>> the market is looking at the fed to see if they are being accommodative or if they are moving higher. >> somebody will have to pay. >> the way markets are looking at dividends and earnings has been a little bit over the top. >> if you look at what the pandemic has done, it has exacerbated every division we had. 5>> this is bloomberg surveillance. >> to our audience worldwide, good morning. this is bloomberg surveillance. with equity futures positive, we are live on bloomberg tv and radio. along sign -- alongside tom keene i'm jonathan ferro. we can introduce a little bit of two-way risk that makes a comeback to the market. to see it. what is really amazing is how far ahead the market was.

it was remarkably tame. the first thing i did was look at the bloomberg terminal to see if we could find some of the technical work. this morningned me is the reaffirmation of the in some form of recovery and enthusiasm for stocks. later by ben laidlaw who is optimistic. jonathan: the s&p 500 futures looking optimistic this morning, up 1.5%. -- 1.9%. look at we have a look at what the markets will look like. will it be sequential we can we can provement or will recovery? we have been trading on the former. we got the gut punch reminder not to forget about the latter. i think it was a letter that made a comeback. last 24back in the

hours in a more pronounced way. tom: no question about it, the pandemic updated it and there are new geographies of concern. it is important. s$ed hyman is adamant that a vaccine is critical in the next year. he was usually -- hugely enthusiastic on the american financial experiment. jonathan: the data has been getting better, but the pandemic number has been climbing. we talked about the data on the economic side. we wanted to see if the economic data validated the optimism. yesterday morning, we sit emphatically with no. we still don't know. the recovery is still pretty unclear at this point. lisa: it is disappointing how little a decline we saw in the continuing claims of people that were jobless.

just a big take away from some of the volatility is that the fundamentals are going to matter , even as the fed pulls out the stops to try to dampen volatility. today, we are going to get a read on consumer sentiment that people are looking at is an important piece of the equation. also, the oil front. earlier, this tumbled in the year. the big question there. joe biden, the democratic presidential candidate is attending a virtual town hall. we are in an election season. we seem to forget that. to become an increasing risk for the market as well,j john. jonathan: thank you for that, lisa. we need to talk about it. the president of the united

states, where he does pull well still is on the economy. and you can see the trajectory going into november. who is best placed to secure economic recovery. tom: there are vice presidential picks for both parties, and the idea of how your report the statistics. statistic a monthly president trump wants to get the grim statistics out of the way. i think july 30, we see the second quarter of the united states. maybe he will see a trend that will advantage him. jonathan: the permanent scars from this crisis, we will catch the s&pis very topic

us, ceo of skybridge joining . fantastic to catch up with you, sir. what was behind the massive move lower in the last couple of days? xo>> obviously, from our perspective it is technically driven. it has to do with the fed easy money policy. mid-march to late march. and the data coming and starts to look a little bit weaker. and that led to much higher downside volume that we have witnessed since march. that being said, when you think about what equity investors are doing, we are looking ahead to 2021 and 2022.

,iven hello treasury yields are it was not very reflective of the real economy. we don't see any trades going up anytime soon. accommodative balance sheet policy for an extended time. think thisy don't pullback is materially worse. we havelook like positive price action already today. tom: troy, where are you right now with hedge funds? what i am really interested in is the idea of a big interest rate. he game. -- really big interest rate p parity game. are you awaiting hedge fund returns? incomee are fixed

managers that are doing more relative trading. most driver of returns for macro managers in february and march was the collapse ended the straits -- in interest rates. and also monetizing some of the selloffs. they have not done a great job capturing the rebound. we are also going to capture the inflation trades. right now, we had a range where 10 years were going to be 50 to 100 basis points. we sincerely doubt the fed is going negative anytime soon. trading fixed income was a great profitq funds that were in march. we just don't see it as a great profit center. about the bestk profit centers going forward given the fact that a lot of people have seen the fed as propping up asset prices.

it we do see that occasionally fundamentals matter, like yesterday. what is underpriced right now in the market given the fed stimulus and the fact that fundamefñe(sáh(p'not be completely discounted. our perspective, look at where the most damage has been done in a large part of our portfolio. particularly consumer abs. when you look at those markets as a whole, what you are seeing is much better fundamentals than we even dreamed of six weeks ago in terms of the residential housing market. most managers are pricing 25% unemployment. two percent to 5% ultimate foreclosures, which is incredibly higher than what one would expect in february. and so we see the data flatlining around 70%.

maybe they go higher. and obviously, the way the market stabilizes is at much better levels than people thought six weeks ago. spreads are exceptionally wide. whether it is the rbs or some of the new issue markets, there are good opportunities there. , exclusively multifamily. and as you are aware, given the transfer payment for government had a 90% increase in transfer payment which offset a 33% drop which led to rise in savings. you have seen rents decline barely at all which has been shockingly positive. that doesn't mean that we will see those rent payments start to fall short of where they were in february. the fundamentals so far have been much better than people

feared. looking for the pieces in particular. so we see that as a great opportunity. when you come over to distressed corporate credit, the easy money has been don made to fed policy intervention primarily. but if you are looking at default rates, you're looking at somewhere between $300 million and $500 million in the fall. we are not arguing that managers will see the same returns, but it should be a rich opportunity set for the next several years. jonathan: will you do me a favor and i stand there is easy money to make, come on the program and let us know ahead of time so that i can make some easy money as well. i love it when people come on the program and to say that easy money has been made. there has been nothing easy

about the last several months. this is the story, isn't it? on the reopening, we have seen upside surprises in the economic data. the concern the last couple of days is whether we got too excited by payroll support and if the latest data on the pandemic -- i want to be clear here, away from the headline number, focusing on the disparity in states like texas, if that starts to shake people's appetite to put more capital to work in riskier parts of this market. you see's no question it within the pandemic. i thought fox did a wonderful treatment state by state of the details. they lead with arizona. so yes, i do think it is the pandemic. i was stunned to look at the charts of the technical quality of this pullback. extendede were so far

into thursday. we will talk about the technicals and the probability. this market will lift to close out the trading week. positive 2% from new york this morning. this is bloomberg. >> with first word news, there has never been a month as bad as april. the ukase is gdp fell more than as the coronavirus got down to a three month basis. the contraction will prompt louder calls for the british government to ease restrictions on industries trying to survive. the imf says the global economy is recovering more slowly than expected from the coronavirus and they expect there will be lingering starts.

projections on june 24. it is expected to be more than the last forecast. the imf says that in general, asian economies are further along in that recovery class. rejectingtrump is calls to overhaul police funding. the president is working on an executive order that he says asks police to meet the most current standards for use of force. but there are details -- few details on what that program would look like. breaking promises made at the historic summit two years ago. kim jong-un says the trump administration turned dreams into a dark nightmare. they agreed to work towards denuclearization of the korean peninsula. president trump demanded that can give up nuclear weapons before the u.s. eases sanctions. global news 24 hours a day on air and on quicktake, powered by

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>> the fact that we are seeing ebbs and flows should not come as a surprise. gottensive investing has

more prone to trending. these are the dynamics that we see these days. so i don't think it is that surprising that we are taking a step back. i wouldn't necessarily think that this is a sign of panic either. macro perspective policy center founder and president. we are live on bloomberg tv and on bloomberg radio, getting you in shape for the trading day. your morning this morning shaping up as follows. by around 2% on the benchmark. yesterday, nowhere to hide. staples and utilities even though the sectors were down around 40%. a big bid through the week on 10 year treasuries down almost 20 basis points from last friday. this friday morning,$m we come p about four basis points. college 0.71% and a

foreign-exchange to found -- call it 0.71% and a foreign-exchange. the aussie back on top. that is a reflection of the improving risk appetite. i was really thunderstruck by the reaffirmation of optimism off of the current yesterday by the bulls. many of them just didn't blink and i over that huge movement. there was no place to hide yesterday. some of wall street hides in the greek letterhì(lc@&h(lc% in the derivative dynamics. macro riskasco -- advisors. he does extremely sophisticated analysis of the interior dynamics of the market. you were the first name we mentioned yesterday. dean kern it was get it.

what did you observe in the interior dynamics yesterday? >> a tremendous move in the s&p 500. a 1.5% running at about move a day. that is high in historical context. that is a standard deviation move. ur distribution table will tell us that is supposed to happen every 63 years. we know markets aren't normally distributed. the biggest conclusion from yesterday is just below the surface. as has been discussed widely, the rotation has violent -- has been violent. , market neutral. it has had seven straight days of 4.5% moves or more.

and that is 100 for a market neutral index. it is staggering. jonathan: the mega cap stocks moving like penny stocks. we are looking for a sign that maybe the coast is clear. but as you look at the vix curve right now, what signal do you take away from that at the moment? >> i think the vix is telling us that the market was really unprepared for this. outperformed the move lower in the s&p by quite a bit. move higher was telling us the degree to which people were caught off sides. i think you could look at the open interest. upside calls to protect portfolios was quite low coming into this. aftertaking a step back

2010, the fed stimulus had dampened volatility dramatically. we saw a real flat market and a real calm market. i wonder if there is a larger take away from yesterday. and you still see these technical reactions that indicate liquidity issues or high degrees of leverage getting unwound. is there some larger take away of the fed reaching a limit in terms of being able to dampen volatility? >> i think it is exactly right there. at every turn we have these significant risk off. and the policy response is larger and more overwhelming. it wades further into private markets. it is telling us the financial system is something that is unwieldy.

i think the old adage, don't fight the fed, it is focused on asset prices. whenever you are doing so, you are fighting the fed. we have to respect the significance of this move yesterday. at the end of the day, a stable vix or a lower vix is part of the fed's playbook. it can't allow the vix to get back up into the 50's and spiral higher. it will sit for a little bit, but at some point, you have to have the fed come back in. buy insurance coming have to keep in mind policy response. tom: one final question and i will be as direct as i can and you can be as nuanced as you like. the game's momentum. do you buy the shift from momentum to value, momentum to

small-cap, momentum to international? or do you stay momentum? >> i stay momentum. i think the real economy is what will drive that relationship. we have seen that shift back into small and value. it came undone violently. so much of it is a function and the success that the economy reopens. you are fighting the fed, you're fighting the policy response from the government. they will feel invested in keeping income earners with income if they don't have jobs. the degree to which these weaker companies and balance sheets will be able to thrive i think is very much an open question given how challenging the reopening of the economy is going to be. >> always fantastic to catch up with you. tom keene, advantage to you from

dean. as we have said all the way down , it is a moment of humility. a lack of visibility that we have over the next several months. it is quite something. tom: it is absolutely remarkable. people have a construct. they have a belief set that they work with. and what's interesting is not that it is being tested, but everybody's beliefs that is being tested on a weekly basis. can they reaffirmed their belief in whatever that belief is? jonathan: we will catch up with jeremy stein, harvard professor of economics. we will do that next with equity futures positive. up nicely to close out a choppy week. we are up by 1.8%.

are live on bloomberg tv and bloomberg radio. this is bloomberg surveillance. ♪

jonathan: from new york city, this is bloomberg surveillance. we are live on bloomberg tv and radio. we are two hours away from the opening bell. this is bloomberg surveillance. we are positive around about 1.9% coming into friday at the close on the session down about 6% on the week. 6% asp 500 down around well. the dollar marginally weaker as well, headed for a fourth straight week of losses. thecyclical proxy for global economy, the aussie dollar doing better in today's session, positive .6 percent.

it was about higher yields and steeper curves, but this week slammed the brakes on and hit rivers. it has been lower treasury yields. today's session, we creep a little bit higher, up four points. certainly, yields are coming back down through the week. and for next week, that is an even larger theme to see. it will be really interesting to see the two-year dynamics as well. there is a huge presumption that they stay right where they are and i'm not sure. a piercing note this morning whereg about a steepener you have yields coming up, still sitting quite subdued. now as a real treat, this is the much -- must listen interview for global wall street.

how good of an interview is this? notesd el-erian will take because he knows jeremy stein owns the high ground of the theoretical finance. the underpinning of what we do. a former fed governor and a member of princeton gymnastics. he runs that herd of cats known as the harvard department of economics. professor, thrilled to have you with us. i want to talk about the anddation of william sharp jack trader from a million years ago. ?oes any of that stuff work >> some of it works. but if you are a stockmarket investor, there is not a lot of other stuff out there. think states will be working on that as well.

tom: i look at the zero bound. what we do is we talk macroeconomics and monetary theory. i want you to take the zero bound over to the capital pricing model. thatundamental theorems0"oy -hatundamental theorems0"oy there isn't a real yield or a virtual nominal yield? how does the geometry work? >> i'm not sure about the geometry, but one of the things with endowments is a class of other investors. they have targets for returns. and i think that, more than anything is this mechanism. one concept that

people have discussed not just in this pandemic but the last several years is the reversal rate. when rates become counterproductive. what are your thoughts on that concept? idea, the rates are very low. idea.an interesting i am more focused on that now as it is related and another thing that will make it harder. i think the fed has done a basically admirable job. it is passive with respect to the banking system. companies have gotten their banks to stop paying dividends.

it is a reverse interest rate. jonathan: pretty much every ceo that would come on our program like this would tell us that the capital position is strong. they suspended their buybacks and they can meet their dividends. what is it about the big banks on wall street that some people are missing? to learnk it is good the lessons from last time around when with think about the financial crisis. over $100 billion. we are raising equity capital into lap of stress test. deteriorate is they are all at once.

the market is trying to tell us something. the last time around, the market was looking that way. this is a very big economic shock. it is a very big economic shock. .he measures of capitalization thatnk there is reason there is the baseline expectation. you can be seriously concerned. just to be really clear here, professor, are you saying that the risk of a bank failure is greater than the federal reserve is acknowledging right now?

>> i think the banks are willing to capitalize. failure -- well before failure, that impairs the ability to lend. rate,e personal interest again, the bigger constraint on lending will be a shock. it will be a moderate, not catastrophic shock. but to think about what will help the recovery in the next year, having a capitalized sector will be one of the more important elements. lisa: professor stein, we are talking about the consequences of the fed's policies. you have potential oversight of banks on one hand and on the other hand, you have a question of capital efficiency. you have done )u$sjuju)hjjpì(lc% this. you say it doesn't make sense for hertz to be bankrupt, people buying shares, and raising

additional money to sell more shares. it seems the market is getting less efficient as the rates go down and people look at the fed as a perpetual backstop. what is the consequence of the lack of efficiency that people are talking about in markets? saying thatan old markets are macro inefficient but micro efficient. i am seeing some of that now and i would not want to try to explain the overall level of the market. there is logic there. i think the relative performance of bank stocks tells us something. even within bank stocks, those are mostly consumer exposed. not sure that i by the idea that this efficiency has been taken out of the market. stein, i want to go

against your expertise. as a representative of harvard economics and all of that heritage. lost a giant in this tragic summer in alberto allesina. how do you replace the irreplaceable? how do you replace that beautiful holistic of political economics? >> i was not expecting that question. that is a very moving question. it is a heartbreaking loss for the department. him. impossible to replace he founded the modern field of political economy in many ways. next to him,office

basically, for 20 years. he was one of the warmest and most generous. when we think of others in the department, we talk about what we've lost. jeremy stein, thank you so much for joining bloomberg surveillance today. he is at harvard university. i look at the markets and i think it is thrilling that we take that time to look at the underlying theories. booke markowitz's original at my desk at 731 lexington. it is foundational mathematics that professor stein represents. el-erianhat mohamed and what many others read and think. the steps of foundational thinking and what they do every day. jonathan: i once had lunch with a former fed official and we

talked about how you cite economists and their work, the pages at the chapters. the former fed official who i won't name turned around and said to me, you know what's really interesting? as random as it sounds, it sounds like he's actually read the books. so tom, i'm throwing that out there just in case some people think that maybe you haven't read the books. up 51 points for the s&p 500. we are up by 1.7%. we advance, we snap back. it has been really volatile. as tom said, the bulls are undeterred from the price action yesterday, picking up where they left off. hard.ry yields are down weaker exchange, a dollar story emerging over the not -- over the month or so. the pound is stronger by about .2% as well.

later on in this program, we will be catching up with mohammed al arian. we will catch up with new york's lieutenant governor on reopening the economy in new york city. from new york city, good morning. with tom, i'm jonathan ferro with lisa abramowicz. we are on bloomberg tv and bloomberg radio. city ofberg news, the houston warns that the coronavirus is at the precipice of a disaster. officials are getting closer to re-imposing stay-at-home orders earlier this week. highestcorded the one-day tally of new cases since the pandemic emerged. wave ofduring the first the disease. the republican party is moving the nominating convention to jacksonville, florida. the event was scheduled for charlotte, north carolina.

leaders want to avoid getting boxed in by president trump over china. he is entitled to invite whoever he wants. he has been musing about inviting the leaders of russia and australia, but not china. they say it is a clear sign that it could become part of the president's anti-china campaign and they don't want to play along. at the border with the european union, it is the same as a no deal brexit. the new border policy emerged after the u.k. and the eu agreed to step up the pace of their trade talks. powered by more than 2700 journalists and analysts in more than 120 countries.

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>> i want the reopening to be successful. i want the economy to be resilient. what i am growing increasingly

concerned that we may be approaching the precipice of a disaster. jonathan: harris county judge -- dog -- judge hid all go judge hidalgo. unclear if they have the legal authority to reimpose law down -- lockdown in houston. i think that will be an interesting conversation over the weekend and into next week. important to understand that in the bloomberg .urveillance world of london like the tensions that you see across the sunbelt of america where there are massive tensions between some of the city authorities and the more statewide executive offices. inis incalculable, the gap

arizona and new mexico. jonathan: the tension between local officials and the governor abbott in texas. keene, i'mom jonathan ferro with lisa abramowicz. we are live on bloomberg tv and bloomberg radio. it is nicely firm this morning. by threear maturity up basis points. we will round us up to 0.71%. and the foreign exchange, just a little bit of a comeback. tom: one of these benchmarks in the pandemic has been a good and state.d

how is the reopening of the york from buffalo to new and into the hamptons, how is it going? >> thank you for having me on the show again. walking the streets, i was in and there is session excitement about reopening and energy on the streets. people are depressed and in a dark place. this demonstrates the resiliency of new yorkers. we are very closely monitoring the health outcomes and the rate of transmission and the hospitalizations. you can be an incredible -- we

have seen an incredible downward trajectory. , and one in new york city more personal services. normalcy, it continues. lisa: lisa: in a dark place and returning to retail therapy to resume some of those feelings. i am curious about threading this needle of encouraging people to go back out there and embrace the economy while also practicing social distancing. how much are you trying to encourage people to come back? how much are you able to employ tracers and trackers to ensure that people are not super spreaders at this point so we don't see a big resurgence of the virus? >> it is the answer to the

problem. some people criticized new york for taking too slow of an approach. we are not going to send the message that any part of the state could open until we listened to national experts and global healthcare experts to assist us in analyzing the data to make sure you don't cross that line. the answer is testing. i am 65,000 today. contract tasers -- contact tracers, assistance with the state of new york. individuals trained.

and i oversee the reopening in western new york and the city of buffalo. ready to jump if anybody tested positive. it is frustrating in new york. we have led the nation in terms of how we have managed this pandemic. no one has done a better job in governor cuomo. if other states could follow our lead, they would be in a far better place. if we will continue reopening in a smart way based on health care data, we are going to do it. mention former mayor mike bloomberg, the parent company bloomberg lp, a founder majority of bloomberg news. there is clearly tension down in texas. i have spoken to natives and

they say the bar is high for another lockdown. you have suggested that to us as well. i am wondering if you could establish some guardrails for us, what you would need to see to reconsider locking things down again. >> we don't expect to go there. there is another alternative, turning to the many voices. have to lookkd at, we look at the metrics we are examining. and how we determine the testing rates. peopleeeks ago, 9% of

were testing positive. that number is .8%. , andok at new york city the numbers are down to 1%, 2%, 3%. the contact tracers were deployed there. these guidelines have been out there. but very few states were actually to fall -- to follow. if he started seeing numbers, it was alarming. we have not had any holdups.

we hope we can catch up with you soon on some more metta news in new york. up next, arian. ♪ -- up next, mohammed al arian. ♪

against thet is fed, seeing how we can be accommodative and higher. >> somebody will have to pay. >> the way that markets are looking at dividends and returns and earnings has been a little bit over the top. >> if you look at what the pandemic has done, it has exacerbated every division that we have. quick this is bloomberg surveillance with tom keene, and lisa abramowicz. good morning, everyone. jonathan ferro