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00:00> > IF POWELL TALKS AT ALL ABOUT CUTTING RATES, IT WILL BE INCREMENTAL STEPS. > > PROBABLY PUT FOCUS ON THE IMPORTANCE OF SERVING PRICE STABILITY. FOLKS UNLIKE LAST YEAR WHEN POWELL MADE IT CLEAR CUT WAS COMING. HE WILL KEEP HIS OPTIONS OPEN. > > THIS IS REALLY ABOUT POLITICAL INTERFERENCE, FOR THAT I WOULD BE CAUTIOUS. > > JAY POWELL IS LOOKING AT WHAT HAPPENS TO HIS MANDATE. > > THIS IS "BLOOMBERG SURVEILLANCE." JONATHAN: LIVE FROM NEW YORK CITY, GOOD MORNING, GOOD MORNING. HEADING INTO THE WEEKEND FOLLOWING FIVE DAYS WITH NO GAINS COME INVESTORS LOOKING AT YOU FED CHAIR JAY POWELL'S BIG SPEECH AS A DIVIDED COMMITTEE'S GETTING TOGETHER IN JACKSON HOLE, WYOMING. POLITICAL PRESSURE CONTINUES TO BUILD BEFORE THE FED'S SEPTEMBER MEETING. THE WHITE HOUSE ONCE RATE CUTS. ANNMARIE: KNOWN ON THE FED IN THE PAST WEEK IS READY TO SOLIDIFY THOSE CUTS. WE HEARD FROM HAMMOCKS AND SHE DOESN'T SEE THE CASE FOR A CUT GIVEN THE CURRENT DATA. SCHMIDT, WE DON'T HAVE DEFINITE DATED TO BE MOVING POLICY RATES RIGHT NOW. GOOLSBY, HE WAS SISSY SERVICES IN INFLATION COME DOWN. IT SOUNDS LIKE THOSE TWO DISSENTERS ARE STILL JUST THAT COME OUTLIERS. JONATHAN: I HAVE NOTICED THE SAME THING IN THE LAST 24 HOURS. POST PAYROLLS, THINGS HAVE CHANGED SO MUCH FOR INVESTORS. POST PAYROLLS, THINGS APPEARED TO HAVE CHANGED VERY LITTLE FOR FED OFFICIALS. DANI: MAYBE THEY CHANGE LITTLE FOR POWELL, TOO. WE GOT A SNEAK PEAK IN "THE WALL STREET JOURNAL" OF THE FRAMEWORK HE PLANS TO SHOW. IT IS VERY TECHNICAL BUT THE TAKEAWAY I HAD WAS THEY WANT TO BE MORE FLEXIBLE ON EMPLOYMENT AND MORE RIGID ON INFLATION. THE NET SUM SEEMS TO BE MORE HAWKISH BUT IS THIS A MARKET THAT IS READY FOR VERY MARGINALLY MORE HAWKISH POWELL? JONATHAN: WE HAVE SEEN IT ON REPEAT, CHAIRMAN POWELL IS NOT GOING TO LOCK IT IN, NOT COMMITTING TO A RATE CUT IN SEPTEMBER. WE ARE PUTTING A LOT OF WEIGHT ON THE NEXT TWO BIG PRINTS OF ECONOMIC DATA, CPI AND PAYROLLS. DANI: I THINK IT POWELL WAS A SOMEWHAT HAWKISH, HE COULD SAY WE ARE DATA DEPENDENT, WE HAVE THE TWO PIECES OF KEY DATA COMING IN, AND WE ARE NOT FREE COMMITTING TO ANYTHING. THE ISSUE IS IF THAT IS INTERPRETED VERY HAWKISH, YOU GET A SELLOFF IN THE MARKET AND STOCKS ON THE FRONT END, WHAT IS THE REACTION FROM THE WHITE HOUSE? JONATHAN: I WANT TO TALK ABOUT THINGS GLOBALLY NOT JUST A SIDE. 30 YEAR BOND YIELDS IN AMERICA GETTING CLOSER TO 5% OF A BASIS POINT THIS MORNING. IN JAPAN, 30 YEAR YIELDS, RECORD HIGHS. IN THE U.K., THE HIGHEST SINCE 1998. THAT LINKAGE OF THE LONG END OF THE CURVE CONTINUES. DANI: WE WILL BE HEARING FROM CENTRAL BANKERS AT JACKSON HOLE SO WHILE POWELL IS THE MOST IMPORTANT, IT WILL BE INTERESTING TO HEAR WHAT THEY SAY, TO COME AND PRESENT THIS PROBLEM EVEN IF YOU WANT TO CUT TO UNLOCK THE HOUSING MARKET, FOR EXAMPLE, HOW YOU DO THAT WOULD LONGER IN YIELDS CONTINUED TO CREEP HIGHER. IT IS A GLOBAL PROBLEM OF THIS, DECISIONS BEING A SUSTAINABLE AND GROWING DEBT. -- FISCAL DECISIONS BEING UNSUSTAINABLE IN GROWING DEBT. JONATHAN: COMING UP THIS HOUR, MARVIN LOH ADAM GEROL -- AHEAD OF CHAIR POWELL'S SPEECH. ALEX NOWRASTEH AND SUCHARITA KODALI. WE BEGIN WITH A DIVIDED FED COMING TOGETHER IN JACKSON HOLE. > > I THINK THEY ARE MODESTLY RESTRICTIVE AREA AND I THINK WE ARE ON A GOOD PATH. > > I AM OPEN TO POSSIBILITIES. WHAT THAT MEANS, PRECISIONS AND FORECASTS ARE GOING TO BE HARD. > > ONCE A LABOR MARKET STUMBLES, IT FALLS. IT FALLS QUICKLY AND HARD. I THINK YOU LIKELY NEED TO ADJUST THE POLICY RATE SOMETIME IN THE COMING MONTHS. > > IT LOOKS TO HEALTHY LABOR MARKETS TO WELL IN BALANCE BUT WAS SOME DISAPPOINTING SIGNS. > > IT FEELS LIKE IT IS A LIVE MEETING. JONATHAN: TO ON WALL STREET, MARVIN LOH WRITING THE FOLLOWING, "WE ARE FINALLY HERE IN THE INITIAL ENTHUSIASM THAT PAOLO WAS GOING TO SIGNAL IMMINENT RATE CUTS IN SEPTEMBER HAS TEMPERED." MARVIN, WELCOME TO THE PROGRAM. WHAT CAN WE EXPECT A LITTLE BIT LATER THIS MORNING? > > I THINK THE CHAIR IS GOING TO BE READY TO ACKNOWLEDGE THAT THEY ARE ABOUT TO TALK ABOUT CUTS. IT PROBABLY WON'T BE MORE THAN THAT. IF WE HAD A LOOK AT WHERE EXPECTATIONS HAVE BEEN ALL YEAR, THEY WERE SAYING TWO CUTS WERE APPROPRIATE, REALLY STARTING TO TALK ABOUT IT IN THE FALL IS WHERE WE ARE AT THIS POINT. AND WE ARE NOT GOING TO GET MUCH MORE THAN THAT IN TERMS OF SPECIFICITY IN REGARDS TO THEIR GOING TO MAKE THE START OF THE CUTTING CYCLE. JONATHAN: THIS IS ON DISCONNECT THAT WE HAVE BEEN TALKING ABOUT OVER THE PAST FEW DAYS. MOST PEOPLE EXPECT A RATE CUT IN SEPTEMBER. VERY FEW EXPECT THEM TO LOCK IT IN LATER DOM THIS MORNING. HOW HIGH IS THE BAR FOR THE CHAIRMAN XI SURPRISE HAWKISH LOU THIS MORNING? > > I THINK IS PRETTY HIGH. REMEMBER, JONATHAN, AT ONE POINT WE WERE SAYING THEY WERE GOING TO CUT IN JULY. THE MARKETS ARE INCLINED TO HOPEFULLY GET THIS RATE CUTS BECAUSE THEY REALLY DO SUPPORT A LOT OF OTHER PARTS OF THE MARKET, PARTICULARLY VALUATIONS WHERE THEY ARE. ULTIMATELY, THE WAY WE HAVE BEEN LOOKING AT IT FOR A WHILE IS THE DATA IS NOT THERE AND THE UNCERTAINTY AROUND TRADE AND ITS IMPACT ON PRICES IS STILL MAKING ITS WAY THROUGH THE SYSTEM. WE HAVE HEARD A LOT OF THE FED REMAIN CONSISTENT IN THAT TYPE OF APPROACH. DANI: IT IS REMARKABLE THAT YOU COULD HAVE A MARKET THAT IS STILL PRICING IN AS HIGH OF ODDS AS IT IS FOR A CUT DESPITE THE FED SPEAK, DESPITE PMI'S YESTERDAY, THE HIGHEST SINCE DECEMBER 2014, AND THEN YOU ALSO -- 2024, RATHER. AND THEN YOU HAVE THE COMMENTARY SAYING WHAT THEY SAW IN THE PMI DATA WOULD BE THE SUGGESTION OF A HIKE NOT A CUT. MARVIN, WHY IS THIS MARKET SO STUBBORN TO PRICE OUT SOME OF THE CUTS IT HAS? > > IT IS NOT AS IF THE DATA IS OVERWHELMINGLY STRONG. IT IS NOT AS IF WE'VE GOT AN ACROSS-THE-BOARD REAR ACCELERATION THAT WE HAVE TO BE CONCERNED WITH. CERTAINLY, THE EMPLOYMENT DATA IS IMPORTANT. I DON'T WANT TO DISCOUNT IT. BUT IT WAS ONE PRINT. THE FOCUS ON THE LABOR MARKET AS ONE OF THE KEY TOPICS ARE THIS JACKSON HOLE SHOWS YOUR POTENTIALLY CHANGES THAT ARE CONCERNING THE FED WITH REGARD TO THE LABOR MARKET. GIVEN THAT THE ECONOMY STOLE HOLDING IN, IF YOU WILL COME AND FEELS IT IS PRETTY BALANCED, WAITING TO SEE IF THOSE CONCERNS CONTINUE TO DOG THE ECONOMY IS AN APPROPRIATE APPROACH. IN TERMS OF THE PRICING, WE REALLY HAVE GONE FROM TALKING ABOUT THE POTENTIAL 50 BASIS POINTS A LITTLE OVER A WEEK AGO TO WHEN WE ARE GETTING TO EVEN ODDS IN SEPTEMBER, WHICH IS WHERE I THINK WE SHOULD GO INTO THIS MEETING. DANI: DOES THAT MEAN THIS MARKET MAY BE IS LESS SUSCEPTIBLE OR IS IT A FRAGILE MARKET HEADING INTO TODAY'S SPEECH WITH FIVE STRAIGHT DAYS OF LOSSES AND JUST LOW VOLUMES OF AUGUST? > > I THINK VALUATIONS ARE KEY TO THIS. I THINK AUGUST IS KEY TO THIS. I THINK WHEN WE TALK ABOUT A FED THAT CAN BE PATIENT, THERE'S ALSO A POSITIVE ECONOMIC STORY ASSOCIATED WITH THAT TO A CERTAIN DEGREE. IF WE ARE REALLY SEEING JOBS WEAKNESS, IT WOULD SIGNAL SOMETHING SIGNIFICANTLY WORSE. OUR REVIEW AND THE VIEW FROM A LOT OF INVESTORS WE TALKED TO IS THEY ARE WILLING TO WAIT AND SEE HOW THINGS EVOLVE. BECAUSE THERE IS NO IMMINENT ECONOMIC CLIFF THAT A LOT OF PEOPLE SEE. JONATHAN: CAN WE GET TO THE STORY COME THE LONG END OF THE YIELD CURVE WORLDWIDE? 30-YEAR BOND YIELDS IN AMERICA, VERY STICKY, VERY CLOSE TO 5%. IF YOU LOOK ABROAD, JAPANESE YIELDS AND THAT MATURITY COME TO THE HIGHEST ON RECORD. IN U.K. EARLIER THIS WEEK, THE HIGHEST SINCE 1998. HOW DISCONNECTED IS A STORY OF THE LONG END FROM THE DEBATE AT THE FRONT END? > > I THINK THAT HAS BEEN REALLY ONE OF THE MOST INTERESTING DEVELOPMENTS OVER THE COURSE OF THIS YEAR. YOU AND I, JONATHAN AND DSANI, WE HAVE TALKED ABOUT THE SHAPE OF THE CURVE A LOT OVER THE LAST SEVERAL QUARTERS AND IT REALLY DOES SHOW THERE ARE STRUCTURAL CHANGES THAT ARE OCCURRING WITH REGARD TO EITHER GET DEMAND FOR DEBT. AND THE INFLATION DYNAMICS, WHICH CONTINUES TO REALLY TELL THE STORY. THEY ARE INTERRELATED FROM A FAIRLY CLOSELY TIE PERSPECTIVE, BUT THERE'S SO MUCH BEING PUT ON THE FACT THAT LOWER SHORT YIELDS WILL ACTUALLY RESULT IN A MUCH CHEAPER FUNDING ENVIRONMENT. I HAVE BEEN PUSHING BACK AGAINST THAT FOR QUITE SOME TIME. JONATHAN: BRING SOME LIFE INTO THAT DEBATE. WHAT ARE YOU SAYING WHEN YOU PUSH BACK? WHAT ARE YOU SAYING TO PEOPLE? > > I HAVE SAID IT BEFORE SO I GUESS I AM NOT GOING TO RISK SAYING SOMETHING OUT OF THE BLUE, BUT 10% -- 5% 10 YEAR FOR THE U.S. IS A SCENARIO THAT IS NOT OUT OF THE REALM OF POSSIBILITY. IF WE PULLED OUT THROUGH THE HOUSING MARKET, IF WE PULLED OUT THROUGH GLOBAL RECURS, IF WE PULLED UP THROUGH OVERALL STEEPNESS WITHIN THE CURVE WITH THE FED CUTTING, IT DOES KIND OF CHANGE IN THE ECONOMIC ENVIRONMENT THAT WE HAVE NOT SEEN FOR DECADES. DANI: GIVEN THAT WE ARE IN A DEBT SCENARIO, DEFICIT SCENARIO LOOKS LIKE WARTIME FOOT INCOME IS THE SUBMARKET -- REALLY, IS IT AN ECONOMY THAT WILL JUST NEED TO BE RUNNING HOT? TO HAVE GDP MOVE UP HIGH ENOUGH TO HAVE THAT NOMINAL GDP IN ORDER TO COMBAT THE RISING DEFICITS? IS THAT WITH THIS MARKET IS PRICING IN IT MAY BE WHAT THE ECONOMY NEEDS? > > GREAT QUESTION. PART OF THIS AVERAGE INFLATION TARGETING, PART OF THIS CHANGE A FRAMEWORK ALSO POTENTIALLY HAS SOME NEUTRAL WRITTEN IMPLICATIONS TO IT. WE HAVE BEEN SLOWLY CREEPING UP ON NEUTRAL RATE. THE ECONOMY ITSELF IS SO LARGE AND SOMEWHAT MATURE THAT WE CAN'T REALLY RUN IT THAT HOT. BUT IT CAN CERTAINLY RUN HOTTER THAN WHAT WE EXPERIENCED FOR THE PANDEMIC. I THINK WITH WAGES, WITH SOME OF THE INFLATION NUMBERS COMING OUT, IT IS GOING TO BE A NATURAL OUTCOME FROM IT. DANI: LOOKING AT WHAT THE MARKET IS PRICING FOR THE END OF 2026, IF WE CAN EVEN GO THAT FAR, FED FUND FUTURES FOR DECEMBER 20 26, 3 .1%. INFLATION SWAPS DECEMBER 2026, 3.3%. THOSE WOULD SEEM TO STAND IN OPPOSITION OF EACH OTHER. SURELY, ONE OF THEM CAN'T BE RIGHT. SO WHICH IS IT? > > EXACTLY. MARKET PRICING IS FOR THIS YEAR -- WE MAKE SO MUCH ABOUT THESE BASIS POINTS CHANGE IN SEPTEMBER. ALL OF A SUDDEN WE ARE GOING INTO JACKSON HOLE AND IT LOOKS EXACTLY WHAT THE FED PRICING IS AT THIS POINT, 3% AT THE -- I'M SORRY, TWO MORE CUTS BEFORE THE END OF THIS YEAR. AS WE GO INTO 2026, THE MARKET IS MUCH MORE AGGRESSIVE AROUND THAT VIEW. I THINK THE MARKET IS OVERLY SAYING WITH WHAT THAT'S WITH WHERE THIS RIGHT IS GOING TO SETTLE AND IF WE WILL BE IN A POSITION TO GET TO THAT NEUTRAL RATE BY THE END OF NEXT YEAR. JONATHAN: I WONDER IF WE ARE TRACKING THE WRONG THING. IF YOU TRACK TO POLITICS, I THINK THIS MAKES SENSE. THE WHITE HOUSE AT THE MOMENT WANTS LOWER RATES. THEY MIGHT BE UPSET WHEN THEY FIND OUT LOWER RATES COULD LEAD TO HIGHER RATES THE LONG END. NOT GIVEN THAT LOOSENING IN THE MORTGAGE MARKET THERE ULTIMATELY LOOKING FOR. THAT IS A BIG DEBATE IN THIS COUNTRY RIGHT NOW POLITICALLY, PARTICULARLY IN THIS CITY. I WONDER IF WE ARE UNDERESTIMATING THE PROSPECT OF A NEW FED CHAIR GETTING AGGRESSIVE WITH THE BALANCE SHEET AND NOT JUST ON INTEREST RATES. > > OH, MY GOODNESS. THIS IS SOMETHING I'VE BEEN THINKING ABOUT FOR QUITE SOME TIME, PARTICULARLY GIVEN IF YOU WILL THE MAR-A-LAGO AND THE FACT TREASURY IS REALLY FOCUSING MORE ON THE SHORT END. I DO THINK IF WE ARE WORRIED ABOUT INDEPENDENCE, WORRIED ABOUT POLICY NOT NECESSARILY SET UP TO ALLOW COUNTRY TO REALLY PERFORM WITH THAT DUAL MANDATE, ALWAYS KIND OF DRIVING THEM TO WHERE BALANCE SHEET POLICY BECOMES ONE OF THE DISCUSSIONS. IF IT BECOMES POLITICIZED AND WEAPONIZED, IT WILL ULTIMATELY STILL RESULT IN AN ENVIRONMENT WHERE INVESTORS ARE NOT AS CONCERNED OR NOT AS COMFORTABLE REALLY WITH HOW THE RATES MARKET IS GOING TO RESPOND. YOU DO STILL WIND UP WITH A LOT OF PRESSURE AT THE LONG END OF THE CURVE. JONATHAN: MARVIN LOH, STATE STREET. LET'S PLAY THIS OUT. A LOT OF WHAT IF'S. THEY DROP INTEREST RATES, AND LET'S SAY MARVIN IS RIGHT AND YIELDS RISE AT THE LONG END AT THE WHITE HOUSE STARTS TO COMPLAIN, WHAT YOU THINK THE WHITE HOUSE IS GOING TO WANT FROM AN INCOMING FED CHAIR IN THAT SCENARIO? DANI: YOU GET SOME FORM OF YIELD CURVE CONTROL, CHANGES TO THE BALANCE SHEET TO YOUR POINT. BUT IT IS THE QUESTION OF INDEPENDENCE. BUT IF YOU DID NOT HAVE A WHITE HOUSE AND A FED THAT SOMEWHAT WORK TOGETHER -- WE HAVE SEEN SO MANY SCENARIOS. I THINK THE U.K. IS RELEVANT IN THIS CASE WHERE THERE WORKING ALMOST IN OPPOSITION TO EACH OTHER. IF YOU'RE CUTTING RATES AND THE IDEA IS TO UNLOCK THE ECONOMY AND YOU'RE HAVING A LONG AND GO UP, YOU KIND OF HAVE TO DO SOMETHING, RIGHT? IT IS HAVING THE OPPOSITE EFFECT OF WHAT YOU WANT. THE CRIES MIGHT BE THAT AS A THREAT INDEPENDENCE, BUT WHAT IF THE QUESTION BECOMES IS THIS NECESSARY FOR THE ECONOMY? JONATHAN: RIGHT NOW 30-YEAR-OLD -- WORLDWIDE OVER THE PAST FEW WEEKS. LET'S GIVE AN UPDATE ON STORIES ELSEWHERE. NOT JUST ABOUT THE FEDERAL RESERVE. WITH YOUR BLOOMBERG BRIEF. > > WE ARE SEEING NVIDIA SHARES FALLING NEARLY 1% IN THE PREMARKET ON REPORTING BY THE INFORMATION THAT THE COMPANY HAS ASKED SUPPLIERS TO HALT PRODUCTION OF ITS CHINA FOCUSED AI CHIP THE H20 AFTER OUR REPORTING THAT BEIJING URGED COMPANIES TO AVOID USING THE CHIP, RAISING QUESTIONS ABOUT THE DEMAND FOR THE H20 WHICH COMPETES WITH SIMILAR PRODUCTS FROM CHINA PERSEUS HUAWEI. 50% PUNITIVE TARIFFS ON EMPLOYEE -- ON IMPORTS WILL KICK IN NEXT WEEK AS WHITE HOUSE TRADE ADVISOR NAVARRO, CAUSING UP TO CHINA AND THAT IS PURCHASE OF RUSSIAN OIL IS HELPING FIND MOSCOW'S WAR IN UKRAINE. INDIAN OFFICIALS ARE SAID TO BE PERPLEXED BY THE U.S. CRITICISM. ZOOM SHARES ARE SURGING MORE THAN 5% IN THE PREMARKET AFTER IT GAVE A STRONGER-THAN-EXPECTED SALES GROWTH OUTLOOK AND RAISED ITS FISCAL YEAR FORECAST. IT'S REVENUE BOOSTED BY ITS NEW PAY AI FEATURES AN EXPANDED LINE OF SOFTWARE PRODUCTS. I WILL HAVE MORE ON THAT STOCK. JONATHAN: THANK YOU. UP NEXT ON THE PROGRAM, CHINA'S CHIP CRACKDOWN. > > CHINA ASKED SOME QUESTIONS ABOUT SOME SECURITY BACKDOORS IN OUR CHIPS. WE HAVE MADE VERY CLEAR H20 HAS NO SECURITY BACKDOORS WE HAD JONATHAN: THAT CONVERSATION UP NEXT WITH ALEX NOWRASTEH OF THE CATO INSTITUTE. GOOD MORNING. ♪ JONATHAN: IT IS THE MAIN EVENT, 10:00 A.M. EASTERN TIME, A SPEECH FROM THE FEDERAL CHAIR JAY POWELL. THE MARKET WAITING FOR THAT ONE HEADING INTO IT FIVE DAYS WITHOUT GAINS ON THE S & P 500. EQUITY FUTURES ATTEMPTED TO BOUNCE HIGHER BY .2% ON THE S & P. ON THE NASDAQ, UP BY 0.2. ON SURVEILLANCE, CHINA'S CHIP CRACKDOWN. > > THE TRUMP ADMINISTRATION HAS APPROVED LICENSES FOR US TO EXPORT H20S TO CHINA. RECENTLY, CHINA ASKED SOME QUESTIONS ABOUT SOME SECURITY BACKDOORS IN OUR CHIPS. WE HAVE MADE VERY CLEAR AND PUT TO REST THAT H20 HAS NO SECURITY BACKDOORS. JONATHAN: THE LATEST THIS MORNING, THE INFORMATION REPORTING NVIDIA HAS INSTRUCTED COMPONENT SUPPLIES TO STOP PRODUCTION RELATED TO THE H20 CHIP. REPORTEDLY COMING AFTER BEIJING URGED LOCAL COMPANIES TO AVOID USING IT. DANI: TRUMPS REVERSAL I HAD DECIDED TO START HAD REALLY IGNITED A SPREE OF H20 CHIPS. I WONDER HOW MANY COMPANIES IN CHINA HAVE FRONT RUN THIS OR WHAT THEY HAVE ALREADY BOUGHT IS BEING HELD UP? ON THE WHOLE PICTURE, IT DOES SEEM LIKE IT IS A SERIOUS EFFORT FROM THE CHINESE GOVERNMENT TO TRY TO PROMOTE SOME OF THEIR HOMEGROWN CHIPMAKERS. AND TO TRY TO HAVE THAT INDEPENDENCE. IT IS INTERESTING BECAUSE ALIBABA AND THE OTHER TECH COMPANIES HAD AND SANG TO THE GOVERNMENT, WE NEED THOSE H20 CHIPS. WE ARE GOING TO LOSE OUT ON TECH SUPREMACY IF WE DON'T HAVE THEM BECAUSE WITHOUT INVIDIOUS CHIPS, FALL BEHIND. JONATHAN: CAN YOU IMAGINE WHAT COULD HAPPEN IF THEY TAKE A STAKE IN THE? WHAT DOES EVERYONE THINK IS GOING TO HAPPEN TO THE CHINESE REVENUE IF THIS IS THE PUSHBACK NVIDIA IS GETTING AT THE MOMENT? DANI: BUT THE OTHER OPTION IS THAT CHINA IS JUST BARGAINING FOR MORE HIGH-POWERED CHIPS. THERE WAS A REPORT FROM REUTERS THAT NVIDIA WAS STARTING TO WORK ON A DIFFERENT KIND OF CHIP THAT THEY COULD SELL INTO CHINA AND ITS. , WE WANT SOMETHING BETTER. JONATHAN: NEGOTIATING THROUGH SOME OF THE BIGGEST COMPANY'S ON THE PLANET. LET'S HAVE THAT CONVERSATION WITH ALEX NOWRASTEH OF THE CATO INSTITUTE. INTERVENTION HAS CONSEQUENCES. IT DOESN'T HAVE UNINTENDED CONSEQUENCES? > > I ABSOLUTELY -- IT ABSOLUTELY DOES. THE LONG-TERM PROBLEMS AND EVEN SHORT-TERM PROBLEMS ARE THE GOVERNMENT TRYING TO TAKE THESE EQUITY STAKES IN SOME OF THE MOST PRODUCTIVE AND INNOVATIVE COMPANIES IN THE WORLD, IS DISASTROUS. INVESTORS AND FIRMS ARE GOING TO LOOK AT THIS AND THEY'RE GOING TO START TO MAKE INVESTMENT DECISIONS BASED ON WHAT MAKES POLITICIANS HAPPY AND ON WHAT FAVORS THEY CAN MAKE RATHER THAN THE PROFITABILITY OF THESE INVESTMENTS. WHICH WILL EVENTUALLY UNDERMINE A LOT OF THE PRODUCTIVITY GAINS WE GET FROM THESE FIRMS. WHEN WE SAW THE SPECK IN THE FINANCIAL CRISIS WHERE THE GOVERNMENT TOOK -- I SAW THIS BACK IN THE GOVERNMENT TOOK BIG BAILOUTS AND THEN MADE INVESTMENT DECISIONS FOR THEM. THIS WAS NOT GOOD FOR THE AUTO INDUSTRY OR THE UNITED STATES. AND I FEAR THE EFFECT OF DOING THIS FOR SOME OF THE MOST ADVANCED CHIPMAKERS IN THE WORLD WILL BE EVEN MORE DESTRUCTIVE. JONATHAN: LET'S WORK THROUGH THIS. LET’'S SAY GSE WAS CONNECTING WHEN THE GOVERNMENT FELT LIKE IT HAD A ROLE TO PLAY. LET'S TALK ABOUT THIS ONE. IT FEELS UNIQUE. THE GOVERNMENT DOES SIMPLY THAT FREEHAND MARKET IS GOING TO ALLOW THEM TO BUILD OUT DOMESTIC FOUNDRY CAPACITY AND THEY LEAD TO FINANCIAL SECURITY PURPOSES. WHAT IS THE PREMARKET SOLUTION TO MAKING THAT HAPPEN? > > I THINK THE MAJOR FREE-MARKET SOLUTION FOR A LOT OF THIS IS THAT THE GOVERNMENT THINKS IT NEEDS TO HAVE CERTAIN COMPONENTS IN ORDER TO FIGHT A WAR AT SOME POINT. STOCKPILING IS A GOOD WAY TO DO THAT. RELYING ON EXPORTS FROM A LOT OF OUR ALLIES IS A GOOD WAY TO DO THIS. IF THAT WAS REALLY THE JUSTIFICATION, THE UNITED STATES GOVERNMENT WOULD NOT BE PUTTING TARIFFS ON OTHER COUNTRIES THAT ARE OUR ALLIES. WE WOULD BE INCREASING TRADE FLOWS WITH THESE COUNTRIES AND AWAY FROM POTENTIAL ADVERSARIES. THE TRUMP ADMINISTRATION IS TRYING TO HAVE EVERY SIDE OF EVERY ARGUMENT IN THIS DEBATE OVER TRADE AND CHIPS AND EQUITY STAKES IN THESE COMPANIES. BUT THESE ARGUMENTS ARE ALL CONTRADICTING EACH OTHER, CONTRADICTING THEMSELVES. AS A RESULT, A LOT OF INVESTORS, A LOT OF THESE COMPANIES, THEY DON'T KNOW WHICH WAY TO TURN. I DON'T KNOW WHAT TYPES OF INVESTMENTS TO MAKE AND THEY DON'T KNOW WHAT THE ADMINISTRATION OR THE NEXT ADMINISTRATION IS GOING TO DO ON THIS. IT IS NOT A STABLE ENVIRONMENT. DANI: TO THAT POINT, OFTEN BUILDING UP THESE TYPES OF THINGS TAKE LONGER THAN FOUR YEARS. IT WILL TAKE LONGER THAN THIS PRESIDENTIAL CYCLE. IS IT YOUR ESTIMATION THEN THAT COMPANIES WON'T COMMIT? WE HAVE ALREADY GOTTEN A LOT OF INVESTMENT PROMISES FROM A VARIETY OF TECH COMPANIES. THOSE GET FOLLOW-THROUGH IF THERE IS THIS CONCERN OF WHAT HAPPENS AFTER FOUR YEARS? > > THE HISTORY OF INDUSTRIAL POLICY IN THE U.S. AND HANDING OUT SUBSIDIES FOR FIRMS WHO DO THIS ARE OFTEN TIME FIRMS OUT FRONT WILL SAY, YES, I WILL DO THIS. IN A PULLBACK INVESTMENTS. WE SAW THIS WITH FOXCONN IN PLACES LIKE WISCONSIN AND OTHER STATES IN THE MIDWEST. WE HAVE SEEN IT WITH COMPANIES THROUGHOUT THE COUNTRY, BASICALLY, GOING BACK A LONG PERIOD OF TIME THAT THEY WILL MAKE A POLITICALLY FAVORABLE JUDGMENT AND MAKE THE CURRENT POLITICIANS LOOK GOOD AND THEY WILL PULL BACK WHEN THEY NOTICE THAT THEY CAN'T MAKE THE ECONOMICS WORK. I CAN'T MAKE INVESTMENT PROFITABLE. ULTIMATELY, THAT IS PROBABLY A BETTER SITUATION THAN THEM INVESTING TENS OF BILLIONS OF DOLLARS IN PROJECTS THAT WON'T ULTIMATELY WORK. COMPANIES KNOW WHAT THEY ARE DOING. THEY UNDERSTAND THE ENVIRONMENT THEY ARE IN, UNDERSTAND THIS DEMONSTRATION PRETTY WELL. THEY ARE JUST TRYING TO WRITE OUT WITHOUT DOING TOO MUCH DAMAGE TO THEMSELVES, TO THEIR INVESTORS, AND TO THEIR SHARE PRICE. DANI: WHAT DEGREE TO COMPANIES UNDERSTAND AND ARE ABLE TO NAVIGATE WHAT CHINA IS DOING? WITH AMD COME NVIDIA COME THE LATEST BEING THAT CHINA SIMILE IS PUSHING BACK ON ALLOWING COMPANIES TO BUY H20 CHIPS, HOW DOES NVIDIA NAVIGATE THAT? > > THAT RIGHT THERE IS THE TRILLION DOLLAR QUESTION. THE CHINESE GOVERNMENT HAS LONG BEEN INSCRUTABLE TO A LOT OF INVESTORS AROUND THE WORLD. THE TRUMP ADMINISTRATION'S DECISION SEEMS CRAZY TO A LOT OF THEM, SO THEY ARE REALLY STUCK BETWEEN A ROCK AND A HARD PLACE. IN TERMS OF THE INVESTMENTS THAT THEY WANT TO MAKE. IT IS GOING TO BE VERY, VERY DIFFICULT FOR THEM TO NAVIGATE. WHEN YOU HAVE ABUTTING GEOPOLITICAL CONFLICT BETWEEN CHINA AND UNITED STATES THAT A LOT OF PEOPLE TRY TO COMPARE TO THE COLD WAR BUT IT IS RADICALLY DIFFERENT BECAUSE THERE ARE ENORMOUS AND VALUABLE TRADE FLOWS BETWEEN THESE COMPANIES. CHINESE COMPANIES, CHINESE FIRMS, AND THE CHINESE GOVERNMENT HAVE LONG DEMANDED PAYMENTS OF INTELLECTUAL PROPERTY FROM AMERICAN COMPANIES TO BE ABLE TO OPERATE IN THEIR MARKETS. I THINK WE WILL SEE A DIVERSIFICATION WHERE THE CHINESE GOVERNMENT IS GOING TO CONTINUE TO NICKEL AND DIME AMERICAN FIRMS AND DEMAND BIGGER AND BIGGER CONCESSIONS, JUST LIKE THE U.S. GOVERNMENT IS DEMANDING FROM AMERICAN FIRMS IN THE FORM OF EQUITY STAKES. THE BIG LOSER IN ALL OF THIS COVERAGE OF POLITICAL CONFLICT, IS GOING TO BE SOME OF THE MOST INNOVATIVE AMERICAN COMPANIES IN THE WORLD NO MATTER WHICH GOVERNMENT IS DOING THE PRESSURE. JONATHAN: APPRECIATE YOUR TIME AND TAKE, ALEX NOWRASTEH OF THE CATO INSTITUTE. IT IS GETTING HARDER AND HARDER TO HAVE A FOOT IN EACH MARKET IN CHINA AND THE U.S. THE PRESIDENT'S FIRST TERM, IT WAS APPLE AND TIM COOK. SECOND TERM, IT IS JENSEN HUANG. DANI: ALMOST LIKE HE'S BECOMING A POLITICIAN. IT ALMOST SEEMS LIKE THAT CONVERSATION HAS BEEN WELL RECEIVED BECAUSE THEY ARE ALLOWING IT. MAYBE THE OTHER SIDE OF THAT COIN WAS NOT ABOUT WHAT CHINA -- JONATHAN: GETTING PUSHED BACK ON THE STOCK IS DOWN BY THAT PERCENT IN THE PREMARKET. UP WITH SUCHARITA KODALI, RAJAT GUPTA -- WRAPPING UP WEEK OF RETAIL SHARES. JONATHAN: FIVE-DAY LOSING STREAK ON THE S & P 500 COME THE LOG SINCE THE START OF THE YEAR. A PERFORMANCE ON THE RUSSELL, SMALL CAPS UP BY 0.5. IN THE BOND MARKET, TO YEAR, TENURE, 30-YEAR -- TENSION ALL OVER THE PLACE. ONE TO TALK ABOUT THE TENSION AT THE FRONT END OF THE CURVE. LOOKING FOR RATE CUTS. YIELDS JUST ABOUT AN CHANGE FOR THE DATA IN THE PAST 24 HOURS WAS OK. CLAIMS WAS IMPAIR BAUPOST PMIS PRETTY DECENT AND SOME HAVE A SNEAKY FEELING THAT MAYBE THE DATA IN THIS ECONOMY STARTS TO PICK UP IN THE MONTHS TO COME. DANI: THE DATA AND PMI WAS SO DECENT THE COMMENTARY FROM THE S & P SAID THE KIND OF DATA COMING IN WOULD BE MORE SUGGESTIVE OF A RATE HIKE VERSUS A RATE CUT. THAT PRICES WERE PICKING UP AND THERE WERE STARTING TO PASS IT ALONG TO CONSUMERS. MAYBE YOU TAKE THAT ALONG WITH WHAT WE HEARD FROM WALMART YESTERDAY SAYING THAT FOR NOW, THEY'RE ABLE TO KEEP PRICES LOWER THAN INFLATION BUT IT IS PICKING UP EVERY SINGLE WEEK. I THINK THAT IS WHY POWELL'S SPEECH, MAYBE HE DOES WANT TO COMMIT TO A CUT. JONATHAN: WE HAVE SOME PAYROLLS FOR YOU POST LABOR DAY AND CPI, SEPTEMBER 17, THE FED MEETING. THREE HOURS UNTIL THE OPENING. JOINING US. > > WE START ON NVIDIA HEADING FOR A FOURTH STRAIGHT DAY OF LOSSES, SHARES DOWN 1%. THIS TIME ON A REPORT BY THE INFORMATION THAT THE COMPANY HASN'T BEEN -- HAS INSTRUCTED SUPPLIERS TO STOP PRODUCTION OF ITS CHINA FOCUSED AI CHIP THE H20 AS PATIENT CONTINUES TO CLAMPDOWN. WALL STREET IS NOT BLINKING. ANALYSTS KEEP LIFTING PRICE TARGET AHEAD OF THE COMPANY'S EARNINGS NEXT WEEK ON WEDNESDAY. WE ARE REPORTING AT LEAST NINE HAVE LIFTED THEIR PRICE TARGET SO FAR. WORKED A-SHARES FALLING FOR PERCENT AS THE SOFTWARE MAKERS DISAPPOINTED, FEELING CONCERNS AMONG THE ANALYST COMMUNITY THAT AI COULD KILL OFF LEGACY SOFTWARE PLAYERS LIKE WORKDAY. IT DID ACQUIRE AI I FOCUSED SECOND CREATED -- NOT BEEN ENOUGH TO ASSUAGE CONCERNS AS YOU CAN SEE. A COMPANY THAT IS SEEING SOME AI IS ZOOM. SHARES UP 5% AFTER THE VIDEOCONFERENCING COMPANY RAISED ITS FULL YEAR REVENUE AND PROFIT OUTLOOK. ANALYSTS SAY THAT A COMPANY'S ARE HELPING OTHER BUSINESSES AUTOMATE TASKS. EVEN AFTER THE POST-PANDEMIC SLOW DOWN, CUSTOMERS ARE STILL RELYING ON ZOOM AND ON TOP OF THAT, PEOPLE ARE STILL WORKING FROM HOME WE HAD JONATHAN: TRUE. NOT US, BUT PEOPLE ARE WORKING FROM HOME. I'M NOT COMPLAINING. I LOVE IT. DANI: I LOVE BEING IN THE STUDIO. I THINK ZOOM IS OVERUSED. WE SHOULD BE CALLING EACH OTHER OR MEETING IN PERSON. I AM OVER IT. JONATHAN: I HATED USING ZOOM. I STILL HATE USING ZOOM. I TRY TO AVOID THOSE MEETINGS ALL THE TIME. DANI: IT IS TOO MUCH. OBVIOUSLY, I LIKE THE SET UP OR SOMEONE ELSE KNOWS WHERE THE CAM SHOULD BE. JONATHAN: PERFECT. ON THE RADAR THIS MORNING, THE DIVISIONS GROWING WITHIN THE FEDERAL RESERVE HEAD OF FED CHAIR JAY POWELL'S FINAL SPEECH FROM JACKSON HOLE. THE FED FACING A SEPTEMBER RATE CUT DECISION WITH OFFICIALS WEIGHING INFLATION AND LABOR MARKET RISK. AMAZING TO ME WE ALL SAID THE MEETINGS WORK -- MINUTES WERE DATA FROM THE FEDERAL RESERVE. THEY DON'T LOOK SO DATED. DANI: I WAS GOING TO SAY HAMMOCK DOESN'T SEE THE CASE FOR SEPTEMBER RATE CUT. SCHMIDT SAYING WE DON'T HAVE DEFINITIVE DATED TO BE MOVING RIGHT NOW. GOOLSBY SAYING THE MEETING IS LIVE IMPLYING IT WAS TO SEE WHERE SERVICES INFLATION COMES IN. MAYBE THE MARKET ISN'T MOVING UNTIL THEY HEAR FROM THE MAN HIMSELF AND THAT IS JAY POWELL. CONSIDERING HE HAS BEEN SIDING MORE IN THE LINE OF THE HAWKS, WHY WOULD HE REALLY DO ANYTHING EXCEPT SAY WE ARE DATA-DEPENDENT AND GET INTO THE WEEDS OF WHAT THE FRAMEWORK FOR MONETARY POLICY WILL LOOK LIKE? JONATHAN: THAT SPEECH AT 10:00 A.M. EASTERN TIME. OUR DIRECTOR IS ALSO CALLED JOHN. THAT WAS A MEAN, MYSELF. LET'S TURN TO NVIDIA. SHARES LOWER THIS MORNING. THE COMPANY HAS ASKED SUPPLIERS TO STOP PRODUCTION RELATED TO THE H20 CHIP AFTER THE BEIJING LOCAL COMPANIES TO AVOID USING THE HARDWARE. THE STOCK IS DOWN BY ABOUT 1%. THE EARNINGS ARE NEXT WEEK. IN MANY WAYS, IT IS ONLY GOING TO BE A SMALL PIECE OF THE BIG STORY. THE POLITICS HAS BECOME SO INTERESTED OVER THE PAST FEW WEEKS. DANI: MORE INTERESTING AND MORE COMPLICATED. HOW DO YOU NAVIGATE SOMETHING LIKE THIS? WERE YOU APPEAL TO THE WHITE HOUSE AND SAY, OUR TECHNOLOGY IS IMPORTANT TO PRESERVE AND IN ORDER TO PRESERVE THAT YOU NEED CHINA TO BE BUYING A NOT MAKING THEIR OWN HOMEGROWN TECHNOLOGY? AND THEN YOU GET REPORTS, FOR EXAMPLE, LIKE HOWARD LUTNICK SPEAKING ABOUT THIS IDEA THEY WANT TO GET CHINA ADDICTED TO U.S. TECHNOLOGY. VARIATION, LET'S BE HONEST COME ON WHAT HUANG SAID BUT THE CHINESE HEARING THAT AND UPSETTING THEM. HOW DO YOU PLAY BETWEEN THESE TWO SIDES? IT SEEMS LIKE NVIDIA IS STUCK. IS IT MAKING NEW CHIPS THEY CAN SELL INTO CHINA? WILL THE U.S. ALLOW THAT? SO MANY DIFFERENT THINGS. I DON'T KNOW HOW YOU BEGIN TO SCRATCH THE SURFACE ON AN EARNINGS CALL NEXT WEEK. JONATHAN: THE COMMUNITY IS STILL BULLISH AND CONSTRUCTIVE ON THIS. THE TEAM PUTTING THE NUMBERS TOGETHER, AT LEAST NINE UPGRADES THE PRICE TARGETS ON THIS STOCK OVER THE PAST WEEK WE HAD RESULTS NEXT WEEK. DANI: IT SURPRISE YOU AND IVES IS INCREDIBLY BULLISH. I WAS READING HIS NOTE THIS MORNING BASICALLY SAYING THE POLITICS OF THE MOMENT ISN'T THE MOST IMPORTANT THING, IT IS A FACT WERE GOING THROUGH AN AI REVOLUTION AND NVIDIA IS AT THE HEART AND CENTER OF IT. YES, IT IS, BUT WHAT HAPPENS IF HUAWEI CAN ALSO BE AT THE CENTER OF IT? WHAT HAPPENS OF IT? WHAT HAPPENS IF CHINA BECOMES LESS RELIANT WITH 15% OF THE REVENUE? THAT HURTS WITH THE STOCK IS RICHLY PRICED AS NVIDIA IS. JONATHAN: SHAKY MUM'S THE LAST WEEK OR SO, DOWN BY 1% SO FAR IN PREMARKET TRADING. THE FINAL STORY, NATIONAL MAIL SERVICES ARE PAUSING PARTIAL DELIVERIES TO THE U.S. AS THE EXEMPTION COMES TO AN END STARTING NEXT WEEK, LOW VALUE PACKAGES NOW FROM OTHER COUNTRIES WILL BE SUBJECT TO TARIFFS AND COMPLIANCE WITH CUSTOMS AND BORDER PROTECTION RULES. DANI: IT SPEAKS OF THE MESSINESS OF TRYING TO FIGURE OUT WHERE WE STAND WITH TARIFFS. I THOUGHT FILLON'S MAIL SERVICE WAS INTERESTING SAYING CUSTOMS NEED TO BE PAID BEFORE THEY CAN BE SHIPPED TO THE U.S. THAT WE LITERALLY HAD NO IDEA HOW TO PAY THOSE CUSTOMS. IT KIND OF ECHOES WITH WHAT HAPPENED WITH OLD A COUPLE WEEKS BACK WHERE THERE WAS A LOT OF CONFUSION. IS GOLD BEING TARIFFED? A LOT OF REFINERS STOPPED SHIPPING IT TO THE U.S.. IT IS NOT JUST THE COST OF TARIFFS, IT IS THE COST OF COMPLIANCE AND THE CONFUSION AND CLOGGING OF SUPPLY CHAINS AS YOU FIGURE IT OUT AND GETS MORE IMPORTANT AS WE MOVE INTO THE AUTUMN AND WINTER MONTHS WHEN BUYING REALLY PICKS UP HEADING INTO THE HOLIDAYS. JONATHAN: WE HAVE INTRODUCED A LOT OF FRICTION INTO THE SYSTEM AND IT WILL TAKE A NUMBER OF MONTHS TO FIGURE THAT OUT. LET'S STAY ON TRADED TALK ABOUT RETAIL. WHILE BART -- WALMART SHARES REPORTED A MISS OUR PROFIT FOR THE FIRST TIME IN THREE YEARS. WRITING THE NEXT FEW WEEKS RETAIL CELL NUMBERS WILL BE TELLING. THE STREET IS TO OPTIMISTIC ABOUT CONSUMER GIVEN THE STOCK TO CLIENT EVEN THE REVENUE GROWTH WAS STRONG FOR THIS COMPANY. SUCHARITA KODALI JOINS US FOR MORE. D TALKING TO THE PROGRAM. ANI TALKED ABOUT THE COMMENTARY COMING FROM WALMART IN THE LAST 24 HOURS, TARIFFED COSTS ARE GOING UP EVERY SINGLE WEEK. WHAT ARE THE MITIGATION STRATEGIES THEY'VE INTRODUCED AND OTHERS, TOO, THEY HAVE IMPLEMENTED THAT ARE ALLOWING THEM NOT TO PASS THAT ON TO THEIR CONSUMER? > > WELL, I THINK CERTAINLY SOME CONSUMERS, PARTICULARLY AT THE LOW END, ABSOLUTELY THINK PRICE INCREASES ARE PASSED ON TO THEM AND THEY'VE BEEN SEEING THAT OVER THE LAST YEAR TO TWO YEARS. BUT OVERALL, I THINK WHAT HAS BEEN HAPPENING IS THAT WALMART HAS TREMENDOUS INFLUENCE AND PURCHASING POWER WITH ITS SUPPLIERS SO IT CAN DEFINITELY FORCE THE SUPPLIERS AND OTHER COMPANIES FURTHER DOWNSTREAM TO ABSORB SOME OF THAT. IN A BASKET OF GOODS THAT MAY BE $100, YOU'RE GOING TO SEE PROBABLY 20 OR MORE SUPPLIERS BEING ABLE TO ABSORB DIFFERENT PARTS OF THAT PRICE INCREASE. IT IS EITHER NOT AS VISIBLE TO WALMART OR IT IS NOT GOING TO BE QUITE AS VISIBLE TO CONSUMERS DEPENDING ON WHAT THE BASKET OF GOODS IS THAT YOU ARE PURCHASING IN THE FIRST PLACE. DANI: WALMART'S MAY BE UNIQUE IN THAT MANNER, BUT JUST GIVEN HOW BIG OF A PREFERENCE IT IS IN RETAIL, WHAT DOES THAT DO TO OTHER RETAILERS WHO MAYBE DON'T HAVE THAT BENEFIT? WHAT DOES IT DO TO OTHER BEHEMOTHS LIKE AMAZON? IS THIS A RACE JUST TO SEE WHO CAN KEEP UP WITH WALMART IN KEEPING PRICES LOWER? > > RIGHT. WHAT WE HAVE SEEN OVER THE LAST SEVERAL YEARS AND THIS IS A STORY NOT JUST WITH WALMART BUT ALSO AMAZON, IS THEY HAD BEEN GAINING SHARE AT THE EXPENSE OF MOST OTHER RETAIL SECTORS. THAT IS ABSOLUTELY WHAT HAPPENS IN THAT ENVIRONMENT. WHAT WE ARE ALSO SEEING NOW IN INDIVIDUAL RETAILER LEVEL IS THAT THERE IS A LITTLE BIT OF A REBOUND WITH CERTAIN SECTORS. WE SAW THIS IN THE MONTHLY RETAIL SALES NUMBERS THE OTHER WEEK WHERE YOU ARE SEEING REBOUND IN DO AND HOME GOODS, A LITTLE BIT OF A REBOUND IN APPAREL. THESE ARE ALL RELATIVE BECAUSE WE HAD DECLINES IN THOSE SECTORS OVER THE LAST SEVERAL YEARS. THEY JUST KIND OF CATCHING UP TO WHERE THEY WERE. IN THE NEAR TERM, THEY ARE HOLDING THEIR OWN AND IT SPEAKS TO THE FACT THAT IN SPITE OF SOME OF THESE CLAIMS AND THESE WORRIES THAT INFLATION IS GOING TO REALLY, REALLY HURT THE CONSUMER, STILL SEEING CONSUMERS IN THE AGGREGATE PURCHASING. DANI: AWAY FROM PRICES AS MUCH AS YOU COULD POSSIBLY NOT THINK ABOUT THOSE WITH WALMART, THEY ALSO HAD A LOT OF COMMENTARY AROUND THEIR AI FEATURES. DIFFERENT AGENTS THEY ARE INVALID FOR DIFFERENT PARTS OF THE SUPPLY CHAIN AND TO CONSUMERS. THIS ALSO COMES OFF THE BACK OF THAT REPORT FROM M.I.T. THAT 95% OF COMPANIES USING GENERATIVE AI ARE HAVING A ZERO RETURN ON INVESTMENT. WHAT IS THE AI USE CASE FOR WALMART? ARE THEY SEEING A RETURN ON INVESTMENT ON THE TYPES OF AI THEY ARE TRYING TO IMPLEMENT? > > THE TRUTH IS THAT IN THE BUSINESS WORLD NOW, THERE IS A BIT OF A FRENZY TO EMBRACE GENERATIVE AI AND GENENTECH AI. THERE IS A BELIEVE THAT THESE WILL TRANSFORM BUSINESSES. BUT AT THE VERY LEAST, THE HOPE IS THEY WILL TRANSFORM YOUR STOCK BECAUSE YOU WILL BE PERCEIVED AS A TECHNOLOGY FORWARD COMPANY AND HOPEFULLY YOU WILL BE ABLE TO FIND SOME SORT OF EITHER REVENUE GAINS OR EARNINGS OR COST SAVING SOMEWHERE IN THE BUSINESS. FOR RETAIL, THE JURY IS STILL VERY MUCH OUT ON WHERE THE BENEFITS ARE. A LOT OF THE BENEFITS OF THE SO-CALLED AI HAD BEEN MACHINE LEARNING ALGORITHMS THAT HAD BEEN EMBEDDED IN THE SOFTWARE OVER THE LAST 20 YEARS. ARE WE SEEING THINGS THAT ARE TREMENDOUSLY NEW NOW? NOT SO MUCH. THERE ARE THE CHATBOTS, THERE ARE SOME AI AGENTS, BUT THOSE ARE REALLY EITHER JUST NEW NAMES FOR OLD -- ESSENTIALLY THE CHATBOTS WE HAD OVER THE LAST SEVERAL DECADES OR THEY WILL BE VARIANTS OF SOME OF THE MACHINE LEARNING ALGORITHMS THAT A LOT OF THESE COMPANIES HAVE EMBEDDED INTO THEIR SYSTEMS QUITE EFFECTIVELY OVER THE LAST DECADE BUT WE JUST DID NOT CALL IT AI. JONATHAN: THAT EVERYBODY CAN AFFORD TO MAKE THESE INVESTMENTS, PARTICULARLY AT A TIME WHEN COSTS FOR THEM ARE GOING UP. IS THIS JUST A SITUATION WHERE THE BIG KEEP ON GETTING BIGGER? > > THERE ARE CERTAINLY SCENARIOS HERE, LIKE YOU SEE WALMART AND AMAZON GROWING AND CERTAINLY TAKING SHARE, BUT AT THE VERY, VERY SMALL RETAIL SECTOR LEVEL, THE MINNOWS OF THE WATER, THE COMPANIES THAT WORK WITH SHOPIFY OR BIG COMMERCE FOR INSTANCE, AI HAS ABSOLUTELY EMPOWERED THEM TO DO THINGS LIKE CREATE PRODUCT DESCRIPTIONS AT SCALE OR TO BE ABLE TO CREATE NEW IMAGERY ON THEIR WEBSITE OR ADD VIDEOS OR DO THINGS IN A WAY THAT MAKES THEM LOOK MORE PROFESSIONAL EVEN IN SPITE OF THE FACT THEY MAY NOT HAVE RESOURCES. THAT IS ABSOLUTELY AN EMPOWERMENT TOOL THAT AI HAS PROVIDED, BUT IT ONLY GOES SO FAR BECAUSE A LOT OF THOSE COMPANIES STILL HAVE TO BUILD BRANDS AND IT IS NOT EASY TO BUILD A BRAND. IT IS NOT EASY TO GET PRODUCTION OF PHYSICAL GOODS AT SCALE. IT IS NOT EASY TO GET AWARENESS. AND THAT IS SOMETHING AMAZON AND WALMART NOW HAVE BECAUSE THEY ARE SO UBIQUITOUS IN THE ECONOMY. IT IS NOT THE CASE FOR A LITTLE SHOPIFY MERCHANT. JONATHAN: SUCHARITA KODALI, THANK YOU. I THINK WALMART YESTERDAY, AS I GET TOGETHER IN JACKSON HOLE WYOMING, ONE OF THE BIGGEST RETAILERS ON THE PLANET COME ALSO IN THIS COUNTRY, MAKING THE POINT THEY'RE DOING THEIR BEST NOT TO PASS ON HIGHER COSTS. THIS IS A DIFFERENT ENVIRONMENT THAN THE ONE WE WERE IN COMING OUT OF THE PANDEMIC. DANI: I THINK A LOT ABOUT OUR CONVERSATION I HAD WITH THE COMPANY THAT SOLD GOODS FROM CHINA TO PEOPLE LIKE HOME DEPOT, WALMART IN THE U.S., AND THEY HAD SAID THE BIG RETAILERS COMPLETELY CLEANED OUT THEIR INVENTORY. THEY HAVE THEIR OWN STORAGE. IF YOU ARE A SMALLER COMPANY, TO YOUR POINT, YOU CAN'T TURN TO THEM AND GET GOODS THAT ARE PRE-TARIFFED. THEY HAVE BEEN CLEANED OUT BY THE BIG PLAYERS. WALMART IS AN IMPORTANT SIGNAL FOR THE FED, BUT IF ANYTHING, THEY ARE DOING SO MUCH BETTER THAN EVERYONE ELSE IS IN NAVIGATING THE PRICES. SO YOU CAN'T JUST USE WALMART. A LOT OF THE SMALL BUSINESSES, WHICH MAKE UP A HUGE PART OF THE ECONOMY, ARE SUFFERING. JONATHAN: I AGREE. STOCK RECOVERED A LITTLE AFTER YESTERDAY'S LOSSES, FUTURES MORE BROADLY, TRYING TO BOUNCE BY 0.2% GOING INTO CHAIRMAN POWELL LATER ON THIS MORNING. IT'S GET AN UPDATE ON STORIES ELSEWHERE WITH YAHAIRA. > > ELON MUSK TRY TO ENLIST MIKE ZUCKERBERG TO HELP FINANCE HIS UNSOLICITED BID TO BUY OPENAI THIS YEAR ACCORDING TO THE COURT FILING FROM THE CHATGPT MAKER. NEITHER ZUCKERBERG ORMETA TOOK PART IN THE BED. DECLINED TO COMMENT AND BLOOMBERG NEWS REACHED OUT TO MUSK BUT HAS YET TO HEAR BACK. ISRAEL'S TOP FOREIGN POLICY AIDE TRAVEL TO UNITED ARAB EMIRATES TO HOLD TALKS WITH THE COUNTRY'S PRESIDENT. SOURCES TELLING US AT BLOOMBERG THE MEETING AS PART OF A PUSH FOR ISRAEL TO IMPROVE RELATIONS STRAINED BY THE WAR AND BECAUSE I. THE UAE WARNED EARLIER THIS MONTH THAT ISRAEL'S DECISION TO CEASE BECAUSE US -- SEES GAZA CITY WOULD LEAD TO CATASTROPHIC CONSEQUENCES. A CHANGE IS COMING TO JEFFRIES. THE FIRM TELLING TOP BANKERS THEY MUST COLLABORATE TO MAXIMIZE THEIR BONUSES ACCORDING TO THE FINANCIAL TIMES. THE CHANGE IS DESIGNED TO SUPPORT THE BANKS AMBITIONS TO WORK ON LARGER CORPORATE TRANSACTIONS AND COMPETE WITH BIGGER WALL STREET FIRMS. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: MORE FROM YAHAIRA IN THE NEXT HOUR. UP NEXT, HEADING TOWARD A LIVE MEETING. > > BEFORE APRIL 2, BEFORE WE DO THAT, IT MADE SENSE FOR RATES TO COME DOWN. > > IN THE INTERIM, WE HAVE HAD MIXED MESSAGES. IT FEELS TO ME LIKE IT IS A LIVE MEETING. JONATHAN:. WITH THE FORMER U.S. LABOR DEPARTMENT CHIEF ECONOMIST BETSEY STEVENSON. FROM NEW YORK, ARE WATCHING BLOOMBERG TV. ♪ JONATHAN: BIG DAY IN JACKSON HOLE, WYOMING. EQUITY FUTURES POSITIVE ON THE S & P. ON THE NASDAQ COME UP BY 0.2. THE FEDERAL RESERVE'S PRESIDENT, CLEVELAND FED WITH THIS TO SAY YESTERDAY. WITH THE INFORMATION I HAVE COME IF THE MEETING WAS TOMORROW, I WOULD NOT SEE A CASE FOR REDUCING INTEREST RATES. SHE WASN'T ALONE IN THAT COMMENTARY YESTERDAY. DANI: YOU COULD BRUSH IT OFF AND SAY SHE IS NOT A VOTER BUT THEN YOU GET SOMETHING LIKE SOMEONE WHO IS AN SAYING WE DON'T HAVE THE DEFINITIVE DATA TO BE MOVING IN THE POLICY RATE RIGHT NOW. GOOLSBY SAYING IT IS A LIVE MEETING. IT WAS AGAIN AND AGAIN WE HEARD FROM VARIOUS SPEAKERS REALLY PUSHING BACK AGAINST THE IDEA THAT SEPTEMBER IS A DONE DEAL. THE TWO DISSENTERS, THEY SEEM LIKE THAT, STILL DISSENTERS. JONATHAN: CALM BEFORE THE POTENTIAL STORM. HEADING TOWARD A LIVE MEETING. > > BEFORE APRIL 2, BEFORE WE GOT SOME UNCERTAINTIES, I BELIEVE IT THAT WE HAD PRETTY STABLE EMPLOYMENT, THAT EMPLACEMENT -- INFLATION IS COMING DOWN AND IT MADE SENSE FOR RATES TO COME DOWN. IN THE INTERIM, WE HAVE HAD MIXED MESSAGES. WE STILL HAVE A FAIR BIT OF INFORMATION THAT WE ARE GOING TO GET BEFORE SEPTEMBER. IT FEELS TO ME LIKE IT IS A LIVE MEETING. JONATHAN: THE LATEST, TARIFFS AND A TIGHT LABOR MARKET CLOUDING THE FED'S DIRECTION AS INVESTORS ARE AWAITING SIGNALS FROM JAY POWELL AT JACKSON HOLE TODAY. BETSEY STEVENSON WRITING, "THE FED IS LOOKING AT JOB NUMBERS WITHOUT A REAL UNDERSTANDING OF WHAT OUR CURRENT STEADY-STATE JOB GROWTH SHOULD BE." SHE JOINS US NOW. THANK YOU FOR GIVING US SOME TIME. I WANT YOUR UNDERSTANDING OF THE CURRENT SITUATION. > > THANK YOU FOR GIVING ME A CHANCE TO GIVE CONTEXT BECAUSE CONTEXT IS IMPORTANT. WHY DO WE REALLY NOT KNOW WHAT THE STEADY STATE SHOULD BE? THE REASON IS THAT WHEN WE ARE LOOKING AT THOSE JOB NUMBERS, WHAT WE ARE TRYING TO THINK ABOUT IS HOW MANY WORKERS AND EMPLOYERS ARE TRYING TO HIGHER BID ON THE OTHER SIDE OF THAT IS HOW MANY WORKERS ARE THERE AVAILABLE FOR THEM TO HIRE. AND HOW MUCH HIRING DOES IT TAKE TO KEEP OUR EMPLOYMENT STEADY. SO WE ARE AT FULL EMPLOYMENT. WHAT WE HAVE RIGHT NOW IS A BIG DECLINE IN IMMIGRATION AND THAT IS CLOUDING THESE NUMBERS. BECAUSE WITH PEOPLE EXITING, LABOR SUPPLY CONTRACTING, WE DEFINITELY NEED FEWER JOBS BEING ADDED EACH MONTH. THE QUESTION IS, HOW MANY FEWER? WHAT IS THAT STEADY-STATE RATE OF GROWTH? ON THE FLIPSIDE, IN 2024, 2023, A LOT OF PEOPLE WERE WORRIED THE ECONOMY WAS OVERHEATING BECAUSE THEY'RE ADDING SO MANY JOBS PER MONTH AND A PUBLIC WORKADAY BE GETTING THESE WORKERS. WELL, WE WERE SEEING A RESURGENCE OF IMMIGRATION AS WE NOW KNOW. THAT RESURGENCE OF IMMIGRATION WAS GIVING THE LABOR SUPPLY THAT EMPLOYERS NEEDED TO BE ABLE TO KEEP HIRING AT THAT VERY RAPID CLIP. DANI: TO THAT POINT, THE MOST RECENT REPORTING FROM THE JOURNAL DOES SUGGEST THERE WILL BE A CHANGE FROM JAY POWELL WHEN HE SPEAKS TODAY BY THE FRAMEWORK ABOUT NOT JUST INFLATION BUT EMPLOYMENT AS WELL AND HOW THEY VIEW THIS LABOR MARKET GIVEN WHAT YOU'RE TALKING ABOUT AND REALLY THE CLOUDS IN THE KNOWINGNESS OF HOW EXACTLY THIS LABOR MARKET IS FORMING, HOW SHOULD THE FRAMEWORK CHANGE? HOW SHOULD THEY BE APPROACHING THIS LABOR MARKET? > > I THINK WHAT THEY NEED TO BE RIGHT NOW IS JUST INCREDIBLY DATA-DRIVEN. THAT IS GOING TO BE LOOKING AT SOURCES OF DATA. THEY ARE TRYING TO LOOK AT NOT JUST HOW MANY JOBS ARE ADDED, WHAT IS THE UNEMPLOYMENT RATE, BUT WHAT IS THE PRESSURE IN THE LABOR MARKET THAT COULD SPARK INFLATION? AND SO THAT IS GOING TO BE DIGGING IN AND LOOKING MORE REGULARLY AT -- LOOKING AT GROUPS OF PEOPLE. THEY HAVE A DUAL MANDATE. THEY DO WANT TO KEEP EMPLOYMENT AT FULL EMPLOYMENT BUT THEY ALSO HAVE TO TRY TO GET THAT INFLATION BACK TO THEIR TARGET OF 2%. WE HAD HIT IT AND SORT OF BOUNCE OFF A LITTLE. WE MIGHT NOT THINK INFLATION -- IT IS NOT OUT OF CONTROL, BUT IT IS CERTAINLY NOT WHERE THEY WANT IT TO BE. AND IT LOOKS LIKE INFLATION BY THE ABOUT TO TICK UP EVEN FURTHER. SO WHAT THEY'RE GOING TO BE LOOKING AT IS WHAT IS HAPPENING TO INFLATION EXPECTATIONS, HOW TOUGH TO THEY HAVE TO BE TO KEEP THAT INFLATIONARY PRESSURE DOWN, AND THEN THEY HAVE TO BALANCE THAT WITH IS THIS SLOWDOWN IN THE LABOR MARKET WE ARE SEEING DRIVEN BY EMPLOYERS JUST NOT HAVING ENOUGH OOMPH? ARE WE STARTING TO SEE A RECESSION WHERE WE WILL HAVE A BUNCH OF RESOURCES WHICH ARE WORKERS AND PEOPLE BUT ALSO CAPITAL EQUIPMENT THAT IS JUST LAYING AROUND AND DOING NOTHING? THAT IS WHAT A RECESSION IS ALL ABOUT. WE DON'T WANT TO RECESSION, BUT WE ALSO DON'T WANT TO SEE US DEMANDING MORE THAN WE CAN SUPPLY AND, PARTICULARLY, WITH REDUCING OUR SUPPLY CHANNELS FROM OVERSEAS, THAT MEANS THEY'RE GOING HAVE TO BE A LITTLE BIT CAREFUL TO TRY TO MAKE SURE THOSE REDUCTIONS IN SUPPLY DON'T LEAD TO HIGHER PRICES. I THINK THIS IS THE TOUGHEST POSITION THE FED HAS EVER BEEN IN IN MY LIFETIME WE HAD DANI: DESCRIBING -- YOU DESCRIBED IN THE STATE OF THINGS, IT SEEMS LIKE LABOR MARKET UNKNOWN SIGNALS UNCLEAR, BUT WHAT IS KNOWN IS THAT INFLATION IS WITH US. IN FACT, IT IS HIGHER THAN THIS TIME LAST YEAR AT JACKSON HOLE. HOW CAN THE FED BE CUTTING NEXT MONTH? > > I THINK THAT IS A BIG QUESTION. I THINK THAT IS WHY YOU ARE HEARING A LOT FROM MEMBERS OF THE BOARD OF GOVERNORS AND THE FOMC THAT IT IS NOT CLEAR THEY SHOULD CUT. THEY ARE REALLY, REALLY GOING TO HAVE TO BE DATA-DEPENDENT. WHAT DOES THAT MEAN? THAT MEANS THEY SHOULD NOT HAVE MADE UP THEIR MINDS RIGHT NOW WHAT THEY'RE GOING TO DO IN SEPTEMBER. THERE IS DATA THAT IS IS GOING TO COME IN BETWEEN NOW AND THEN AND THEY'RE GOING TO HAVE TO REACT TO IT. I WILL SAY KEEP IN MIND WE WANT THE FED TO REACT BEFORE WE SEE A BIG PROBLEM. THE FED -- THINK ABOUT COMING INTO COVID. THE FED COULD SEE THE WRITING ON THE WALL WITH COVID BECAUSE IT WAS A PANDEMIC AND WE HAD TO HELP DATA BEFORE WE HAD THE ECONOMIC DATA. THEY WERE ABLE TO WORK TO STIMULATE THE ECONOMY TO CUT RATES BEFORE WE SAW THE PROBLEMS OF COVID. I THINK THAT REALLY HELPED US RECOVER, HAVE LESS BET ECONOMIC EXPERTS WITH COVID AND RECOVER QUICKLY. BUT THEY KEPT RATES TOO LOW, TOO LONG AND WE HAD THAT SURGE OF INFLATION. IT IS A TOUGH BALANCING ACT FOR THEM AND THEY'RE GOING HAD TO BE LOOKING FORWARD, USING THE BEST DATA THAT CAN COME AND THEN FACING A DATA CRISIS IN THE FEDERAL GOVERNMENT -- WHICH IS FIRING WORKERS, CUTTING BACK STAFFING, WHICH IS MAKING IT SO THE DATA IS CLOUDIER AND TAKING LONGER FOR ACCURATE DATA TO COME OUT. JONATHAN: APPRECIATE YOUR TIME, FANTASTIC PIECE. THANK YOU FOR JOINING US, FORMER LABOR DEPARTMENT CHIEF ECONOMIST BETSEY STEVENSON, FROM AND WHAT A DIFFICULT SPOT THIS IS FOR THE FEDERAL RESERVE AND THE CHAIRMAN AND JACKSON HOLE THIS MORNING. DANI: I THINK IF IT WERE NORMAL TIMES, CAN MAKE THE ARGUMENT OF ONE-OFF PRICE INCREASES BUT WE ARE STILL COMING FROM THE SCORES OF 2022. JONATHAN: COMING UP, THE FORMER TRUMP TRADE OFFICIAL. THE SECOND HOUR OF "BLOOMBERG SURVEILLANCE." > > YOU ARE SEEING AI CONCERN PULLBACK IN BIG TECH. > > WE DON'T THINK BIG TECH IS OVERVALUED. > > WE HAVE A GREAT CATALYST FOR BEARS, SKEPTICS, AND NERVOUS INVESTORS TO TAKE PROFITS WITHOUT FOAM OUT. -- WITHOUT FOMO. > > THE MARKET SENTIMENT IS PRETTY BEARISH. > > THIS IS "BLOOMBERG SURVEILLANCE" WITH JONATHAN FERRO, LISA ABRAMOWICZ, AND ANNMARIE HORDERN. MICHAEL: THE SECOND -- JONATHAN: THE SECOND HOUR BLOOMBERG SURVEILLANCE STARTS RIGHT NOW. YOUR SCORES LOOK LIKE THIS. EQUITY FUTURES SHAPING UP AS FOLLOWS, POSITIVE .2% FOLLOWING FIVE DAYS OF NO GAINS ON THE S & P 500, THE LONGEST STREAK BACK TO THE START OF THIS YEAR. ON THE NASDAQ POSITIVE .2% AND ON THE RUSSELL POSITIVE .5%. IN THE BOND MARKET JUST ABOUT UNCHANGED. 3.79 56 ON THE FRONT END. ON THE LONG END 4.9244 RATE THREE HOURS AWAY CHAIRMAN POWELL IN JACKSON HOLE, WYOMING WITH A BIG SPEECH INTO SEPTEMBER. DANI: MAYBE WE WERE UNMOVED WAITING FOR THAT. I AM SURPRISED MORE ATTENTION IS NOT GIVEN TO THIS WALL STREET JOURNAL ABOUT WHAT WE WILL GET FROM JAY POWELL. BASICALLY WRITING THEY LOOK LIKE THEY WILL BE ABANDONING FLEXIBLE AVERAGE INFLATION TARGET WHILE GIVING THEMSELVES MORE FLEXIBILITY ON THE LABOR MARKET. MORE RIGID ON INFLATION, LESS RIGID UNEMPLOYMENT. SOMETIMES THEY PUT THESE STORIES OUT TO TRY TO GET A MARKET REACTION SO HE DOES NOT SURPRISE THE MARKET. YOU ARE NOT GETTING A MARKET REACTION SO IF THAT IS THE INTENTION IT IS NOT WORKING. HE HAS TO DRAW BOTH -- HE HAS TO JUGGLE SOUNDING HAWKISH -- MICHAEL: WE HAVE HAD THIS -- JONATHAN: WE HAVE HAD THIS CONVERSATION FOR WEEKS AND WEEKS. LET'S TAKE THE DATA FOR WHAT IT IS RIGHT NOW. WHAT IS BEHIND THAT? A TURN IN THE CYCLE OR A STRUCTURAL SHIFT. HE GIVES A NOD TO THE LATTER AND NOT THE FORMER THEN WE WILL MOVE TO SEPTEMBER. DANI: IF THIS IS MORE ABOUT SUPPLIED TO THE LABOR MARKET, IF HE TRIES TO UNDERLINE THAT YOU CAN GET A REACTION BUT TO COME BACK TO THIS THEY DO NOT WANT TO GET THE ATTENTION OF THE WHITE HOUSE. MAYBE HE WANTS TO SOUND HAWKISH IN THE MARGINS, DOING IT THROUGH A TECHNICAL WAY TALKING ABOUT THEIR FRAMEWORK. I CANNOT IMAGINE THIS IS A CHAIR WHO REALLY WANTS TO PUSH BACK ON MARKET PRICING BECAUSE OF THE RAMIFICATION OF WHAT IT WOULD MEAN. JONATHAN: LISA AND TOM KEENE AND MICHAEL MCKEE GROUND IN JACKSON HOLE BRINGING YOU FULL COVERAGE. FUTURES POSITIVE. COMING UP, MICHAEL SCHUMACHER OF WELLS FARGO AS INVESTORS ARE BREAKING FOR JAY POWELL SPEECH IN JACKSON HOLE. JEANETTE LOWE OF STRATEGIC AND FORMER WHITE HOUSE TRADE OFFICIAL AS THE U.S. AND THE EU PROVIDE DETAILS OF A GIANT TRADE PACT. WE BEGIN WITH STOCKS STEADY AS MARKETS JUMPED DOWN TO JEROME POWELL'S FINAL SPEECH IN JACKSON HOLE. MICHAEL SCHUMACHER WRITING "WE THINK RATE ARE LIKELY TO REACT FAIRLY SHARPLY TO THE SPEECH JUST AS THEY DID LAST YEAR." LET'S TAKE IT FROM THE TOP. WHAT ARE YOU LOOKING FOR? MICHAEL: I THINK THERE IS SOME BOILERPLATE. WE WILL TALK ABOUT THE FED ACCOMPLISHMENTS AND ALSO CHALLENGES SINCE 2018. IT IS HIS LAST SPEECH AS CHAIR AND THAT SEEMS LIKE A CLEARCUT THING TO DO. HE WILL UNVEIL THE NEW FRAMEWORK. AIT, CAN EVERYONE EXPLAIN IT? NO. WILL HE GO DOWN THE RABBIT HOLE OF TALKING ABOUT NEAR-TERM MONETARY POLICY? THAT IS WHAT WE ARE FIXATED ON. I THINK IT IS NOT LIKELY BUT IF HE DOES THINGS GET INTERESTING SO THAT IS WHAT PEOPLE WILL BE IN ON 10:00 FOR SURE. JONATHAN: DO YOU THINK WE ARE OVERESTIMATING HOW MUCH THEIR VIEWS HAVE CHANGED SINCE THAT PAYROLLS REPORT? MIKE: PROBABLY SO. THE FED TALKS TIME AND TIME AGAIN ABOUT WANTING TO BE DATA-DEPENDENT AND IT IS MORE INTENSELY DATA-DEPENDENT NOW THE NORMAL. WE HAVE NOT SEEN A LOT OF DATA SINCE THE PAYROLLS REPORT AND I DOUBT VIEWS HAVE CHANGED A LOT. IT SEEMS TO ME THERE HAS BEEN A TREMENDOUS AMOUNT OF TALK AND THE RATIO HAS BEEN SKEWED SO FAR. YOU THINK ABOUT JACKSON HOLE LAST YEAR THAT JAY POWELL'S AT THE DOOR OPEN TO A 50 BASIS POINT CUT THAT THE FED DELIVERED AND MARKETS WENT WILD. THERE IS A PRECEDENT FOR THIS TO BE SUPERMARKET MOVING. WILL HE GO DOWN THAT ROAD? HE HAS TO BE THINKING ABOUT AT. DANI: LET'S SAY YOU GET A PAL WHO JUST SAYS WE ARE DATA-DEPENDENT AND THAT IS IT? WHAT IS THE REACTION LIKELY TO BE? MIKE: PEOPLE SAY NOT THAT INTERESTING, JACKSON HOLE WAS TALKED ABOUT AND DID NOT DELIVER MUCH. WHERE IT GETS CHALLENGING IS LET'S SAY POWELL DOES OPEN THE DOOR TO A RATE CUT AT LEAST A LITTLE BIT IN SEPTEMBER. YOU CAN SEE PRICING MOVE A TIME. THE MARKET IS PRICED FOR 17 OR 18 BASIS POINTS. THAT MOVES A LITTLE BIT. MAYBE IT GOES TO 22 OR 23. IT GETS INTRIGUING WHEN YOU THINK ABOUT THE MORE DISTANT PRICING. RIGHT NOW THE MARKET IS PRICED AT 3.05, THAT CAN GO DOWN IN A HURRY. YOU THINK BACK TO NONFARM, SOME OF THOSE NUMBERS MOVE 30 BASIS POINTS IN ONE DAY. JACKSON HOLE WILL NOT HAVE THAT KIND OF IMPACT BUT IT COULD. IT COULD BE HUGE MOVES IN TERMS OF NEAR-TERM PRICING. IT IS A ASYMMETRIC APPROACH. DANI: ARE YOU SAYING THAT THEY GET MARKET REACTION COULD BE IF HE OPENS THE DOOR TO CUTS VERSUS SLIGHTLY SHUTTING THE DOOR TO CUTS? MIKE: IF HE OPENS THE DOOR TO CUTS THERE IS NOT MUCH REACTION TO NEAR-TERM PRICING BECAUSE THE MARKET IS TEED UP FOR A RATE CUT IN SEPTEMBER. THERE IS MORE REACTION FARTHER OUT. THINK ABOUT PRICING FOR LATE 2026, EARLY 2027. IF HE SOUNDS HAWKISH FLIP THAT AROUND. THERE IS A HUGE MOVE IN MARKET PRICING IN THE NEAR TERM. IF POWELL SAYS I AM NOT COMFORTABLE WHAT IS THE MARKET GOING TO PRICE FOR SEPTEMBER? IT WILL PROBABLY NOT CHANGE THE ULTIMATE DESTINATION THAT MUCH. YOU SEE A SMALLER REACTION FARTHER OUT AT A BIGGER REACTION NEAR-TERM. I THINK THE MARKET WILL HAVE TO PARSE HIS WORD SUPER CAREFULLY. JONATHAN: CAN WE GET MORE SPECIFIC ABOUT WHERE ON THE YIELD CURVE THIS MIGHT PLAY OUT? WE ARE TRYING TO FIGURE OUT HOW UNANCHORED THE STORY OF THE LONG END IS FROM THE DEBATE OF THE FRONT END OF THE CURVE, 30 YEAR BOND YIELDS MAKING NEW HIGHS IN JAPAN ON A SIMILAR STORY IN THE U.K. YIELDS GETTING CLOSER AND CLOSER TO 5%. I WONDER HOW YOU ARE THINKING ABOUT THAT STORY? MIKE: WE ARE NEGATIVE ON THE LONG END IN MARKET AFTERMARKET. WE THINK IT IS A STORY ACROSS G10. YOU HAVE THE SAME THINGS WHICH ARE HUGELY TROUBLING. NUMBER ONE A SUPPLIES PICKING UP IN EVERY COUNTRY. WHEN YOU THINK ABOUT THE REST OF THE WORLD, DEFENSE SPENDING IS CLIMBING AT A RAPID RATE. THAT WILL FLOW THROUGH INTO LONG-TERM ISSUANCE. AGAINST THAT THINK ABOUT STRUCTURAL SHIFTS IN DEMAND. THIS IS A BIG STORY. FOR A LONG TIME THE TREASURY TYPES HAVE RELIED ON STRUCTURAL BUYING FROM FOLKS LIKE INSURANCE COMPANIES AND PENSIONS. WE THINK THAT IS DECLINING. TAKE THE U.S. PENSIONS. ON THE CORPORATE SIDE SOLVENCY IS GREAT. THE AVERAGE CORPORATE HAS 105 SOLVENCY WHERE 106 SOLVENCY. LOTS MORE PENSIONS GOING TO BUY BONDS, THEY ARE IN. INSURANCE COMPANIES, SAME BASIC IDEA. IT IS NOT JUST THE U.S., IT IS ALSO THE CASE IN JAPAN AS WELL. SLOW DOWN STRUCTURAL DEMAND VERSUS SHARP INCREASES IN EXPECTED SUPPLY. WE ARE NEGATIVE ACROSS THE BOARD. I DON'T THINK THE CHAIRMAN CAN SAY ANYTHING TO CHANGE THAT STORY. JONATHAN: WHEN YOU LISTEN TO THE WHITE HOUSE AND THE PRESIDENT, HE IS NOT ASKING FOR LOWER RATES. WHAT HE WANTS IS LOWER BORROWING COSTS AND ONE MIGHT NOT LEAD TO THE OTHER. I WANT TO UNDERSTAND WHAT YOU THINK HAPPENS NEXT? WHAT DO THINK HAPPENS IF YOU ARE RIGHT, THAT THEY CAN DROP RATES AT THE FRONT END BUT RATES AT THE LONG END STAY STUBBORNLY HIGH AND BORROWING COSTS FOR THE GOVERNMENT TO NOT GO DOWN. WHAT WILL THEY DO? MIKE: THE FEEDBACK LOOP GETS TOUGH. WHEN YOU THINK ABOUT THE INTEREST BURDEN IT HAS GONE UP TO 3% OF GDP. THAT COULD CLIMB TO 3.5% PRETTY EASILY. IT IS ALREADY GETTING PAINFUL AND FORCING TOUGH TRADE-OFFS IN CONGRESS. IS THAT NUMBER RATCHETS UP THE PRESSURE POLITICALLY BECOMES MORE INTENSE. THIS IS A PROBLEM FOR THE TRUMP ADMINISTRATION AND IT COULD BE MUCH MORE SEVERE IN A COUPLE YEARS. THE TRADE-OFF BECOMES HOW DO YOU BRING DOWN LONG-TERM BORROWING COSTS. YOU SPEND LESS MONEY. IF THERE IS THE POLITICAL WILL TO CUT THAT DEFICIT FROM 6.5% DOWN TO 5%, JUST CHANGE THE DIRECTION WE SEE NO EVIDENCE. AS WE NOTED IS A GLOBAL PROBLEM. IT IS THE CASE IN JAPAN, EUROPE, THE U.K. YOU WILL SEE THOSE INCREASES IN SUPPLY FOR A LONG TIME. AT LEAST CHANGING THE DIRECTION OF TRAVEL IN THE U.S. WOULD HELP QUITE A BIT. DANI: THE LAST TIME WE SAW DEFICITS LEVEL THEY ARE WAS WORLD WAR II AND AT THAT TIME YOU HAD THE TREASURY WORK ALONG WITH THE FEDERAL RESERVE TO TRY TO TACKLE THAT. AT THE RISK OF SOUNDING CONTROVERSIAL, WHY NOT SHIP AWAY A LITTLE BIT AT THAT INDEPENDENCE TO HAVE A TREASURY AND A FED WHO WORKED TOGETHER TO TRY TO SOLVE WHAT IS BALLOONING DEFICITS AND HIGHER COSTS FOR THE U.S.? MIKE: IT COULD BE SOMETHING LIKE THAT. THEY COULD SAY WE PULL OUT OF THE 1950'S PLAYBOOK AND LET INFLATION GO UP AND OVER TIME GET RID OF THAT DEBT PROBLEM. HE COULD ALSO GO TO MORE OF A FINANCIAL APPROACH. EFFECTIVELY COMPEL BANKS AND INSURANCE COMPANIES TO HOLD MORE GOVERNMENT DEBT. NONE OF THOSE THINGS IS PARTICULARLY POPULAR. AS FAR AS GETTING THE FED TOGETHER WITH THE TREASURY, THAT REQUIRES CONGRESS TO GET INVOLVED. IS CONGRESS WILLING TO MAKE THAT STEP? TO THE AMERICAN PUBLIC WE HAVE THIS PROBLEM AND WE ARE TRYING TO DEAL WITH THAT. IT STRIKES ME IS NOT POLITICALLY PALATABLE TO GET AHEAD OF THE GAME. ALTHOUGH IT IS BECOMING AN ISSUE IN THE MARKETS IT IS NOT YET AT THE BOILING POINT POLITICALLY. JONATHAN: I THINK DANNY ARTICULATED THE ARGUMENT QUITE WELL IN THE PREVIOUS HOUR. DANI MADE THE ARGUMENT THAT FOR THE FEDERAL RESERVE -- IF THEY DROP INTEREST RATES AND YOU SEE THE LONG END SELLOFF AND YIELDS RISE THEY HAVE NOT EASED FINANCIAL CONDITIONS IN THE MORTGAGE MARKET WHICH THEY MIGHT BE CONCERNED ABOUT. WITH THAT IN MIND, AS DANI MENTIONED, FOR MONETARY POLICY OBJECTIVES ALONE, NEVER MIND THE GOVERNMENT, DO THEY NEED TO THINK ABOUT THAT? MIKE: THEY DO. IT IS A GREAT POINT. THINK ABOUT HOW MUCH THE ECONOMY IS TIED TO SHORT-TERM RATES VERSUS LONG-TERM RATES. LONG-TERM RATES DRIVE THE BUS. THE SIGNAL WITH RESPECT TO FED FUNDS IS IMPORTANT. GENERALLY SPEAKING THERE IS A GOOD CORRELATION BETWEEN LONG RATES AND SHORT RATES. VERY HEAVY GOVERNMENT BORROWING AND THE SUPPLY DEMAND WE TALKED ABOUT GLOBALLY OVERRIDES THE FED WHAT DOES IT ACCOMPLISH BY CUTTING THE FUNDS RATE BY 25 OR 50 OR MORE? NOT A LOT. THAT IS A TOUGH OPTIC FOR THE FED. THE FED WANTS TO TRY TO MESSAGE IT TO DRIVE DOWN LONG-TERM RATES BUT THEY ARE NOT COOPERATING RIGHT NOW. HAVING SAID ALL OF THAT IF POWELL OPENS THE DOOR TO A CUT IN THE FED GOES 25 BASIS POINTS ON SUB 17 ARE LONG RATES GOING DOWN? I THINK THEY WILL. THERE IS A GREATER THE NORMAL RISK YOU DO NOT GET THE USUAL RELATIONSHIP. JONATHAN: MIKE SCHUMACHER OF WELLS FARGO. WE GO DOWN THE MARKET RABBIT HOLE AND HE COULD HAVE HUGE CONSEQUENCES FOR FOREIGN EXCHANGE. I THINK YOU NOTED EARLIER. THAT HAS TO BE A CONSIDERATION FOR THE COMMITTEE AT THE FEDERAL RESERVE. DANI: IF THEY WANT TO START CUTTING AND LOOSENING MONETARY POLICY THAN THEY HAVE TO THINK ABOUT THE LONG END. FOR ALL OF THE FEARS ABOUT FED INDEPENDENCE WE MIGHT BE IN A SITUATION WHERE THE GOVERNMENT AND THE FEDERAL RESERVE WANT THE SAME THING AND THAT IS MORE EASY POLICY BUT YOU CANNOT DO THAT IF THE LONG END IS RISING. THAT IS WHY I ASKED MIKE YOU GET IN A SITUATION WHERE THE FED AND THE TREASURY WORK TOGETHER THAT THE INDEPENDENCE NEEDS TO BE CHIPPED AWAY AT TO RECEIVE THE GOALS -- TO ACHIEVE THE GOALS OF TACKLING THE DEFICIT AND MAKE SURE THE ECONOMY IS NOT CRACKING UNDER THE PRESSURE OF MORE RESTRICTIVE RATES. ON THE -- JONATHAN: ON THE EQUITY SIDE OF THINGS -- LET'S GO TO THE BLOOMBERG BRIEF. YAHAIRA: NVIDIA SHARES FALLING ON REPORTING THE COMPANY HAS ASKED SUPPLIERS TO HALT PRODUCTION OF ITS CHINA FOCUSED AI CHIP. THIS AFTER OUR REPORTING THAT BEIJING URGED LOCAL COMPANIES TO AVOID USING THE CHIP. THIS RAISING QUESTIONS ABOUT THE DEMAND FOR THE AGE 20 WHICH COMPETES WITH SIMILAR PRODUCTS WITH CHINA'S HUAWEI. META HAS MADE ANOTHER OF THE BIG AI HIGHER -- AI HIRE. THAT IS ACCORDING TO PEOPLE FAMILIAR. HE WILL BE JOINING MEDA INTELLIGENCE AS IT IS THE SIXTH APPLE EMPLOYEE TO DEFECT TO META-AS MEDA CONFIRMS IT PLANS TO FREEZE AI HIRING AFTER ITS BLOCKBUSTER SPENDING SPREE. THE TRUMP ADMINISTRATION WILL NOT SEEK EQUITY STAKES IN CHIPMAKERS THAT PLEDGE TO BOOST THEIR U.S. INVESTMENTS. COMPANIES LIKE DSM MICRON WOULD BE EXEMPT FROM THE POLICY AFTER THEY ANNOUNCED BILLIONS IN U.S. INVESTMENT PLANS. FOR INTEL TALKS ARE UNDERWAY ABOUT THE WHITE HOUSE TAKING A POTENTIAL STAKE IN THE COMPANY. JONATHAN: UP NEXT ON THE PROGRAM , GOVERNOR COOK UNDER PRESSURE. > > I REFER PEOPLE EVERY WEEK ON A MINIMUM TO THE DEPARTMENT OF JUSTICE MORTGAGE FRAUD. DID SHE SIGN THESE DOCUMENTS? I BELIEVE SHE DID. JONATHAN: THAT CONVERSATION UP NEXT WITH JEANETTE LOWE OF STRATEGAS. GOOD MORNING. ♪ JONATHAN: A SPEECH FROM JAY POWELL LATER ON THIS MORNING. LESS THAN THREE HOURS AWAY. FUTURES POSITIVE .2% ON THE S & P, THE NASDAQ UP .17%. GOVERNOR COOK UNDER PRESSURE. > > WE REFER PEOPLE ALMOST EVERY DAY. I REFER PEOPLE EVERY WEEK ON A MINIMUM TO THE DEPARTMENT OF JUSTICE FOR MORTGAGE FRAUD. THIS IS LITERALLY WHAT I AM REQUIRED TO DO UNDERNEATH THE HOUSING AND ECONOMIC RECOVERY ACT OF 2008, WHICH IS TO ENSURE THE SAFETY AND SOUNDNESS OF THE MORTGAGE MARKET. DID SHE SIGN THESE DOCUMENTS? I BELIEVE SHE DID. JONATHAN: THE JUSTICE DEPARTMENT URGING JAY POWELL TO REMOVE GOVERNOR COOK FROM THE BOARD AS IT PLANS TO INVESTIGATE. JOINING US TO DISCUSS IS BLOOMBERG'S MIKE MCKEE. DIFFICULT FOR THE FED CHAIR TO ADDRESS A LEGAL PROCESS THAT HAS NOT OFFICIALLY STARTED. YOU'VE BEEN WALKING THROUGH THE CORRIDORS OF JACKSON HOLE. HOW IS THIS PLAYING OUT? MICHAEL: THERE IS A LOT OF SYMPATHY FOR LISA COOK AND THE FACT THAT SHE HAS JOINED JAY POWELL IN BEEN THE OBJECT OF DERISION FROM THE ADMINISTRATION. THEY ALSO RECOGNIZE THAT AT THIS POINT WHAT PULTE IS DOING IS ALLEGING THIS BEHAVIOR HER PART. HE KEEPS SAYING SHE COMMITTED MORTGAGE FRAUD BUT THAT HAS YET TO BE INVESTIGATED OR ADJUDICATED. THE SYMPATHY IS WITH COOK FOR RIGHT NOW BUT WE KNOW SHE DID NOT COME TO JACKSON HOLE AT LEAST AS OF LAST NIGHT. WE DON'T KNOW WHAT THE NEW ALLEGATIONS PULTE WANTS TO LODGE TODAY ARE BUT AT THIS POINT THERE IS NOT MUCH TO SAY BUT WE ARE WAITING TO SEE WHETHER SHE SPEAKS ANYMORE. I AM TOLD SHE WILL NOT. I WOULD NOT EXPECT JAY POWELL TO SAY ANYTHING PUBLICLY ABOUT AT. JONATHAN: WE WILL HEAR FROM THE DIRECTOR AT 9:30 EASTERN TIME. WE WILL HEAR IN A COUPLE OF HOURS WHAT HE HAS TO SAY. I WONDER HOW DIFFERENT THIS IS TO WHAT HAPPENED TO THE DALLAS FED PRESIDENT A NUMBER OF YEARS AGO. DANI MENTIONED THAT THAT ULTIMATELY BECAME A DISTRACTION AND HE RESIGNED. HOW DIFFERENT IS THIS? MICHAEL: WE DON'T KNOW YET BECAUSE WE DO NOT KNOW WHETHER THE ALLEGATIONS ARE TRUE AND EXACTLY WHAT THEY ENTAIL AND WHAT IT MIGHT MEAN. THE ALLEGATIONS AGAINST NOT ONLY ROBERT KAPLAN BUT AGAINST THE BOSTON FED PRESIDENT ROSENGREN AND LATER ON AGAINST RICH CLARIDA THE VICE CHAIR AT THE TIME WERE THAT THEY PROFITED FROM INSIDER TRADING BECAUSE THEY KNEW WHAT THE FED WAS GOING TO DO. THEY WERE ALL CLEARED OF THAT, THERE WAS NO CONVICTION AND THERE WERE NO COURT CASES BUT THEY DID RESIGN BECAUSE THEY WERE A DISTRACTION. I SUPPOSE THAT COULD HAPPEN IN COOK'S CASE, BUT THE ISSUE THERE IS IF YOU WANT TO GIVE DONALD AN EXTRA SEAT ON THE FED BOARD. JONATHAN: SHOULD THAT BE A CONSIDERATION FOR THE FEDERAL RESERVE? MICHAEL: IT IS A TOUGH THING TO SAY. IF YOU ASK ANYONE THERE THEY WOULD NOT COMMENT ON IT. I AM SURE IT IS. I HAVE TALKED TO FED PEOPLE WHO SAY THEY KNEW JAY POWELL WAS GOING TO LEAVE AND NOW THEY SAY MAYBE HE WILL NOT BECAUSE OF THE SITUATION. THERE IS A FEELING THAT THERE COULD BE A DANGER TO THE FED IN DOING THAT, ESPECIALLY GIVEN THE AGGRESSIVE WAY TRUMP HAS GONE AFTER THE CENTRAL BANK. AT THIS POINT IT IS ALL UP IN THE AIR. NOBODY KNOWS WHAT WILL HAPPEN NEXT. JONATHAN: MICHAEL MCKEE ON THE GROUND IN JACKSON HOLE, WYOMING. LOOKING FORWARD TO YOUR REPORTING. THAT IS SHOCKING TO ME. IF YOU BELIEVE IT IS A DISTRACTION I FIND THAT SHOCKING THAT YOU WOULD BE WORRIED ABOUT WHO THE PRESIDENT MIGHT NON-RATE FOR A YOU ON THE FEDERAL RESERVE BOARD. DANI: TO PUT IT SIMPLY WE DO NOT KNOW WHAT HAS HAPPENED. A LEGAL CASE HAS NOT STARTED. IF THERE IS EVIDENCE OF FRAUD HOW DO YOU STAY ON? IF THERE IS EVIDENCE OF FRAUD HOW DO YOU STAY ON AND HOW DO YOU HAVE THE POLITICAL CONCERNS BE MORE IMPORTANT THAN THAT? THAT IS A THREAT TO THE FED AND A CREDIBILITY. JONATHAN: THE PRESIDENT HAS A RIGHT TO REPLACE YOU BY DEFINITION. JEANETTE LOWE IS WITH US FROM STRATEGAS. HOW MUCH SPACE DOES THE FED HAVE TO RESHAPE THIS FEDERAL RESERVE? JEANETTE: OBVIOUSLY THE TRUMP ADMINISTRATION HAS BEEN LOOKING TO TRY TO PUT ITS IMPRINT ON THE FEDERAL RESERVE. THEY WOULD LIKE TO GET MORE OF THEIR MEMBERS IN. THE FACT THAT MICHAEL BARR STEPPED DOWN AS VICE CHAIR BUT DID NOT GET OFF THE FEDERAL RESERVE EARLIER THIS YEAR PUTS PRESSURE ON THE ADMINISTRATION AND THE SENSE THEY FELT LIKE THEY WERE GETTING PRESSURE BACK FROM THE FED AND THEY WANT TO PUT MORE OF THEIR IMPRINT NOW BECAUSE THEY THOUGHT THEY MIGHT'VE HAD THAT SPOT OPEN. YOU HAVE STEPHEN MIRREN POTENTIALLY GETTING ON THE FED WITHIN THE NEXT WEEK'S. THAT IS ONE PIECE. OBVIOUSLY THIS PRESSURE ON LISA COOK, WHETHER SHE IS REMOVED FOR CAUSE OR STEPS DOWN BECAUSE OF POLITICAL PRESSURE, THAT CREATES ANOTHER OPPORTUNITY FOR THE PRESIDENT TO HAVE MORE MEMBERS ALIGNED WITH HIS VIEWS ON THE FIT. THAT WILL BE IMPORTANT FOR INTEREST RATES AN IMPORTANT FOR DOING A VOTE ON GOVERNOR MICHELLE BOWMAN'S FINANCIAL DEREGULATION PLAN AS WELL. THERE IS PRESSURE WITHIN THE WHITE HOUSE TO TRY TO MAKE THEIR MARK AND GET A MAJORITY OF MEMBERS AND THIS IS PART OF THAT EFFORT. DANI: WHAT YOU ARE SAYING CLEARLY HAS RAMIFICATIONS. IF YOU GET MORE FED GOVERNORS THAT ARE MORE DOVISH, BUT IN THE LONG TERM THE CONCERN ABOUT INDEPENDENCE. THE APPOINTMENTS TO THE FEDERAL RESERVE TRUMP HAS MADE OUR THOUGHTFUL PEOPLE. SOME OF THE NAMES ARE VERY CREDIBLE AND THOUGHTFUL PEOPLE. IS IT REALLY A CONCERN FOR WIDER FED INDEPENDENCE IF TRUMP HAS MORE OF HIS OWN PICKS ON THE FOMC? JEANETTE: OBVIOUSLY THE ADMINISTRATION FEELS THEY SHOULD BE ABLE TO PROVIDE SOME INFLUENCE ON THIS AND THEY WERE EXPECTING -- IT IS STANDARD POLICY FOR A FED CHAIR TO STEP DOWN AFTER THEIR TERM ENDS, EVEN IF THEIR TERM ON THE FED BOARD HAS NOT ENDED. THERE CAN BE CONCERNS ABOUT WHETHER OR NOT HE IS PUSHING TOO MUCH TO HAVE MORE INFLUENCE. AT THE SAME TIME THE ADMINISTRATION COULD ARGUE THEY FEEL GOVERNORS ARE STAYING PUT TO PREVENT THEM FROM HAVING THE INFLUENCE THEY SHOULD HAVE DURING THEIR TERM, DURING THEIR ADMINISTRATION. OBVIOUSLY I COULD SEE THAT THERE COULD BE ARGUMENTS BOTH WAYS. ONE OF THE INTERESTING THINGS WITH LISA COOK'S SHE HAS A VERY LONG TERM LEFT SO THIS WOULD ALLOW HIM TO PUT SOMEONE ON THE FED THAT WOULD BE THERE FOR QUITE A LONG TIME. DANI: THE ORDER OF THINGS, JAY POWELL SPEAKING AT 10:00. 30 MINUTES BEFORE WE WILL GET PULTE MAKING A STATEMENT ON NEW EVIDENCE IN THE COOK MATTER. YOU EXPECT POWELL TO ADDRESS IT AT ALL? JEANETTE: I DON'T. I THINK POWELL IS FOCUSED ON VARIOUS OTHER THINGS. HE HAS ALREADY BEEN THE SUBJECT OF POLITICAL PRESSURE HIMSELF. HE WANTS TO MAKE THIS A SPEECH THAT WILL BE MUCH MORE ABOUT HIS LEGACY AND IT WILL BE FOCUSED ON CERTAIN COMPONENTS. CHANGING THE FRAMEWORK, FOCUSING ON WHAT MIGHT BE FORETOLD FOR THE SEPTEMBER MEETING. THOSE ARE THE PIECES HE WANTS TO FOCUS ON. I DON'T THINK HE WANTS TO MAKE THIS POLITICAL. YOU MAY SAY SOMETHING ABOUT THE INDEPENDENCE THAT I DO NOT THINK HE WOULD SAY ANYTHING ABOUT THIS CASE IN PARTICULAR. JONATHAN: JEANETTE LOWE OF STRATEGAS. IT IS DIFFICULT ENOUGH TO TALK ABOUT A LEGAL PROCESS THAT HAS STARTED, NEVER MIND ONE THAT HAS NOT STARTED. I DON'T THINK IT IS SOMETHING THE CHAIRMAN CAN TACKLE HEAD-ON JUST YET. DANI: ALSO THE FACT THAT IT WOULD MAYBE INVITE MORE IRE FROM THE WHITE HOUSE IF HE PUSHES BACK HARD ON THIS ISSUE. PART OF PRESERVING THE INDEPENDENCE FROM POWELL TRYING TO CREATE A BARRIER ABOUT THE POLITICS. NOT ANSWERING JOURNALIST QUESTIONS. I DO NOT SEE WHY THIS CASE WILL BE ANY DIFFERENT. JONATHAN: WE WILL LET THE PROCESS PLAY OUT IF THE PROCESS EVEN BEGINS. THE FORMER WHITE HOUSE TRADE OFFICIAL ON THE DETAILS OF A DEAL BETWEEN THE U.S. AND THE EU. META-SIGNS A $10 BILLION DEAL WITH GOOGLE. JONATHAN: A FIVE-DAY DAY LOSING STREAK ON THE S & P 500, THE LONGEST SINCE EARLY JANUARY OF THIS YEAR. YOU HAVE TO GO BACK ABOUT A MONTH AND THE EQUITY MARKET. EQUITY FUTURES BOUNCING BACK .2% ON THE S & P, ON THE NASDAQ .14%. LET'S CROSS OVER TO GET HERA FOR MORE. YAHAIRA: WE START WITH THE LATEST RETAILER TO REPORT RESULTS AND THAT IS BJ'S WHOLESALE CLUB. SHARES ARE UP 1.20 5% AFTER IT RAISED ITS FOUR YEAR PROFIT OUTLOOK AND THE CEO IS STRIKING AN OPTIMISTIC TONE SAYING WE ARE PLEASED WITH THE PERFORMANCE ON BUSINESS YEAR TO DATE AND ARE CONFIDENT IN THE OUTLOOK IN THE BACK HALF, UNDERSCORING THE SENSE CONSUMERS ARE STILL SEEKING VALUE AT WHOLESALE CLUBS LIKE THIS ONE. THIS ONE ALONG WITH DISCOUNT RETAILERS LIKE ROSS STORES AND T.J. MAXX ARE ABLE TO PROVIDE THAT SO THEY ARE DOING WELL. WE MOVED TO ANOTHER RETAILER NOT DOING SO WELL AND THAT IS THE GAP. SHARES DOWN TWO POINT 6% AFTER BARCLAYS DOWNGRADED THE STOCK WILL WAIT. THE ANALYST SAYING TERROR PRESSURES HAVE TAKEN THE COMPANY'S BLUE SKY MARGIN SCENARIO OFF THE TABLE. -- SAYING TARIFF PRESSURES HAVE TAKEN THE COMPANY'S BLUE SKY MARGIN SCENARIO OFF THE TABLE. INVESTORS HOPING FOR A TURNAROUND AFTER A DISASTER US EARNINGS REPORT LAST TIME THAT LED TO SHARES FALLING 20% DUE TO THE COMPANY WARNING TARIFFS COULD CUT PROFITS UP TO $300 MILLION. WE HAVE ANOTHER MEGA A IDEAL AND NO SURPRISE IT INVOLVES META. META PLANS TO SPEND AT LEAST $10 MILLION WITH GOOGLE CLOUD TO SUPERCHARGE ITS COMPUTING POWER. THIS DEAL UNDERSCORING META PUSHING A GUIDE TO OUTPACED COMPETITORS. MANDEEP SINGH SAYS THIS VALIDATES GOOGLE CLOUDS PRICING EDGE SINCE IT WAS ABLE TO BEAT OUT MICROSOFT AND AMAZON WHICH ARE MARKET LEADERS IN THIS SPACE. JONATHAN: THE COMPANY HAS BEEN SO AGGRESSIVE OVER THE LAST MONTHS. APPRECIATE IT. OUR TOP STORY, DIVISIONS GROWING WITHIN THE FEDERAL RESERVE AHEAD OF JAY POWELL'S FINAL JACKSON HOLE SPEECH. THE FED FACING A SEPTEMBER RATE CUT DECISION WITHIN OFFICIALS WEIGHING INFLATION AND LABOR RISKS. WE HAVE A DUAL MANDATE GOING INTO CONFLICT? DANI: WE HAVE A FED THAT IS MORE BIASED TOWARDS THE INFLATION SIDE OF THE DUAL MANDATE? THAT IS WHAT WE HAVE HEARD FROM FED OFFICIALS SPEAKING. I THOUGHT MIKE SCHUMACHER PUT THE REACTION REALLY WELL THAT IF YOU HAVE A MORE HAWKISH POWELL YOU HAVE A BIG REACTION ON THE FRONT END. IF HE CONFIRMS AYCOCK YOU HAVE A REACTION ON THE LONG END. THAT SHOWS US YOU HAVE A FRONT END AND A LONG END IN CONFLICT WITH EACH OTHER. JONATHAN: THIS IS SOMETHING WE'VE BEEN TALKING UP THROUGHOUT THIS MORNING. THE GLOBAL DEVELOPMENTS OVER THE PAST FEW MONTHS IN JAPAN AND THE U.K., THIS LEAKAGE WE ARE SEEING AT THE LONG END OF THE CURVE, IT IS AN INTERNATIONAL STORY, LITTLE BECOME AN AMERICAN PROBLEM? IS IT SOMETHING OFFICIALS NEED TO RESPOND TO? DANI: THE STORY INTERNATIONALLY IS THIS ONE IN THE U.S. IN JAPAN THEY HAVE OPTIONS THAT HAVE DONE POORLY AND YOU HAVE A FEW OF THOSE IN THE U.S.. IT GROWS TO BE A BIGGER PROBLEM IS NOT JUST OFFICIALS THAT HAVE TO DO SOMETHING OR IS IT THE FED THAT NEEDS TO GET CREATIVE IF THEY WANT TO CUT AND MAKE SURE LONG-TERM RATES DO NOT GET HIGHER? JONATHAN: YOU CAN CUT INTEREST RATES IN CERTAIN PLACES OF THE ECONOMY. YOU HAVE BEEN TALKING ABOUT THIS. IT IS SOMETHING WE SAW TAKING PLACE WHEN THE REDUCED INTEREST RATES 100 BASIS POINTS. IF THAT REPEATS THIS IS NOT THE OBJECTIVE OF THIS WHITE HOUSE. THEY HAVE TALKED ABOUT HOUSING AND BORROWING COSTS. IF YOU SEE THAT PLAY OUT IT WILL BECOME A PROBLEM. JONATHAN: PRESIDENT -- DANI: PRESIDENT TRUMP BEEN CLAMBERING FOR RATE CUTS. 100 BASIS POINTS. WE HAVE SEEN 100 BASIS POINTS PRICE IN AND IT IS A 10 YEAR THAT IS CUT AND A 30 YEAR MOVES HIGHER. YOU MIGHT GET IN A SITUATION WHERE THE WHITE HOUSE IN FED WANT THE SAME THING. JONATHAN: THERE IS ANOTHER PROBLEM AT THE FEDERAL RESERVE. THE JUSTICE DEPARTMENT URGING THE FEDERAL RESERVE TO REMOVE GOVERNOR LISA COOK AHEAD OF A PROBE INTO ACCUSATIONS OF MORTGAGE FRAUD. TOP HOUSING REGULATOR BILL PULTE POSTING ON X HE WILL SHARE NEW INFORMATION LATER THIS MORNING. JONATHAN: WHAT STRIKES ME IS THE TIMING OF THIS. HE IS SPEAKING 9:30, JAY POWELL SPEAKS AT 10:00. IT IS UNLIKELY IT WILL CHANGE WHATEVER POWELL SAYS CONSIDERING HE PROBABLY HAS BEEN THINKING ABOUT THIS FOR SOME TIME BUT IT WILL BE THE ELEPHANT IN THE ROOM. THE THEME OF JACKSON HOLE IS ABOUT A CHANGING LABOR MARKET FOR THE UNOFFICIAL THEME IS FED INDEPENDENCE. JONATHAN: WITHOUT A DOUBT AND THE CHAIRMAN WILL NOT ADDRESS IT UNLESS HE GIVE SOME THROWAWAY LINE. I WONDER IF EVERYONE ELSE WHO ATTENDS DOES IT FOR HIM. THIS IS SOMETHING LISA TALKED ABOUT THAT YOU HAVE THE LIKES OF THE ECB PRESIDENT CHRISTINE LAGARDE WHO MIGHT DO THOSE KINDS OF THINGS FOR HIM. DANI: I KNOW THEY ARE SPEAKING TO OFFICIALS LATER FROM OTHER CENTRAL BANKS AND IT IS INTERESTING TO SEE WHAT THEY SAY TO HER. DOES IT FALL ON DEAF EARS? HOW MUCH OF A DIFFERENCE DOES IT MAKE? THE FED'S PROBLEMS ARE GLOBAL PROBLEMS TO THE POINT THE YIELD CURVE AFFECTING EVERYONE IN THE WORLD. CHRISTINE LAGARDE HAS A SKIN IN THIS GAME. WHERE DID THEY GO FROM HERE WITH THE THAT SEEMS INTENT ON TRYING TO GET MORE APPOINTEES INTO THE FOMC? JONATHAN: WE ARE BUILDING UP TO A VERY INTERESTING MORNING. IT STARTS WITH CHAIRMAN POWELL AT 10:00. YOU MIGHT WANT TO LOOK AT WHAT PULTE WILL SAY IT 9:30. META POACHING AND AI EXECUTIVE FROM APPLE. SOURCES TELLING US IT WILL BE AT LEAST THE SIXTH APPLE EMPLOYEE TO DEFECT TO THE SOCIAL NETWORK COMPANY. DANI: FOR APPLE, WHO DID THEY HAVE LEFT? THERE WAS A STORY META WAS LOOKING AT FREEZING AI HIRING. IT IS LIKE SAYING YOU WILL GO ON A DIET AND THEN EATING $200 MILLION IN DOUGHNUTS FOR BREAKFAST. THEY KEEP HOLLOWING OUT THE AI TALENT. IT UNDERSCORES A PART OF THE LABOR MARKET. YOU HAVE A HANDFUL OF PEOPLE BECOMING INCREDIBLY WEALTHY AROUND AI AND ALSO PEOPLE TRADING IN THE STOCK MARKET AROUND AI AT THE SAME TIME IT IS A STAGNATING LABOR MARKET. WE HAVE TALKED AD NAUSEA HIM ABOUT A CASE SHAPE ECONOMY. JONATHAN: I DON'T KNOW HOW THIS PLAYS OUT BUT LUKE KAWA DID A FANTASTIC JOB TALKING ABOUT HOW AGGRESSIVE THE EARLY STAGE OF THAT THIS MIGHT BE IN THE GAP WE SEE IN AMERICA AND OTHER COUNTRIES MIGHT GET WIDER IN THE FIRST FEW YEARS OF ROLLING THIS OUT. DANI: THERE IS ALSO THIS REALLY INTERESTING CONVERSATION ABOUT CROWDING OUT. WHETHER THIS IS CROWDING OUT OTHER INVESTMENT. IF IT IS A HYPERSCALE TYPE ENVIRONMENT WHERE THEY NEED A LOT OF RESEARCH IS, NOT JUST TALENT AND CAPITAL BUT POWER BUT ENERGY, DOES THAT CROWD EVERYONE ELSE OUT? IS IT NORMAL PEOPLE HAVING TO PAY MORE FOR ELECTRICITY BECAUSE YOU HAVE THE AI HYPERSCALERS WHO BRING UP SO MUCH -- HOOVERING UP SO MUCH? JONATHAN: THIS COULD BECOME A HUGE PROBLEM, NOT JUST HOUSING BUT THE PRICE OF ELECTRICITY. I DON'T KNOW HOW YOU EXPLAIN IT AWAY, PARTICULARLY IN EUROPE WHERE THEY DO NOT HAVE THE ENERGY ABUNDANCE WE HAVE IN THE UNITED STATES. DANI: YOU ADD IN ALL OF THIS TO WHAT ALREADY SEEMS LIKE CRACKS AMONG CONSUMERS. WHAT HAPPENS WHEN THEY HAVE TO PAY MORE FOR ENERGY? EUROPE IS LIVING WITH THE SCARS OF HIGH ENERGY PRICES. HOW DO THEY DEAL WITH THAT AND HOW DOES CONSUMER BEHAVIOR CHANGE? JONATHAN: CHINA CREATING A UNITED FRONT WITH INDIA AGAINST U.S. TARIFFS, WRITING "CHINA WILL STAND WITH INDIA TO UPHOLD THE MULTILATERAL TRADING SYSTEM WITH THE WTO AT THE CORE." JOINING US NOW IS KATE KALUTKIEWICZ, FORMER WHITE HOUSE TRADE OFFICIAL. CAN WE SIT ON THAT STATEMENT. CHINA WILL STAND WITH INDIA TO UPHOLD THE MULTILATERAL TRADING SYSTEM WITH THE WTO AT ITS CORE. THE IRONY. YOUR REACTION. KATE: I AM STRUGGLING NOT TO LAUGH OUT LOUD. CHINA LIKES TO TRY TO WIN THE SORT OF RHETORIC A GAME. THE IRONY OF CHINA, WHICH HAS BEEN THE SOURCE OF THE DOWNFALL OF THE WTO TRYING NOW TO LEAD IS SOMETHING THE U.S. WAS PROBABLY CHUCKLING AT AND WILL NOT RESPOND TO. JONATHAN: YOU THINK THEY NEED TO GET THE EUROPEANS ON SIDE AND I'M TALKING ABOUT THE U.S.? FOR A LONG TIME THE CHINA HAS BENEFITED FROM THE REST OF THE WORLD BEING OPEN AND THEM BEING RELATIVELY CLOSED. THIS IS SOMETHING THAT SUCCESSIVE U.S. ADMINISTRATIONS HAVE TRIED TO DO SOMETHING ABOUT. THE EUROPEANS HAVE STRUGGLED TO GET ON BOARD WITH UNITED STATES. DO YOU THINK IT IS DIFFERENT THIS TIME? KATE: I THINK IT IS DIFFERENT THIS TIME. WE HAVE SEEN A CHANGE IN OTHER COUNTRIES PARTICULARLY THE EUROPEANS BEING MORE WILLING TO CONFRONT THE CHINESE ECONOMIC CHALLENGES MORE DIRECTLY, MOVING FROM CALLING CHINA A COMPETITOR TO A STRATEGIC PROBLEM. YOU HAVE SEEN IN THESE TRADE FRAMEWORK AGREEMENTS THE TRUMP ADMINISTRATION HAS STRUCK WITH A NUMBER OF COUNTRIES PROVISIONS AROUND ECONOMIC SECURITY AND THAT IS CODE WORDS COVERING PROVISIONS DIRECTED AT CHINA. EXPORT CONTROLS. THINGS THAT ARE AIMED AT CUTTING THIS RELATIONSHIP ECONOMICALLY BETWEEN OUR TRADING PARTNERS AND CHINA. THIS IS A DRAMATIC CHANGE. DANI: WHAT DOES IT LOOK LIKE IF YOU HAVE A CHINA WHO IS MORE WILLING TO TAKE IN AND STAND BY THE LIKES OF INDIA? WHAT DOES THAT LOOK LIKE AND WHAT IS IT MEAN FOR NEGOTIATIONS ALREADY UNDERWAY BETWEEN THE U.S. AND CHINA TRADE TALKS? KATE: I WOULD LOOK AT IT IN THE LENS OF THE U.S. AND INDIA. I LOOK AT COUNTRIES THAT ARE WILLING TO SIDLE UP NEXT TO CHINA. I WOULD ARGUE THAT IS A LOSING PROSPECT. CHINA IS NOT IN IT TO SUPPORT INDIA. HE IS IN IT TO FIGHT THE UNITED STATES. THAT IS A LOSING POSITION FOR INDIA AND WOULD BE A LOSING POSITION FOR BRAZIL AND A LONG TERM WE WILL SEE THAT START TO FRACTURE. CHINA IS NOT GOING TO DEFEND INDIA'S INTERESTS LONG-TERM. IT WILL LOOK OUT FOR ITSELF. DANI: YOU HAVE THE U.S. APPROACHED INDIA HAS BEEN RUSSIAN OIL. THEY HAVE NOT HIT OUT ON CHINA ON SECONDARY TARIFFS AROUND RUSSIAN OIL. HOW DO YOU THINK THE U.S. WILL APPROACH THIS IF IT IS INDIA THAT HAS BEEN STOPPARD AND NOT WILLING TO CHANGE COURSE -- THAT HAS BEEN STUBBORN AND NOT WILLING TO CHANGE COURSE ON THAT? KATE: THIS PLAY WITH INDIA HAS TAKEN LONGER THAN FOLKS EXPECTED. WE WERE VERY CLOSE TO A TRADE DEAL BETWEEN THE U.S. AND INDIA AND A LITTLE BIT OF THE STUBBORNNESS PROBABLY RELATED TO INDIA'S ANGER OVER PRESIDENT TRUMP DECLARING IT WAS HE WHO SOLVES THE PROBLEMS WITH PAKISTAN AND A COUPLE OF OTHER NATIONAL SECURITY RELATED ITEMS -- I THINK THIS HAS STYMIED MODI'S ABILITY TO MOVE POLITICALLY WITHIN HIS OWN COUNTRY. I SUSPECT WE WILL SEE A LEADER LEVEL ENGAGEMENT BETWEEN THE PRESIDENTS SOMETIME SOON. IT WILL TAKE THAT TO UNSTICK THIS RELATIONSHIP BUT I REMAIN RELATIVELY POSITIVE WE WILL SEE AN OUTCOME AT A VERY HIGH LEVEL THAT TAKES DOWN SOME OF THE PRESSURE. IT WILL HAVE TO RELATE SOMEWHAT TO INDIA'S MOVE AWAY FROM RUSSIAN OIL. THIS IS BEEN SOMETHING THE TRUMP ADMINISTRATION HAS PRIORITIZED RECENTLY WHICH IS OUTSIDE OF THE TRADE LANE BUT NONETHELESS PUT UNSTICK SOME OF THE TRADE PROBLEMS IF INDIA MAKES CHANGES THE TRUMP ADMINISTRATION IS LOOKING FOR. DANI: INDIA IS ONE OF THE LAST THAT DOES NOT HAVE THE HIGH-LEVEL AGREEMENT WE ARE UNDERSTANDING THE CONTOURS OF WHAT HAPPENS WHEN YOU GET THAT AGREEMENT WITH YESTERDAY AND HUBLEY PUBLISHED VERSION OF U.S. AND EU TRADE. -- YESTERDAY THE NEWLY PUBLISHED VERSION OF U.S. AND EU TRADE. HOW CERTAIN ARE WE WHEN IT COMES TO TRADE FOR PLACES WE HAVE GOT THOSE AGREEMENTS? KATE: THE AGREEMENTS ARE ANNOUNCED WITH THE LAP -- WITH A LOT OF POMP AND CIRCUMSTANCES SOMETIME LACKED DETAIL. WE ARE SEEING A LACK OF REGAL -- A LACK OF LEGAL DETAIL. YOU SEE LANGUAGE AROUND INTENDS. WE ARE FAR AWAY FROM LEGALLY BINDING LANGUAGE COMPANIES WOULD LIKE TO SEE. NONETHELESS YESTERDAY'S STATEMENT IS AMONG ONE OF THE MORE DETAILED JOINT STATEMENTS LAYING OUT EXACTLY WHAT BOTH SIDES EXPECT TO DO GOING FORWARD. WE ARE AT A FAIRLY TRAUMATIC TURNING POINT IN THE TRANSATLANTIC RELATIONSHIP. WE HAD A PRESIDENT WHO SAID THAT YOU WAS CREATED TO SCREW THE UNITED STATES AND NOW ALL OF THE SHOWS OF CAMARADERIE, NOT ONLY THE BEATINGS AT THE WHITE HOUSE BUT ALSO THIS TRADE FRAMEWORK WHICH SIGNIFIES A WIN ON BOTH SIDES. JONATHAN: THEY NEED EACH OTHER. KATE KALUTKIEWICZ, FORMER WHITE HOUSE TRADE OFFICIAL ON THE CURRENT TRADE SITUATION. MUCH HAS HAPPENED OVER THE PAST MONTHS. DANI: THE FACT THAT EVERYTHING HAS BEEN DONE IN REVERSE, YOU GET THE HIGH-LEVEL MEETINGS AND THEN YOU FIGURE OUT THE DETAILS LATER. YOUR POINT ON THE EUROPEANS IS SUCH A GOOD ONE BECAUSE THERE IS STILL A LOT OF STICKING POINTS. THINGS LIKE DIGITAL SOVEREIGNTY. DOES THE EU WANT TO GIVE UP SOME OF THEIR TOUGH REGULATIONS ON THE WORLD'S BIGGEST TECHNOLOGY COMPANIES WHICH ARE AMERICAN? A LOT TO BE FIGURED OUT EVEN THOUGH YOU HAVE THE BROAD AGREEMENT. JONATHAN: IT IS NOT USUALLY HOW DIPLOMACY WORKS. YOU GOING TO THE BACK ROOM AND IRONED OUT THE DETAILS THAN THEY SIGN OFF ON EVERYTHING THAT HAS BEEN AGREED. IT IS THE REVERSE OF THAT. JONATHAN: IT SEEMS LIKE -- DANI: IT SEEMS LIKE EVEN WHEN YOU HAVE THE BACK ROOM TRADING LIKE SWITZERLAND YOU HAVE A PRESIDENT XI WAS NOT PART OF THIS DEAL. JONATHAN: FUTURES -- YOU HAVE A PRESIDENT SAYING I WAS NOT PART OF THAT DEAL. -- YAHAIRA: A NEW YORK APPEALS COURT HAS THROWN OUT A MASSIVE FRAUD PENALTY AGAINST PRESIDENT TRUMP AND HIS COMPANY. THE COURT UPHELD THE FINDING THAT HE BROKE THE LAW BY INFLATING THE VALUE OF HIS ASSETS BUT RULED THE HALF $1 BILLION FIND WAS EXCESSIVE. ATTORNEY GENERAL LETITIA JAMES HAS VOWED TO CHALLENGE THE RULING. ERIC TRUMP PLANS TO VISIT TOKYO AS PART OF THE FAMILIES CRYPTO INDUSTRY PUSH. SOURCES TELLING US THE U.S. PRESIDENTS ON PLANS TO ATTEND A SHAREHOLDER MEETING OF THE JAPANESE BITCOIN FIRM META-PLANET ON SEPTEMBER 1. YOU WERE TALKING ABOUT TRADE. HERE IS THE LATEST ON INDIA. 50% PUNITIVE TARIFFS ON INDIA WILL PICK IN AS PLANNED THIS WEEK AS WHITE HOUSE TRADE ADVISOR PETER NAVARRO SAYS INDIA IS COZYING UP TO CHINA AND ITS PURCHASING OF RUSSIAN OIL IS HELPING FUND MOSCOW'S WAR IN UKRAINE. OFFICIALS ARE SAID TO BE PERPLEXED BY THE U.S. CRITICISM. JONATHAN: THANK YOU. UP NEXT, STAYING ON THE GOLDEN PATH. > > WE HAVE HAD MIXED MESSAGES. WE HAVE HAD SOME INFLATION REPORTS THAT CAME IN MILDER THAN WE EXPECTED AND I WAS FEELING GOOD BECAUSE I THOUGHT IF THE TARIFFS STAY IN THEIR LANE THERE IS A REAL SENSE IN WHICH MAYBE WE NEVER LEFT THE GOLDEN PATH. MICHAEL: -- JONATHAN: HOW MUCH HAVE THINGS CHANGED? GERSHON DISTENFELD JOINS US NEXT. JONATHAN: LIVE FROM NEW YORK CITY WELCOME TO THE PROGRAM. YOU CHOOSE POSITIVE .2% ON THE S & P 500, UP .1% ON THE NASDAQ. ABOUT TWO HOURS AND 10 MINUTES AWAY FROM HEARING FROM JAY POWELL IN JACKSON HOLE. STAYING ON THE GOLDEN PATH. > > WE HAVE HAD MIXED MESSAGES. WE HAVE HAD SOME INFLATION REPORTS THAT CAME IN MILDER THAN WE EXPECTED AND I WAS FEELING GOOD BECAUSE I THOUGHT IF THE TARIFFS STAY IN THEIR LANE THERE IS A REAL SENSE IN WHICH MAYBE WE NEVER LEFT THE GOLDEN PATH. THE LAST INFLATION REPORT THAT CAME IN WHERE YOU SAW SERVICES INFLATION START SHOOTING UP IS A DANGER. I AM HOPING THAT IS A BLIP. JONATHAN: A DIVIDED COMMITTEE AHEAD OF JAY POWELL SPEECH. GERSHON DISTENFELD WRITING I WOULD BE SURPRISED IF PYLE SAID ANYTHING TO CONFIRM A SEPTEMBER RATE CUT BUT HE WILL KEEP THE DOOR OPEN. I DON'T THINK HE WANTS A BOND MARKET SELLOFF RIGHT NOW. DARSHAN -- GERSHON JOINS US NOW. THE CONNECTION BETWEEN THE DEBATE AT THE FRONT END OF THE CURVE IN THE STORY OUT OF THE LONGER END. HOW CONNECTED ARE THOSE THINGS? GERSHON: MUCH LESS CONNECTED THAN WE HAD IN THE PAST. I HAVE HEARD GUEST AFTER GUEST AND THEY ARE DANCING AROUND THE REAL ISSUE. THEY ADMIT THE FED IS IN A DIFFICULT POSITION. THE DUAL MANDATE, WE HAVE SEE OF POWER GETS TO CHANGING IT. THE DUAL MANDATE -- WE WILL SEE IF POWELL GETS TO CHANGING IT. THE DUAL MANDATE IS STUCK, GROWTH AND INFLATION GIVING DIFFERENT SIGNALS. PEOPLE SIGNALING WHAT MATTERS IS LONG AND HE OF THE CURVE AND WHAT PEOPLE ARE NOT INCLUDING IS THE FED HAS A LOT LESS INFLUENCE ON THE DIRECTION OF THINGS THAN THEY HAVE HAD IN THE PAST. THAT IS THE REALITY. IT WILL BE GOOD THEATER TO HEAR THE SPEECH AT 10:00. IF YOU'RE A TRAITOR AND YOU CARE ABOUT WHAT MARKETS WILL DO TODAY YOU WILL PAY A LOT OF ATTENTION. I DON'T THINK THERE IS A LOT THAT CAN BE SAID THAT WILL IMPACT THE REAL ISSUE WHICH IS THE LOWER END OF THE CURVE. DANI: IF THEY HAVE LESS CONTROL OF THE LONGER END OF THE CURVE THAT MEANS MONETARY POLICY TRANSMISSION HAS CHANGED AND THEIR EFFECTIVENESS AT DOING SO HAS CHANGED. A LOT HAS BEEN MADE ABOUT WHO HOLDS DEBT AND WHETHER OR NOT THEY CAN AFFECT THAT AS MUCH. WHAT DOES THAT MEAN GOING FORWARD IF THE FED WANTS TO START CUTTING OF THE LONG END IS OUT OF THEIR CONTROL? GERSHON: OBVIOUSLY THERE IS SOME IMPACT IN THE SHORT END. LOOK AT THE CORPORATE MARKET. WE ARE SEEING FINANCING COSTS HAVE BEEN STUBBORNLY HIGH THEY'VE BEEN FLOWING THROUGH TO CREDIT METRICS. I DON'T KNOW IF THERE IS THAT MUCH THEY CAN DO. THE REALITY IS ESPECIALLY IN THE U.S. WE HAVE A REAL PROBLEM WITH THE BUDGET DEFICIT AND MARKETS WILL CONTINUE TO LOOK AT THAT. THIS IS A OUT OF CONSENSUS VIEW BECAUSE IT IS NOT WHAT WE HAVE SEEN OF THE LAST 50 YEARS THAT I WOULD NOT BE SURPRISED IF WE WAKE UP TWO OR THREE OR FIVE YEARS IN THE 10 YEAR IS AT A MUCH MORE NORMAL RATE, 3% OR 3.5%. CLOSE YOUR EARS FOR THIS AND THE 30 YEAR IS AT 6%. I AM NOT PREDICTING THAT WILL DEFINITELY HAPPEN I AM SAYING IT IS NOT OUT OF THE REALM OF POSSIBILITY. INVESTORS WORLDWIDE WILL BE HESITANT THE LAND FOR 30 YEARS TO THE UNITED STATES BEEN THERE IS NO POLITICAL WILLPOWER ON EITHER SIDE TO GET THE BUDGET DEFICIT UNDER CONTROL. DANI: I'M TRYING TO UNDERSTAND WHAT THAT WORLD WOULD LOOK LIKE. IT'S PERCENT, MAYBE WE CANNOT FATHOM THAT. SOMETHING HIGHER -- 6%, MAYBE WE CANNOT FATHOM THAT. SOMETHING HIGHER -- WHAT DOES IT MEAN ABOUT THE TRAJECTORY OF DEFICITS IN THE U.S. AND BEING ABLE TO GROW AND HAVING DEBT ISSUED AND FOREIGNERS BY IT? GERSHON: IF YOU LOOK AT THE LONG ARC OF HISTORY 5% OR 6% IS NOT CRAZY. WHEN I ENTERED THE INDUSTRY 30 YEARS AGO THE 10 WAS IN THE MID-FIVES AND PEOPLE THOUGHT THAT WAS THE LOWEST IT HAD BEEN 20 YEARS. PEOPLE WERE LIKE THAT IS REALLY EXPENSIVE. YOU CAN ONLY GO UP FROM HERE. NOW WE HAVE BEEN IN A PERIOD OF LOW RATES AND PEOPLE THINK THE OTHER WAY. THERE IS A RECENCY BIAS BUT IT WILL WEIGH ON GROWTH. THERE IS NO QUESTION. THE QUESTION THAT IS IS AI OR OTHER AREAS OF PRODUCTIVITY GOING TO OFFSET THAT AND WE WILL STILL HAVE A GOOD OUTCOME? IT IS A VERY HARD THING TO FORECAST. JONATHAN: YOU ARE POINTING TO HER ABOUT SOVEREIGN BALANCE SHEETS. WHAT ARE DO NOT SEE HIS CONCERN ABOUT CORPORATE BALANCE SHEETS. HOW DO YOU THINK ABOUT THE RELATIVE VALUE IN CORPORATE AMERICA VERSUS THE SOVEREIGN AND HOW MUCH TIGHTER CAN SPREADS GET? GERSHON: SPREADS ARE VERY TIGHT. I THINK IT IS IMPORTANT TO RECOGNIZE IT IS YIELDS THAT GENERATE RETURNS AND NOT SPREADS. GUN TO MY HEAD I THINK SPREADS WIDEN BUT I STILL RECOMMEND BUYING HIGH-YIELD OR CREDIT AND THE REASON IS THE WAY SPREADS WILL LIKELY WIDEN IS AT SOME POINT WE EXPECT THE FED TO CUT TWO OR THREE TIMES THIS YEAR AND CONTINUED TO CUT NEXT YEAR AS IT BECOMES CLEAR THE DATA IS SOFTENING ON THE GROWTH SIDE IN THE LABOR MARKET. WHILE HAPPEN THEN IS THE SHORT END OF THE CURVE WHERE HIGH-YIELD IS -- THE THREE TO FIVE YEAR PART OF THE PURPLE RALLY HARD. HIGH YIELDS WILL COME DOWN. THAT MEANS THE SPRINT WILL WIDEN. -- THAT MEANS THE SPREAD WILL WIDEN. YOU WILL GET RETURNS FROM CREDIT. I AM NOT BANGING THE TABLE. IN APRIL AND MAY THINGS GOT VERY CHEAP. THE REALITY IS EVERYTHING IS EXPENSIVE RIGHT NOW. I THINK WE SHOULD EXPECT LOWER RETURNS ACROSS THE BOARD FROM STOCKS AND FROM BONDS. THE GAP WILL CLOSE. STOCKS HAVE DONE SO MUCH BETTER THAN BONDS AND THAT GAP WILL CLOSE. THAT IS WHY PEOPLE STILL NEED TO HAVE FIXED INCOME. JONATHAN: IF YOU SEND THE JET YOU THINK I WILL MAKE IT DOWN THERE IN TIME AND WATCHED CHARIMAN POWELL TOGETHER? GERSHON: CHAIRMAN POWELL DOES NOT GO ANYWHERE WITHOUT ME ADVISING HIM TO THE LAST SECOND. YOU ARE A LITTLE BIT LATE. YOU IN NEW YORK. NOT GOING TO BE ABLE TO MAKE IT. JONATHAN: ENJOY YOURSELF. GERSHON DISTENFELD DOWN IN FLORIDA. WE ARE IN THE WRONG STATE THIS MORNING. THE WEATHER HERE HAS BEEN DREADFUL. DANI: REALLY BAD. THERE IS NO OTHER WAY TO WATCH JAY POWELL BESIDES A BEER IN YOUR HAND AND SUNNY SKIES. JONATHAN: FIXED INCOME IN THE FEDERAL RESERVE CHAIR. UP NEXT, AARON CANNON, BRUCE KASMAN OF JP MORGAN AS WE CACKLE YOU DOWN TO A ADDRESS FROM THE FED CHAIR. JAY POWELL IN JACKSON HOLE, WYOMING. FROM NEW YORK, THIS IS BLOOMBERG. > > THE FED TALKS AT ALL ABOUT CUTTING RATES IT IS GOING TO BE INCREMENTAL STEPS AHEAD. > > WILL PROBABLY PUT A LOT OF FOCUS ON THE PRICE STABILITY. > > VERY MUCH UNLIKE LAST YEAR, WHEN POWELL MADE WAS COMING, HE'S GOING TO KEEP HIS OPTIONS OPEN. > > THERE IS A DECENT ECONOMIC ARGUMENT THIS IS NOT ABOUT YOUR FEELINGS AT ALL. POWELL WILL BE CAUTIOUS. > > JAY POWELL IS LOOKING AT WHAT HAPPENS TO HIS MANDATE. > > THIS IS "BLOOMBERG SURVEILLANCE." JONATHAN: CHAIRMAN POWELL, TWO HOURS AWAY. THE OPENING BELL, 90 MINUTES AWAY. EQUITY FUTURES LOOK LIKE THIS. WE ARE POSITIVE .2% ON THE S & P, BOUNCING BACK FROM A LOSING STREAK. HIGHER ON THE NASDAQ 100. A HUGE DEBATE ABOUT THIS DEBATE AT THE FRONT END AND THE CONNECTION AT THE STORY THE LONGER END OF THE CURVE. TWOS AT 3.79%. GOING INTO THIS ONE, CHAIRMAN POWELL, TWO HOURS AWAY. DANI: IT IS TELLING THAT HE IS GIVING THIS SPEECH AT A TIME WHEN LONG ENDS ARE AT HIGHS. THERE IS A QUESTION JUST ABOUT THE LONGER TERM. WE WERE JUST SPEAKING ABOUT THIS WITH ALLIANCEBERNSTEIN. ABOUT HOW POLICY TRANSMISSION WORKS. IF YOU HAVE A FED THAT WANTS TO CUT A LONG END THAT IS STUBBORNLY HIGH. JONATHAN: THE EFFICACY OF INTEREST-RATE POLICY, WHICH FOR MONETARY POLICY OFFICIALS IS A PROBLEM IN AND OF ITSELF. LAYER ON TOP THE POLITICAL PRESSURE. I WANT TO SEE MORTGAGES AND A MORTGAGES COME DOWN. THIS COULD BECOME A PROBLEM FURTHER DOWN THE ROAD. DANI: THERE IS THE RISK THEY ARE EXACERBATED BY DOING MOVES THAT SEEMINGLY DAMAGE THE INDEPENDENCE OF THE FED. WHETHER OR NOT IT DAMAGES THE INDEPENDENCE IS KIND OF NOT THE STORY. IT IS THE PERCEPTION OF IT THAT MAKES PEOPLE LESS WILLING TO BUY LONG-TERM BONDS OR JUST NEED A HIGHER RISK PREMIUM FOR DOING SO. IT IS AN ADMINISTRATION THAT WANTS YIELDS DOWN, BUT THEY WANT MORTGAGES DOWN SO THEY NEED THE LONG END OF THE CURVE TO MOVE. JONATHAN: YOUR EQUITY MARKET, ATTEMPTING TO POUNCE. POSITIVE BY .2%. COMING UP, WE WILL CATCH UP WITH AARON CANNON AS STOCKS LOOK TO AVOID A SIX DAY OF LOSSES. AND JEAN BOIVIN OF BLACKROCK AS INVESTORS LOOK FOR A FROM JAY POWELL. WE BEGIN IN JACKSON HOLE, AS JAY POWELL PREPARES TO MAKE HIS FINAL JACKSON HOLE ADDRESS. LISA IS THERE ON THE GROUND AHEAD OF THAT SPEECH. FRAME THINGS FOR US. WHAT CAN WE LOOK AHEAD TO IN A FEW HOURS' TIME? LISA: I THINK YOU GUYS PUT IT WELL. THIS IS A FLOCK MOMENT FOR THE FEDERAL RESERVE, BECAUSE THE ECONOMIC BACKDROP IS SO CONFUSING. IS IT REALLY THE INFLATIONARY PRESSURE? WHERE IS IT A WEAKENING IN THE LABOR MARKET THAT YOU TAKE THEIR ATTENTION, BUT ALSO HOW DO YOU MAINTAIN FED CREDIBILITY? AS DANIEL WAS SAYING, IT IS NOT ONLY THE ABILITY TO ACT WITHOUT POLITICAL INTERFERENCE, BUT THE PERCEPTION TO DO SO. THAT IS HEIGHTENED BY THE IDEA THAT IF THIS FEDERAL RESERVE MAKES THE SAME TRANSITORY MISTAKE THEY MADE SEVERAL YEARS AGO, DOES THAT LEAVE THEM WITHOUT THE CREDIBILITY OF BEING ABLE TO TAMP DOWN INFLATION? THAT SEEMS TO BE LOOMING LARGE IN THE COMMENTARY OF AUSTIN GOOLSBY, AS WELL AS SOME OF THE OTHERS. OTHERS WHO HAVE SPOKEN IN THE PAST 36 HOURS. ALSO ON THE OTHER SIDE OF THE MANDATE, WHAT I WAS HEARING FROM A NUMBER OF FED OFFICIALS HERE ON THE GROUND YESTERDAY, THEY HAVE SEEN A DETERIORATION IN THE LABOR MARKET. AT LEAST IN ANECDOTAL DATA, IN ADDITION TO WHAT THEY ARE SEEING IN THE HARD DATA IN THE PAST SIX WEEKS. IF THEY ALLOW THE LABOR MARKET TO FALL OUT OF BED THAT TOO WILL IMPACT THEIR CREDIBILITY AT THE SAME TIME YOU HAVE THE ALLEGATIONS COME FROM THE WHITE HOUSE. DEFINITELY A REALLY INTERESTING MOMENT AND ONE THAT JAY POWELL HAS TO NAVIGATE GIVEN HOW MUCH OF A SPOTLIGHT IS ON HIM. JONATHAN: LET'S SET ON THAT. IT IS HOW WE STARTED THE PROGRAM THIS MORNING. JUST ON THE LABOR MARKET, FROM A MARKET PERSPECTIVE A LOT CHANGED AFTER PAYROLLS. BUT LISTENING TO FED OFFICIALS IN THE PAST 24 HOURS, WE DID NOT GET THE SENSE THAT THEIR VIEWS HAD SHIFTED THAT MUCH OFF OF THAT ONE REPORT. CAN YOU GIVE US SOME MORE COLOR ON THAT? HOW MUCH HAVE VIEWS CHANGED SINCE PAYROLLS? LISA: YOU KNOW, IT IS A GREAT QUESTION, AND IT GOES DOWN TO THE -- TO THE DIVISION ON THE FED WE KEEP TALKING ABOUT. WE TALK ABOUT NIKKI BOWMAN AND THE MOST DISTANT WE HAVE SEEN ON THE BOARD OF GOVERNORS IN DECADES, BUT IT GOES BEYOND THAT. WHEN YOU TALK TO PEOPLE IN PRIVATE THIS IS CONCERNING TO THEM, BECAUSE WHEN THEY TALK TO THEIR CORPORATE CLIENTS, WHEN THEY TALK TO EXECUTIVES THEY HEAR A DIFFERENT STORY DEPENDING ON WHAT REGION THEY ARE IN. THIS IS NOT ONE AMERICA THEY ARE TRYING TO GAUGE. THE CURRENT AVERAGE AMERICAN, AS PATRICK HARKER HAS SAID, DOES NOT EXIST ANYMORE. HOW DID THEY TAKE WHAT IS GOING ON IN THIS AGGREGATE AND FORM MONETARY POLICY? HOW DO YOU MAINTAIN MONETARY POLICY CREDIBILITY AT A TIME WHERE THE TRANSMISSION MECHANISM IS REALLY IN QUESTION? HOW MUCH CAN THEY INFLUENCE IN REAL-TIME THE LABOR MARKET OR INFLATION DYNAMICS? I WAS SPEAKING WITH ONE OFFICIAL YESTERDAY WHO SAID IT WAS QUITE -- QUITE CLEAR THAT THE FED CAN INFLUENCE INFLATION OR QUICKLY THEN IT CANNOT LABOR MARKET, SO YOU DON'T WANT TO DISRUPT THE LABOR MARKET, BECAUSE YOU CANNOT INTERVENE IN THE SAME WAY YOU CAN FOR THE INFLATION SITE. THAT IS A MORE DOVISH TAKE. CLEARLY THERE ARE HAWKS THAT HAVE THAT'S GOING FROM 2022. ALSO I VERY MUCH DUG IN, ESPECIALLY GIVEN THE POLITICAL INTERFERENCE. RIGHT NOW FEELS LIKE A SPLINTERED FED AT A -- AT A HIGHLY FRAUGHT MOMENT. JONATHAN: ONE FINAL QUESTION. WHAT THEY TELL US IN PUBLIC IS SO DIFFERENT TO WHAT THEY TELL US BEHIND CLOSED DOORS. HOW IS THIS STORY OF FEDERAL RESERVE INDEPENDENCE, THE PRESSURE ON THE INSTITUTION, PLAYING OUT IN JACKSON HOLE? LISA: SO, IT IS A REALLY GOOD POINT, THAT IN PRIVATE CONVERSATIONS IS WHERE EVERYBODY KEEPS THIS. WHAT IT HAS COME DOWN TO IS SPECULATION ON WHO IS GOING TO SET THE TONE FOR THE FEDERAL RESERVE NEXT YEAR. THAT IS GOING TO REALLY BE A BIG QUESTION. WHO CAN ACTUALLY PLACATE PRESIDENT TRUMP'S DESIRES WHILE REMAINING TRUE TO THE ECONOMY, AND HOW MUCH CAN A MARKET PUSHBACK? HOW MUCH CAN THE FED TRY TO TAMP DOWN SOME OF THE RESPONSE YOU MAY SEE IN MARKETS? IT ALL COMES DOWN TO THE DOLLAR. THAT ULTIMATELY IS A RELEASE VALVE AND IT IS NOT PREDICATED COMPLETELY ON U.S. POLICY AND TRADERS. THAT, I THINK, IS A PREEMINENT CONCERN AROUND A LOT OF POLICYMAKERS HERE. THE DOLLAR WEAKENS TOO MUCH, ALL OF A SUDDEN YOU HAVE A NEW INFLATIONARY PRESSURE. JONATHAN: LOOKING FORWARD TO THE COVERAGE. BRAMMO IN JACKSON HOLE ALONGSIDE TK AND MIKE MCKEE. ABOUT AN HOUR FROM NOW, THAT IS WHEN THE CONVERSATION BEGINS FOR THEM. THIS HAS BEEN OUR DISCUSSION THIS MORNING. A BE A BETTER INTERVIEW QUESTION IS NOT WHAT YOU WANT TO DO WITH INTEREST RATES, BUT WHAT DO YOU WANT TO DO WITH THE BALANCE SHEET AND WHAT WILL YOU DO IF LONG END RATES DON'T COME DOWN? DANI: BECAUSE THEY HAVE THIS PROBLEM OF CUTTING RATES IS NOT NECESSARILY GOING TO BRING THE LONG END DOWN. THIS IS A PROBLEM THEY HAD IN PAST CUTTING CYCLES. DO YOU INTRODUCE THE QUESTION OF YIELD CURVE CONTROL? BUT HOW MUCH IS IT A MARKET THAT WOULD PUSHBACK AGAINST THAT? HOW MUCH OF IT IS SEEING WHAT IS HAPPENING IN POLITICS AND NOT WILLING TO BUY THE LONG END OF THIS YIELD CURVE? IT IS SO MUCH FOR THEM TO CONSIDER HIM AND THE BLOOD FORCE INSTRUMENT TOOL OF RATES IS NOT ENOUGH TO TACKLE IT. JONATHAN: HERE IS THE VIEW ON WALL STREET. AARON CANNON WRITING THE FOLLOWING. THE FEDERAL RESERVE FINDS ITSELF IN A TRUE CONUNDRUM. JAY POWELL WILL LEAVE THE DOOR OPEN FOR A SEPTEMBER RATE CUT AND HIS COMMENTS WILL DO LITTLE TO PUSHBACK ON THIS VIEW. AARON JOINS US NOW FOR MORE. WELCOME TO THE PROGRAM. LET'S GET INTO THAT. HOW MUCH PRESSURE IS ON THIS FED CHAIR TODAY HIM AND HOW MUCH HINGES ON CPI IN A FEW WEEKS TIME, AND PAYROLLS? AARON: THAT IS RIGHT. ASK FOR HAVING ME. I THINK AT THE END OF THE DAY THE FED HAS TWO MORE IMPORTANT DATA POINTS TO LOOK AT, AND THEY DON'T SEEM TO BE IN A POSITION TO WANT TO SHIFT THE POLITICAL NARRATIVE, WHICH IS THAT THEY NEED TO CUT RATES TO FEED INTO THE WHITE HOUSE NARRATIVE. I THINK THEY ARE LOOKING AT THE LABOR MARKET, THEY ARE SEEING THOSE ANECDOTAL SIGNS OF SOFTENING. WE SAW THAT IN THE JOLTS DATA, IN THE REVISIONS, AND THE TALK AROUND THAT. BUT THEY ARE ALSO GRAPPLING WITH THE REALITY THAT CORE CPI IS AT 3.1%, AND IF YOU LOOK AT LONG-TERM BREAKEVEN INFLATION RATES THEY ARE STILL BELOW 2.5%. AND THERE ARE OTHER ANECDOTAL CONCERNS AROUND TARIFFS AND WHETHER THAT HAS FED THROUGH IN THEIR ENTIRETY WITH INVENTORIES HAVING BURNED DOWN FROM LIBERATION DAY. I SUSPECT TODAY MAY BE A DAY FOR THE FED TO CONTINUE TO STATE WHAT THEY SAID BACK ON JULY 30, AND TO PROBABLY PUT SOME WEIGHT ON THE NEXT BIG DATA POINTS BEFORE THE SEPTEMBER MEETING. DANI: LOOKING BACK AT WHAT POWER SAID ON THAT PRESS CONFERENCE, FINANCIAL CONDITIONS ARE ACCOMMODATIVE. IF WE GOT SOMETHING LIKE THAT, WHAT WOULD BE THE REACTION FROM MARKETS? CERTAINLY NOT OPENING THE DOOR, OR CONFIRMING A SEPTEMBER CUT. AARON: IT IS INTERESTING. -THE RISK TODAY IS, A WEEK AGO WE WERE LOOKING AT THE POTENTIAL FOR A 50 BASIS POINT CUT. TODAY WE ARE NOT EVEN AT THE 100% LIKELIHOOD OF A 25% BASIS POINT CUT. I THINK THE FED MAY BE TRYING TO PULL THE MARKET BACK TOWARDS WHERE IT'S NORTHSTAR'S HEADING IN SEPTEMBER, WHICH IS PROBABLY A 25 BASIS POINT CUT, AND IT IS PROBABLY BETTER FOR MY MARKET REACTION PERSPECTIVE TO HAVE THE MARKET, YOU KNOW, WONDERING IF THEY'RE GOING TO DO 25. I WAS LOOKING AT FED FUNDS FUTURES. THERE IS A 65% OF A 25 BASIS POINT CUT AT THE SEPTEMBER MEETING. IF YOU ARE THE FED YOU THINK, MAYBE THAT IS A GOOD POSITION FOR THE MARKET TO THINK ABOUT. DANI: THAT IS THE BOND MARKET. WHAT ABOUT THIS EQUITY MARKET THAT HAS SEEN CONSECUTIVE DAYS OF LOSSES? HOW MUCH OF THAT REVERSING AND GETTING BACK TO RALLYING IS PREDICATED ON GETTING A CLEAR SIGNAL THAT WE WILL BE CUTTING RATES? AARON: I DON'T KNOW. I THINK WE HAVE GONE SUCH A LONG WAY SINCE APRIL. THE S & P UP 30-ODD PERCENT. WE HAD EARNINGS THAT CAME IN REASONABLY STRONG. 11% ANNUALIZED EARNINGS GROWTH JUST BEFORE EARNINGS CAME OUT AT 4% OR 5%. IF YOU LOOK AT MAG 7, WHICH BIG PERCENTAGE OF THE MARKET, OVER A THIRD OF THE S & P 500, DRIVING EARNINGS, 20 6% GROWTH RATE. EXPECTATIONS FOR 13%. THE MARKET IS TAKING A BREATHER NOW. WE ARE TRADING AT 22 TIMES FORD ON THE S & P. IF YOU LOOK AT THE 490 THREE NAMES OUTSIDE OF THE MAG 7 TRADING AT 20 TIMES, CERTAINLY THIS IS NOT A MOMENT TO THINK THAT THE MARKET IS SUPER ATTRACTIVE ON A VALUATION PERSPECTIVE. BUT THE GROWTH IS THERE AND I THINK THAT IS JUSTIFYING WHERE WE ARE AT THE MOMENT. JONATHAN: WHAT WOULD WE NEED TO SEE TO SUPPORT A MORE SUSTAINABLE TRANSITION ROTATION BENEATH THE SURFACE OF THIS ACT WE MARKET? INSIPID EMERGING SPORADICALLY OVER THE PAST FEW DAYS, BUT WHAT WE NEED TO SEE TO MAKE IT MORE SUSTAINABLE? AARON: THERE ARE A COUPLE OF THINGS. THIS HAS BEEN A MULTI-MONTH TREND. WHO LEADING THE MARKET FROM A SECTOR PERSPECTIVE? INDUSTRIALS. UTILITIES. COMMUNICATION SERVICES AND TECHNOLOGY ARE IN THERE AS WELL. BUT INDUSTRIALS, NUMBER ONE. SO, I THINK THAT SPEAKS TO A BROADENING. IF YOU LOOK AT THE CONTRIBUTION OF RETURNS TO THE S & P THIS YEAR THERE ARE NAMES OUTSIDE THE MAG 7 THAT ARE IN THERE. I'M NOT TOUTING THESE, BUT JUST PHILLIP MORRIS AND PALANTIR. THERE IS A BROADENING. IF YOU SEE THE RATES, THE FED FUNDS RATE CUT, HE MAY SEE SMALL-CAP EQUITIES START TO BROADEN THAT RALLY. I THINK THE FEAR IS THAT MULTIPLE RATE CUTS IN PARTICULAR COULD OCCUR AS A RESULT OF SLOWER GROWTH. IF WE HAVE A SLOWER GROWTH NARRATIVE I DON'T THINK THAT HELPS SMALL CAPS. IF WE HAVE RATE CUT BECAUSE CPI'S COMING OFF, THEN I THINK YOU COULD SEE THE BROADENING IN THE EQUITY MARKET. JONATHAN: APPRECIATE YOUR TIME. AARON KENNON OF CLEAR HARBOR ASSET MANAGEMENT, ECHOING WHAT WE HEARD FROM JOHN STOLTZFUS ON THE PRICE ACTION WE HAVE SEEN SO FAR. DANI: THE PROBLEM IS WITH INDUSTRIALS AND UTILITIES RALLYING YOU COULD MAKE THE CASE THAT THOSE ARE ALSO JUST A I-ADJACENT TRADES. THE THINGS LIKE AI DATA CENTER BUILD OUTS ARE OFFERING PREMIUM YOU ARE SEEING IN THOSE STOCKS. IF THE AI NARRATIVE FALTERS, DO THOSE TOO? JONATHAN: NUMBER TWO PERFORMER ON THE SUMP EITHER SHARE. EBAY, CVS, GENERAL ELECTRIC. THERE ARE SOME NAMES OUTSIDE OF THE COUNTRY. -- CONCENTRATION WE TALK ABOUT EVERYDAY. DANI: THERE ARE, BUT AGAIN, GIVEN THE MARKET CAP WAITING SINCE THE SPRING THE TOP 10 STOCKS HAVE CONTRIBUTED 60% OF THE RETURNS. THE TOP 10 STOCKS? TECH, TECH, TECH, FINANCE, FINANCE. JONATHAN: NVIDIA, THE BIG ONE NEXT WEEK. EQUITY FUTURES ON THE S & P POSITIVE THIS MORNING. LET'S GET YOU AN UPDATE ON STORIES ELSEWHERE WITH YOUR BLOOMBERG BRIEF. YAHAIRA: FBI AGENT'S RATED FORMER TRUMP NATIONAL SECURITY ADVISER JOHN BOLTON'S MARYLAND HOME THIS MORNING. SOURCES TELLING US AT BLOOMBERG RAID INVOLVED CLASSIFIED DOCUMENTS. BOLTON WAS PREVIOUSLY ALLEGED TO HAVE INCLUDED CLASSIFIED INFORMATION IN A BOOK HE RELEASED SEVERAL YEARS AGO. BOLTON AND THE FBI HAVE DECLINED TO COMMENT. RUSSIA IS STOPPING OIL SHIPMENTS AGAIN TO HUNGARY AND SLOVAKIA AFTER EIGHT UKRAINIAN ATTACK ON A PIPELINE THAT CLOSE TO THE TWO NATIONS. NOW SLOVAKIA AND HUNGARY ARE ASKING THE EU'S INTERVENTION, ASKING IT UPHOLDS ITS COMMITMENTS TO GUARANTEE THE SECURITY OF ENERGY SUPPLIES FOR EU MEMBER STATES. IN A FEDERAL JUDGE, RULING THE SPRAWLING IMMIGRATION DETENTION CAMP KNOWN AS ALLIGATOR ALCATRAZ MOST WIND DOWN OPERATIONS AND BE DISMANTLED. THE U.S. DISTRICT COURT JUDGE ORDERED IMMIGRATION AUTHORITIES TO STOP BRINGING IN DETAINEES AFTER FINDING IT WAS THE ULTIMATE PROPER ENVIRONMENTAL REVIEW. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: THANK YOU. MORE IN ABOUT 30 MINUTES' TIME. , THE MORNING CALLS, PLUS TONY WANG OF T. ROWE PRICE. LOOKING AHEAD TO EARNINGS FROM NVIDIA. FROM NEW YORK CITY, YOU ARE WATCHING BLOOMBERG TV. ♪ > > JUST GOING TO TALK ABOUT THE FED'S ACCOMPLISHMENTS AND CHALLENGES. AS YOU NOTED THIS LAST WEEK, I ALMOST THINK HE IS GOING TO UNVEIL THE NEW FRAMEWORK. THE MORE SYMMETRIC APPROACH MAKES A LOT OF SENSE. WILL HE GO DOWN THE ROAD OF TALKING ABOUT NEAR-TERM MONETARY POLICY? THAT IS THE MARKET QUESTION. I THINK IT IS NOT LIKELY. JONATHAN: THAT IS THE MARKET QUESTION. HERE IS THE MARKET ACTION. BOUNCING BACK BY .2% ON THE S & P. THE NASDAQ, UP BY .2%. SKU MORNING CALLS. STEEL FOLK CUTTING ITS PRICE TARGET ON ZOOM, SETTING MACRO CONDITIONS AND PRESSURE ON REVENUE GROWTH. YOUR SECOND CALL FROM PIEPER SANDLER, RAISING ITS PRICE TARGET ON BROADCOM, SAYING IT IS WELL-POSITIONED IN THE LANDSCAPE. EVERCORE RAISING ITS PRICE TARGET ON NVIDIA, SAYING THE CHIPMAKER IS STILL THE TOPIC IN THE NEAR TERM. THAT'S STICK WITH NVIDIA. THE COMPANY TELLING SUPPLIERS TO HALT H20 CHIP PRODUCTION. REPORTING CHINA IS URGING LOCAL COMPANIES TO STOP USING THE HARDWARE. MANDEEP SINGH OF BLOOMBERG INTELLIGENCE JOINS US. GOOD MORNING. WHAT IS HAPPENING HERE IN CHINA? MANDEEP: WE KNOW WHEN NVIDIA GUIDED LAST QUARTER THEY PRETTY MUCH TOOK OFF ALL OF THE CHINA REVENUE. ENDEARING THE QUARTER WE HEARD H20'S COULD BE SOLD, AND NOW WE ARE HEARING THE PUSHBACK FROM THE CHINESE GOVERNMENT, SAYING PROBABLY THEY DON'T WANT THE H20'S TO BE SOLD TO CHINESE COMPANIES. IN THIS CASE I THINK NVIDIA IS PROBABLY PULLING BACK IN TERMS OF THEIR ABILITY TO SELL TO CHINA. TO MY MIND, NOTHING HAS CHANGED IN TERMS OF THE GUIDE THEY GAVE. IT IS JUST, PEOPLE WERE ANTICIPATING SOME UPSIDE TO CHINA REVENUE BECAUSE NVIDIA WOULD BE ABLE TO SELL H 20'S. I DON'T THINK THAT IS HAPPENING, SO THAT UPSIDE TO ESTIMATES FROM THE CHINA SIDE IS GOING TO GO AWAY. DANI: THERE WAS THAT REUTERS STORY THIS WEEK THAT NVIDIA WAS LOOKING AT DEVELOPING A DIFFERENT CHIP, A BE MORE POWERFUL THAT GOOD SELL INTO CHINA. -- THAT IT COULD SELL INTO CHINA. IF THAT SOURCE OF REVENUE GETS CUT OFF HER NVIDIA TO GET AROUND IT WITH A NEW CHIP? MANDEEP: I DON'T THINK SO, SIMPLY BECAUSE THE GOVERNMENT FEELS, YOU KNOW, YOU ARE DEALING WITH SENSITIVE DATA WHEN YOU ARE TRAINING THESE MODELS, AND JUST WANT TO LOWER THE RELIANCE OF THE COMPANIES IN THE BUSINESS OF TRADING LARGE MODELS IN CHINA ON NVIDIA CHIPS. FOR THAT MATTER, FROM THAT PERSPECTIVE I THINK THEY WANT TO RELY ON LOCAL CHIPMAKERS, BUT H20 IS A DEPRECATED VERSION. NVIDIA IS SO FAR AHEAD IN TERMS OF WHERE THEY ARE CURRENTLY AND WHERE THEY WANT TO GO THAT SELLING AGE'S WAS INFERIOR TO BEGIN WITH, AND THEY CANNOT SELL THOSE I CANNOT SEE THEM GETTING AROUND THAT. -- THAT ABILITY TO SELL SOME OTHER VERSION OF THEIR CHIP. JONATHAN: WE WANT TO BRING IN TONY WONG. WELCOME TO THE PROGRAM. HOW DO YOU COMPARE AND CONTRAST THE RAMP UP WE HAVE SEEN IN SOVEREIGN CUSTOMERS FOR THE LIKES OF NVIDIA. AGAINST THE DEVELOPMENTS WE HAVE WITNESSED IN CHINA OVER THE PAST TWO MONTHS ALONE? TONY: I THINK AI AND DEMAND FOR COMPUTE CONTINUES TO BE STRONG A. I THINK YOU SAW THE CLOUD NUMBERS BE REALLY IMPRESSIVE AND AI RACE CONTINUES. WHAT IS GOING ON IN CHINA IS A CONTINUATION OF THAT. IT IS PROBABLY A NEGOTIATION OF HOW MUCH NVIDIA CHIPS AND AT WHAT POWER AND PERFORMANCE IS AVAILABLE. AND IN TERMS OF JUST WHAT THEY NEED A CONTINUES TO GROW. TO ME I THINK WHAT MATTERS IS THAT NVIDIA STAYS AHEAD. THAT THE WORLD IS DEVELOPING ON U.S. TECHNOLOGY AND NVIDIA PLATFORMS, AND TO ME THAT IS THE NORTHSTAR IN TERMS OF WHAT THE MARKET SHOULD LOOK FOR. DANI: THE POINT OF NVIDIA STAYING AHEAD, CLEARLY CHINA WANTS THEM TO USE HOMEGROWN CHIPMAKERS. HOW FAR AWAY ARE THOSE HOMEGROWN CHIPMAKERS? ARE THEY A REALISTIC ALTERNATIVE TO NVIDIA FOR CHINA TECH RIGHT NOW? TONY: I DON'T THINK SO. I THINK YOU OFTEN GET THESE TYPES OF NEWS REPORTS OF CHINA BEING PRETTY CLOSE WITH A NEW CHIP COMING. WE HAVE SEEN THIS TIME AFTER TIME OVER THE LAST FIVE TO 10 YEARS, AND SO TO ME THAT IS NOTHING NEW. A NEW CYCLE AND PART OF THE NEGOTIATION. TO ME THE SYSTEM, IF YOU LOOK AT WHAT THEY'RE DOING, ESSENTIALLY THEY ARE DESIGNING THE WHOLE SYSTEM AND MORE OF THE DATA CENTER TOGETHER. WHAT THEY ARE DOING IN NETWORKING AND THE CPU ARM, AND IN TERMS OF ALL OF THE SOFTWARE, THAT CONTINUES TO BE AHEAD, BUT I THINK COMPANIES ARE CONTINUING TO EXECUTE AND INNOVATE ON NEW PRODUCT AS WELL. DANI: IT IS THE FUNDAMENTALS YOU ARE TALKING ABOUT THAT REMAIN STRONG WITH NVIDIA. BUT HOW DO YOU FACTOR IN PRICE THINGS IN? LIKE WHAT WE ARE TALKING ABOUT IN CHINA AND ON THE U.S. SIDE TOO? TAKING REVENUE FROM THEIR CHINESE SALES? HOW DOES THAT IMPACT WHERE YOU THINK THE FAIR VALUE OF NVIDIA IS AT THIS MOMENT? TONY: I THINK HERE, HAVE TO WHAT WE HAVE SEEN SINCE APRIL, I MEAN, WE ARE DEFINITELY AT A DIFFERENT VALUATION RANGE. SENTIMENT IS VERY POSITIVE AFTER THIS BIG RUN. WE SAW A REALLY GOOD EARNINGS SEASON, AND SOME OF THAT HAS BEEN BAKED INTO NVIDIA STOCK. I THINK HERE PEOPLE WILL BE LOOKING FOR SUSTAINABILITY. SO, TO ME IT IS GOING TO BE THE EQUATION OF DEMAND. HOW DO WE THINK ABOUT NEW CUSTOMERS COMING INTO THE NVIDIA BACKLOG? AS WELL AS EXISTING CLUSTERS BEING BUILT OUT? AND ALSO SUPPLY IN TERMS OF RAMPING AND DO WE HAVE POWER CONSTRAINTS? I THINK THAT IS GOING TO BE ON TOP OF THE MARKET'S MIND COMING IN THE NEXT FEW WEEKS. JONATHAN: LOOKING FURTHER OUT WE ARE FOCUSED MORE ON ASSESSING THE AMOUNT OF GOVERNMENT INTERVENTION WE HAVE HAD, AND MAYBE WE'LL HAVE IN THE MONTHS TO COME. HOW ARE YOU THINKING ABOUT WHAT IS HAPPENING WITH INTEL AND WHAT IT COULD MEAN FOR OTHER COMPANIES? ONE CONVERSATION WE HAVE HAD THIS WEEK IS THAT IF WE DO TAKE AN EQUITY STAKE IN INTEL AND THEY BUILD OUT DOMESTIC FOUNDRY CAPACITY, WILL OTHER COMPANIES BE PUSHED TO USE IT IN A WAY THAT MIGHT NOT BE GOOD FOR THEIR BOTTOM LINE? TONY: YEAH, TO ME I THINK THE TECH TRENDS AND COMPETITIVE ADVANTAGES OF THE TECH COMPANIES MATTER THE MOST. I THINK THE GOVERNMENT ASSISTANCE AND HELP, THAT OBVIOUSLY IS BENEFICIAL, BUT AT THE END OF THE DAY I THINK IT IS ON INTEL TO IMPROVE THEIR FOUNDRY OPERATIONS, OR MANUFACTURING. HISTORICALLY IT HAS NOT BEEN A CAPITAL ISSUE. IT IS ABOUT FOCUSING ON WHAT THEY ARE DOING RATHER THAN PERHAPS THE GOVERNMENT TAKING A STAKE. TO ME THE TECH TRENDS ARE WHAT IS MOST IMPORTANT, AND HOW WELL YOU ARE POSITIONED. JONATHAN: THANKS FOR JOINING US. HOPE FULLY WE CAN CATCH UP NEXT WEEK. TONY WANG OF T. ROWE PRICE. JUST A FINAL WORD ON THESE DEVELOPMENTS IN 30 SECONDS. HOW HAVE YOU THOUGHT ABOUT THESE THINGS? THE PROSPECT OF TAKING STAKES IN COMPANIES LIKE INTEL? FOR MANDEEP: THE U.S. GOVERNMENT? THE FOUNDRY NEEDS TO BE REVIVED, AND FROM THAT RESPECT OF THERE IS NO SHORTCUT. EVEN IF GOVERNMENT INFUSES, YOU KNOW, MULTIBILLION DOLLARS, IT IS NOT GOING TO FIX THE FOUNDRY BUSINESS. IT IS GOING TO TAKE TIME TO MATTER WHAT. JONATHAN: IT IS GOOD TO SEE YOU. MANDEEP SINGH OF BLOOMBERG INTELLIGENCE. UP NEXT, 95 MINUTES AWAY BRUCE KASMAN OF -- BRUCE KASMAN JOINS US TO LOOK AHEAD TO JACKSON HOLE, WYOMING. PLUS, SOME MORNING MOVERS FOR YOU AND ANOTHER CHECK ON THE RETAIL SPACE. BJ'S IS DOWN BY TWO POINT 3%. WE HAVE A BOUNCE BACK IN THIS EQUITY MARKET FOLLOWING LOSSES ON THE S & P. CAN WE AVOID DAY SIX? THE FATE OF THIS MARKET SEEMINGLY IN THE HANDS OF ONE MAN. CHAIRMAN POWELL IN JACKSON HOLE. FROM NEW YORK THIS MORNING, GOOD MORNING. JONATHAN: THE OPENING BELL IS ABOUT 60 MINUTES AWAY. EQUITIES DOING OK. WE ARE ALL WAITING FOR THE SAME THING. CHAIRMAN POWELL IN 90 MINUTES IN JACKSON HOLE, WYOMING. REMEMBER PAIN, PAIN, PAIN, AND CLOSED THINGS OUT AND MOVED ON AND HIKED INTEREST RATES AGGRESSIVELY? THIS IS A DIFFERENT TIME. THINGS ARE MUCH MORE FINELY BALANCED. FOR THAT REASON I IMAGINE THIS ONE GOES LONGER THAN EIGHT MINUTES. YOU HAVE TO DO A FRAMEWORK REVIEW. A REVIEW OF THE LABOR MARKET, INFLATION, WHERE WE ARE. A BE A REFLECTION ON YOUR TERM. YOU CAN SEE THIS WHEN TAKING LONGER THAN IT DID A FEW YEARS BACK. DANI: MAYBE HE DOESN'T WANT TO BE CLEAR EITHER. IN SAYING IT IS PAIN. MAYBE INSTEAD WHAT WE GET IS SOMETHING THAT IS HIGHLY TECHNICAL, VERY REFLECTIVE, BUT ONE THAT DOES NOT ROCK THE BOAT BECAUSE HE UNDERSTANDS THE POLITICAL PRESSURES OF THE MOMENT. JONATHAN: WE ARE ALL WAITING FOR THE SAME THING. THE TEAM IS GOING TO HAVE SPECIAL COVERAGE. LISA ALONGSIDE TK, TOGETHER WITH MIKE MCKEE IN AN HOUR'S TIME. LET'S GET YOU SOME MORNING MOVERS. YAHAIRA: WE START WITH ROSS STORES. SHARES ARE UP THREE POINT 4% AFTER THE COMPANY PROJECTED STRONGER SALES AHEAD WITH EXECUTIVES SAYING INFLATION WILL DRIVE MORE SHOPPERS TO ITS OFF-PRICE RACKS. THE RETAILER SAYING SAME-STORE SALES COULD RISE AS MUCH AS 3% IN THE NEXT TWO QUARTERS, TOPPING WALL STREET EXPECTATIONS. THAT MIRRORS THE STRENGTH WE SAW T.J. MAXX, UNDERSCORING THE TREND THAT CONSUMERS ARE SPENDING, BUT BEING VERY VALUE CONSCIOUS. STICKING WITH THAT TREND, WE HAVE BJ'S WHOLESALE CLUB. SHARES ARE FALLING 2%. SHARES WERE HIGHER TODAY, BUT INVESTORS ARE DIGESTING WHAT LOOKS TO BE A MIXED EARNINGS REPORT. WHILE IT DID RAISE ITS FULL-YEAR PROFIT OUTLOOK AND THE CEO STRUCK AN OPTIMISTIC TONE ABOUT THE BACK HALF, INVESTORS SEEMINGLY FOCUSED ON THAT SALES MESS IN THE SECOND QUARTER. WE END ON THEM NEWLY-MERGED PARAMOUNT SKY DANCE. SHARES ARE FALLING .4%. IT IS A SMALL MOVE, BUT COMES AFTER YESTERDAY'S HUGE GAINS. THIS STOCK POPPED 14% AS IT BECOMES THE LATEST MEME STOCK OF THE SUMMER. THE FRENZY TRACES BACK TO EXCITEMENT ABOUT PARAMOUNT'S UFC BROADCASTING DEAL. THAT NEWS LIT UP WALL STREET THAT'S, AND IT LOOKS LIKE TRADERS ARE CONTINUING TO PILE IN, THOUGH IT LOOKS LIKE THEY ARE TAKING PROFITS TODAY. JONATHAN: MORE IN ABOUT 15 MINUTES. LET'S TURN TO OUR TOP STORY. COUNTING YOU DOWN TO JAY POWELL'S KEYNOTE SPEECH. MIKE MCKEE IS ON THE GROUND WITH MORE. DO YOU IMAGINE THIS ONE MIGHT TAKE LONGER THAN THE EIGHT MINUTES FROM A FEW YEARS AGO? MIKE: I THINK IT WILL, AND I DON'T THINK WE ARE GOING TO HEAR ABOUT PAIN THIS TIME. LET ME ASK YOU A QUESTION HERE. WHAT HAPPENS IF WE REVERT TO THE MEAN WITH JOBS AT THE BEGINNING OF SEPTEMBER AND WE GET A REASONABLE JOBS NUMBER AND MAYBE EVEN LAST MONTH REVISED UP A LITTLE BIT? THEN WHAT IS THE FED GOING TO DO? ARE THEY GOING TO CUT RATES? AS YOU WERE SAYING BEFORE YOU WANT TO BREAK, THE FATE OF WALL STREET TODAY HANGS IN THE BALANCE AS WE WAIT TO HEAR FROM WHAT THE CHAIRMAN SAYS. HE IS LIKELY TO WANT TO GET WALL STREET TO PULL BACK A LITTLE BIT FROM, ESSENTIALLY, PRICING IN A RATE CUT, BECAUSE STILL ANYTHING COULD HAPPEN. IT IS NOT EASY TO DO, THOUGH. JONATHAN: IS THAT YOUR SENSE OF THINGS? THAT THEY NEED TO INTRODUCE SOME TWO-WAY RISK BECAUSE SO MUCH HINGES ON PAYROLLS ON THE FIFTH AND INFLATION ON THE 11TH? MIKE: WELL, THEY WOULD LIKE TO DO THAT. OF COURSE, THE PAYROLLS NUMBERS AND CPI NUMBERS COULD INTRODUCE THAT RISK AS WELL. LIKELY WILL MOVE THE FUTURES MARKETS. BUT RIGHT NOW YOU HAVE NOT ONLY THE PRESIDENT PUSHING ON THE FED, BUT THE MARKETS PUSHING ON THE FED, BECAUSE THEY ALL WANT TO SEE LOWER RATES, EVEN IF THEY ARE NOT JUSTIFIED BY THE ECONOMY. WHAT WE HAVE SEEN SO FAR AS MEMBERS OF THE OPEN MARKET COMMITTEE SAYING, WE ARE OPEN TO THE IDEA OF A RATE CUT IF THE DATA JUSTIFY IT. BUT THE WALL STREET PEOPLE ARE NOT HEARING THE "IF THE DATA JUSTIFY IT BECAUSE COPART. JONATHAN: MIKE MCKEE ON THE GROUND IN JACKSON HOLE. LOOKING FORWARD TO YOUR COVERAGE. LET'S STICK WITH THE FED. BRUCE KASMAN OF JP MORGAN WRITING THE FOLLOWING. ELEVATED INFLATION SUGGESTS REMOVAL OF DOWNSIDE GROWTH RISK AND MAKE IT UNLIKELY THAT THE FED WOULD DELIVER SUBSTANTIAL EASING EXPECTED TO THE END OF NEXT YEAR. BRUCE JOINS US NOW FOR MORE. IT HAS BEEN TOO LONG, MY FRIEND. WALKING TO THE PROGRAM. JULY 30 WAS LAST TIME WE HEARD FROM CHAIRMAN POWELL. HOW DATED DO YOU THINK THOSE VIEWS ARE? BRUCE: IT IS CLEARLY DATA BECAUSE WE HAVE A -- WE HAVE HAD IMPORTANT INFORMATION WITH A WEAK LABOR REPORT AND INFLATION. EVER, I THINK IT IS IMPORTANT TO LOOK AT WHAT WE GOT FROM THAT MEETING, BOTH IN TERMS OF POWELL'S INSCRIPTION OF THE LABOR MARKET AS SOLID, AS WELL AS THE COMMITTEE MINUTES THAT SHOWED THAT A MAJORITY OF MEMBERS STILL THOUGHT INFLATION RISKS WERE MORE IMPORTANT THAN GROWTH RISKS. WE ARE STARTING WITH A COMMITTEE THAT I THINK HAS A SOMEWHAT HAWKISH BIAS AROUND EASING. I DON'T THINK FROM WHAT YOU HAVE HEARD FROM MEMBERS THAT THERE IS A CONSENSUS TO EASE. WHATEVER WE GET FROM POWELL TODAY HE CLEARLY CANNOT TELL US WHAT THE SEPTEMBER MEETING IS GOING TO DO. HAVING SAID THAT, I THINK THE WEAK LABOR MARKET REPORT IS IMPORTANT. IT DOES SET THE SIGNAL. I THINK THE FED TRADITIONALLY HAS AN ASYMMETRIC BIAS TO BE SENTIMENT -- TO BE SENSITIVE TO RISK. I THINK HE'S GOING TO BE TILTED IN THE DIRECTION OF BEING MOVING AWAY FROM -- MOVING AWAY FROM HIS DESCRIPTION OF THE LABOR MARKET AS SOLID. DANI: SO HE OPENS THE DOOR, BUT TO WHAT DEGREE DO YOU THINK HE WOULD INTRODUCE THAT TWO-WAY RISK, THAT TWO-SIDED RISK AND COAX THE MARKET AWAY FROM LEANING AS HEAVILY AS IT IS NOW INTO A RATE CUT IN SEPTEMBER? BRUCE: I THINK RIGHT NOW THE MARKET HAS DECIDED THERE IS ALMOST CERTAINLY GOING TO BE A RATE CUT. I THINK BY OPENING THE DOOR BUT BY NOT SAYING WE ARE GOING TO WALK THROUGH IT THAT DOES REFLECT THE TWO-SIDED RISK. THIS IS NOT A CHAIR THAT IS GOING TO DO WHAT HE DID LAST YEAR AND PROMISE A RATE CUT AT THE SEPTEMBER MEETING, BUT I THINK HE HAS TO REFLECT THE RISING RISK. HE HAS TO REFLECT THE SHIFT IN HIS OWN THINKING. HE HAS TO TELL US THAT SEPTEMBER IS A LIVE MEETING. IF HE DOES THAT I THINK THE MARKET WILL PRETTY MUCH STAY WHERE IT IS ON THE SEPTEMBER CALL. DANI: IF WE ALSO GET DISCRETION -- DISCUSSION ABOUT THE FRAMEWORK AND YOU HEAR POWELL TALK ABOUT TURNING AWAY FROM FLEXIBLE AVERAGE INFLATION TARGETING, IF HE SORT OF EMPHASIZED THAT IS THERE ANY SIGNAL IN THAT ALONE? OR IS THAT MORE DETAILS THAT MATTER NOT FOR NEAR TERM POLICY, BUT POLICY DOWN THE ROAD? BRUCE: I THINK THE REALITY IS THE FLEXIBLE INFLATION TARGETING REGIME NEVER REALLY TOOK OFF, AND I THINK THERE ARE SOME PROBLEMS WITH THE WAY IT WAS DESCRIBED IN THE LAST FRAMEWORK REVIEW. I THINK POWELL WILL BASICALLY TELL US WE ARE MOVING BACK, BUT I DON'T THINK IT HAS ANY IMPLICATIONS FOR HOW THE FED IS GOING TO SET POLICY. NOT IN SEPTEMBER AND NOT GOING FORWARD FROM THERE. IT WILL BE INTERESTING COLOR BUT NOT IMPACTFUL. JONATHAN: I WANT YOUR UNDERSTANDING OF THE LABOR MARKET FIRST, THEN WE CAN TALK ABOUT WHETHER THERE IS ANY DAYLIGHT BETWEEN HOW YOU THINK THE FED READS THINGS. DO YOU THINK IS GOING ON HERE? WE HAVE HAD A STEP DOWN IN PAYROLLS GROW. LET'S RUN WITH THE NUMBERS WE HAVE GOT SO FAR. THEY MIGHT CHANGE. WE HAVE SEEN A STEP DOWN IN PAYROLLS GROW. DO YOU PUT MORE EMPHASIS ON THE DEMAND-SIDE OR SUPPLY-SIDE? CYCLICAL TURN OR STRUCTURAL SHIFT? BRUCE: I THINK LABOR DEMAND IS THE KEY ISSUE HERE, AND IN AN ECONOMY THAT IS SLOWED SHARPLY IN THE FIRST HALF OF THE YEAR WHAT WE ARE ALSO SEEING IS A FAIRLY SUBSTANTIAL DOWNSHIFT FROM THE MAGNITUDE OF LABOR DEMAND. I'M CONCERNED THAT WHEN WE SEE PRIVATE BARRELS SLOWED TO THE PACE WE HAVE SEEN OVER THE LAST FEW MONTHS THAT IS A WARNING SIGNAL. BUT AT THE SAME TIME WE HAVE NOT SEEN BUSINESSES START TO RETRENCH. THERE IS NOTHING SUGGESTING LAYOFFS HAVE PICKED UP, AND THERE IS ALSO, I THINK IMPORTANTLY, NO SIGNS THAT THE SLOWING IN LABOR DEMAND HAS HIT LABOR INCOME AS WAGES HAVE PICKED UP SOMEWHAT IN THE LAST FEW MONTHS AND HOURS. WE HAVE AN ECONOMY THAT HAS DOWNSHIFTED. IT IS SENDING A RISK SIGNAL, BUT NOT BY ANY MEANS BREAKING. HAVE THE FLIPSIDE ON INFLATION TO WORRY ABOUT. I THINK YOU HAVE TO LOOK AT THE FED AS RESPONDING TO THESE ASYMMETRICALLY. RECESSION RISK WHEN IT STARTS TO PICK UP BECOMES THE DOMINANT FACTOR IN THEIR THINKING. I THINK IT IS ENOUGH TO GET YOU A COUPLE OF USES. MAYBE THREE. IT IS NOT ENOUGH TO GET YOU THE 130 BASIS POINTS THE MARKET IS PRICING IN OVER THE NEXT 18 MONTHS. JONATHAN: GOVERNOR WALLER'S IN YOUR CAMP, BUT THE COUNTERPOINT IS THAT MEASURES OF SLACK HAVE BEEN STABLE. HE POINTED TO WAGES. AGES ARE STILL OK. YOU MIGHT GET PEOPLE ON THE COMMITTEE WHO SAY THIS IS MORE ABOUT LABOR SUPPLY. AND THAT WE HAVE GOT A REAL RISK HERE THAT WE MIGHT GET PUSHED IN ONE DIRECTION WHEN PERHAPS WE SHOULD BE LOOKING IN THE OTHER. HOW DO YOU THINK THAT DEBATE IS GOING TO PLAY OUT ON THE COMMITTEE IN SEPTEMBER? BRUCE: YOU CAN CLEARLY SEE THAT IN THE MINUTES THIS WEEK. I'M VERY MUCH IN WALLER'S CAMP, BUT I'M NOT WITH HIM. I THINK MOST OF THE COMMITTEE IS NOT WITH HIM IN THE WAY HE IS READING THE INFLATION DATA. THAT IS THE TOUGH PART OF THIS CALL. THERE IS INFLATION PRESSURE BUILDING. I DON'T THINK UNDERLYING SIGNALS ARE TELLING US U.S. CORE INFLATION IS BELOW 3% AT THIS POINT. IF IT WAS NOT FOR A RISK ISSUE I DON'T THINK THE FED WOULD HAVE A CASE FOR EASING. I THINK THERE IS A LEGITIMATE RISK ISSUE AND I THINK IT IS APPROPRIATE TO RESPOND TO THAT WITH MODEST EASING AS WE GO THROUGH THE NEXT TWO OR THREE MEETINGS. DANI: HOW IMPORTANT IS IT, WHERE WE HAVE COME FROM? THE FACT THIS HAS BEEN 4.5 YEARS OF INFLATION CONSISTENTLY ABOVE TARGET? THE FACT YOU HAVE SCARS OF 2022 STILL REALLY FRESH? DOES THAT IN ITSELF PUSH BACK AGAINST SOME OF THE THINKING? HE MIGHT BE RIGHT IN NORMAL TIMES, BUT THIS TIME AROUND THE RISK OF INFLATION IS DIFFERENT? BRUCE: I THINK THAT IS RIGHT, AND I THINK IF WE WERE SITTING IN A WORLD WHERE YOU DID NOT FEEL THERE WAS A HEIGHTENED RISK OF A LABOR MARKET BREAK YOU ARE NOT SUPPOSED TO BE EASING, EVEN AS YOU SEE GROWTH HAVING SLOWED. BUT WE DO KNOW THAT RECESSIONS ARE QUITE DISRUPTIVE. WE DO KNOW THEY ARE QUITE THIS INFLATIONARY. WE ALSO CAN SEE THAT SO FAR THE FED HAS NOT LOST ITS ANCHOR ON THE LONGER END ON INFLATION CREDIBILITY. IN THE BALANCING ACT HERE IF YOU ARE CONCERNED ABOUT RECESSION RISK YOU ARE SUPPOSED TO RESPOND TO IT. IF I COULD PUT ANOTHER POINT IN HERE, I THINK THE FED IS POLITICALLY VULNERABLE, AND I THINK THE RISK THEY HAVE FAILED TO RESPOND TO A DOWNTURN TAKING HOLD HERE WOULD CREATE A PRETTY SUBSTANTIAL BACKLASH, WHICH I THINK DOES WEIGH ON THEIR MINDS IN TERMS OF HOW THEY ARE GOING TO THINK ABOUT THINGS AS THEY GO INTO THE SEPTEMBER MEETING. JONATHAN: JUST BUILD ON THAT. VULNERABLE AS AN INSTITUTION. WHAT DOES THAT REALLY MEAN? BRUCE: IF YOU LISTEN TO STEVEN MORAN, IF YOU LISTEN TO SCOTT BESSENT, THERE IS TALK ABOUT THE FED BEING REEVALUATED AS AN INSTITUTION. THIS IS NOT ABOUT WHO LEAVES THE FED. THIS IS NOT ABOUT FIRING MEMBERS OF THE BOARD. THIS IS ABOUT, DO WE HAVE A REEVALUATION OF THE FEDERAL RESERVE ACT AT SOME POINT? IS THE FED IS AN INSTITUTION GOING TO BE CHANGED BY THIS ADMINISTRATION? THEY ARE CERTAINLY POINTING IN THAT DIRECTION AND THE MORE THE FED FALLS BEHIND THE CURVE THE MORE THE FED PUTS ITSELF IN A POSITION WHERE IT IS NOT SENSITIVE TO GROWTH RISKS THAT ARE REALIZED, THE MORE THOSE RISKS INCREASE. THE FED UNDERSTANDS THAT. THE FED IS A POLITICAL INSTITUTION AND IT ACCOMMODATES WHEN IT IS UNDER PRESSURE. IT IS A MARGINAL ISSUE. I THINK IT WILL MAKE THE FED EASE WHEN THERE IS NOT A GOOD CASE FOR IT. WHEN DECISIONS ARE MARGINALIZED THEY LEAN IN A DOVISH DIRECTION AND THAT IS WHAT WE ARE GOING TO SEE AT THE SEPTEMBER MEETING. JONATHAN: THAT IS FANTASTIC INSIDE. AN ORIGINAL TAKE THEIR FROM BRUCE KASMAN. TRULY THOUGHTFUL ON WHERE HE THINKS THE FED IS AT RIGHT NOW. FROM A RISK MANAGEMENT PERSPECTIVE IT MAKES SENSE TO CUT INTEREST RATES SOON, BUT THE RATE CUTTING CYCLE THIS MARKET HAS PRICED OVER THE NEXT YEAR OR SO, DIFFERENT STORY. DANI: I THINK THAT IS A SALIENT ARGUMENT. WALLER MAKES SENSE WHEN HE SPEAKS. IT IS NOT THAT THIS IS A FAR OUT ARGUMENT. THE IDEA THAT THEY NEED TO OFFER UP SOME RATE CUTS BECAUSE THE OTHER CONSEQUENCE OF NOT TACKLING GROWTH WOULD BE MORE CHANGES TO THE INSTITUTION IS AN INTERESTING ONE, TO YOUR POINT, IT STILL DOESN'T JONATHAN: MEAN MARKET PRICING IS RIGHT. CHAIRMAN POWELL, ONE HOUR, 18 MINUTES AWAY. THE COVERAGE FROM JACKSON HOLE BEGINS AT 9:00 A.M. EASTERN TIME . EQUITY FUTURES POSITIVE BY .2%. WITH AN UPDATE, HERE IS YAHAIRA ANAND. YAHAIRA: FBI AGENT'S RATED FORMER TRUMP NATIONAL SECURITY ADVISER JOHN BOLTON'S MARYLAND HOME THIS MORNING. SOURCES TELLING US THE RATE INVOLVES CLASSIFIED DOCUMENTS. BOLTON WAS PREVIOUSLY ALLEGED TO HAVE INCLUDED CLASSIFIED INFORMATION IN A BOOK HE RELEASED SEVERAL YEARS AGO. FULTON AND THE FBI HAVE DECLINED TO COMMENT. THAT PRESIDENT AUSTIN GOOLSBY SAYS ONE DATA POINT IN THE LAST INFLATION REPORT WAS DANGEROUS. IN AN INTERVIEW HE SAID HE HOPES THE SERVICES INFLATION DATA SHOOTING UP WAS A BLIP. GOOLSBY ADDING THE FED'S SET TIMBER POLICY GATHERING FEELS LIKE A LIVE MEETING. NO DOUBT. ESPN AND MAJOR LEAGUE BASEBALL ARE REPORTEDLY CLOSE TO AN AGREEMENT THAT WOULD ALLOW THE NETWORK TO CARRY MLB TV AND THE RIGHTS TO ALL OUT OF MARKET BASEBALL GAMES. THAT IS ACCORDING TO THE ATHLETIC. THE DEAL WOULD GIVE ESPN THE ABILITY TO OFFER MLB TV TO FANS AS PART OF THE NETWORK'S NEWLY-LAUNCHED DIRECT TO CONSUMER STREAMING SERVICE. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: THOSE OF YOU WHO WATCH THIS PROGRAM REGULARLY, THE BIGGEST FRUSTRATION ABOUT SPORT IS YOU DON'T KNOW WHERE TO FIND IT. THAT IS THE PROBLEM I HAVE WITH PREMIER LEAGUE FOOTBALL. IT DISAPPEARS ONTO PEACOCK AND THEN COMES BACK ONTO NORMAL TV LIKE USA, ONE OF THOSE CHANNELS. I CAN NEVER FIND THE GAMES I WANT TO WATCH. DANI: THE WORST -- AND I FEEL LIKE THIS IS REALLY FITTING RIGHT NOW -- IS TENNIS. SO MANY DIFFERENT CHANNELS. I NEED TO ASK FOR ARRAYS LITERALLY JUST TO AFFORD TO WATCH ALL OF THE TENNIS. JONATHAN: THE GULF. SOME OF HIS -- SOME OF IT IS ON ESPN. DANI: THAT IS BAD FOR BUSINESS, RIGHT? THEY DON'T GET AS MANY EYEBALLS. IT IS SO SAD TO HAVE TO -- 2:00 P.M. ON THE WEEKEND HAVE TO CHANNELS ARE FOR GOLF. JONATHAN: REDUCE THE FRICTION. JUST REDUCE THE FRICTION. LET'S SET YOU UP FOR THE DAY AHEAD. WE WILL CATCH UP WITH JEAN BOIVIN OF BLACKROCK AS WE COUNT YOU DOWN TO CHAIRMAN POWELL'S SPEECH. ♪ > > WE WANT THE FED TO REACT BEFORE WE SEE A BIG PROBLEM. WHAT THEY NEED TO DO RIGHT NOW IS INCREDIBLY DATA-DRIVEN. THAT'S GOING TO MEAN LOOKING AT LOTS OF SOURCES OF DATA. THEY DO WANT TO KEEP EMPLOYMENT AT FULL EMPLOYMENT, BUT THEY'VE ALSO TRIED TO GET -- GOT TO TRY TO GET THAT INFLATION BACK TO THEIR TARGET. JONATHAN: THAT IS THE BIG OBJECTIVE FOR THE FEDERAL RESERVE. WE ARE COUNTING YOU DOWN TO A BIG SPEECH THIS MORNING. EQUITY FUTURES ON THE S & P POSITIVE BY .2%. ON THE NASDAQ, HIGHER BY .15%. THAT SPEECH, ONE HOUR AT MINUTES AWAY. JEAN BOVEE AND HAVING THIS TO SAY. WE WOULD STILL LEAN AGAINST THE PRICING OF MULTIPLE CUTS OVER THE NEXT YEAR. JOINING US IN THE STUDIO. GOOD MORNING. WHY WOULD YOU PUSH BACK? JEAN: I THINK THE SITUATION IS VERY MURKY AND IT REMAINS VERY MUCH SO. THE NUMBER THAT CAME OUT AMONG THE LAST ONE WAS AN IMPORTANT ONE, AND WE ARE PLAYING CLOSE ATTENTION -- PAYING CLOSE ATTENTION. IT LEADS TO AN EASING BIAS, BUT THE INFLATION STORY IS FAR FROM CLEAR. WE HAVE MANY MORE PRINTS. IT IS THE NEXT MANY BEFORE WE GET A REAL HANDLE ON THAT SITUATION. YOU KNOW, YOU GET INFLATION AND GROWTH GOING IN THE OPPOSITE DIRECTION. HOWEVER THEY GOING TO BALANCE THAT IS FAR FROM CLEAR. JONATHAN: HOW DO YOU PUT IT IN A SPEECH? JEAN: I THINK YOU ARE CAREFUL TO GUIDE THE MARKET, ESPECIALLY WHERE THE MARKET IS. I THINK YOU DO NOT WANT TO [INDISCERNIBLE] I THINK THERE IS A BIG STORY ON INFLATION THAT NEEDS TO BE SPELLED OUT. THE LABOR MARKET IS A VERY UNUSUAL DYNAMIC. IT IS VERY INTERESTING THAT THE TOPIC OF THE CONFERENCE IS ABOUT EMPLOYMENT AND LABOR MARKET DEMOGRAPHICS, WHICH ARE BIG STRUCTURAL FORCES THAT ARE MAKING THE LABOR MARKET VERY MURKY. I THINK YOU EMPHASIZED THAT, AND I THINK PRESIDENT GOALS B IS RIGHT THAT THE STORY ON INFLATION IS REALLY PUZZLING. I THINK IT IS IMPORTANT TO REMEMBER THAT GOING INTO THIS YEAR IF WE HAVE NOT HAD THIS KIND OF SURPRISE WEEK IS IN SERVICE INFLATION WE WOULD BE MORE LIKE 3% INFLATION RIGHT NOW. THERE IS NO REAL EXPLANATION FOR THIS WEAKNESS IN SERVICE INFLATION, BECAUSE IT DOES NOT LINE UP WITH THE WAGE DYNAMIC WE ARE SAYING. I THINK THE JURY IS VERY MUCH OUT ON INFLATION, AND UNLESS RECESSION RISK IS REAL IT IS GOING TO BE TOUGH TO HAVE THOSE CUTS. DANI: IS THIS A POWELL THAT INTRODUCES TWO-WAY RISK IN HIS SPEECH TODAY? JEAN: I THINK THIS IS HARD TO DO, AND I THINK BY EMPHASIZING SOME OF THE INFLATION STORY THAT IS NOT RESOLVED AND RECESSION, IT IS ONE DATA POINT ON THE PAYROLL, RIGHT? WE COULD GET A PRETTY STRONG ONE NEXT ONE. WE BELIEVE THAT, YOU KNOW, 40,000 TO 60,000 JOBS IS KIND OF WHAT WE NEED TO KEEP INFLATION STABLE. SO, THAT IS EASY TO ACHIEVE IN THE NEXT PAYROLL NUMBERS. THAT WOULD NOT BE SCREAMING RECESSION, SO, I DON'T KNOW. MAKING THOSE KIND OF POINTS PUSHES AGAINST 100% PRICED IN. DANI: A LOT OF PEOPLE HAVE COME AROUND THIS TABLE THIS WEEK -- JEAN: AND BEFORE. DANI: MAYBE FOR THE PAST TWO MONTHS. WE COULD GO BACK FURTHER, SAYING IT IS -- THEY ARE STUCK BETWEEN A HARD PLACE. HOW VULNERABLE ARE WE TO HAVING A FED THAT WILL PUSH BACK AND A POWELL THAT WILL PUSH BACK AGAINST CURRENT MARKET PRICING? JEAN: I THINK THIS IS AN ENVIRONMENT THAT IS VERY VOLATILE. YOU KEEP TELLING CLIENTS AND INVESTORS THAT THIS IS AN ENVIRONMENT WHERE WE HAVE MORE SCENARIOS THAT ARE POSSIBLE ON THE TABLE THAN USUAL. YOU CANNOT BANK ON ONE BEING 100%. THINGS ARE NOT BINARY. AS A RESULT WE THINK THAT CREATES A LOT OF ALPHA, OR INVESTMENT OPPORTUNITIES. THE FACT THAT IT IS PRESSED 100% AND THERE MIGHT BE ROOM FOR SOME SURPRISE WILL CREATE SOME NEAR-TERM OPPORTUNITIES. I THINK THAT CREATES A PRETTY INTERESTING TRADING ENVIRONMENT FOR INVESTORS. JONATHAN: WHAT DO YOU LIKE RIGHT NOW? JEAN: WE LIKE RISK IN GENERAL, BECAUSE NO MATTER WHAT HAPPENS WITH THE COMMUNICATION TODAY AND EVEN IF THERE WAS A SURPRISE HAWKISH AND IS COMING OUT IN THE MARKET WERE TO REACT ADVERSELY, WE THINK THAT IS PRETTY STRONG ON THE SUPPORT FOR RISK ASSETS. WE LIKE EQUITIES. WE LIKE U.S. EQUITIES IN PARTICULAR. WE WOULD BE A BIT MORE CAREFUL ON THE RIGHT SIDE OF THINGS ON FIXED INCOME, LIKE WHAT WE WERE DISCUSSING HERE. AND IN THE CONTEXT WHERE THE DOLLAR HAS BEEN, YOU KNOW, BEHAVING THE WAY IT HAS THIS YEAR, THERE ARE POCKETS OF INTEREST IN EMERGING MARKETS THAT CONTINUES TO BE THERE FOR US. AND AI IS CERTAINLY SOMETHING THAT SPITE THE ONGOING DEBATE AND SO ON, YOU KNOW, WE THINK IT JONATHAN: IS A POWERFUL FORCE. LET'S SIT ON THAT. YOU HAVE TALKED ABOUT THIS AS A TEAM, A LACK OF MACRO ANCHORS. CAN YOU BUILD OUT THAT JUST A LITTLE MORE? JEAN: I THINK THIS ENVIRONMENT SINCE 2020, IT IS IRONIC. THEY'RE GOING TO BE REVIEWING THEIR FRAMEWORK NOW, FIVE YEARS. IT WAS EXACTLY FOR US WHERE WE MOVED TO A COMPLETELY DIFFERENT REGIME. IT USED TO BE ALL ABOUT DEMAND AND RISK OF INFLATION, UNDERSHOOTING TARGETS. NOW WE THINK IT IS ALL SHAPED BY SUPPLY. SO, TRANSFORMATION. IT IS A REAL TRANSFORMATION. THERE IS A LOT OF FORCES AT PLAY. AI IS ONE IN PARTICULAR. THAT MEANS, WHERE WE ARE GOING TO BE ENDING UP IN 2, 3, 5 YEARS IS MORE CLEAR THAT AT ANY POINT IN YEARS PRIOR TO 2020. ARE WE GOING TO GET 3% GROWTH ON A SUSTAINED BASIS? WHICH WOULD BE A SPEED UP? WE GET 1%? THESE ARE VERY DIFFERENT WORLDS. VERY LIKELY WE COULD BE IN BOTH, BUT WE DON'T KNOW. NEED TO BE READY FOR THAT. AND INFLATION, WE ARE DEBATING THE NEAR TERM, BUT WE HAVE BIG DEFICITS. WE HAVE DEBTS. HOW THIS IS GOING TO PLAY OUT, HOW THIS TRADE-OFF WILL BE OVER THE NEXT FIVE YEARS IS VERY UNCLEAR. AS A RESULT I THINK IT IS DIFFICULT TO BUILD OUT A SCENARIO FOR A STRATEGIC ASSET ALLOCATION AND SAY THIS IS A REASONABLE BASIS WHERE I CAN NAVIGATE. INSTEAD YOU NEED TO BE MORE TACTICAL. INSTEAD OF LOOKING AT THESE MACRO ANCHORS WE WANT TO LOOK AT THESE MEGA-FORCE ANCHORS. AND AI, THERE ARE MANY MACRO SCENARIOS, BUT WE THINK AI WILLPOWER THROUGH THEM. JONATHAN: WHICH IS WHY A THINK SO MANY OF THESE NAMES HAVE BEEN BID UP SO AGGRESSIVELY. PEOPLE FEEL MORE COMFORTABLE WITH THAT THAN THEY DO WITH THESE OTHER ISSUES. DANI: BECAUSE EVERYTHING ELSE IS UNKNOWN. THE POLITICS OF THE MOMENT, THE DEFICITS, THE ECONOMY. WHAT IS KNOWN IS THAT THESE HYPERSCALERS ARE SPENDING MONEY ON AI AND IT IS SHOWING NO SIGNS OF SLOWING DOWN. JONATHAN: IT IS GOOD TO SEE YOU. JEAN BOIVIN OF BLACKROCK RAKING DOWN THESE FINANCIAL MARKETS IN EQUITIES AND RATES. THE KIND OF ANCHORS YOU NEED RIGHT NOW TO GET COMFORTABLE IN FINANCIAL MARKETS. WE ARE COUNTING YOU DOWN TO THE BIG ONE. THAT SPEECH IN JACKSON HOLE, ONE HOUR FIVE MINUTES AWAY. THE TEAM ON THE GROUND, TK, BRAMMO, MIKE MCKEE BRINGING A SPECIAL COVERAGE. THE SPEECH ITSELF AT 10:00 A.M. EASTERN TIME. HEADING INTO IT EQUITY FUTURES POSITIVE BY .2% ON THE S & P. FOLLOWING FIVE DAYS OF LOSSES ON THE BENCHMARK STATESIDE, IN THE BOND MARKET THE 2-YEAR AT 2.3 79%. AFTER ALL OF THIS IS SAID AND DONE WE WILL CATCH UP WITH YOU ON MONDAY. HE WILL SPEAK TO BOB ELLIOTT, DAN SKELLEY OF MORGAN STANLEY, LIZ YOUNG-THOMAS OF SOPHIA. INC. FOR CHOOSING BLOOMBERG TV. THIS WAS BLOOMBERG SURVEILLANCE. --"BLOOMBERG SURVEILLANCE." ♪

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Bloomberg Surveillance 8/22/2025

Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern speak daily with leaders and decision makers from Wall Street to Washington and beyond. No other program better positions investors and executives for the trading day. (Source: Bloomberg)

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