN WASHINGTON? > > LAWMAKERS ARE COMING BACK. WE'VE GOT THE JANUARY 6 COMMITTEE HEARING TODAY AND IT'S ABOUT 96 DEGREES WITH EXTREME WEATHER FUNDERS ONCE PROTECTED, LOTS OF SYMBOLISM HANGING OVER THE WHITE HOUSE AS THE PRESIDENT GETS READY TO HEAD OVERSEAS. SHUTDOWN, NOT SO MUCH. IT WILL FEEL THAT WAY NEXT MONTH WHICH REMINDS US THAT LAWMAKERS HAVE ONLY ABOUT THREE WEEKS TO GET A LOT OF THINGS DONE BEFORE THEY HEAD HOME. I WON'T CALL IT THERE RESET BUT TO THEIR HOME DISTRICT WORK PERIOD MONTH. LISA: I THINK I'M GOING TO HEAD HOME TO MY HOME DISTRICT WORK UNIT IN THE ADIRONDACKS. ONE MAIN ISSUE IS GAS PRICES. WE HAVE SEEN THEM COME UP A LITTLE BIT BUT THERE IS BIG DISCUSSION ABOUT WHAT RUSSIA GETS FROM OIL AND GAS. IS THERE ANYTHING ABOUT GETTING EVERYBODY ON BOARD GLOBALLY? > > BE CAREFUL ASKING WHAT MAKES SENSE TO ME BECAUSE WE CAN REPORT THE FACTS, BUT IT IS HARD TO RATIONALIZE WHAT IS GOING ON. THE CAP IS YET TO BE ESTABLISHED BUT IT WILL BE IN THE FRONT OF PRESIDENT BIDEN'S MIND AS HE HEADS INTO SAUDI ARABIA, IN HOPES OF UNLOCKING SPARE CAPACITY. AS SAUDI ARABIA AND THE UAE SUGGESTS, THERE'S ABOUT 3 MILLION BARRELS A DAY. THE REFINING BOTTLENECK IS A MAJOR ISSUE. 95% CAPACITY IS WHERE WE ARE RUNNING. EVEN IF THE PRESIDENT SCORED A BIG DEAL AND ANNOUNCED A GUSH OF OIL COMING, WE MAY NOT BE ABLE TO DO ENOUGH TO IMPACT PRICES AT THE PUMP. LISA: IS CAPEX RESIGNED TO GETTING A BEATING AT MIDTERM ELECTIONS BECAUSE IT IS SO DIFFICULT TO GET SOME OF THESE? JOE: DEPENDS WHO YOU ASK. THEY HAVE THEIR OWN PERSONALITIES. NOW THAT WE ARE COMING UP ON NOVEMBER AND GETTING INTO THE SECOND PATH OF THE FIRST TERM, IT IS LIKELY WE WILL START SEEING THE REVOLVING DOOR SWING. WE DID SEE THE COMMUNICATIONS DIRECTOR, KATE BEDINGFIELD, ANNOUNCED HER RESIGNATION. THE FACT OF THE MATTER IS, IF THEY HAVE NOT LEFT YET, THERE ON BOARD FOR THE MIDTERMS AND THEY WILL BE FANNING OUT ACROSS THE COUNTRY TO MAKE THE CASE FOR THIS PRESIDENT. TOM: WHAT DOES JOE MANCHIN WANT TO GET ACCOMPLISHED HERE? I GET THE BATTLES, BUT I CAN'T GET A STRAIGHT ANSWER WHEN HIS GOAL IS. JOE: I DON'T THINK CHUCK SCHUMER CAN EITHER. THEY WANT TO HAVE SOMETHING TO SHOW FOR THIS SESSION. WE WILL REMEMBER JOE MANCHIN LAID ON THAT $1.5 TRILLION AND SO FORTH WITH BILL BACK BETTER, IT LOOKS LIKE THEY ARE MOVING AHEAD WITH A RECONCILIATION BILL. BUT IT'S COMPLICATED. ONE THING I WANT YOU TO LOOK OUT FOR IS THE EXPIRATION OF ENHANCED SUBSIDIES FOR OBAMACARE. THE AFFORDABLE CARE ACT. THEY EXPIRE AT THE END OF THIS YEAR AND THE RECONCILIATION PLAN COULD BE THE ONLY AVENUE THE DEMOCRATS HAVE TO REVIVE OR EXTEND THOSE SUBSIDIES, OTHERWISE WE WILL BE TALKING ABOUT ANOTHER MASS WITH MILLIONS OF PEOPLE POTENTIALLY LOSING HEALTH INSURANCE. JONATHAN: WE WILL BE TALKING IN THE NEXT HOUR, LOOKING FORWARD TO IT. JOE MATHIEU AND WASHINGTON, D.C.. INTERESTING STUFF WHEN YOU LOOK AT GASOLINE SPENDING, UP ANOTHER 4% IN JUNE, 20% OVER THE LAST FIVE MONTHS. IT IS STARTING TO TAKE A TOLL ON OTHER CATEGORIES OF CONSUMER SPENDING. INCLUDING SERVICES, ACCORDING TO THEM. SPENDING ON RESTAURANTS FOR THE FIRST TIME SINCE JANUARY. REMEMBER WHAT HAPPENED IN JANUARY, THE OMICRON SURGE. MONTH OVER MONTH, THE DECLINE SINCE JANUARY 1 SPENDING AND RESTAURANTS. INTERESTING. TOM: AND THEY SHOW THE DOOR TO THE CEO. YOU WONDER IN OBVIOUS RETAIL FASHION, IN GENERAL, HOW ARE THEY GOING TO DO? FOCUS ON THE MACHINE OF HOME DEPOT, IT WILL BE FASCINATING TO SEE HOW IT PERFORMS. JONATHAN: IS TAKEN AS TO HOUSING, THEY HAVE PUT OUT THIS AS WELL. I'M SURE YOU SAW THIS. 60,000 HOME PURCHASE AGREEMENTS IN JUNE. ALMOST 60% OF HOMES THAT WENT UNDER CONTRACT THAT MONTH, THE NEXT HIGHEST PERCENTAGE IS MARCH AND APRIL OF 2020. YOU CAN IMAGINE WHY PEOPLE WORK SPOOKED AND CLOSING ON HOUSES, BUT PEOPLE ARE SPOOKED. AND THEY ARE GETTING CRIMPED BY GAS PRICES. LISA: WHEN IT COMES TO THE TRANSACTION VOLUME OF HOUSING, YOU ARE SEEING PRICES COME DOWN JUST A TOUCH BUT NOT DRAMATICALLY. THE WORRY IS IT IS GOING TO BRING RENTS DOWN QUICKLY ENOUGH. SOME OF THESE FISSURES ARE NOT GOING TO BLEED INTO LOWER CPI OR BASIC INFLATION FOR THE AVERAGE CONSUMER QUICKLY ENOUGH TO CURTAIL SOME ONGOING TIGHTENING AND DESTRUCTION. JONATHAN: LOOKING FORWARD TO THAT TONIGHT AND TOMORROW, THEN ONTO BANK EARNINGS IN AMERICA. LISA WILL BE WITH US. AND THEN SHE IS ON A JET PLANE. FAR, FAR AWAY. THROUGH HEATHROW. LISA: [LAUGHTER] WESTIN HAS ANALYSIS, INSIGHT JONATHAN: FROM NEW YORK CITY THIS MORNING, GOOD MORNING. EQUITIES LOWER BY .5%, S & P 500 DOWN BY .4%. A JP MORGAN, FROM MAX BULLISH TO ABOUT 95% MAX BULLISH. TOM: A ROUGH CHANGE. JONATHAN: IN THE BOND MARKET, LOOKS LIKE THIS GOING INTO CPI TOMORROW. THE HEADLINE IS ABOUT 8.8% AND MAYBE HIGHER. WE WILL BUILD ON THAT WITH YIELDS COMING IN AHEAD OF CPI. A LOT OF YOU ARE A FOCUS ON WHAT IS HAPPENING WITH THE EURO-DOLLAR, LET'S TALK ABOUT PROBLEMS BEHIND THE SINGLE CURRENCY. ALL ABOUT ENERGY, GAS IN WHAT HAPPENED WITH ENERGY SUPPLIES INTO WINTER. 11 OR 12 MONTHS AWAY. WHAT GOLDMAN DID WITH COPPER IS WORTHY OF MORE ATTENTION. THE PRICE TARGET COMES OUT ABOUT 8650 DOWN TO 5700. WE ARE SOFTER BY ABOUT 1.5%. IF YOU ARE LOOKING FOR BIG GLOBAL GROWTH RESURGENCE IN THE SECOND HALF, GOLDMAN IS NOT INVOLVED. TOM: IT IS DRIFTING AWAY. WHEN YOU LOOK AT THE SUMMATION OF THE COAL AND COPPER CHARTS, THE FORECAST OF FOUR OR FIVE MONTHS AGO OF 2.8% GLOBAL, WE LEFT. GUESS WHAT, WE ARE THERE. JONATHAN: I TALKED ABOUT THE FORECAST ON THE EURO, YOU HAVE TO MAKE A FORECAST ON GAS AND WHAT PUTIN MAY OR MAY NOT DO. YOU HAVE TO MAKE IT: WHAT HAPPENS WITH LOCKDOWNS IN CHINA AND THAT IS JOSEPH'S HARD. BECOME SOUND TO WHETHER WE ARE REOPENING OR LOOKING DOWN IN CHINA AND THE EVIDENCE TOWARD SHANGHAI POINTS TOWARD MORE RESTRICTIONS. TOM: THERE WAS ONE STUDY OF 18% EVEN AS IT STAYS FLAT, BUT I DO TAKE YOUR POINT. JONATHAN: THE ONLY THING, THE BOTTOM LINE WHETHER COPPER OR THE EURO, THE FORECAST IS BASED ON THE WHIMS OF DICTATORS. YOU HAVE TO WORK OUT WHAT THEY WILL DO. TOM: WE WILL HAVE TO SAY. TRY 6.94. ON THE HEATHROW'S -- 26.94. THE HEATHROW STORY, A GENTLEMAN WHO IS GOOD IT AVIATION, GUY JOHNSON JOINS US AT HEATHROW. WHAT IS THE DISTINCTION OF THE CHAOS AT HEATHROW? GUY: IT IS GETTING WORSE. WHILE THERE ARE DIFFERENT PROBLEMS IN DIFFERENT PARTS OF THE WORLD, THE AIR TRAFFIC CONTROL SYSTEM IN THE UNITED STATES, IT IS HERE IN HEATHROW WITH A SITUATION WHERE THEY CAN'T HAVE ENOUGH QUICKLY ENOUGH. NOTE HAS BEEN PUBLISHED THIS MORNING BY THE CEO OF HEATHROW, HE GOES ON TO TALK ABOUT THE ARITHMETIC OF WHAT IS HAPPENING HERE. THEY'RE TRYING TO BRING PEOPLE IN AND IT IS A SLOW PROCESS. THEY ARE HIRING AS QUICKLY AS THEY CAN AND THEN STRUGGLING TO TRAIN STAFF AS QUICKLY AS THEY CAN. THEY'RE NOT KEEPING UP WITH THE DEMAND. HEATHROW IS NOW SAYING IT CAN DELIVER 100,000 PASSENGERS A DAY AND NO MORE. WHAT IT IS SAYING IS THAT BY CURRENT FORECASTS, LOOKING AT THE CURRENT FORECASTS, AIRLINES HAVE BOOKED AROUND 104,000 SEATS PER DAY IN AND OUT OF HEATHROW. THEY ARE SAYING THEY CAN'T DO THAT. WHAT THEY ARE SAYING IS IN EXCESS OF 4000 THERE, 1500 OF THOSE SEATS HAVE ALREADY BEEN BOOKED AND 3.5 THOUSAND HAVE NOT. -- YOU CANNOT SELL ANY MORE OUT OF OUR AIRPORT. A HUGE PROBLEM, THEY'RE TRYING TO REBUILD THEIR BALANCE SHEETS AS A RESULT OF THE PANDEMIC. A CAPACITY AND STRENGTH, LABOR MARKET CONSTRAINTS ARE A FACTOR AND THEY CANNOT DO IT. 100,000 PASSENGERS AND THAT'S IT. LISA: THIS DOES NOT BODE WELL FOR THE INFLATIONARY BACKDROP. PEOPLE ARE WILLING TO PAY MORE FOR TICKETS AND AIRLINES WILL DEMAND MORE IN ORDER TO COMPENSATE WORKERS, HOW MUCH IS THIS AN AIRLINE SPECIFIC STORY AND AN AIRPORT SPECIFIC STORY, A BROADER ONE IN THE WORKFORCE IN THE UNITED KINGDOM? GUY: IT IS MUCH BROADER, LISA. LAST NIGHT, THE TRAIN DRIVERS VOTED TO GO ON STRIKE. USING OTHER TRAIN STUFF GOING ON STRIKE, BARRISTERS ON STRIKE. THE SERVICE SECTOR IS FEELING IT AND IN A BIG WAY. WE ARE SHORT OF STAFF, PEOPLE HAVE LEFT THE LABOR FORCE WITH THE U.K. AND THE PUBLICATION OF BREXIT AS WELL. EVEN IF AIRLINES WANTED TO CHARGE MORE FOR THE SEEDS, HEATHROW IS SAYING YOU CAN'T HAVE THE SEAT. WE ARE DONE. THERE IS A LIMIT. JONATHAN: MASSIVE QUESTION ABOUT HOW MUCH SEATS WILL COST LEAVING FROM OTHER AIRPORTS OF THE U.K.. WHAT WILL HAPPEN THERE? GUY: YOU WILL SEE THIS MOVE OVER TO OTHER AIRPORTS, THE MOST OBVIOUS CASE IN POINT HERE, YOU GET SOME OF THE REGIONAL AIRPORTS. BUT THERE WAS A TAXI A FEW MONTHS AGO I SHARED WITH SOMEONE WHO WORKED THERE AND THEY HAD A PROBLEM, ACROSS THE BOARD, ACROSS THE U.K.. THERE ARE SLIGHTLY DIFFERENT PROBLEMS BUT BASICALLY THE SAME ISSUES, GROUND HAGGLING STAFF, TICKETS, IT GOES ACROSS THE BOARD. AND DIFFERENT REGIONS ARE HAVING DIFFERENT PROBLEMS. IT IS A PROBLEM THAT WILL FACE THE ENTIRE INDUSTRY ACROSS THIS SUMMER. YOU MAY END UP SEEING A SIGNIFICANT DROP-OFF OFF IN DEMAND. THAT IS THE QUESTION EVERYBODY IS TRYING TO ASK THEMSELVES, WHAT HAPPENS, DOES THE DEMAND DROP OFF? LEAVING YOU HIGH AND DRY IN THAT SITUATION, THE OPPOSITE OF WHERE THEY FIND THEMSELVES NOW. THERE'S A HUGE PROBLEM, IF YOU LOOK AT THE REVISIONS BEING BUILT UP IN THE AIRLINE SECTOR, THEIR BUILDING AND BUILDING. JONATHAN: WHAT A MESS. GREAT WORK. LOOKING FORWARD TO YOUR COVERAGE LATER WITH THE EUROPEAN CLOSE. TOM: YOU CAN GET FROM EDINBURGH TO NAPLES WITH ONE STOP. JONATHAN: WHAT HE JUST SAID WORKING OUT THE APPROPRIATE CAPACITY, AT SOME POINT IN THE FUTURE IT IS A DIFFICULT THING TO DO. YOU'VE SEEN THAT WITH RETAILERS. TOM: WE ARE COMING OUT OF A ONCE-IN-A-LIFETIME MEDICAL CRISIS THAT WE ARE STILL IN. FOR GLOBAL WALL STREET AS YOU ARE FIXATED ON THE DOLLAR, THE EURO, FORGET ABOUT PARITY SILLINESS, A 0.98. THE GUY WITH THE SINGLE MOST IMPORTANT CONCEPT OUT THERE WITH THE MAJOR TIP TO DAVID ROSENBERG OF DAVID BURTON -- OF TORONTO. LOOKING AT CORE INFLATION, WHY SHOULD WE PAY ATTENTION TO CORE CPI? DAVID: PARTLY BECAUSE IT IS NOT BEEN SO AFFECTED BY THE PANDEMIC. A LOT OF HEADLINE INFLATION NUMBERS AND YOU'RE LOOKING AT RENTS, AIRLINE FARES ARE CRAZY, HOTEL RATES, THEY HAVE ALL BEEN DISTORTED BY COVID. THE IDEA OF A CORE NUMBER AS IT LOOKS BEHIND THAT NOISE AND GETS TO THE INFLATION STORY. THAT IS WHAT WILL BE THERE WOULD ALL OF THE COVID STUFF EVENTUALLY DROPS AWAY. WHAT IS DRIVING THE CORE STORY MOSTLY IS WAGE GROWTH. THIS TIME LAST YEAR WE WERE TALKING ABOUT THAT IN THE LABOR MARKET AND GETTING WORRIED ABOUT THE IDEA OF A WAGE PRICE SPIRAL THAT SPOOKS THE FED LAST YEAR. NOW THE PICTURES VERY DIFFERENT, GROWTH HAS SLOWED AND ALREADY IT IS FEEDING INTO SMALLER MONTH-TO-MONTH PRINTS IN THE CORE CPI. IT IS TOO EARLY TO CRACK OPEN THE CHAMPAGNE AND WE HAVE TOO MANY BIG DISTORTIONS ON THE UPSIDE FROM COVID. BUT WHERE WILL WE BE IN SIX MONTHS, 12 MONTHS TIME? THESE NUMBERS ARE ENCOURAGING AND THERE'S EVERY CHANCE THEY CONTINUE. LISA: CORE CPI HAS LOST A LITTLE POTENCY AT A TIME WHEN PEOPLE ARE WORRIED ABOUT INFLATION EXPECTATIONS. EVEN JAY POWELL SAID WE CAN'T BE TOO NUANCED BECAUSE AT THE END OF THE DAY, IT IS WHAT PEOPLE FEEL EVERY DAY AND IT HAS HAPPENED LONG ENOUGH WE ARE STARTING TO SEE INFLATION EXPECTATIONS CREEP UP, NOTWITHSTANDING THE DEBT ON THE LONGER TERM. HOW DO YOU PUSH BACK AGAINST THAT? CORE CPI USED TO BE IMPORTANT BUT IS LESS SO NOW. IAN: YEAH, I DON'T BUY THAT FOR A SECOND. WHY DO WE CARE ABOUT INFLATION EXPECTATIONS OR WHAT ANYBODY THINKS? WE CARE BECAUSE IT MIGHT TRANSLATE INTO ACTION. AND WE CARE ABOUT HIGHER WAGE DEMANDS. IF HEADLINE INFLATION HAS SHUT UP, EXPECTATIONS HAVE SHUT UP AND PEOPLE ARE EXTRACTING BIGGER WAGE INCREASES FROM THEIR EMPLOYERS, YOU GOT THE DANGER OF A WAGE PRICE SPIRAL LOOK IN THE 70'S WHICH WE ALL KNOW IS A HORRENDOUS NIGHTMARE THAT TOOK A LONG TIME TO FIX. BUT WAGE GROWTH OVER THE LAST FEW MONTHS, IT'S AVERAGED ABOUT 4%. AT THE END OF THE LAST NORMAL ECONOMIC CYCLE, A SUSTAINABLE PACE IN PRODUCTIVITY GROWTH. I'M HAPPY WITH THAT. IT WAS DIFFERENT A YEAR AGO. NO QUESTION ABOUT THE WAGE GROWTH AND IT WAS VERY SCARY. IF IT CONTINUED OR ACCELERATED, THE FED WOULD HAVE BEEN IN PANIC MODE. BUT WHAT HAPPENED IS SUPPLY PICKED UP, PARTICIPATION HAS RISEN AND PEOPLE HAVE COME BACK TO THE LABOR FORCE. YOU CAN SEE ALREADY IN THE CORE CPI. THE FEAR OF EXPECTATIONS DRIVEN SPIRAL IS NOT JUSTIFIED ANYMORE. IT IS A RISK BUT IT IS NOT THERE. LISA: WE WERE TALKING WITH GUY JOHNSON ABOUT HEATHROW, THE CONCERN ABOUT ALL THESE COMPANIES BUILDING OF CAPACITY IN THE FACE OF SOME OF THE DISTORTIONS ON THE HEELS OF THE PANDEMIC ONLY TO BE THE BEST AT WITH A LACK OF DEMAND IN THE NEXT COUPLE OF MONTHS. HOW MUCH DO YOU EXPECT A DISINFLATIONARY FORCE FROM THAT OVERCAPACITY THAT IS BEING BUILT UP RIGHT NOW? IAN: YEAH, THIS IS A BIG DEAL, ESPECIALLY IN THE GOODS MARKET. INDUSTRIES IN SOME SECTORS ARE WAY ABOVE BEFORE COVID, MASSIVELY IN SOME CASES. WE HAVE A STORY OF GIGANTIC EXPANSION, THE STORY FOR THE NEXT YEAR IS GIGANTIC COMPRESSION FOR ORDINARY LEVELS. THERE IS A QUESTION FOR EQUITY INVESTORS BECAUSE OF EARNINGS COMPRESSION. FROM THE MARKET -- IT IS QUICKER THAN MARKETS EXPECT IS NOT JUST ABOUT GRADUAL SLOWDOWN OF WAGE PRESSURE. IT'S ABOUT THE POTENTIAL FOR COLLAPSE. AND THERE IS NO WAY ON EARTH AND IS NOTABLY SUSPENDED AND IF THEY FALL QUICKLY, YOU COULD SEE CORE INFLATION IN THE U.S.. TOM: A FINAL QUESTION HERE. PATHEON HAS A UNIQUE FOCUS ON THE PACIFIC RIM. ARE WE SEEING BUTTERFLY EFFECT, BUTTERFLIES FLAPPING ABROAD AS WE FOCUS ON THE EURO? ARE WE MISSING PEM UNRAVEL? -- THE EM UNRAVEL? IAN: I'M NOT SURE. THERE ARE SOME BRIGHT SPOTS. AND THE CHINA DATA ARE IMPROVING WITH--MOVING FORWARD. NUMBERS WILL BE TERRIBLE BUT THAT IS ANCIENT HISTORY, STRETCHING BACK TO APRIL WHEN THINGS ARE DIFFERENT. WE ARE NOT ALL-ISH BUT IT IS NOT CATASTROPHIC AND SOME OF THESE HAVE POPPED HIGHER WHICH IS A RELIEVED EVERYBODY ELSE. BUT THE EURO STORY IS ABOUT THE EURO AND THE U.S. STORIES ABOUT THE U.S.. JONATHAN: GOOD TO CATCH UP, I THINK YOU AND THE TEAM AT PATHEON MACROECONOMICS. THE CHIEF ECONOMIST. THIS MARKET IS BETTING AGAINST INFLATION AND SLOWER GROWTH. BREAKEVENS ARE BASICALLY AT THE LOWS OF THE YEAR AND IT DOES NOT LOOK --GET TALKED MUCH ABOUT. LISA: I WAS LOOKING AT THAT THIS MORNING, WHILE YOU MENTIONED THAT. THE FIVE-YEAR BREAKEVEN RATES. THIS IS MARKET EXPECTATIONS OVER THE NEXT FIVE YEARS. THEY ARE AT THE TARGET. IT HAS BEEN TRENDING LOWER, THE FED IS GOING TO GET WHAT THEY WANT AND THERE'S GOING TO BE ENOUGH INFLATION TO GET THE MARKET THERE AS WELL. JONATHAN: AND WHAT PRICE THEY HAVE TO PAY? THAT'S WHAT THE MARKET HAS FIGURE OUT. FUTURES DOWN .6% ON THE S & P. FROM NEW YORK CITY THIS MORNING, GOOD MORNING FOR OUR AUDIENCE WORLDWIDE ON TV AND RADIO, THIS IS BLOOMBERG.. > > THE WORLD HAS NEVER WITNESSED SUCH A MAJOR ENERGY CRISIS IN TERMS OF THE DEPTH AND COMPLEXITY. WE MIGHT NOT HAVE SEEN THE WORST OF THIS YET. JONATHAN: FATIH BIROL THERE, THE IEA EXECUTIVE DIRECTOR. GOOD MORNING, DOWN .6% ON THE NASDAQ -- S & P 500, WE WERE DOWN NINE BASIS POINTS YESTERDAY ON THE SESSION. WE SEE THAT MOVE LOWER GOING INTO CPI TOMORROW, WANT TO REFLECT ON THE WORDS OF THE ECONOMY MINISTER TO ECHO WHAT THEY SAID. SHOULD BE GETTING READY FOR A TOTAL RUSSIAN GAS SUPPLY SHUT DOWN AND THIS IS THE MOST LIKELY EVENT, THE FEAR ABOUT SOME OF THESE MOVES WITH THE EURO-DOLLAR WITHIN STRIKING DISTANCE. TOM: I WENT THROUGH THE COAL COMPLEX TODAY AND YOU ARE SAYING IT NOT ONLY IN THE MOVE TO PARITY, 1.012 RIGHT NOW, BUT IT IS MIRRORED IN WHAT I'M GOING TO CALL USABLE COMMODITIES, COPPER, ROTTERDAM COAL, THERE IT IS. JONATHAN: I WONDER HOW MUCH MORE YOU'RE GOING TO SEE ACROSS ECONOMIES IN EUROPE FOR JUST FOR -- FOR DIFFERENT REASONS. WHAT ABOUT ENERGY? TOM: WE WILL SEE ABOUT ENERGY AND MAYBE THAT IS THE NEXT STEP. BRENT CRUDE IS DOWN 124 TO 104. THE HEADLINES FROM SPAIN, HARKENING BACK TO OUR CONVERSATION WITH ANOTHER THE OTHER DAY, SPAIN COULD IMPOSE TAX ON BANKS. JONATHAN: I HAVE NOT GOT THE DETAILS. I WILL BRING THOSE TO YOU. TOM: RIGHT NOW, ELLEN, THE SENIOR FELLOW AT THE ATLANTIC COUNCIL ON OIL AND THE STRONG DOLLAR WHICH HARKENS BACK TO ANOTHER TIME AND PLACE, WHAT DOES A STRONG DOLLAR MEAN FOR YOUR OIL WORLD? ELLEN: YEAH, THINGS ARE QUITE INCREDIBLE IN OIL RIGHT NOW AS WE ARE SEEING PRICES GOING ON ALMOST A ROLLER COASTER, UP AND DOWN, FEARS OF RECESSION TEND TO SEND PRICES DOWN BECAUSE THERE IS A SENSE THIS WILL REDUCE DEMAND. BUT THE NEXT THING YOU HEAR IS DEMAND IS SO STRONG. STILL. AND YOU SEE PRICES GOING UP. I THINK THE NEWS OF HEATHROW REDUCING CAPACITY, CAPACITY LIMITS, THE IDEA THAT COULD REVERBERATE ACROSS OTHER AIRPORTS COULD PUT A DAMPER ON TRAVEL AND DEMAND AS WELL. JONATHAN: -- TOM: IS THERE A LINK FROM THE PETROL DOLLAR TO THE OIL DEMAND? ELLEN: THAT IS A GOOD QUESTION AND AT THIS POINT WE ARE NOT SEEING A DROP IN DEMAND. WE LOOK AT MEME STOCKS, SOME WEEKS WE SEE A DROP AND OTHER WEEKS WE ARE SEEING AN INCREASE. I THINK WE HAVE SEEN SOME DECLINES IN TERMS OF DEMAND DISRUPTION, BUT NOT A LOT. THERE'S A LOT OF PENT-UP DEMAND. IT DOES NOT SEEM LIKE THE DOLLAR IS AFFECTING DEMAND ALL THAT MUCH AT THIS POINT. LISA: WHICH RAISES A QUESTION OF WHAT WE WILL SEE THE POP IN OIL PRICES, GIVEN BIROL FROM THE IEA JUST SAID THIS IS SOMETHING WE'VE NEVER SEEN IN TERMS OF COMPLEXITY AND SPEED. WHY DOES THIS TRANSLATE TO HIGHER PRICES AND WHAT YOU ARE SEEING IN THE FISCAL MARKET? ELLEN: IT IS SO INTERESTING. WE ARE SEEING CALLS FOR OIL GOING DOWN TO $60 A BARREL. THERE'S A HUGE MARGIN AND IT REFLECTS A LOT OF THE UNCERTAINTY AND HE IS CORRECT TO CALL ATTENTION TO A LOT OF THE ISSUES WE ARE SEEING TODAY. LOOK AT WHAT HAPPENED IN SRI LANKA. THAT COULD BE NEXT FOR MANY MORE COUNTRIES. NOT JUST DEVELOPING NATIONS, BUT WE COULD SEE FUEL CRISES AROUND THE GLOBE. PART OF THAT IS DUE TO HISTORICALLY LOW INVESTMENT IN FOSSIL FUEL. THE TREND IS NOT REALLY REVERSING ITSELF AT ANY POINT. THIS IS PRECIPITATING A HUGE ENERGY CRISIS. LISA: DOES ANY PART OF THE CAPPING OF ENERGY PRICES FROM RUSSIA OR THE ENERGY PRICES THEY RECEIVE, DOES IT MAKE SENSE TO YOU IN TERMS OF FEASIBILITY AND ROLLOUT AND GETTING EVERYBODY ON BOARD, OR IS THIS HIGHLIGHTING THE LACK OF TOOLS AVAILABLE TO CURTAIL THE CRISIS PEOPLE ARE TALKING ABOUT? ELLEN: I DON'T SEE HOW IMPOSING A CAP ON OIL PRICES IS IDLE FEASIBLE. YOU CAN SAY, ONLY PAY THIS AMOUNT FOR RUSSIAN CRUDE AND THE IDEA IS THAT THEY WILL WANT TO PAY LESS. OF COURSE THEY WANT TO, BUT WILL THE RUSSIANS WANT TO SELL THEM FOR LESS? RUSSIA IS HOLDING THE CARDS BECAUSE IF INDIA AND CHINA WANT THEIR OIL, THEY CAN SAY SORRY, WE ARE NOT GOING TO SELL IT FOR $40 UNDER THE BENCHMARK. WE ARE OFFERING YOU A $20 DISCOUNT AND ARE INDIA AND CHINA GOING TO STATE -- SAY NO AND RISK THEM HAVING A FUEL CRISIS IN THEIR COUNTRY JUST BECAUSE THE WEST IS SAYING WE WANT YOU TO CAP THE PRICE OF RUSSIAN OIL SO IT WILL HURT UKRAINE IN THE WAR? TOM: YOU MENTIONED SRI LANKA AND I'M CURIOUS ABOUT THE CONTAGION EFFECT. WHEN A POOR COUNTRY BELEAGUERED BY HIGH OIL PRICES PROVIDE SUBSIDIES TO MYSTICALLY, WHERE DO THEY GET THAT MONEY? -- DOMESTICALLY, WERE TO THE GET THAT MONEY? ELLEN: MY GUESS IS THEY FIRST ISSUE DEBT AND THEY ARE HOPING FOR A BAILOUT FROM THE IMF. IF THAT IS NOT COMING PEOPLE SEE SERIOUS PROBLEMS. AND WE ARE SEEING NOT JUST DEVELOPING COUNTRIES DO THIS BUT WE ARE SEEING THIS IN MORE DEVELOPED COUNTRIES AS WELL, OFFERING THE SUBSIDIES OR TRYING TO SUBSIDIZE THE ENERGY PRICES. IN SOME CASES THEY ARE SAYING TO THE UTILITIES, YOU CAN CHARGE MORE THAN X. IF UTILITIES HAVE TO PAY MORE THAN FOR THEIR FUEL, THAT IS GOING TO PUT THE UTILITIES IN A BANKRUPTCY SITUATION AND LIKELY CAUSE THEM TO BE NATIONALIZED IN THE GOVERNMENT IS GOING TO TAKE THAT DEBT. THEY ARE NOT REALLY SOLVING THE PROBLEM, THEY'RE KICKING IT TO OTHER PEOPLE OR ENTITIES. JONATHAN: ELLEN WALD FROM THE ATLANTIC COUNCIL, THANK YOU. WE'VE GOT A REAL PROBLEM IN EUROPE TO SAY THE LEAST AND IT COULD GET WORSE YEAR-END. TOM: WE DO, AND THEY ARE SINGLE HEAD OF THE MOVING THE MARKET. BRENT CRUDE DOWN 105, ABSOLUTELY CRATERED. BRENT CRUDE 102 .91, OIL AND FREEFALL. JONATHAN: -- TOM: I FAMOUS FAMILY, INDIAN NAME, MORE OF AN THAN A WESTERN PHRASE. JONATHAN: YOU CAN DIG YOURSELF OUT OF THAT HOLE IN A MOMENT. TALKING MEDIVATION ON SLOWER GROWTH, CRUDE DOWN FOR PERCENT. LISA: ELLEN HIGHLIGHTED THAT CAME OUT WE ARE NOT SEEING DEMAND GO DOWN THAT MUCH. THE ENFORCED HEATHROW BAND AND ENOUGH PEOPLE -- BAN ENGINE OF PEOPLE WANTING TO COME TO THE AIRPORT. JONATHAN: > > THIS IS A CURRENCY AND BOND DRIVEN MARKET RIGHT NOW. > > MARKET CURRENCY ARE ALREADY PRICING IN RATE CUTS NEXT YEAR. > > WE ARE HEADING TOWARD A FINANCIAL ACCIDENT. > > THE GOLDILOCKS OUTCOME IS OFF THE TABLE. > > I WILL BE SURPRISED IF WE MOVED TO A BULL MARKET ANYTIME SOON. > > THIS IS BLOOMBERG: SURVEILLANCE WITH TOM KEENE, LISA ABRAMOWICZ AND JONATHAN FERRO. JONATHAN: FROM OUR HEADQUARTERS IN NEW YORK CITY, GOOD MORNING. THE FUTURES DOWN 1.8%, CRUDE BREAKING DOWN BY 4.5% AND A SIZABLE BID INTO THE TREASURY MARKET. TOM: WE LIKE TO AVOID INFLAMMATORY COMMENTS, BUT THE LAST 20 MINUTES, PLUNGE IS THE OPERATIVE TERM, BUT CORRELATION IS OVER AND THINGS ARE TIGHTLY CORRELATED THIS MORNING. A TO 10 SPREAD -- 82 TENDS SPREAD. WE'VE HAD A NEGATIVE 10 BASIS POINTS. HISTORICALLY, THAT IS A BIG YEAR. JONATHAN: TOM, THIS IS HAPPENING. TREASURY YIELDS LOWER THIS MORNING. THIS IS HAPPENING GOING INTO CPI TOMORROW. TOM: WE WILL TALK ABOUT IT WITH ANNA HAN. ADJUSTING THIS MORNING, WHAT IS SO IMPORTANT ON THE BLOOMBERG SCREEN, THE LAUNCHPAD, THE CORRELATED NATURE OF THIS IS EXTREMELY DIFFERENT THAN I WE ARE--A WEEK AGO. LISA: IT IS HINGED ON THE OIL MARKETS AND THE IDEA THAT YOU'RE COMING OUT OF THE PANDEMIC TO A NEW CRISIS AND HOW DO YOU ADJUST? I KEEP GOING BACK TO THE HEATHROW STORY BECAUSE IT IS AN OIL STORY AND AN ECONOMIC GROWTH STORY, HOW MUCH DO YOU HAVE TO CURTAIL GROWTH OR ECONOMIC MOMENTUM BECAUSE OF A LACK OF STAFF AND HIGH ENERGY PRICES? JONATHAN: SUPPLY-SIDE STORY. HEATHROW IN THE LAST HOUR ANNOUNCING A CAP THROUGH THE AIRPORT, LIMITING DAILY TRAFFIC TO 100,000 PEOPLE THROUGH SEPTEMBER 11 AND IT COMES DOWN TO GETTING NEW RECRUITS THROUGH TRAINING, SECURITY CLEARANCE, ONBOARDING THEM. THIS TAKES A WHILE. TOM: LET'S REMEMBER, MOST OF US ARE TRAVELING FANCY CLASS. THERE ARE SOME AGONY OUT THERE AND I WOULD SUGGEST THIS IS ABOUT INDIVIDUAL STORIES HEATHROW HAS CONFRONTED WHERE THEY SAID THIS CAN HAPPEN ON OUR WATCH. JONATHAN: YOU SHOULD HAVE SEEN LISA SPACE. SPEAK FOR YOURSELF. --WE SAYS -- LISA'S FACE. LISA: MOST OF US TRAVELING IN FANCY CLASS, I DON'T KNOW IF I AGREE WITH THAT. JONATHAN: BUT SELLING TICKETS FROM THE HEATHROW AIRLINES, THAT'S THE SUPPLY-SIDE STORY. YOU WONDER NOT FOR AMERICA SO MUCH BUT FOR EUROPE AS WE GET DEEPER AND DEEPER FOR THIS ECONOMY. LISA: AND YOU WERE GRAPPLING WITH THE SAME THING I WAS. IF YOU CONSTRAIN THE SUPPLY YOU HAVE OF TICKETS, AS THE PRICE GOES UP, DOES DAN -- DOES DEMAND PROCESSED OR DO YOU SEE A CRASH WHERE PEOPLE ARE NOT GETTING EMPLOYED AND THEY CAN'T GO BUY TICKETS? AT WHAT POINT DEATHS THIS -- DOES THIS EVEN OUT AND DOES IT CAUSE A BIGGER PRICE SHOCK BEFORE THE FALL? JONATHAN: CPI EARNINGS, BANK EARNINGS FRIDAY. THE FUTURES DOWN, WE ARE LOWER ABOUT THREE QUARTERS -- A MOVE IN CRUDE, WTI NEGATIVE FIVE PERCENTAGE POINTS AND THE EURO-DOLLAR, PARITY BACK TO 100.22 -- 1.0022. LISA: AND IT DOES HINGE ON OIL AND GAS PRICES, TRADING IN TANDEM A LITTLE, AND I'M SPECULATING BUT WITH THE PRICE OF OIL AND GAS, THERE IS A CONCERN THOSE PRICES ARE GOING TO LEAD TO A MORE SIGNIFICANT ISSUE FOR THE EURO, ESPECIALLY AHEAD OF WHAT WE EXPECT FROM A POTENTIAL DECISION FROM RUSSIA ON GUEST SUPPLIES. TODAY WE GET ANY MINUTE NOW THE OPEC ONCE THE OIL MARKET REPORT. HOW MUCH THEY TALK ABOUT THE SUPPLY AND DEMAND DYNAMIC IS CONFIRMING WHAT WE ARE SEEING IN THE MARKET, PRICES BELOW $100 A BARREL AT WTI AND 101.81 BRENT. PRESIDENT OF RICHMOND TOM BARKER WILL GIVE A SPEECH, TALKING ABOUT HOW MUCH WILL COME OUT TOMORROW, IN ORDER TO GO 75 BASIS POINTS IN SEPTEMBER, NOT THE MOST IMPORTANT DATA POINT TO WATCH, BUT LOOKING FORWARD TO THE INFLATION EXPECTATIONS ON FRIDAY. THE U.S. IS SELLING THIS, I WANT TO UNDERSTAND HOW MUCH THIS DEMAND INTO THE TREASURY MARKET, PARTICULARLY THE LONGER END, PROCESS. ESPECIALLY AS YOU ARE NOTING WE ARE SEEING A COLLAPSE IN THE YIELD CURVE, DOWN -10, THE MOST INVERTED GOING BACK TO 2007. JONATHAN: UNREAL. THANK YOU. CRUDE BACK TO 99, DOWN BY 4.9 PERCENT. WHAT'S CALL IT NEGATIVE FIVE. -- LET'S CALL IT -5%. TOM: I WOULD ARGUE CURRENCY IS PART OF THE PICTURE, TIED INTO COMMODITIES THIS MORNING ENTERED HIS IS JUMP CONDITION TUESDAY. I MENTIONED IT BEFORE, THESE CURRENCIES, GETTING TWO OPINIONS. ONE IS IT DOES NOT MATTER AND THE OTHER IS LOOK AT THAT, MEXICAN PESO, GETTING OUT NEAR 21, EM IS MOVING WITH A STRONG DOLLAR. JONATHAN: SAM WITH THE EURO-DOLLAR ON TWITTER, THE EURO-DOLLAR PARITY, BRILLIANT. LISA: ESPECIALLY IF YOU LOOK AT AIRLINE TICKETS. JONATHAN: IF YOU CAN FIND ONE. IF YOU'RE GOING HEATHROW TO THE CONTINENTAL. JOINING US IS ANNA FROM WELLS FARGO SECURITY, THIS VOLATILITY, THIS MESS, DO WE NEED TO GET COMFORTABLE AND GET USED TO IT? WILL IT STICK WITH US FOR A WHILE? ANNA: I DON'T KNOW IF YOU CAN SAY COMFORTABLE BUT IT'S GOING TO STICK AROUND. A LOT OF VOLATILITY YOU'RE GOING TO CONTINUE TO SEE OUTLIER MOVES, AGGRESSIVE UP AND AGGRESSIVE DROPS DOWN THAT WILL PERSIST UNTIL WE SEE A SIGN FROM THE FED THAT THEY ARE USING OFF THE GAS PEDAL IN TERMS OF THE HIKING SCHEDULE. TOM: IT IS BRILLIANCE, YOU CAN SAY FORGET ABOUT THE PROBABILITY DISTRIBUTION, FORGET ABOUT THE CENTER TENDENCY, LOOK AT THE TALES. WHAT DOES THE LEFT TAIL, THE SWEAT OF THE LEFT TAIL, THE FEAR OF THE LEFT TAIL, WHICH DOES IT LOOK LIKE RIGHT NOW? ANNA: IN THE CONTEXT OF WHAT THEIR THINKING ABOUT, WHAT HAVE BEEN THE WORST PERFORMERS, WHAT ARE THEY SIGNALING? AND WE HAVE THIS SCENARIO AND WHAT LOOKS TO BE A CASE OF RECESSION, YOU HAVE HEARD BASE CASE TIME AND AGAIN, WHAT IS DRIVING THAT? YOU'RE SEEING THESE POOR PERFORMANCES AND BROKEN STORIES HERE. WHEN YOU HAVE A SITUATION THAT CAN PERSIST, YOU CAN AVOID THAT LOW MOMENTUM BASKET, TWO BOTTOM FISHING AND AVOID THE HIGH-RISK BASKET AND LEAN MORE TOWARD THE LOW VOLATILITY IF YOU ARE WORRIED ABOUT THAT RECESSION. BUT YOU ALSO HAVE TO THINK OF THIS IN CONTEXT OF INFLATION, WHAT ARE THE POTENTIAL DRIVERS THAT MIGHT BRING INFLATION OFF? WHAT ARE THE EXTREME CASES? AND WE DON'T SEE THOSE RELIEVING THOSE AT THE CPI BELOW A .5 FOR THE REST OF THE YEAR. LISA: INFLATION IS A STORY PEOPLE HAVE BEEN OBSESSING ABOUT MOST OF THE YEAR, BUT NOW IT IS THE STRONG DOLLAR AND WITH THAT DOES FOR THE S & P. THE COMPANY THAT DRIVES ABOUT 30% OF REVENUE FROM OVERSEAS, HOW MUCH IS BAKED IN AND HOW MUCH DO YOU EXPECT THAT TO BE A HEADWIND DURING THE EARNINGS SEASON FOR WHAT EQUITY VALUATIONS DO? ANNA: I DON'T THINK IT IS FULLY FAKED IN. I WISH I COULD PINPOINT A NUMBER BUT YOU BRING UP A GREAT POINT. THE DOLLAR STRENGTHENING AND THAT IS COMING FROM THE DIFFERENT PACE IN WHICH WE ARE TIGHTENING MONETARY POLICY. WHAT THAT DOES TO EARNINGS AND MARGINS UNDER PRESSURE, IS GOING TO ADD ANOTHER WEIGHT TO THE U.S. CORPORATE EARNINGS SEASON. I THINK THAT HAS CAUSED VOLATILITY. PEOPLE ARE WORRIED, CAN WE CONTINUE TO GROW EARNINGS AT THE PACE AT WHICH PEOPLE ARE HOPING FOR AND WHAT LOOKS TO BE A SLOWING GDP GROWTH, A WEAKENING CONSUMER? THAT GROWTH IS GOING TO BE DERIVED CONFIDENCE IN EQUITIES AND WHAT DICTATES THE DIRECTION. JONATHAN: A LOT OF THIS HAS BEEN THE ENERGY INDUSTRY AND THE PRICE OF CRUDE, ENERGY AND GAS. TODAY BECOME THE VICTIM OF THE SOLUTION? IF I'M EXPECTING THAT GDP DECELERATION, -- ANNA: I THINK THERE ARE WAYS TO BE EXPOSED TO THE ENERGY MARKET AND PLAY THAT CAREFULLY. LOOKING AT OIL AND COMMODITIES, WE MAY BE PEAKING HERE. THAT DOES NOT MEAN THEY'RE GOING TO BE ROLLING OVER QUICKLY OR STRONG ENOUGH THAT CPI COMES OUT AGGRESSIVELY, BUT WE THINK IN MANY INSTANCES AND CASES, WE MAY BE SEEING THE TOP HERE. ANOTHER ASPECT OF THAT AND WHERE WE MIGHT SEE SOME OF THAT BEING HINTED AT IS YOU LOOK AT HOW MUCH THE MARKET BELIEVES THE IMPACT THAT ENERGY HAS ON CPI MIGHT BE REDUCED IF YOU LOOK AT BREAKEVEN. YOU CAN SEE THAT WILLING OFF FROM WHAT HAS BEEN ABOVE THROUGH TO BASIS POINTS DOWN TO MAYBE 370, 230, EXCUSE ME. 230 BASIS POINTS. THAT IS SHOWING YOU IT IS STARTING TO WEAKEN THE IMPACT AND WE'RE GETTING THE SIGNAL THAT OIL AND COMMODITY ARE REACHING THEIR PEAK. JONATHAN: AWESOME. AT A HEN -- ANNA HAN OF WELLS FARGO. LISA: YOU'RE SEEING LONGER-TERM PUSHING EXPECTATIONS AND NEAR-TERM ONES COMING DOWN, HOW MUCH OF THAT IS BLEEDING INTO THE BELIEF THAT PERHAPS OIL HAS ALREADY PEAKED OR IS NEAR ITS PEAK BECAUSE YOU WILL SEE A DECLINE IN DEMAND COMMENSURATE WITH ANY POTENTIAL DECLINE IN SUPPLY? JONATHAN: I PROMISE I WOULD BRING YOU THIS FROM HIM, HE HAS GONE FROM MAX BULLISH TO KIND OF MAX BULLISH. WE INCREASE THE WAKE OF GOVERNMENT BONDS IN OUR PORTFOLIO. WE FOCUS ON EQUITIES AND COMMODITIES, SERVING AS A PARTIAL HEDGE IN AN ADVERSE SCENARIO. THERE IS A SUPER BULLISH TUNE. TOM: SOME COMPANY AS WELL, A GLOOMY WEEK BUT SOME PEOPLE ARE SAYING USE THIS AS AN OPPORTUNITY. JONATHAN: WE WILL CAP UP WITH -- CATCH UP WITH OUR NEXT GUEST IN A MOMENT. FUTURES -10% ON THE S & P, CREW BREAKING DOWN TO 99, DOWN 5%. THIS IS BLOOMBERG. ♪ RITIKA: KEEPING YOU UP-TO-DATE WITH THE NEWS, I'M RITIKA GUPTA. ANCHOR CONCERNS ABOUT THE GLOBAL ECONOMIC SLOWDOWN. WHITE HOUSE SAYS OPEC HAS MOVED TO REPRODUCTION IF THE MOVE TO THE MIDDLE EAST IS ANY PRECEDENT IN SAUDI ARABIA. CANDIDATES TO BE THE NEXT PRIME MINISTER, 20 MEMBERS OF PARLIAMENT. NOMINATIONS WILL OPEN AND CLOSE WITH THE FIRST TO BE HELD ON WEDNESDAY. THE NEXT PRIME WILL BE ANNOUNCED SEPTEMBER 5. LIMITING THE RECENT TRAVEL CHAOS AT HEATHROW. THEY WILL STOP SELLING TICKETS TO SO MUCH TROUBLE, THEY WILL LIMIT TRAFFIC TO 100,000 PEOPLE THROUGH SEPTEMBER 11 AND NEW RECRUITS. ONE OF THE MOST DRAMATIC STEPS, REDUCING COSTS. THE COMPANY WILL QUIT BUILDING EXERCISE BIKES AND TREADMILLS AT ITS OWN FACTORY. THE COMPANY HAD NEARLY 3000 EMPLOYEES THIS YEAR AND SHARES ARE DOWN IN 2022. HUMAN BEINGS HAVE SEEN DISTANT GALAXIES MORE THAN 4 BILLION YEARS AGO IN VIVID DETAIL. ONE OF THE BEST -- FIRST FULL-COLOR IMAGES FROM THE JAMES WEBB SPACE TELESCOPE. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. > > I THINK THAT ULTIMATELY THE PRICE OF OIL OR THE FED OR THE STRONG DOLLAR WILL LEAD US INTO A RECESSION, AND WHEN THE RECESSION HITS, A 2023 EVENT, THE MARKET WILL FIND THE BOTTOM SOMEWHERE BETWEEN 25 AND 40% BELOW THE PEAK OF 4800. JONATHAN: GREAT TO HEAR FROM LEON COOPERMAN FROM OMEGA FAMILY OFFICE. GOOD MORNING, WITH TOM KEENE AND LISA ABRAMOWICZ, I'M JONATHAN FERRO. PRICE ACTION ON THE S & P, NEGATIVE ON THE NASDAQ 100. YIELDS TRAVELING LOWER, DOWN BY EIGHT BASIS POINTS. CRUDE WITH THE 99 DOWN BY 4.5%. EVERYWHERE YOU LOOK THERE IS A HEADLINE. THE EURO-DOLLAR APPROACHING PARITY, UNCHANGED ON THE SESSION OF THE EURO. THE FIRST OIL MARKET OUTLOOK FOR 2023, NO RELIEF FOR SQUEEZE CONSUMERS. MORE CRUDE NEEDED FROM THE GROUP, EVEN THOUGH MOST MEMBERS ARE ALREADY PUMPING FLAT OUT. EXPECTING GLOBAL GROWTH TO EXCEED SUPPLY BY ONE MILLION BARRELS A DAY NEXT YEAR. TOM: LET'S GO THROUGH IT BEFORE WE GET TO JOE MATHIEU. WE'VE GOT A SHUTDOWN. THE EFFECT STORY IN EUROPE, THE IDEA OF THE GERMAN SLOWDOWN. AND THEN IT GOT A WAR STILL GOING ON IN UKRAINE AND THE STEW OF THIS GETS YOU TO A POINT OF CRISIS. JONATHAN: CHINA IS ON THE PLATE, I THINK IT HAS TO BE. CLEARLY WE ARE FACING THE PROSPECT OF INCREASED RESEARCH AND ACROSS THE COUNTRY AND THE COMMODITY MARKET IS PICKING UP ON THAT. WE TALKED ABOUT HIM AT JP MORGAN, WHEN HE IS LOOKING FOR IN THE SECOND HALF OF IS A REBOUND IN THE MARKET, LED BY CHINA. CHINA IS A BIG ISSUE IN A LOT OF PEOPLE'S OUTLOOKS. TOM: THE JP MORGAN EMFX INDEX, A SOLID INDEX, HAS WEAKENED BY 47%. THAT IS A STUNNING STATISTIC AND MUCH OF THAT RECENTLY. JOE MATHIEU ON BLOOMBERG RADIO HAD A GOOD CONVERSATION EVERY DAY AND JOINS US THIS MORNING. I BELIEVE IT IS TUESDAY, ABOUT THE ONLY THING I CAN GET MY HANDS AROUND THIS MORNING. THE PRESIDENT, HOW MUCH WILL RIYADH BE ABOUT OIL TALKS? JOE: IT'S PENCIL YOU ASK. WHITE HOUSE SAY IT IS MORE A TRIP ABOUT SECURITY AND THE PRESIDENT WROTE ABOUT IN HIS OP-ED. EVERYBODY KNOWS THE PRESIDENT NEEDS TO GET MORE OIL PUMPS HERE, WHETHER OR NOT IT WILL OIL -- LOWER PRICES AT THE PUMP. BUT THERE IS A DIFFERENT STRATEGY HERE. HE DOES NOT LOOK LIKE HE IS GOING HAT AND HAND WITH SAUDI ARABIA. HE WILL BE ASKING OPEC PRODUCERS TO DO THEIR PART AND PUMP MORE. BUT IF YOU THINK BACK TO THE ABRAHAM ACCORDS AND THE FACT THAT ISRAEL HAS NOT NORMALIZED RELATIONS WITH SAUDI ARABIA, THE WHITE HOUSE PRESIDENCY IS AN OPPORTUNITY. THAT IS WHAT WE -- THEY WILL TRY TO STRIKE. THE FIRST U.S. PRESIDENT TO FLY FROM ISRAEL TO JEDDAH AND ISRAEL TO SAUDI ARABIA, THERE MIGHT BE TALK ABOUT BRINGING SAUDI ARABIA INTO THE FOLD. IT MEANS MORE AS WE HAVE SEEN PUTIN REPAIRING A VISIT TO THE WRONG. THERE ARE A LOT OF LAYERS AND IT IS A COMPLICATED TRIP FOR ISRAEL, SAUDI ARABIA AND OIL MAY BE ONLY PART OF THE EQUATION. TOM: BRINGING THAT CLEAR DISCUSSION BACK TO DOMESTIC POLITICS, WHAT IS THAT OUTPUT? JOE: IT HAS TO DO WITH PRICES. THERE'S NOT MUCH OF A POINT. FROM A DIPLOMATIC STANDPOINT, A GLOBAL PEACE STANDPOINT, A SECURITY STANDPOINT, THAT WOULD BE AN AMAZING STORY TO TELL, BRINGING THE ISRAELIS AND THE SAUDI'S TOGETHER. BUT IT MAY NOT IMPACT PEOPLE IN AMERICA IN TIME FOR NOVEMBER. LISA: WHEN YOU TALK ABOUT NOVEMBER, THERE WAS A POLL BY THE NEW YORK TIMES, IT FOUND THAT 64% OF DEMOCRATS WANT JOE BIDEN TO STEP ASIDE AND LET ANOTHER DEMOCRAT RUN. WHAT IF YOU HEARD ABOUT WHO THE FRONT WOULD BE TO TAKE HIS SPOT? JOE: THERE IS NOT ONE AND THAT'S WHY THEY HAVE NOT TALKED ABOUT IT, I DON'T THINK BIDEN LIKES THIS CONVERSATION THOUGH MAYBE SOMETIMES WHEN HE WAKES UP HE THINKS I HOPE THIS IS THE ONLY TERM. BUT THE NEW YORK TIMES RAN NUMBERS ON THE REPUBLICAN SIDE AND SHOW THAT RON DESANTIS, THE GOVERNOR OF FLORIDA, IS RUNNING A GOOD CHALLENGE TO TRUMP AS A POTENTIAL CANDIDATE IN 2024. IN HIS EARLY TO BE RUNNING THESE NUMBERS AND WHEN YOU THINK ABOUT IT FROM A GENERIC GOING STANDPOINT, IF YOU PUT JOE BIDEN AGAINST AN UNNAMED REPUBLICAN, JOE BIDEN LEAVES--LEADS THOSE POLLS. YOU ARE SEEING GOVERNORS LIKE GAVIN NEWSOM I STANDOUTS, BUT -- LISA: IT IS INTERESTING TO THINK WHAT THIS WILL LOOK LIKE, CERTAIN FISCAL PLANS ARE HANGING OUT. HOW MUCH COHESION IS THERE TO GET ANYTHING THROUGH IF THERE IS NOT NECESSARILY A FRONT RUNNER OF THE PARTY AS EVIDENCED BY THIS POLL? JOE: UNTIL WE GET FURTHER DOWN THE ROAD, IT IS IN JOE BIDEN'S INTERESTS TO MAKE IT CLEAR HE AT LEAST COULD RUN FOR A SECOND TERM. YOU WILL NOT GET ANYTHING DONE HERE. SO THE PRESIDENT WILL KEEP HIS HEAD DOWN. THE QUESTION IS WHAT HAPPENS TO KAMALA HARRIS? WHEN IS THE LAST TIME WE SAW A SITTING VICE PRESIDENT NOT BE CONSIDERED FOR THE JOB AT THE END OF THIS TERM AND WE MAY START SEEING MORE OF HER. WE ARE SEEING HER TOMORROW INTERVIEWS AND MORE MEDIA, I WONDER IF SHE BECOMES MORE PROMINENT AND VISIBLE IN THIS ADMINISTRATION POST MIDTERMS. JONATHAN: THANK YOU, LOOKING FORWARD TO THE PROGRAM ON BLOOMBERG RADIO LATER, AT 5:00 P.M. EASTERN TIME. A BIG ISSUE FOR US THIS MORNING, THIS AT HEATHROW IS FASCINATING. THEY HAVE INTRODUCED A LIMIT ON PASSENGER TRAFFIC THROUGH SEPTEMBER 11, THEY ARE THE AIRLINE TO STOP SELLING TICKETS. WE PICKED UP ON THIS THEME. ALBEIT AN EXTREME CASE, THIS IS A USEFUL ILLUSTRATION OF HOW PERSISTENT EXPECTATIONS CAN LOWER DEMAND BUT KEEP INFLATION HIGH. YOU CAN LIMIT CAPACITY. WHAT'S GOING TO HAPPEN TO TICKET PRICES ELSEWHERE? LISA: PEOPLE WANT TO TRAVEL, GO ON VACATION AND SEE FAMILY. THEY WILL LOOK FOR A PLACE WHERE THEY CAN GET BACK TICKET. IF YOU TRY TO CONSTRAIN SUPPLY, IT IS ONLY GOING TO LEAD PRICES HIGHER IN THE NEAR TERM BEFORE THIS EFFECT OF THE ECONOMIC FOLLOW-THROUGH TAKES PLACE. IT IS A CONUNDRUM, HIGHLIGHTING THE PAIN POINT. JONATHAN: HOW EXCEPTIONAL WILL IT BE THROUGH THE REST OF THE SUMMER AND YEAR? ARE WE GOING TO SEE OTHER THINGS LIKE THIS? TOM: THERE'S NO QUESTION IN MY MIND. IT'S GOING TO BE WILDLY UNEVEN AND ONE THING IS THE POLARITY BETWEEN WHAT THE UNITED STATES IS DOING AND THE U.S. IS DISTINCTLY DIFFERENT GOING INTO THE THIRD QUARTER. JONATHAN: THE NASDAQ 100 LOWER BY .1%, NOT AS BAD. CRUDE ROLLING OVER BY 1.5%, 99 JONATHAN: IF YOU WERE LOOKING FOR A BOUNCE, IT IS NOT A GREAT START TO THE WEEK. THE S & P, NEGATIVE HALF OF 1%. MUTED PRICE ACTION ON THE NASDAQ. A LITTLE BIT OF A BOUNCE OFF THE LOWS IN THE LAST 20 MINUTES OR SO. THE BOND MARKET PICTURE REFLECTING THE EQUITY MARKET STORY. YIELDS COME IN LOWER. DOWN AGGRESSIVELY YESTERDAY TOO. A CPI PRINT TOMORROW AND WE HOPE FOR THE THIRD STRAIGHT MONTH THAT WE MAY HAVE SEEN A MECHANICAL PEAK IN YEAR-OVER-YEAR INFLATION, 8.8% IS THE ESTIMATE. TOM: THE CORE MATTERS. JONATHAN: THAT IS EXPECTED IN JUST A LITTLE BIT. TOM: LARRY AND HAD A GREAT TWEET ABOUT THAT. WE HAVE TO STAY ON GLOBAL WALL STREET IN THE CURRENCY MARKET IS NOT AS UPSET AS IT WAS TWO HOURS AGO. JONATHAN: A BIT OF A BOUNCE AND PARITY ON EURO-DOLLAR. I WANT TO FOCUS ON COMMODITIES BECAUSE IT HAS BEEN A BREAK THIS MORNING. BRENT DOWN BY 3% OR 4%. JUST A LITTLE BIT OF A MOVE OFF THE LOWS IN THE LAST 20 MINUTES OR SO. THE MOVE ON COPPER, DOWN BY 2.3%. GOLDMAN SACHS, A BIG REVISION LOWER ON THEIR PRICE TARGET. THEY THINK THAT COME IN THE NEXT COUPLE OF MONTHS. GLOBAL GROWTH CONCERNS AT THE EPICENTER OF THIS MARKET. BRAM O SAID IT EARLIER. MARKETS BETTING AGAINST INFLATION AND ON SLOWER GROWTH. TOM: WE NEED TO BE FLEXIBLE, THAT IS ALL THERE IS TO IT. YOU HAVE TO BE CREATIVE. YOU GO FROM GENEVA INTO THE NOT THE MAIN AIRPORT BUT IT IS GOOD ENOUGH FOR CRETE. JONATHAN: ARE YOU LISA'S TRAVEL AGENT? ON A SERIOUS POINT, I WONDER WHAT IS GOING TO HAPPEN WITH THESE AIRLINES IN HEATHROW. IF YOU INTRODUCE A PASSENGER CAP, DID THEY INTENSIFY SOME PEOPLE WITH CHEAPER TICKETS TO CANCEL? TO THEY HAVE TO MOVE PEOPLE AROUND TO MAKE SURE THAT ALL THE FLIGHTS THAT ARE FLOWN ARE FULL? IT'LL BE INTERESTING TO SEE WHAT THEY DO. TOM: MORE IMPORTANTLY, AMERICAN AIRLINES JUST SAW SECOND-QUARTER REVENUE UP 12%. THE SEATS ARE FULL AND WE ARE PAYING JAY NORMA'S DOLLARS. THEY ARE MEANT -- J GINORMOUS DOLLARS. THEY ARE MINTING MONEY. JONATHAN: I'M ALL EARS. ASSET PRICE ACTION. LET'S GET TO BRAMO. LISA: THIS IS THE WHEEZING -- THE REASON WHY I'M GOING TO SKIP THE FLIGHTS AND JUST DRIVE. GAP SHARES, I AM FOCUSED ON BUDGET MOVERS, INCLUDING GAP AFTER THEY FIRED THEIR CHIEF EXECUTIVE OFFICER. SHE HAD COME IN IN 2021 -- IN 2020. GAP SHARES DOWN NEARLY 50% YEAR TO DATE AND DOWN ALMOST 6% IN PREMARKET TRADING. WHAT WILL IT TAKE TO TURN AROUND A COMPANY THAT HAS STRUGGLED WITH CONCEPT AND A LACK OF CONSUMER DEMAND. BED, BATH & BEYOND, ANOTHER LAGGARD IN THE RETAIL SPACE. SHARES DOWN ABOUT 2.10% -- DOWN ABOUT 2/10 OF A PERCENT. HOW MUCH COULD A NEW PERSON REVIVE A RETAILER IN SUCH A DIFFERENT AND DIFFICULT ENVIRONMENT? AMAZON, THEY HAVE THEIR PRIME DAY WHICH I'M ONLY MENTIONING FOR TOM. DOES ANYBODY CARE ABOUT THIS STUFF? IS IT BASICALLY JUST A MARKETING PLOY? TOM: I'VE NEVER DONE IT. JONATHAN: YOU'VE NEVER DONE PRIME DAY? TOM: NO. LISA: HAVE YOU? JONATHAN: SURE. TOM: THE BET HERE INTO EARNINGS IS WHAT ARE THEY DOING TO RIGHT SIZE A CAUSE THAT BEZOS PUT OUT AS HE WAS GOING OUT THE DOOR. LISA: A LOT OF PEOPLE ARE PROBABLY PARTICIPATING IN PRIME DAY. JONATHAN: 100 TABLETS, DISHWASHER TABLETS. USUALLY THEY DO A NICE OFFER. LISA: I THOUGHT YOU WERE TALKING ABOUT IPADS. JONATHAN: THANKS FOR REMINDING ME. LISA: ANYTIME. I'M ALSO LOOKING AT A NUMBER OF POTENTIAL WINNERS, EVEN AMID THIS VERY DIFFICULT SITUATION. PEPSI IN PARTICULAR CAME OUT, UPGRADING FOR THE SECOND QUARTER IN A ROW, THEIR EXPECTATIONS FOR PROFITS. PELOTON UP A WHOLE 1% AFTER SAYING THEY WERE GOING TO MOVE THEIR MANUFACTURING OF THEIR BIKES AND OTHER SUPPLIES TO OTHER PARTNERS AND NOT MAKE IT IN-HOUSE. AMERICAN EXPRESS -- AND JON, THIS GOES TO A STORE YOU'RE TALKING ABOUT -- MORGAN STANLEY DOWNGRADED THEIR EXPECTATIONS FOR THE COMPANY BECAUSE OF CONSUMER SPENDING AND A PULLBACK AWAY FROM OIL AND GAS. THAT BANK OF AMERICA REPORT YOU'RE TALKING ABOUT, ABOUT CARD SPENDING. JONATHAN: A TON OF PRICE TARGET CUTS. LISA, THANK YOU. TOM: WHAT DID BETSY DO? JONATHAN: CUT PRICE TARGETS ON A TON OF FINANCIALS. STILL PRICED IN WITH THE PRICE TARGETS AT THE MOMENT, SOME DECENT UPSIDE FOR SOME BIG NAMES. BUILDING ON WHAT LISA SAID ON THE CONSUMER SITUATION, THE NEW YORK FED PUT OUT THERE JUNE CONSUMER EXPECTATION SURVEY AND SHORT-TERM INFLATION EXPECTATIONS ARE UP. MEDIUM-TERM ARE DOWN. HOME PRICE EXPECTATIONS ARE LOWER, SPENDING EXPECTATIONS ARE LOWER. JUST ACROSS THE BOARD, NOT WHAT YOU WANT TO HEAR. TOM: EXTRAORDINARY TO SEE ON THE AMAZON PRIME DAY, I'M LOOKING AT SOLID BOWTIES, DOWN FOR TO -- DOWN 27%. KATHY JONES WITH US, CHIEF INCOME STRATEGIST AT CHARLES SCHWAB. AS THE GREAT STORY THAT WE ARE GOING TO BE WITH PRICES UP AND YIELDS LOWER? KATHY: I THINK THE TIME TO MOVE INTO MORE DURATION HAS COME AND WE HAVE SUGGESTING THAT FOR A WHILE NOW AND WHEN YOU GET 10 YEAR YIELDS ABOVE 3%, ESPECIALLY AT A TIME WHEN THE FED IS TIGHTENING AND THE ECONOMY IS UNDER A LOT OF STRESS, I THINK THAT SAFE HAVEN MOVE -- IS THE WAY TO GO. TOM: A WONDERFUL DISCUSSION ON THE TAIL RISK OUT THERE. WE RARELY TALK ABOUT TAIL RISK IN THE BOND MARKET. I WANT TO GO THERE RIGHT NOW. HOW UNCERTAIN IS THE DETERMINATION OF WHAT PRICE WILL DO IN FIXED INCOME NOW? HOW MALLEABLE ARE THE TAIL RISKS OF THE BOND MARKET? KATHY: IT IS A GREAT QUESTION. THE QUESTION IS WHERE IN THE BOND MARKET ARE WE TALKING ABOUT? WE SEE A LOT OF TAIL RISK IN CREDIT, PARTICULARLY LOWER QUALITY -- EVEN IN THE PRIVATE DEBT MARKET, THERE IS A TILTING AMOUNT OF STRESS AND I THINK THE TAIL RISK IS PRETTY HIGH. TREASURIES, OBVIOUSLY THERE ARE SOME AND I DON'T THINK IT IS IMMENSE ANYMORE, SIMPLY BECAUSE WE HAVE HAD SUCH A MASSIVE UPWARD SHIFT IN THE YIELD CURVE AND WE'VE GOT THE FED TIGHTENING. THAT COMBINATION TYPICALLY WILL FLATTEN THE YIELD CURVE, INVERT THE YIELD CURVE, SO THAT PROBABLY DIMINISHES SOME OF THE TAIL RISK IN THE LONG END. LISA: YOU ARE TALKING ABOUT -- MOVING TO BEING A BULL WHEN IT COMES TO RISK ASSETS. WHEN YOU LOOK AT HIS NOTES, IT IS VERY NUANCED, SAYING THAT IS NOT PRICING IT IS MUCH RISK RIGHT NOW AS STOCKS. WOULD YOU AGREE WITH THAT? KATHY: I DON'T DO STOCKS, SO I CAN COMPARE THE TWO BUT I THINK CREDIT STILL HAS A WAYS TO GO IN TERMS OF PRICING IN RECESSIONARY -- A FURTHER DETERIORATION IN CREDIT QUALITY AND CREDIT PERFORMANCE, BOTH DOMESTICALLY AND AA. THE HIGH-YIELD THREAD HAS MOVED AND WE BEGIN TO MOVE ANOTHER 150 BASIS POINTS AS WE GET INTO A PRETTY SHARP DOWNTURN WHICH LOOKS LIKE THAT IS WHERE WE ARE HEADING TOWARD THE SECOND HALF OF THE YEAR. LISA: WHICH SOUNDS LIKE IT COULD BE CONTROLLED OR UNCONTROLLED BASED ON THE PACE OF IT. WE COULD START TO SEE REAL MARKET DYSFUNCTION THAT COULD GET THE FED'S ATTENTION. DO YOU SEE CORPORATE BEING VULNERABLE TO THAT TYPE OF FISSURE HE WAS TALKING ABOUT? KATHY: THE PROBLEM AND CORPORATE CREDIT IS A LIQUIDITY ISSUE. IT IS A VERY LOW CREDIT QUALITY AND WE COULD RUN INTO SOME PROBLEMS AND ACCESS TO THE MARKET WOULD BE DIFFICULT FOR LOW RATED BUT IN THE INVESTMENT GRADE SPACE, BUT WE WORRY ABOUT IS LIQUIDITY, BECAUSE THE DEALERS ARE NOT HOLDING AS MUCH, A LOT HAS MOVED INTO THE PRIVATE MARKET. IF THERE IS A DISLOCATION, IT IS SIMPLE THE INABILITY FOR THE MARKET TO GET THE LIQUIDITY IT NEEDS TO GET THE PRICE AND YIELD RIGHT. WE COULD SEE SOME PROBLEMS. WE ARE NOT ANTICIPATING IT, BUT IT COULD CERTAINLY HAPPEN IF THEY DETERIORATE QUICKLY. JONATHAN: KATHY, THANK YOU. KATHY JONES OF CHARLES SCHWAB. WE ARE DOWN FOR TENTHS ON THE S & P WITH POSITIVE 1/10 OF A PERCENT ON NASDAQ. THE DISTANCE BETWEEN THE TWO YEAR AND THE 10 YEAR, IT IS -10 BASIS POINTS THIS MORNING. TOM: IT IS REAL SIMPLE. IT IS BACK TO THE GREAT FINANCIAL CRISIS. I'M NOT COMPARING THE TWO ON A SINGLE SITUATION. IT IS RADICALLY DIFFERENT. THE FACT OF THE MATTER IS THIS BEARS WATCHING. THE 10 YEAR YIELD, 47 OF THE SPREADS. THE ANSWER IS, THE TWO YEAR YIELD IS HIGHER THAN THE 10 YEAR YIELD, SEE YOU GO THROUGH ZERO AND DOWN YOU GO AND THE AMOUNT IS A HUGE DEAL. 10 BASIS POINTS OF INVERSION IS A DIFFERENT STORY THAN THREE BASIS POINTS OF INVERSION. JONATHAN: WHEN YOU'RE WILLING TO ACCEPT A LOWER YIELD ON A LONGER DATED MATURITY THAN A SHORT-TERM MATURITY, THAT TYPICALLY SIGNALS SOME KIND OF PROBLEM. LISA: AND AS YOU CITED EARLIER, IT IS A QUESTION OF HOW WE GET THERE. IS IT GOING TO BE GRADUAL, CONTROLLED, OR IS IT GOING TO BE VIOLENT? IS IT GOING TO BE SOMETHING SIGNIFICANT WHEN IT COMES TO THE MARKET AND ECONOMIC DISRUPTION? AS THOMAS BEEN -- AS TOM HAS BEEN TALKING ABOUT. JONATHAN: JORDAN ROCHESTER WENT LOOKING FOR THAT MOVE TO PARITY. WE ARE BASICALLY THERE. HE IS FACTORING IN DOLLAR STRENGTH AND MORE. WE WILL CATCH UP WITH HIM NEXT. I AM JONATHAN FERRO. THIS IS BLOOMBERG SURVEILLANCE. ♪ RITIKA: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD, I AM RITIKA GUPTA. OPEC'S FIRST OUTLOOK FOR 2023 HAS BEEN RELEASED AND SUGGESTS NO RELIEF FOR THE GLOBAL SQUEEZE. MEMBERS ALREADY ARE FALLING FAR BEHIND THE VOLUMES NEEDED RIGHT NOW. IN THE U.K., RETAILERS REPORTED ANOTHER DROP IN SALES. RECORD HIGH INFLATION IS KEEPING CONSUMERS FROM SPENDING ON BRITISH PRODUCTS AND SERVICES. IN SHANGHAI, THERE ARE FEARS THE CITY IS GETTING BACK INTO A LOCKDOWN LITTLE MORE THAN THREE WEEKS AFTER EXITING A TWO MONTH ORDEAL. IT IS THE FOURTH DAY IN A ROW THAT CASE NUMBERS HAVE BEEN ABOVE 50. TWO MORE ROUNDS OF MASS TESTING WERE TRIGGERED IN SHANGHAI. THE EU GAVE THEIR FINAL APPROVAL TODAY, RECOMMENDING THAT -- THE NATION BE ALLOWED TO BEGIN USING THE COMMON CURRENCY. IT IS THE FIRST EURO NEWCOMER SINCE 2015. PEPCO RAISED THEIR OUTLOOK FOR THE SECOND QUARTER IN A ROW -- PEPSICO RAISED THEIR OUTLOOK FOR THE SECOND QUARTER IN A ROW. CONSUMER DEMAND REMAINS RESILIENT. THEIR NORTH AMERICAN FOOD AND BEVERAGE BUSINESS REMAINS STRONG DURING THE QUARTER. IT IS THE FIRST TIME HUMAN BEINGS HAVE SEEN A DISTANT GALAXY CLUSTER IN SUCH VIVID DETAIL. PRESIDENT BIDEN UNVEILED ONE OF THE FIRST FULL-COLOR IMAGES FROM THE JAMES WEBB SPACE KIT TELESCOPE -- JAMES WEBB SPACE TELESCOPE. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM RITIKA GUPTA. > > WHEN YOU LOOK AT HOW MUCH THE EURO HAS OVERSHOT IN THE PAST, WE HAVE A RANGE ANYWHERE FROM NINE TO FIVE IN THE CURRENT ENVIRONMENT. THAT SORT OF RANGE IS NOT UNTHINKABLE. JONATHAN: THE GLOBAL HEAD OF FX RESEARCH AT WHICH A BANKS. SEEMINGLY EVERYBODY ON BOARD WITH THE STORY, LOOKING FOR A WEAKER EURO. GOOD MORNING. TOM KEENE, LISA ABRAMOWICZ AND JONATHAN FERRO, LOOKING AT FUTURES WITH A BIT OF A BOUNCE. YIELDS LOWER BY SEVEN BASIS POINTS ON THE DAY. CRUDE AT $99, DOWN BY 4.57%. JORDAN ROCHESTER LOOKING FOR 95 BY THE END OF AUGUST WITH MORE PAIN TO COME FOR THAT CURRENCY PAIR. TOM: IT IS ABOUT BRINGING IN THE EXPERTS AND ALL WE CAN SAY IS JORDAN ROCHESTER IS NUANCED AND DIFFERENT. TO TALK TO ALL THE PEOPLE, READ THEIR RESEARCH, IT HELPS US COLLATE AROUND THIS SHOP THAT WE HAD -- SHOCK THAT WE HAVE. JONATHAN: DO WE BRING IN JORDAN RIGHT NOW? TOM: BRING HIM IN. JONATHAN: WHERE DID YOU GET THE EXTRA DOWNSIDE ON THE EURO-DOLLAR? JORDAN: GOOD MORNING EVERYONE. IN TERMS OF WHY WE THINK THE EURO CARRIES ON, THE RISK IS THE GAS FLOWS BUT ALSO THE GLOBAL RECESSION STORY BUILDING UP. MOST ANALYSTS HAVE JUST REALIZED THE EURO CAN KEEP HEADING LOWER AND THERE WAS A BIT OF A FIGHT ON THE SOUTH SIDE COMMUNITIES WHEN THE ECB TURNED HAWKISH AND NOW IT IS QUITE CLEAR THAT GAS FLOW IS DOMINATING AND THE REASON IT GOES TO 95 IS THREE REASONS. THE FIRST IS THE GAS FLOWS. THERE WAS A HIGH CHANCE THAT OPERATIONS DO NOT RESUME IN WHAT WE ARE SEEING IS A FUNDAMENTAL MACRO STORY. EURO-DOLLAR IS HEADING LOWER BECAUSE EUROPEAN IMPORTS OF GAS, BUYING WHATEVER THEY CAN FROM THE U.S.. THEY ARE THROWING MONEY AT THE WALL TO MAKE SURE THE EU ACHIEVES THE 80% GAS STORAGE AIMS. THEY HAVE A LOT MORE TO DO AND THAT IS UNTIL THAT TARGET IS REACHED. THE SECOND REASON IS CHINA. THE COVID BUSINESS CYCLE, TELLING US THAT SHANGHAI MIGHT BE GOING INTO LOCKDOWN AGAIN. THAT IS THE BIGGEST TRADING PARTNER FOR THE EURO AREA AND THE THIRD ONE IS RECESSION RISKS. THE U.S. RAISING RATES THE WAY THEY HAVE AND THE ECB IS GOING TO RAISE RATES IN JULY, SEPTEMBER, OCTOBER AND SO ON BUT WE ARE TALKING ABOUT RATE CUTS NEXT YEAR AND I FIND IT INTERESTING HOW THERE IS SO MUCH FED CUTTING PRICES THAT THE CURVE IS INVERTED. IT IS THE NEXT STORY AND IT IS NOT ALL ABOUT GAS FLOWS. TOM: MOVING FROM -10 TO -11 BASIS POINTS. DAVID FOGARTY OVER AT THE BIG GERMAN BANK, MAKES IT CLEAR THAT AT SOME POINT, WE HAVE TO STEP IN. USING EURO AS A PROXY, ARE WE ANYWHERE NEAR ON A 0.95 WHERE INSTITUTIONS WILL STEP IN TO STAUNCH THE DOLLAR STRENGTH? JORDAN: IT IS DEFINITELY POSSIBLE BUT UNLIKELY. SO WHEN THE EURO WAS INVENTED, THERE WAS FX INTERVENTION AND THAT WAS AUTHORITIES AND AROUND THE WORLD STEPPING IN TO HELP SUPPORT THE CURRENCY SO THAT IT DID NOT SPUR A EUROZONE CRISIS. THERE WAS A JOINT EFFORT AND AT THE SAME TIME, INFLATION WAS NOT AS MUCH OF A PROBLEM AS IT IS TODAY. RIGHT NOW, EVERY CENTRAL BANK AROUND THE WORLD TO MUCH ONCE A STRONGER CURRENCY. IT HELPS TAME INFLATION. THAT IS WHY WE ARE SEEING THE LIGHTS OF THE S & P WHO HAVE FOR YEARS FOUGHT THE CURVE AND TRIED TO NOT HAVE A STRONG OR CURRENCY AND THEY ARE PRETTY MUCH ASKING FOR ONE. THE EURO ZONE DO THAT BY RATE HIKES AND THAT IS THE MAIN WAY THEY COULD POSSIBLY DO THAT BUT AS I SAID EARLIER, THE GROWTH STORY IS MUCH BIGGER THAN JUST THE RATE HIKES AND WHAT IS GOING ON IN CHINA. FX INTERVENTION IS BEING TALKED ABOUT IN JAPAN AS WELL. THE AUTHORITIES SAY THE MOVE IS A DETACHMENT FROM FUNDAMENTALS WHERE OTHERS SAY IT IS QUITE IN LINE WITH FUNDAMENTALS. THAT IS THE SAME WITH THE EURO. GERMAN EXPORTS HAVE NOW BECOME VERY UNCOMPETITIVE AND THE COST OF ELECTRICITY AND ENERGY IN EUROPE IS ROUGHLY AROUND SIX TIMES HIGHER THAN IN AMERICA, SO TO MAKE A PIECE OF INTO FACTORED EQUIPMENT, YOU ARE PAYING SIX TIMES MORE IN ELECTRA CITY COSTS. NEED A WEAKER CURRENCY TO HELP YOU OUT. LISA: I WANT TO TEASE OUT THE POTENTIAL CASES THAT YOU LAY OUT . 95 IS THE MOST LIKELY THAT YOU SEE AND BY MID AUGUST. YOU SAID THAT A 90 PRINT IT ACTUALLY BE REASONABLE TO LOOK FOR OVER THE WINTER IF WE DO GET A NORD STREAM ONE CUT OFF IF RUSSIA DOES NOT RESTORE THE GAS SUPPLIES. AT WHAT POINT DO SOMETHING BREAK, AT WHAT POINT IS THERE A LEVEL AT WHICH YOU START TO SEE A CONTAGION THAT PERHAPS IS NOT LINEAR. JORDAN: 90 TO 95 IS NONLINEAR. WHAT BREAKS? CREDIT CHANNELS WILL BE MUCH MORE THE AREA WHERE THINGS BREAK AND THE DRYING UP OF CONSUMER DEMAND. AT LEAST TO A DOVISH CENTRAL BANK, THAT WOULD MEAN A LOW EURO, SO I THINK THE EXCHANGE RATE IS THE RELEASE VALVE AND I DON'T THINK IT IS GOING TO BE WHAT CAUSES THAT STRESS. IT IS COMING FROM THE SUPPLY AND DEMAND SIDE OF THE EQUATION. WHEN WE GET TO 95, WE ARE KINDA BASING THAT ON THE NORD STREAM ONE FLOWS THEY BE GOING BACK TO 40% OF THEIR CAPACITY. 90%, THAT IS THE SCENARIO WERE NORD STREAM ONE DOES NOT COME BACK ONLINE AND THE EURO DOES NOT GET ENOUGH GAS STORAGE AND THE GERMAN MANUFACTURERS GET THERE -- THEY EXPECT THAT AT 5% IF WE HAVE GAS RATIONING AND OUTSIDE OF COVID, THAT IS ONE OF THE BIGGEST ECONOMIC SHOCKS EVER SEEN, SO THAT IS A CHRYSLER -- THAT IS A CRISIS. JONATHAN: WE ARE RATIONING FLIGHTS AT HEATHROW, BASICALLY PUTTING A PASSENGER LIMIT ON AIRLINES THROUGH SEPTEMBER. WHAT DO YOU MAKE OF THAT? HOW IMPORTANT IS THAT STORY TO YOU? JORDAN: IT IS THE SUMMER OF DISCONTENT. FOR A LOT OF PEOPLE, THIS IS A PERSONAL STORY FOR THEIR OWN LIVES. MAYBE THIS WILL DISRUPT MY FLIGHTS. ON A MACRO SCALE, IT IS GOING TO LEAD TO A SUMMER OF DISCONTENT AND IT COULD LEAD HIGHER WAGES MORE BROADLY AND THAT MAKES THINGS TRICKY FOR THE CENTRAL BANKS LOOKING AT RISING WAGES AND THEY SHOULD BE RAISING RATES, BUT THEY ARE ALL SEEING ECONOMIC CRISES BUILDING UP IN THE FUTURE AND THE CENTRAL BANKS ARE IN A REALLY WEIRD PLACE, THE NEED TO RAISE RATES AND TAME INFLATION BUT THEY ARE LOOKING AT NEGATIVE GROWTH. THAT SUMMER OF DISCONTENT JUST KEEPS CENTRAL BANKS IN A WEIRD PLACE. JONATHAN: JORDAN ROCHESTER, OF MNOMURA. TOM: IN EUROPE, THERE ARE ALL THESE MICRO STORIES AND I LIKE WHAT HE SAID ABOUT LITTLE FLYERS THIS MORNING. TO GO TO THE OTHER SIDE OF THE WORLD, OUT ON TWITTER FROM BLOOMBERG, WRITING ON PROPERTY BONDS. I DON'T KNOW ANYTHING ABOUT THIS IN CHINA BUT WE ARE UNDERPLAYING THE STRESSES OF CHINA. JONATHAN: COULD NOT AGREE MORE. WE TALKED ABOUT THAT A FEW TIMES. THE PROSPECT OF MORE COVID RESTRICTIONS. WTI, DOWN BY 4.6%. COMING UP, JIM POLSON. LOOKING FORWARD TO THAT. FROM NEW YORK, THIS IS BLOOMBERG. > > UNDERLYING ECONOMY, THE LABOR MARKET, THERE WAS OBVIOUSLY MORE TIGHTENING. > > I'M SHOCKED THAT INTEREST RATES ARE AS LOW AS THEY ARE. > > WHAT WE ARE SEEING GLOBALLY IS A HUGE WARNING FROM INVESTORS. > > THE BIG MARKET CALL IS MUCH MORE VOLATILITY GOING FORWARD. > > THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. TOM: GOOD MORNING EVERYONE. GLOBAL SLOWDOWN. THANK YOU FOR JOINING GOEBEL WALL STREET -- GLOBAL WALL STREET AND ALL OF YOU INTERESTED IN THIS INTERNATIONAL SLOWDOWN. EVERYWHERE WE LOOK, THAT IS THE SIGNAL. JONATHAN: LOUD AND CLEAR OVER THE LAST FEW WEEKS. THE WORST YEAR SINCE 2001 AND UNDERPINNING BEHIND THAT MOVE, AND ENERGY ISSUE. PERHAPS THAT IS ALREADY HERE. TOM: WE SEE IT WITH THE DEATH OF ESG. WE SEE IT IN ROTTERDAM AS WELL, BUT WHAT I WANT TO FOCUS ON IN THE LAST HOUR, WE HAVE CURVE INVERSION, A 2/10 SPREAD. JONATHAN: IT HAS BEEN DEVELOPING OVER THE LAST FEW WEEKS. SOME PEOPLE THINK WE COULD GET VERY CLOSE TO A NINE HANDLE ON HEADLINE CPI. TOM: THERE IS HEADLINE CPI AND THEN CORE CPI. LISA, HOW DO YOU FOCUS ON THE DATA AND WHAT WILL OCCUR IN FIXED INCOME? LISA: IT DOES NOT SEEM LIKE NUANCE WILL RULE THE DAY. YEAR-OVER-YEAR, IT IS ONE OF THE MOST EXTREME CASES AND PREDICTIONS AND THAT IS THE CASE, YOU CAN EXPECT PEOPLE TO START TO PRICE IN 275 BASIS POINT RATE HIKES AND WHEN YOU TALK ABOUT THE CORE ON THE MARGINS, THAT COULD BE USED AS AN EXCUSE. THE FED CHAIR HAS COME OUT AND SAID THIS IS NOT A TIME FOR NUANCE WHEN YOU HAVE INFLATION AT THE HOTTEST PASTE -- PACE. TOM: I BELIEVE STEPHEN LYNCH -- STEVE ENGLE IN HIS SCHEDULED TO BE WITH US. -- STEVE ENGLAND IS SCHEDULED TO BE WITH US. -- WHEN THE GUARD AND OTHER INSTITUTIONS WILL STEP IN? I DON'T HAVE A HANDLE ON THAT. JONATHAN: IT IS A CENTRAL BANK RATE HIKE FROM PRESIDENT LAGARDE FOR THIS CURRENCY, CAN YOU ANSWER THAT QUESTION? TOM: I DON'T KNOW. YOU BRING OVER TO E.M., EVERYONE IS TELLING A CM DOESN'T MATTER AND I DON'T BUY IT. JONATHAN: CHINA MATTERS MORE FOR THIS GLOBAL ECONOMY. IT MATTERS MORE TO THE COMMODITY MARKET. WE'VE SAID IT THROUGH THIS MORNING. YOU CAN'T MAKE A CALL ON THIS COMMODITY MARKET WITHOUT A DEEP UNDERSTANDING, A BETTER UNDERSTANDING OF WHERE THE CHINESE ECONOMY IS GOING, AND WHETHER PRESIDENT XI MOVES OUT FROM THIS LOCKDOWN STORY. TOM: JUMP CONDITION ON TWO STANDARD DEVIATIONS. THAT SHOWS NOT SO MUCH CURRENCY AS A MECHANISM FOR CHINA BUT THERE IS AN IMMEDIACY TO THEIR ACTIONS TO STABILIZE THEIR ECONOMY. JONATHAN: LET'S WAIT FOR THIS PRICE ACTION. COPPER HEADING SOUTH. TALKING ABOUT THE DIFFERENCE BETWEEN TWO AND 10. -10 OR 11 BASIS POINTS. MOMENTS AGO ON THIS PROGRAM, JORDAN ROCHESTER TALKING ABOUT THE PROSPECT OF HITTING -- NEVER HITTING 95 AND MAYBE GOING BELOW THAT LEVEL BUT ACKNOWLEDGES THAT ANY CALL ON GOING SOUTH OF 95 ULTIMATELY IS A CALL ON WHAT HAPPENS WITH GAS SUPPLY LATER THIS YEAR. TOM: IT IS, AND THE GAS SUPPLY IS A CALENDAR ITEM. HOW DO YOU FOCUS IN THE RECORD HEAT WE ARE SEEING ACROSS CONTINENTAL EUROPE? JONATHAN: BRUTAL. IT IS GOING TO BE HARDER THIS YEAR. THE IMPORTANT FACTOR RIGHT NOW, THE EURO IS WHAT HAPPENS WHEN NORD STREAM ONE COMES BACK ONLINE, HOW MUCH GAS WE GET THROUGH THAT AND HOW MUCH WE GET LATER THIS YEAR. FOR THE ECB, WHAT IS THE POLICY FOR THE ECB? TOM: I THINK THEY ARE MAKING IT UP AS THEY GO. JONATHAN: THEY MEET NEXT WEEK. IT IS BRUTAL. TOM: I THINK IT IS BRUTAL, AND I WOULD SUGGEST OUR ECONOMIC THEORY IN ACTION IS BEING MADE UP AS WE GO. JIM PAULSON JOINS US NOW. HE KNOWS THAT MINNESOTA IS NOT IN DROUGHT BUT OFTEN THE SOUTHWEST, THERE IS SERIOUS DROUGHT. LET'S START THERE. WHAT IS A SYMBOL OF WHAT COMMODITIES ARE DOING WITH THE LATEST CORN SURGE? HOW DO YOU FOLD THE MIDWEST COMMODITIES SURGE INTO THE MIX OF INVESTMENT DYNAMICS? JIM: YOU KNOW I THINK -- I'VE ALWAYS SAID, I GREW UP IN IOWA AND ALWAYS SAID THAT IOWANS ARE RELATED TO TEXANS IN A COUNTRY THAT LIKES DISINFLATION. INFLATION ALWAYS DID GOOD FOR THE IOWA ECONOMY AND ALWAYS HAS DONE GOOD FOR THE RURAL MINNESOTA ECONOMY BUT MUCH OF THE COUNTRY IS BETTER WITHOUT IT AND THERE IS A LOT OF RURAL AMERICA THAT HAS BENEFITED GREATLY FROM COMMODITY PRICES IN GENERAL AND THEY WILL START TO FEEL THE PINCH IF IT COMES OFF, WHICH I THINK IT IS. I THINK IT IS ALREADY STARTING TO GO THAT WAY, BUT IT IS ALWAYS A SITUATION WHERE INFLATION BUSINESS IN A DISINFLATIONARY COUNTRY, YOU FEEL IT MOREOVER ALL. JONATHAN: WE'VE BEEN TOLD ONCE OR TWICE THAT YOU SHOULD SEEK DISCOMFORT AND MARKETS, THAT IS WHERE THE BIG RETURNS ARE. ARE YOU READY TO GET COMFORTABLE WHERE THE DISCOMFORT IS? JIM: I'VE BEEN UNCOMFORTABLE FOR A WHILE ALREADY. THIS IS A BEAR MARKET THAT WON'T END. I DON'T HAVE TO GET UNCOMFORTABLE, I'VE BEEN THERE ALREADY. IT SEEMS CLEAR TO ME THAT IF YOU LOOK AT THE STOCK MARKET, IT IS GOING TO NEED TO SOME INKLING, THE TIGHTENING MONETARY AND FISCAL TIGHTENING PACKAGES EMPLOYED AROUND THE WORLD HAS GOT TO COME TO AN END, TO SEE SOME END TO THAT AND I THINK WE ARE GETTING CLOSER THAN WE THINK. I LOOK AT THE FED AND I THINK IT TAKES ITS DIRECTION FROM ITS BOSS JUST LIKE YOU AND I DO. IT'S BOSS IS THE ECONOMY IN THE BOND MARKET, AND MIGHT -- ITS IS THE ECONOMY AND THE BOND MARKET IN MY VIEW. IF YOU LOOK AT REAL GROWTH -- YOU WERE JUST TALKING ABOUT GLOBAL GROWTH SLOWING ALL STOP IT CERTAINLY HAS IN THE UNIT IT STATES. THE ECONOMIC -- THE GDP NUMBER LOOKS LOOK ANOTHER NEGATIVE PRINT OF THE SECOND QUARTER. REAL GROWTH HAS CERTAINLY SLOWED DRAMATICALLY. THAT ECONOMIC GROWTH IS TELLING THE FED A BETTER WRAP THIS UP. I THINK ON THE INFLATION FRONT, I THINK WE ARE WINNING THE WAR. I KNOW WE WILL GET A HOT PRINT TOMORROW BUT WE ALSO KNOW THAT THE NEXT COUPLE OF MONTHS AFTER THAT, WE ARE GOING TO GET NEGATIVE READS FROM ENERGY. HEADLINE DECLINES. COMMODITY PRICES HAVE BEEN A CONSTANT UPWARD THRUST ON INFLATION. THEY ARE NOW GOING TO BECOME A DEFLATIONARY THRUST. CORE CPI, PPI, IT IS ALL BEEN DECELERATING THE LAST COUPLE OF MONTHS. WAGE INFLATION YEAR TO DATE IS UP ONLY 4.5%, A CLEAR DECELERATION. I THINK THERE IS A LOT OF EVIDENCE THAT INFLATION IS ROLLING OVER. LISA: I THINK TO MYSELF AND I'M EXTRAPOLATING OUT, DOES THIS MEAN THAT YOU ARE GOING LONG TECH BECAUSE YOU SEE THE BELIEF THAT PERHAPS THE FED WILL BACK OFF AND YOU ARE PARING BACK ON THE COMMODITY SPACE IF YOU ARE SEEING A PEAK INFLATION ENVIRONMENT? JIM: YES, I WOULD. THAT IS WHERE I MET. -- WHERE I'M AT. LOOKING AT THE BOND MARKET, IT IS GETTING -- GIVING EVERYBODY A RATE CUT AND THE BREAKEVEN RATES HAVE COLLAPSED. DOWN FROM 6.5% JUST THREE MONTHS AGO AND IT COULD BE BACK TO THE 2% HANDLED A TARGET OF THE END OF SUMMER. I THINK WE GET A RATE PAUSE, NOT A CUT BUT A PAUSE BY THE FED AND MAYBE BY THE FALL TIME AND IF THE MARKETS ARE STICK PICKED THAT UP, THEY WILL MOVE AWAY FROM COMMODITIES, CYCLICALS, DEFENSIVE STOCKS. THEY WILL MOVE MORE TOWARDS EARLY CYCLE STOCKS, MAYBE CONSUMER DISCRETIONARY AND ALSO TO YOUR POINT, I THINK TECHNOLOGY AND GROWTH GETS A LEADERSHIP -- JONATHAN: AWESOME TO GET YOUR VIEWS, JIM PAULSEN OF LEUTHOLD WEEDEN. UNCOMFORTABLE. DISCOMFORT. TOM: THAT WAS SUCH AN IMPORTANT INTERVIEW TO GO TO JIM PAULSEN. THIS IS THE DIVIDE IN THE ZIP CODES OF MINNEAPOLIS. THE 55402 VERSUS THE WALL STREET FINANCIAL DIVIDE. IT IS STUNNING RIGHT NOW. JIM JUST FLAT OUT SAYS ENOUGH, SLOW DOWN. JONATHAN: PROVIDING ANY KIND OF OUTLOOK IS DIFFICULT. I WILL ALLOW NOMURA TO PROVIDE ONE. EXPECT A RECESSION IN -- 25 IN NOVEMBER AND DECEMBER AND FEBRUARY 2023 AND THEN THE CUTS ARRIVED. IT IS THE RATE CUT CALL. 25 BASIS POINT CUTS PER MEETING AND LIKELY STARTING SEPTEMBER 2023. THAT IS WAY OFF. TOM: I'VE NEVER WITNESSED THIS. I DON'T UNDERSTAND THE GUESSTIMATES OF GETTING THE INCENSE BOTTLE OUT AND RUBBING THE SIDES. JONATHAN: ISN'T THAT WHAT THE CLIENTS ARE ASKING? WHEN DO THE CARTS -- CUTS STOP? TOM: THE ANSWER IS MAYBE WE DON'T KNOW. WHAT IS THE RAMIFICATIONS OF A 1.17 POUND STERLING? JONATHAN: -- LISA: THERE IS A BIGGER POINT HERE REGARDLESS OF THE PARLOR GAME OF WHEN THE RATE CUTS BEGIN. PEOPLE HAVE BEEN SO CONDITIONED THAT IS WHAT WILL HAPPEN. THEY HAVE NOT BEEN CONDITIONED BY INFLATION THAT IS GOING TO BECOME ENTRENCHED AND THEY DON'T BUY THAT STORY. THAT TO ME IS A BIG TAKEAWAY, TO THE IDEA OF RATE CUT COSTS. JONATHAN: MY TAKE AWAY FROM MY INTERVIEW ON FRIDAY. HE TURNED AROUND AND SAID HOW STICKY WILL IT BE, THAT IS THE NUMBER ONE QUESTION YOU NEED TO BE ASKING. GUESS HOW STICKY INFLATION WILL BE BEYOND THESE PRINTS OF CLOSE 9%. FUTURES DOWN HALF OF 1%. THE BRILLIANT STEVEN ENGLANDER ON THIS FX MARKET, COMING UP SHORTLY. THIS IS BLOOMBERG. ♪ RITIKA: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD, I AMRIT KUCHTA. -- I AM RITIKA GUPTA. NO RELIEF FOR THE SQUEEZE OF CONSUMERS. MEMBERS ARE ALREADY FAR -- FALLING FAR BEHIND THE VOLUME NEEDED RIGHT NOW. THE CONSERVATIVE PARTY ONCE THE NARROW A WIDE FIELD OF CANDIDATES TO BE WRITTEN'S NEXT PRIME MINISTER. NOMINATIONS WILL OPEN AND CLOSE TODAY WITH THE FIRST BALLOT HELD ON WEDNESDAY. THE NEW LEADER AND NEXT PRIME MINISTER WILL BE ANNOUNCED SEPTEMBER 5. LONDON'S HEATHROW AIRPORT IS LIMITING TRAVELS -- TRAVEL CHAOS. THE BIGGEST AIRPORT IN THE U.K. WILL LIMIT DAILY PASSENGER TRAFFIC TO 100,000 PEOPLE THROUGH SEPTEMBER 11. THEY ARE STRUGGLING TO HIRE NEW STAFF. AMERICAN AIRLINES IS STICKING WITH THEIR EXPECTATIONS FOR A JUMP IN SECOND-QUARTER SALES DESPITE RISING COST. TOTAL REVENUE IS A SPECTER TO BE UP 12%. MEANWHILE, -- WILL ALSO ARISE ABOUT 12%. PELOTON IS TAKING ONE OF THE MOST DRAMATIC STEPS YET TO SYMBOL PHI OPERATIONS AND REDUCE COSTS. THEY WILL QUIT BUILDING EXERCISE BIKES AND TREADMILLS AT ITS OWN FACTORIES. PARTNERS WILL NO HANDLING -- WILL NOW HANDLE THE MANUFACTURING. THE COMPANY CUT NEARLY 3000 EMPLOYEES EARLIER THIS YEAR. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. > > WE'VE TAKEN COMMODITIES DOWN SHARPLY, OIL DOWN 25 BOX AND DISCRETIONARY HAS GIVEN US NOTHING. THIS IDEA THAT SOME PAUSE IN CRUDE OR WEAKNESS IN CRUDE WILL SUDDENLY RE-CATALYZE THE CONSUMER, I THINK THE MARKET IS ATTESTING TO THAT NOT BEING THE CASE. JONATHAN: CHRIS VERRONE OF STRATEGIAS. CRUDE AGAIN LOWER BY 6.1%. DOWN ON WTI, YIELDS LOWER BY SEVEN BASIS POINTS. EURO-DOLLAR POSITIVE JUST ABOUT A 10TH OF 1%. BASICALLY HITTING PARITY THIS MORNING. TOM: GETTING THE BEST VOICES WE CAN ON THIS TIME OF SHOCK ON THE DATA SCREEN AND SOME POTENTIAL CRISIS AS WELL. HE IS ABSOLUTELY DEFINITIVE AND WHAT ARE CALLED CROSS RATES, THE NUANCES AWAY FROM EURO-DOLLAR, DOLLAR-YEN, DOLLAR DYNAMICS. THE STUDY OF ALL THE MAJOR CURRENCIES. STEPHEN ENGLANDER, ICONIC AT CITIGROUP. WHICH IS THE CROSS RATE THAT GIVES YOU THE MOST INFORMATION? STEVEN: I THINK LOOKING AT THE EURO, IT IS SO DIFFICULT FOR EVERYTHING AND THE MARKET IS SO SHORT. THE OTHER CROSSES I'M LOOKING AT, YOU LOOK AT WHAT ASIA IS DOING, PARTICULARLY EM ASIA THROUGH THIS EPISODE OF DOLLAR STRENGTH, AND IT IS REALLY OUTPERFORMED. EM ASIA -- IT DOESN'T MEAN THAT IT IS A BUY RIGHT NOW BECAUSE IT IS RISK OFF AND WE ARE MOVING INTO A RECESSION BUT IT DOES SEEM TO BE ON A RELATIVE BASIS AND HAS BEEN FAR MORE STABLE. TOM: DO YOU ASSUME THE YEN CATCHES UP WITH EURO WEAKNESS? STEVEN: I THINK JAPAN'S POLICY IS PUZZLING. THE ECB'S SILENCE ON THE EURO IN TERMS OF ITS WEAKNESS, I DON'T THINK A WEAK EURO IS DOING THEM ANY GOOD RIGHT NOW. I THINK THAT THE ASIAN CURRENCY MANAGERS ARE NOT PARTICULARLY LOOKING FOR EXCESS WEAKNESS RIGHT NOW. LISA: GIVEN ALL OF THAT, YOU HAVE A PRETTY BOLD CALL WHERE YOU BASICALLY SAY IT IS GETTING HARDER AND HARDER TO GET THE DOLLAR STRONGER FROM HERE AND THAT WHAT WE HAVE SEEN FROM THE REACTION ON FRIDAY, OF EXLEY DOLLAR WEAKNESS ON THE HEELS OF A STRONGER-THAN-EXPECTED PAYROLLS REPORT HIGHLIGHTS THAT PEOPLE ARE LONG-HAULERS AND SET TO BORROW. WHAT DOES THAT MEAN IN TERMS OF HOW SIGNIFICANT THIS COULD UNWIND OR IF PEOPLE ARE MISREADING THE MARKET RIGHT NOW? STEVEN: I THINK THE KEY THING RIGHT NOW IS WHETHER GAS SUPPLIES ARE RESTORED IN 10 DAYS OR SO. IF THEY ARE, I THINK EURO SHORTS ARE IN A BAD POSITION. A LOT OF THIS WEEK'S EURO SELLING IS ON THE BACK OF CONCERNS THAT THE LIGHTS ARE GOING TO GO OUT IN EUROPE. AT THIS POINT, THE GAS INVENTORIES SEEMS TO BE NORMAL. THE QUESTION IS, CAN THEY CONTINUE TO ACCUMULATE AND DISSIPATE SOME OF THE PESSIMISM? IT IS ONE OF THE KEY THINGS FOR THE EURO RIGHT NOW. LISA: DO YOU FORESEE THE IDEA OF BREAKING BELOW 95 THE WAY THAT JORDAN ROCHESTER WAS SAYING? THAT WE COULD SEE THE EURO GOING MATERIALLY LOWER? DO YOU THINK PEOPLE ARE UNDERESTIMATING HOW MUCH PEOPLE ARE POSITIONED FOR THAT WEAKNESS AT THIS POINT? STEVEN: TO ME, THIS IS VERY DIFFERENT THAN WHEN THE EURO WENT ABOVE PARITY AND EVERYBODY HAD STARTED OFF OPTIMISTIC. THIS WAS A REAL DISAPPOINTMENT TO THE MARKET. THE MARKET HAS BEEN PREPARING FOR THIS FOR A COUPLE OF MONTHS, AND I DON'T THINK WE ARE CLOSE TO WHERE IT USED TO BE. TOM: I LOOKED AT LONG TRADE-WEIGHTED DOLLAR AND THE STEEPNESS OF THE PLAZA ACCORD WAS STUNNING COMPARED TO A MORE PERSISTENT STRONG DOLLAR NOW BUT NOWHERE NEAR THE MOVEMENT THAT WE SAW IN THE EARLY 1980'S. ARE WE ANYWHERE NEAR WHERE INSTITUTIONS COME INTO STAUNCH THE DOLLAR? -- COME IN TO STAUNCH THE DOLLAR? STEVEN: I THINK WE NEED SOME GOOD NEWS. YOU LOOK AT THE NEWS FLOW, CHINA COVID ISSUES, RUSSIAN GAS, THE U.S. ON WHAT THEY ARE GOING TO BE DOING. ALL OF THIS IS KIND OF RISK OFF. THE DOLLAR IS SUPPORTIVE AS LONG AS THAT IS THE NEWS FLOW. I THINK IF THERE IS ANY SIGNAL BASED ON OPTIMISM, I THINK WE WILL SEE THE DOLLAR COME OFF. JONATHAN: STEVE ENGLANDER, THANK YOU. DO YOU LIKE THAT LINE UP IN THE EARLY 2000'S? WHAT A LINEUP THAT WAS 20 YEARS AGO. TOM: THIS IS REALLY IMPORTANT AND JON AND I LOOK AT THE PEDIGREE OF THE DIFFERENT SHOPS AND PEOPLE BOUNCE AROUND AS WELL, BUT THEY EACH HAVE A CERTAIN CHARACTER. EACH ONE OF THESE FIRMS IS DIFFERENT. WE ARE TRYING EACH DAY TO GIVE YOU A CROSS-SECTION AROUND THEM. I WOULD LOOK AT DEUTSCHE BANK. IT IS FASCINATING, THE CONTRIBUTIONS THEY HAVE MADE RECENTLY. JONATHAN: I GO BACK TO 20 YEARS AGO BECAUSE IT PRODUCED ABOUT FIVE HEADS OF FOREIGN-EXCHANGE. 20 YEARS LATER. TOM: YOU FOLLOW THE PEDIGREES. I THINK BOB SINCHE IS RUNNING A HOCKEY CAMP NOW, NORTH OF OLD FORGE. JONATHAN: WHEN BRAMO FLIES OFF THIS WEEKEND. LISA: I'M NOT FLYING, I'M DRIVING. I'M WORRIED ABOUT GETTING CANCELED. TOM: PEOPLE ON THE BREAK HERE, LIKE WHAT TO THEY DO ON THE BREAK? I MAKE MORE TANG. LISA IS FOCUSED ON DEAR FLY REPELLENT. THIS LOOKS TO BE THE ONE. JONATHAN: SERIOUS STUFF. IF YOU ARE JUST TUNING IN, BELIEVE IT OR NOT, STUFF IS HAPPENING. SOME INTERESTING STUFF IN THE BOND MARKET. WHERE ARE WE NOW? 11 NICK -- 11 BASIS POINTS NEGATIVE? LISA: GOING BACK TO 2007, WE CROSSED 11 BASIS POINTS AND WE ARE NOW FIRMLY THROUGH THAT. TOM: ROUND IT UP, -12. JONATHAN: ROUND IT DOWN. INTEREST IN THE DIRECTION OF TRAVEL. LISA COMING IN WITH THE CPI PRINT TOMORROW. I NEVER THOUGHT WE WOULD SIT HERE AND TALK ABOUT CONSUMER INFLATION EXPECTATIONS. HERE WE ARE BECAUSE OF CHAIRMAN POWELL. LISA: THERE IS A CONSENSUSBUILDING THAT LONGER TERM WE WILL REVERT BACK TO NORMAL. THE ISSUE IS HOW WE GET THERE AND NOW THAT SEEMS TO BE THE QUESTION PEOPLE ARE PARSING THROUGH, BUT THE CONSENSUS FOR THE MOMENT IS FOR THAT LONGER DURATION BID. JONATHAN: FUTURES DOWN ONE HALF OF 1%. FOR OUR AUDIENCE WORLDWIDE, THIS IS BLOOMBERG SURVEILLANCE. ♪ JONATHAN: THE WEEK REALLY GETTING STARTED AND ALL THE DATA FRONT IT IS NOT REALLY START UNTIL TOMORROW WHEN WE GET THE UNITED STATES OF AMERICA. WE ARE ALL LOWER, FUTURES DOWN BY 4/10 OF 1%, BREATHING SOME LIFE INTO THE NASDAQ OVER THE LAST HOUR, POSITIVE BY 0.06%. EURO-DOLLAR HITTING PARITY THIS MORNING. WE SPOKE TO JORDAN ROCHESTER OF NOMURA LOOKING AT 97, DOWN TO 95 ON EURO-DOLLAR THROUGH THE SUMMER. IT MAY NOT HAPPEN WITH GAS PRICES AND THAT IS THE PROBLEM. YOU HAVE TO HAVE A FORECAST OF WHAT HAPPENS WITH GAS PRICES TO HAVE A FORECAST OF WHAT IS GOING TO HAPPEN IN EUROPE. TOM: CAN YOU IMAGINE IF WE ROLLOVER AND TEST WHERE WE WERE AT 5:00, 6:00 THIS MORNING? JONATHAN: ON THE EURO? TOM: ON EURO AND STERLING. THE STERLING CHART IS ELEGANT AS IT GOES AWAY. ARE YOU A PRIME MINISTER CANDIDATE? JONATHAN: I'M NOT, BUT I MAY THROW MY HAT IN THE RING. IF I WAS AN MP OF THE CONSERVATIVE PARTY, I'M NOT GERMANY PEOPLE WOULD LIKE THAT TO HAPPEN BUT YOU AND I COULD MAKE A RUN FOR IT. YOU WOULD BE MY CHIEF ADVISER. TOM: PLEASE. LET'S PAUSE WITH AN ANNUAL VISIT THAT WE DO WITH -- AT STANFORD UNIVERSITY WITH CLASSROOMS THAT ARE PACKED, RAILING ABOUT CAPITALISM IN A CONSTRUCTIVE WAY. HER NOT TO TEAR DOWN OUR BANKS OR FINANCIAL SYSTEM, IT IS A GOAL TO INFORM ON THEIR SIZE. SHE'S THE ECONOMICS PROFESSOR AT STANFORD UNIVERSITY AND LOOKS AT THIS THROUGH AN OPERATIONS RESEARCH PERSPECTIVE. IT HAS BEEN TOO LONG, WONDERFUL TO HAVE YOU BACK. I WANT TO GO TO BUT I THINK IS UNSPOKEN, WHICH IS USING JP MORGAN AS A PROXY, PRE-PANDEMIC, THEY HAD OPERATING INCOME OF 45 BILLION DOLLARS AND AFTER THE STRUGGLES OF THE PANDEMIC THEY ARE OPERATING AT $53 BILLION. THEY ARE UP 15% OR WHATEVER. WHY ARE THESE BANKS THAT YOU OFTEN CRITICIZE CONSTRUCTIVELY, WHY ARE THEY SUCH PROFIT-MAKING JUGGERNAUTS? > > IT IS WONDERFUL TO BE A BIG BANK LIKE J.P. MORGAN CHASE. IT IS A GOOD LIFE. THE PANDEMIC WORKED FINE FOR THEM. I TALKED TO PEOPLE IN THE SECTOR, I LOOKED AT HOW THEY DID THROUGH AND YOU CAN SEE, WHATEVER YOU DO FOR THE ECONOMY, THEY END UP BENEFITING. TOM: HOW DO THEY ATTACH THEMSELVES TO THE REST OF AMERICA? THEY WILL TROT OUT ALL SORTS OF SOCIAL PROGRAMS, DIVERSITY PROGRAMS AND THE REST, IF WE HAVE SUCH SUCCESS, IF WE HAVE AMERICAN BANKING BEING SO PROFOUND, HOW DO THEY EXTEND THAT TO THE REST OF THE COUNTRY? ANAT: THEY ARE JUST VERY PRIVILEGED. WE WANTED TO GIVE PPP LOANS TO SMALL BUSINESSES. THE BANKS GOT IN THE MIDDLE OF THAT. GOT A SPREAD AT NO RISK WITH NO FEES AND IT WAS A BIG WINDFALL FOR THEM. THEN THE FED BOUGHT CORPORATE BONDS AND ENABLED A LOT OF ISSUANCE OF BONDS AND THAT WAS A GREAT PROFIT FOR THE BANKS. ONCE AGAIN, IT WORKED OUT FOR THEM, WHATEVER BAILOUT OR SUPPORT THAT COMES TO ANYONE, THEY GET A PIECE OF IT. TOM: THIS QUESTION CAME UP. I'M VERY BIG ON THIS. NOT A MONOPOLY BUT A VERY DIFFERENT THING. YOU ARE ONE OF THE WORLD LEADERS ON THIS. IT IS LIKE A RUBBER PLANTATION IN SINGAPORE WHERE THE ONLY PLACE YOU HAVE TO SELL YOUR RUBBER IS TO ONE PARTY. HOW IS AMERICA NOW, AND IS THAT OUR CAPITALISTIC ANGST? ANAT: VERY MUCH SO. IT IS A MATTER OF POWER, BARGAINING POWER AND THE LAW. IF YOU LOOK AT THE WAY WE NOW ALLOW MANDATORY ARBITRATION TO BE ENFORCEABLE FOR CONSUMERS AND EMPLOYEES, NONCOMPETE AGREEMENTS, THEY'RE ALL OF THESE WAYS IN WHICH CORPORATIONS HAVE POWER OVER PEOPLE WHO WORK FOR THEM WHETHER THEY ARE EMPLOYED OR A GIG WORKERS OR CONTRACT WORKER. LISA: YOU TALKED ABOUT THE BANKS AND HOW THEY ALWAYS COME OUT AHEAD. AT THIS MOMENT WE ARE TALKING ABOUT GOING THROUGH THE MACRO TO THIS MICRO MOMENT WHERE PEOPLE ARE TALKING ABOUT SOME POSSIBLE DISRUPTION IN MARKETS THAT IS SIGNIFICANT GIVEN THE CONCERNS ABOUT RETURN GROWTH. ISN'T IT FRANKLY A SUPPORT FOR MARKETS AND A TESTAMENT TO THEIR STRENGTH THAT WE HAVEN'T SEEN SOME SORT OF MASS DISRUPTION AKIN TO WHAT WE SAW IN 2008 GIVEN HOW QUICKLY THINGS ARE MOVING? ANAT: I'M NOT SURE WE WILL SEE DISRUPTION FROM THIS SLOWDOWN. THERE ARE WAYS BANKS CAN INCREASE LENDING RATES THAT ARE SORT OF PAIRED AND IT IS NOT CLEAR THAT IT IS STRONG JUST BECAUSE IT DOESN'T IMPLODE IN A GIVEN MOMENT. THE SYSTEM ONLY STARTS REALLY CRACKING SERIOUSLY IF THERE IS A MASSIVE FEAR. RIGHT NOW WE ARE SEEING CRYPTO ACTION WHICH HAS SIMILARITIES TO SOME OF THE ISSUES WE SAW IN BANKING, EXCESSIVE BORROWING, ALL KINDS OF DEFAULTS, COLLATERAL, ETC. LISA: THAT IS THE POINT AND I WANTED TO CONTINUE WITH THAT IDEA BUT WE ALMOST NEVER EXPRESS THE STRESS WHERE IT COMES. WHERE ARE YOU SEEING THE NOTES OF POTENTIAL CONTAGION OR STRESS THAT MIGHT NOT BE IN THE TRADITIONAL FORMS OF FINANCE THAT WE SAW IN THE PAST? ANAT: MY BIG FEAR THAT I'VE DEVELOPED IS A SORT OF THINKING, JAMIE DIMON LIKES TO SAY -- SAYS THAT HE TOLD HIS DAUGHTER THAT A CRISIS IS JUST SOMETHING THAT HAPPENS, A FINANCIAL CRISIS EVERY 3, 5 OR SEVEN YEARS AND WE ARE DUE TO FOR ONE -- DO FOR ONE ACCORDING TO HIM. MY MAIN CONCERN IS CYBERSECURITY. YOU KIND OF KNOW THAT THERE ARE THINGS LOOKING POTENTIALLY. THEY ARE HACKING THE NEW YORK FED AND THEY ARE LOOKING, AND ALL OF A SUDDEN, I DON'T KNOW, SHOULD I PRINT OUT MY BANKING STATEMENT? I THINK BANKS MIGHT BE MORE PREPARED THAN OTHER INSTITUTIONS. IF YOU LOOK AT THE COLONIAL PIPELINE AND SOME OF THESE DISRUPTIONS OF INFRASTRUCTURE, WE CAN HAVE A LOT OF CONTAGION. THERE ARE HOSPITALS AND MUNICIPALITIES. IF IT IS WARFARE, IN THE DIGITAL DIMENSION, WHO KNOWS? TOM: GETTING BACK TO THE MARKETS. A LITTLE GREEN ON THE SCREEN WITH NASDAQ. HAVE YOU EVER BEEN TO THE HOOVER INSTITUTION? THEY ALLOW YOU IN THE DOOR? ANAT: I'VE TALKED TO PEOPLE. TOM: YOU HAVE? I WANT TO I WANT TO TALK ABOUT THE MINORITY IN THIS WORLD, WHICH IS LEGISLATIVE LINKAGE, PROGRESSIVE AND LIBERAL ECONOMICS CAN HAVE WITH A BROADER CONSERVATIVE AMERICA. ANAT: MY BIG BATTLE THAT YOU HAVE BEEN FAMILIAR WITH, WHICH I JUST SORT OF GAVE UP BECAUSE I GOT TIRED OF SPENDING MY TIME ON IT IS THE IDEA THAT YOU HAVE TO BE ON YOUR OWN, ABLE TO ABSORB LOSSES. THAT IS BIPARTISAN. EQUITY FUNDING. THERE WAS A PROPOSAL BY DAVID BETTER WHEN HE WAS IN THE SENATE WITH SHERROD BROWN, AND THEY HAD THE SENATE IN 2015, VOTE UNANIMOUSLY THAT THEY DON'T LIKE -- EXCEPT WHEN IT CAME TIME TO DISCUSSING HOW TO DEAL WITH FAILING BANKS. THEY WOULDN'T VOTE FOR 15% EQUITY, WHICH IS SO RADICAL THAT NO OTHER COMPANY HAS THAT. TOM: WE WILL LEAVE IT THERE WITH THE MARKETS MOVING. PROFESSOR ADMATI, THANK YOU FOR JOINING US. JOHN, IT HARKENS BACK TO TOO BIG TO FAIL AND SOME OF THESE MARKET INDICATORS HARKENING BACK TO WHERE WE WERE IN 2007. JONATHAN: THINKING ABOUT A CRISIS. WHAT WAS SAID YESTERDAY? DON'T LOOK THE WAY YOU TYPICALLY LOOK FOR A GLOBAL FX CRISIS. HE SAID LOOK TO EUROPE. WE ARE LOOKING TO EUROPE IN A BIGGER WAY. LISA: THAT POTENTIALLY DRIVES THINGS DOWN. AT WHAT POINT DO THINGS BREAK? JORDAN ROCHESTER SAID WE ARE GETTING THERE. JONATHAN: ING WAS TALKING TO THE TEAM EARLIER THIS MORNING. HE BASICALLY TURNED AROUND AND ECONOMIST AT ING. LET ABOUT IF OR WHEN THERE WILL BE A RECESSION BUT HOW DEEP IT WILL BE IN EUROPE. THAT IS WHAT WE ARE TRYING TO FIGURE OUT. WITH THAT IN MIND, THIS PRETTY MUCH CREPT UP ON US. NEXT THURSDAY, WE WILL CC -- WE WILL SEE SOMETHING FROM THIS ECB -- FROM THE ECB THAT WE HAVEN'T SEEN IN A LONG TIME, A RATE HIKE. TOM: THE IMPORTANCE OF IT IS TANGIBLE WHERE YOU AND I SHOULD GET ON THE GULFSTREAM AND GET OVER TO FRANKFURT AND COVER THIS PROPERLY. JONATHAN: THAT MIGHT BE DIFFICULT AT THE MOMENT. TOM: TALK ABOUT THIS HISTORIC MOMENT FOR CHRISTINE LAGARDE. JONATHAN: WE TALKED ABOUT THE INVASION OF UKRAINE OVER THE LAST SIX MONTHS AND THE NEXT STAGE OF OUR COVERAGE AND OF COURSE WE WILL COVER THAT INVASION AND THE WAR AS IT IS ONGOING. THE ECONOMIC FALLOUT. THAT IS JUST TURNING TO COME TO THE SURFACE AND A MUCH MORE PRONOUNCED WAY. LISA: AND WHAT IS THE ECONOMIC FALLOUT? I'M TRYING TO THINK ABOUT WHAT THE RAMIFICATIONS ARE, FOR ARTIFICIALLY CURTAILING THE SUPPLY BECAUSE OF A LACK OF WORKERS. DOESN'T THAT LEAD TO HIGHER PRICES? DOESN'T THAT LEAD TO HIGHER WAGES? TOM: HIGHER VALUATION AND HIGHER PRICES. LISA: HOW MUCH DOES THAT TRICKLE OUT TO AN ECONOMIC PROPOSITION THAT IS POTENTIALLY PROBLEMATIC AND WHAT TO CENTRAL BANKS DO WITH THAT? TOM: THE ONLY THING ANAT ADMATI AGREES WITH JOHN TAYLOR ON. JONATHAN: -- OF BLACKROCK. TOM: WONDERFUL. JONATHAN: LESS CONSTRUCTIVE ON EQUITIES. FUTURES ARE DOWN BY A THIRD OF 1%. THIS IS BLOOMBERG. ♪ RITIKA: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD. I AM RITIKA GUPTA. PRESIDENT BIDEN AND MEXICO'S PRESIDENT WILL DISCUSS WAYS TO EXPAND LEGAL MIGRATION AND IMPROVE SECURITY WHEN THEY MEET TODAY AT THE WHITE HOUSE. THEY WILL ANNOUNCE JOINT ACTION TO IMPROVE INFRASTRUCTURE AND COOPERATION ALONG THE 2000 MILE BORDER. THE MEXICAN PRESIDENT SAYS INCREASING IMMIGRATION WOULD STRENGTHEN THE U.S. LABOR FORCE AND HELP CURB INFLATION. A BILLIONAIRE REAL ESTATE TITAN IS URGING THE FED TO AGGRESSIVELY RAISE INTEREST RATES AND BREAK -- > > I THINK THAT INTEREST RATES COULD GO UP A COUPLE HUNDRED BASIS POINTS, AND NOT THROW US INTO A RECESSION. I THINK THERE HAS BEEN SO MUCH CAPITAL SLOSHING AROUND, THAT I THINK THE FIRST MAJOR SWALLOWS OF REDUCING THE EXCESS FLOW, I THINK YOU WILL HAVE QUITE THE IMPACT THAT THE STOCK MARKET IS REFLECTING. RITIKA: YOU CAN WATCH ALL OF THAT EXCLUSIVE INTERVIEW TONIGHT AT 9:00 P.M. NEW YORK TIME WITH DAVID RUBENSTEIN. AND SHANGHAI, THERE ARE FEARS THE CITY IS HEADING BACK INTO LOCKDOWN A LITTLE MORE THAN FIVE WEEKS AFTER EXITING THE TWO MONTH ORDEAL. THE CITY REPORTED 55 NEW CORONAVIRUS CASES ON MONDAY, THE FOURTH DAY IN A ROW THAT CASE NUMBERS HAD BEEN ABOVE 50, WITH DETECTION OF A NEW SUB STRAIN. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM RITIKA GUPTA, THIS IS BLOOMBERG. ♪ > > IT IS THE COMBINATION OF LIQUIDITY AND THE INCREASE OF INTEREST RATES THAT IS STARTING TO BOTHER CENTRAL MARKETS. MY BET WOULD BE THAT AT SOME POINT IN THE NEXT FEW MONTHS, MAYBE THE NEXT FEW WEEKS, WE ARE HEADING FOR SOME KIND OF A FINANCIAL ACCIDENT. TOM: MICHAEL SHAOUL, REALLY STRONG YESTERDAY. I THOUGHT IT WAS GOOD HOW HE PULLED IT BACK TO LOOK AND FOCUS ON EUROPE. LISA: THAT SEEMS TO BE THE THEME FOR TODAY. ALSO IT IS BLEEDING INTO A GENERAL FEAR OF EUROPEAN EQUITIES. TOM: THE GENERAL FEAR TWO HOURS AGO WAS MORE FEARFUL THAN IT WAS NOW. I COULD START WITH ANY ITEM OF DATA. THE NASDAQ SLIGHTLY GREEN. LISA: WE HAVE TO TALK ABOUT THAT CURRENCY STORY BUT IN THE PERSPECTIVE OF THE STOCK MARKET BECAUSE WE SEE THAT DOLLAR STRENGTH BOTH WEIGHING ON THE EURO AND THE YEN, BECOMING A WEAKNESS AROUND THE WORLD STORY. THE STOCK MARKET SHOWS A LITTLE DIFFERENT. THEY ARE OUT CHILI ON PERFORMING ANYBODY WHO IS HOLDING DOLLARS. THE CHART SHOWS YOU THE S & P 500. THE S & P 500 IN DOLLAR ADJUSTED TERMS, WHAT YOU WILL SEE IS THAT IN THE LAST YEAR, IF YOU ADJUST FOR THE DOLLAR, YOUR PORTFOLIO ON THE S & P 500 IS FLAT. IF YOU ARE HOLDING IT BY THE DOLLAR, THEN YOU ARE SEEING YOUR LOSSES ERODED 12% IN THE LAST YEAR. IT SPEAKS TO THAT CURRENCY STORY, JUST HOW MUCH OF THE DOLLAR STORY IS HOLDING YOU BACK IF YOUR LOCAL INVESTOR. TOM: IT SPEAKS TO THE EM MARKET WEAKNESS WE HAVE SEEN. RIGHT NOW, THE IMPORTANT PODCAST AND WRITING, ALWAYS THINKING ABOUT THESE MARKETS AND I WANT TO DOVETAIL YOUR RECESSION ANALYSIS AND YOU'RE UPSET AT THE MEDIA'S HYSTERIC TEA OVER TWO QUARTERS WITH THE IDEA OF THE EARNINGS SEASON UPON US WHERE WE HAVE A QUARTERLY EARNINGS FRENZY. HOW DO YOU DANCE THE QUARTERLY EARNINGS BALLET CONSTRUCTIVELY? > > A COUPLE OF THINGS. FIRST, HISTORICALLY THE ANALYST COMMUNITY TENDS TO OVERESTIMATE EARNINGS, EXCEPT IN THE MIDST AND THE DEPTHS OF RECESSIONS WHERE THEY UNDERESTIMATE THEM. THAT SAID, WE'VE BEEN AT RECORD EARNINGS FOR TWO YEARS. THE PANDEMIC WAS VERY GOOD FOR EARNINGS, GIVE THE AMERICAN PEOPLE $5 TRILLION IN STIMULUS AND THEY WILL GO OUT AND SPEND IT AND IT WORKS ITS WAY TO THE BOTTOM LINE. TOM: AMERICAN AIRLINES OUT WITH 12% REVENUE GROWTH. BARRY: 12%? THAT IS GIANT. TOM: HOW DO YOU ADJUST FOR THIS NEW INFLATION THAT WE HAVE TO FIGURE OUT WHICH COMPANY IS GOING TO DELIVER PERSISTENT FREE CASH FLOW? BARRY: HERE IS THE THING ABOUT INFLATION AND STOCKS. INFLATION ISN'T SELECTIVE. IT CUTS ACROSS THE BOARD, IT HITS EVERYTHING. THERE IS LOTS OF EVIDENCE THAT NOT ONLY OUR COMPANIES PASSING ALONG PRICE INCREASES, GIVEN CONSTRAINED SUPPLIES TO THE CONSUMER, BUT THE CONSUMERS HAVE MORE OR LESS BEEN WILLINGLY PAYING IT, AND THAT SEEMS TO NOT HAVE A NEGATIVE IMPACT ON REVENUE AND NOT HAVE A NEGATIVE IMPACT ON PROFITS. IF COMPANIES CAN PASS THIS ALONG, IT SHOULDN'T HAVE TOO BIG AN IMPACT ON THE BOTTOM LINE AND THAT IS WHY SURPRISINGLY TO A LOT OF PEOPLE, STOCKS TEND TO BE A PRETTY DECENT HEDGE ON INFLATION. LISA: DO YOU THINK THIS IS THE TIME TO BE MORE AGGRESSIVE? BARRY: HERE IS THE QUESTION. WHETHER OR NOT WE GET A RECESSION IN 2023, I DON'T WANT TO EVEN TALK ABOUT 2024. IT IS HARD TO SEE THE CURRENT ENVIRONMENT AS BEING RECESSIONARY, GIVEN JOB INCREASES, CONSUMER SPENDING INCREASES, HOW MUCH OF ADDITIONAL TIGHTENING IS ALREADY REFLECTED IN THE MARKET DROPPING ABOUT 20%, YEAR TO DATE, AND HOW MUCH FURTHER IS THE FED GOING TO GO IN ORDER TO TAMP DOWN INFLATION? REMEMBER THE CPI REPORT IS BACKWARD LOOKING. LOTS OF EVIDENCE SUGGESTS WE ARE ALREADY SUBSTANTIALLY PASSED PEAK INFLATION. I DON'T KNOW IF IT IS IN THE JUNE CPI REPORT WE GET TOMORROW OR THE JULY REPORT WE GET IN AUGUST, BUT I DON'T THINK THE FED SHOULD BE LOOKING AT 75 BASIS POINTS UNLESS THEY WANT TO CAUSE A RECESSION. THEY SHOULD BE LOOKING AT 50, WHICH MEANS WE ARE PROBABLY TWO THIRDS THROUGH THE SELLOFF AND IF YOU WANT TO START LEGGING INTO EQUITIES HERE WITH THE UNDERSTANDING THAT THIS MAY NOT BE THE BOTTOM. THERE MAY BE MORE TO GO. DO IT IN CHUNKS, THAT IS HOW YOU GET AGGRESSIVE. YOU START BUYING HERE ON THE EXPECTATION THAT WE END UP DOWN 25 PERCENT BUT THE ECONOMY IS TOO STRONG TO SEE AN APPRECIABLY WORSE MARKET FROM THEIR. LISA: GIVEN THE STRENGTH YOU HEAR ABOUT AND YOU ARE TALKING ABOUT, HOW MUCH CAN YOU STILL COUNT ON BONDS AND BUFFERS WHEN THE RATION SEEMS TO BE THE CONSENSUS? BARRY: THAT IS A FASCINATING QUESTION. WE ARE COMING OFF OF A 40 YEAR BOND BULL MARKET WHERE BONDS DID NOTHING BUT GO UP AND RATES DID NOTHING BUT GO DOWN. NOW THE QUESTION IS HOW HIGH OUR BOND YIELDS GOING TO GO FOR THE START BECOMING MORE ATTRACTIVE TO INVESTORS? IF YOU CAN EVENTUALLY SEE A 3% STABLE YIELD ON THE 10 YEAR, I THINK THAT IS WHERE BONDS ARE A BUY BUT RIGHT NOW, THERE IS A LOT OF VOLATILITY AND UNCERTAINTY. WE DON'T KNOW IF THE FED IS GOING TO HAVE A POLICY MISTAKE OR IF THEY WILL ENGINEER A SOFT LANDING AND THAT IS THE ANSWER TO YOUR QUESTION. TOM: ONE MORE QUESTION, THE IDEA THAT CORPORATIONS SHOULD BUY BACK SHARES WHEN THINGS ARE LOUSY. ARE WE HERE? BARRY: TOO MANY CORPORATIONS, THEY ARE PRICE CHASERS AND THEY ARE BUYERS WHEN THINGS ARE GOOD. IT IS RARE IN THE DEPTHS OF 2008 OR 2009 THAT WE SEE THAT. IF YOU WANT TO ENGAGE IN INCREASING SHAREHOLDER YIELD AND YOU WANT TO RAISE YOUR DIVIDEND AND BUYBACK STOCKS DOWN 25%, CERTAINLY A GOOD PLACE TO START ASSUMING YOUR CASH FLOW SUPPORTS IT. TOM: BARRY RITHOLTZ, THANK YOU VERY MUCH. LISA, I WOULD SUMMARIZE WHERE WE ARE AS MORE CONSTRUCTIVE THAN TWO HOURS AGO. LISA: THAT SEEMS TO BE A THEME IN THESE EARLY HOURS. I WONDER HOW MUCH THAT BECOMES A LIQUIDITY STORY AT A TIME WE JUST HAD THE LOWEST VOLUME OF TREASURIES TRADE GOING BACK TO DECEMBER. HOW MUCH OF THAT HAS WHIPPED MARKETS AND THEN STABILIZES WHEN PEOPLE COME TO THE OFFICE? TOM: OIL, IT IS AMAZING THAT DROP ON OIL WE SAW TWO HOURS AGO. LISA: ESPECIALLY CONSIDERING THE OPEC REPORT. THEY PUT OUT THEIR FIRST REPORT OF THE YEAR TALKING ABOUT THE OUTLOOK, SAYING THAT SUPPLIES ARE NOT GOING TO MEET DEMAND. EVEN WITH THE EXPECTATION FOR DEMAND TO COOL OFF IN THE FACE OF THESE THINGS, AND OIL IS STILL DOWN. HOW MUCH OF THIS IS A CHINA STORY, HOW MUCH IS POSITIONING ON FUTURES? TOM: LISA, WE MENTIONED THE DEER FLY REPELLENT. WE SET OFF A FIRESTORM OF ANALYSIS ON TWITTER. LISA: I'M LOOKING FORWARD TO THE WEALTH. I'M LOOKING TO AVOID THEM. AS WE TALK ABOUT VACATION PLANS, WE CAN'T LOSE SIGHT OF THE FACT THAT A LOT OF PEOPLE ARE NOT LEAVING TO GO ON VACATION. TOM: THAT WAS A NICE SEGUE. LISA: THANK YOU, I TRY. TOM: DEER FLIES HAVE WINGSPAN'S LIKE BEEF TO CHOOSE -- LIKE B-52 S. LISA: WHY DO YOU KEEP GOING BACK THERE? THEY ARE THE MAIN OF MY SPIRIT -- BANE OF MY EXISTENCE. TOM: THIS IS BLOOMBERG.

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'Bloomberg Surveillance Simulcast' Full Show 7/12/2022

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

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