>> to be extended as we continue to deal with covid. >> earnings broke not valuation also drive markets higher next year. >> i think the market is telling you that we are closer to disinflation than inflation. >> this is a fed that's going to take its time. it's going to measure twice and cut once. >> the fed starts to taper in november, maybe december. either way they are tapering. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz, and tom keene. we welcome all of you on radio and television. another hour of bloomberg surveillance. thanks for the responses on twitter. by email. by carrier prince george's pidgeon. we appreciate it. ferro love. taylor rigs in to save the day. i look at where we are and i go back to all the academics you

have done. none of it links together. taylor, to be blunt, our act is not textbooks, is it? taylor: it is not. certainly not in level threefment it is a fully invested bears in this market. that is the phrase, tom, i keep hearing. there are no bears in the equity market and no bears in the bond market despite yields calling to climb higher. tom: the sur vealness of this. mexico g.d.p. for q 2 a bit dated, up 19%. rounded up to 20%. lisa, the heart of the matter, you have been really good on this, we are going from a boom economy to what we don't know. lisa: the idea of how quickly we slow. how much is based on fact. how much will this roll into a new normal that looks different from the old normal. frankly over the decade slower growth and lower inflation. how much are we entering the same paradigm with even more debt and older population versus productivity from big tech?

tom: we have a guest so grizzled, so ancient we'll speed this up this morning in this hour. let me do the data. futures. we have added junk condition on the standard & poor's 500. if you look at the standard deviations of august, we are now outside two standard deviations on the daily move on spx. nevertheless it's a bull market. a bit of red there. two cent spread. it steepens dramatically. that is that morning sarcasm. you don't need that in the afternoon. you have to do that in the morning to keep people going. with their tea, their defaff chai. how do you pronounce it? taylor: chai, decaf. tom: 106 basis points on the two cents. lisa abramowicz, shugging down starbucks, darkest black coffee

they have. lisa: not doing chai today. crude turned up which is interesting because it had its first down day after two days of gains. looked like we were potentially building on that. talk about the optimism you are built into the market after 50 record highs. 8:30 a.m. durable goods orders, how much are companies in the united states rebuilding inventories? restocking, how dynamic is that market at a time when there are still supply chain disruptions. at 12 p.m. i'm interested to hear amtrak officer flynn has to say. i expect him to talk about infrastructure. how much spend interesting the federal government could fuel his company. president biden is rolling out cybersecurity steps and meeting top technology executive tim cook, andy of apple, microsoft, this is a distraction from the main issues of afghanistan.

can they get their legislative agenda through? however there is this feeling that there is more of a cyber threat than ever before. how much spending will the federal government put behind this? we'll end up dropping up tech valuations and give people more confidence. tom: very good. this is a joy, folks. taylor, lisa, and tom with you on radio and television. what we are supposed to do is come out right now and talk about price up, yield up. or price up yield down. i.g., high yield bonds, with bob michele. he's been at jpmorgan for 400 years. joins us this morning. bob, we'll spend serious time here on the great unspokele and you nail it in your research note. stephanie at stony brook has changed the world. she came out with modern monetary theory. we are in an mmt experiment of some type as well.

and the financial media's not talking about this enough because everybody thought it was a theory which would go away which is unfair to something that's had such an impact. are you a believer in m.m.t.? bob: morning, tom. it's hard not to be a believer. it seems like the go-to policy response now in a crisis where the role of government is to borrow large amounts of debts and deploy it through fiscal stimulus and try to short cut to recovery. and the role of central banks is to print lots of money and buy that debt and ensure that the cost of the recovery is affordable. i think it's worked. it's hard to see where any pain has been created or where there will be problems down the road. i think we all sense there's got to be something. what i'd like to see out of jackson hole is for the central bankers to say this is an emergency policy response. this is a normal -- isn't a

normal part of our tool kit. they need to draw the line. tom: i think this is really important, with no criticism of people like claudia and stephanie, i'm not even criticizing their cats, they have cats at home, it's evident op twitter that they do. lisa, nobody has an exit strategy from our pandemic m.m.t. lisa: no one has a sense of exactly what the consequences will be, either. we talk about the potential of some dill tearous use ramifications of -- from the m.m.t. types of policies you talk about. yet we are not seeing them. yields are not going up. inflation is going up as recognized as passing and some decelerating. when are we going to see the negative ramifications from m.m.t.-like policies? bob: we are at an interesting point right now with chair powell and the fed in the crosshairs of what's going on in washington. he's got jackson hole in the

september fomc meeting to back out of this. but right now we are well past the crisis. and the recovery is under way. and we are recovering a lot of lost jobs and we are going to close the output gap by the end of this year. and if m.m.t. continues with half a trillion in infrastructure bill and 3 1/2 trillion until various forms of stimulus, and the fed continues to print money and buy debt, i think there's a moral hazard there where you are looking at the fed underwriting a lot of government policies. i think it's a very good time for the fed to assert its independence, draw a line in the sand, and say that they are bringing these things to an end now. lisa: when and what commentary do you need to hear to get them to do that? as that inflation goes from transitory to worrying? bob: i think that's part of it. i think right now they can point

to substantial further progress has been made on a lot of the things that they looked at. when they look at where policy rates are, they don't need to be at zero for a lot longer. they don't need the $120 billion in large-scale asset purchases every month. they can move to something that's more normal. i step back and i look at where things are. if this had been a normal cycle say going back, 20 to 40 years ago, maybe even 15 or so years ago, at this point in the cycle i would expect the feds funds rate to be 2%. around zero real yield and expect the 10-year treasury to be around 3%, about a 1% real yield. so the fact that we are not there tells you the amount of distortion that the central banks are creating. lisa: if the fed were to say at the jackson hole meeting they were tapering their bond purchases september, november,

december at some point in the near future and indicated it would be faster than expected, what would be the market response? bob: i think the market response would be a gradual rise in rates. i know there's some debate out there about whether fed tapering leads to a rise in rates or not. i don't get that at all. let me tell you. if bond prices aren't the very definition of asset price inflation, you've got a central bank printing unlimited amounts of its own money and going in and buying a specific asset class. if that's not how you inflate the price of an asset class, how do you? you look at the negative 1% real yield on 10-year treasuries. i think the first stop is to get to something that looks around a 0%. tom: how do you manage that? we'll run out of time, but how

do you effect a 100 basis point move in the real yield? do you do it off the nominal or with the help of inflation expectations? bob: i think you do it with a combination of both. mostly with nominal yields. mostly with the realization that you don't have the 800 pound gorilla at the fed sitting on the bond market and maybe other central banks will dial down. tom: ferro right now is writing on manuscript brought on medication, it's going to be an important book. i think barnes & noble is waiting with boxes and boxes of it. you got to do a book. bob michele on m.m.t., that would be just wonderful. with jp morgan asset manager they have been on fire with real intellectual. lisa, gi back, bob michele there with invested theory, and i still go back to david stubbs on productivity i thought was lights out. lisa: if you have that

productivity boost and you have very easy monetary conditions, do you end up with a faster face of inflation? might be good inflation or better inflation than people expected. the question marks on this market are dramatic. i never heard of such wide differentiated opinions. tom: you are 100% correct, we don't have the time to talk about it. lisa, what you get is two americas. you get an america that is benefited by all this. lisa: you get the america that has access to some of its equity and bond market performance and those that have not. this is a big discussion. tom: the 10-year real yield negative 1.02 basis points. that is historic. stay with us. lots going on in radio and television. futures flats. this is bloomberg. good morning.

ritika: senate democrats are push agnew plan that would penalize american companies that shift profits abroad. in a proposal released today senate finance committee can chairman outlined his decision. democrats say for decades companies have been allowed to move profits and jobs outside the u.s. and president biden is sticking to his plan to remove u.s. troops from afghanistan by august 31, but he's ordered his national security team to come up with contingency plans if he decides a delay is necessary. the president says that completing the u.s. mission by the deadline depends on the

taliban continuing to cooperate and allowing access to the airport. johnson & johnson says a boost of its covid-19 vaccine provides a rapid increase in antibodies. that's supporting use of a second shot among people who previously received j&j's single dose i am munization. a second shot led to a nine point increase in covid fighting antibodies. it powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

>> will they stay high? >> as you are aware that the second forward waive hit india hard and suddenly. obviously i would say almost 50 days of the quarter were impacted in a very significant manner. and that has come through the portfolio site. all the banks and financial institutions higher than expected during the quarter. we do believe it is transitory. we expect moderation in the second half of the year. we have already seen positive trends come through in the second half of june. and july has been much better than june. i think the same trend continued

in august also. the resolution which was 98%, the 99.5% what i say over peak levels, there is a 26% year on year recovery.

>> several thousand americans have been safely evacuated from afghanistan.

and to include several hundred just yesterday were able to get on to the airport for follow on transportation. it's every day we are moving americans out of the country. tom: this is a different spokesman. he's john kirby, admiral kirby, of the department of defense in the united states navy. he actually has a history of moving bodies around under huge stress. frankly, that's very different than what we have seen from some in the administrations working with chuck hagel years ago. emily wilkins knows this of bloomberg government. we are thrilled she's with us. the market is flat right now. emily wilkins, a guy like john kirby knows it's chaos. what is the biden administration doing so that they listen to the secretary of defense and listen to admiral kirby about the steps forward? emily: at this point we are seeing the biden administration under lots of pressure from

lawmakers, international leaders with the g-7 to really go ahead and make sure they are extending that august 31 deadline. but at this point president biden and others in his cabinet said that's not necessary. that they are going to be able to get everyone out by that august 31 deadline. mind you, that means getting the american citizens in afghanistan out in the next couple days. so you can go ahead and get u.s. soldiers out. tom: completely unfair question but unfair wednesday, emily, is the issue here kabul and the airfield, or is the issue getting americans over to kabul to get out? em-- emily: you heard calls yesterday from republican senate leader mitch mcconnell saying they send soldiers out into kabul to make sure people can get to the airport safely. they can get into the airport and on the plane. that's been a sticking point for a lot of individuals as well. you are seeing president biden

talk about con-- contingency plans should they decide they need to extend the deadline. lisa: how much pressure is he coming un, president biden, with respect to international allies. you guys need to remain in there for a bit longer and make sure everybody who is an ally or cooperator can get out safely. emily: this is immense pressure coming from the international community. we saw that in the statement from the g-7 yesterday. but it's also immense pressure coming from within his own party. i talked with a number of congressional democrats yesterday who said that august 31 is not enough time. that the biden administration needs to extend that deadline. these are bipartisan calls. they are coming from within biden's own party. there is a lot of pressure on him right now to go ahead and extend it which is why i think we heard him yesterday talk about the contingency plan. i think this is something we have to continue following in the next couple days to see if the administration does change its tune on when they are going

to have that deadline. taylor: in the meantime we have president biden's popularity dip a bit. this raises questions about his agenda. in particular the $3.5 trillion resolution that was passed by the house yesterday. what do we have in terms of a sense of what impact there will be from the decline in popularity, from some of this controversy, on the agenda? this has been a big question. it's hard to paragraphs out the answer -- pars out the answer. emily: while democrats are upset with what's going on in afghanistan and will be demanding oversight and answers about why this withdrawal was as messy as it was, democrats want that reconciliation plan to pass. yeah, there's debate about exactly how much money they need to spend. somewhat much less than that $3.5 trillion. they do want to expand medicare. they want more childcare. they want eldercare. they want certain aspects of climate change. so to a certain extent democrats don't to see reconciliation go

down because -- because biden's approval ratings have dipped. they think that will help them in the mid terms. and the lawmakers i talked to yesterday, they really said this is sort of two separate tracks. yes, they are going to keep focusing on afghanistan, but that doesn't impact the fact that they are moving ahead doing lots of work right now behind the scenes to get the details of that reconciliation package nailed down. taylor: i want to follow on what lisa was hinting at. a lot of analysts are concerned and questioning that biden said his strength was foreign policy. there would be adults in the room. that this was his best showing. and this is what we are getting. are there concerns now that this is his strength? how does that hurt him here at home? emily: absolutely. the idea that biden was someone who has been in government for a very long time. who is very competent. who knows how to make things work. and then to see this is definitely shaking confidence in

biden. as lisa pointed out we have seen that in the approval and disapproval ratings for the president. and that definitely is going to have an impact. it's something that i talked to republicans they say, yes, this will be an issue throughout the rest of the year. throughout 2022. it's something they are going to be reminding voters of. at the same token, though, most americans if you ask them what their policy priorities are they are more likely to talk about domestic issues before international issues. while a lot of the images we are seeing right now from afghanistan are gut wrenching and heartbreaking, at the same point there is a question about how much those images are still going to be in the news, in the media, how much americans are going to be reminded of them come november of 2022. tom: thank you so much. greatly appreciate it. bloomberg government, eventful wednesday in marker. lisa, we have to go to the markets and i want to go all the different equity opinions we have seen. heated opinion yesterday from

bear market types. pushing against so many of the bullish tones. the upgrades that we got. lisa, let's talk about it quickly. ubs chris harvey, they got it wrong. chris mentioned that on this show. we thank him for his candidness. they got it wrong. and man with a vengeance did they come up. lisa: they became one of the biggest bears and now they are the biggest bull. taking a look at the uncertainty, tom, if you step back, some of the articles that have been written talk about how during the pandemic the one thing that equity analysts got wrong were the earnings. they vastly underestimated how high the earnings would be. their valuation expectations, they were valuing stocks way too high relative to where they actually were because the equity was that much higher in terms of value. if you take a look at that, people are looking at where we are now and saying, it's not as expensive as it seems. tom: the nuance here, taylor, is john leading the way with 5,000 out. i think it's 18 months.

the basic idea of yeah, the numerator moves, price moves, the denominator moves and earnings. i flunked. i got that question wrong, taylor. taylor: price decided by earnings. tom: thank you. clarity with taylor. never have her on again. taylor, the key thing here is guolla looks for imagine coming down. taylor: margin compression. along with peak growth is certainly things we have been talking about. you would argue how do you get that when you have a discount rate at 1%? 130 on the 10-year. how much is still a boost on equities. we are nowhere near yield seeing a headwind to some of these equity prices when you think about discounting some of those cash flows back to present value, tom. tom: see that, lisa, she put me -- lisa: it's tough, tom. it's tough. tom: coming up, folks, in our next hour, taylor riggs on the

ratio dupont ratio. taylor: i can recommend a meditation book written by john ferro. tom: it's been quite a drawdown in the s.p.x. lisa: we'll discuss it. tom: this is bloomberg, good morning. morning.

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tom: good morning, everyone. boomberg surveil. mr. ferro is off. taylor riggs is helping out today. that's a good thifpblgt we are going to get to a really important conversation here. wonderful, unique expert on the geography of central asia. what it means for not only for financial system, but also our political system under siege in washington. first a quick look at the markets. flat is the way i'm going to put it. we devolved to red and green on the screen in the equity markets. i know, lisa abramowicz, the yield of 1.31% on the 10-year yield. we have yields -- lisa, yields are creeping away. lisa: yields are creeping away. and the coral larry effect given the fact that people were wondering, well, yields can rise as long as it's slow and also just note, crude, turning higher

on the day. third straight day of gains. tom: 71.37. romaine bostic with the individual stocks, romaine, what do you have? romaine: start off with j&j. a lot of talk about those booster shots. we know the u.s. pushing to start booster shots for moderna and pfizer vaccinated folks starting september 20. now j&j throwing its data on the pile. coming out with a report on early stage clinical trial about booster for its single shot immunization here. it shows very promising results here. there is no formal request yet to include j&j in this booster program. but j&j wants to be a part of the conversation here. j&j shares up fractionally. keep an eye on the chinese stocks that rally we saw ran into a speed bump. we heard from the s.e.c. chair late last night saying a lot of these companies need to be a little bit more transparent, a lot more transparent about their

financials here. he did not map out any specific regular tations, another regular another shot across the bow for anyone trying to buy into this dip. a big warning you have to be careful. keep an eye on j.w. nordstrom. overall they beat on most of the metrics here, but analysts seem to be drawing comparisons here to 2019 levels saying the company not back to where it was particularly at a time when competitors like macy's and kohl's making grounds. jp morgan wasting no time. this is for you, you don't talk about enough -- this is all we talk about on the close. taylor knows this well. revenge of the memes stocks. amc up for than 20%. amc now back up above 40. both these stocks higher here in the premarket setting up for what could be another

interesting day. six straight days of gains. guess what, tom, this is about fundamentals. they reported earnings, 22% jump in comp sales. surprise e.p.s. tom: you work with him every day? romaine: this is yeoman's work. tom: deepest sympathies. taylor: we get all the fun memes in the afternoon. tom: thank you so much. really important conversation typically done at davos. maybe jackson hole. world meetings where she holds court with profound and original prospectus -- perspective on central asia. afsanch beschloss is the chief executive officer. yes very good on investment. expert on natural gas. also expert on her iran and all of central asia. it is in crisis. miss beschloss, thank you so much for joining us today.

you know back to the 1950's the iran, pakistan, india gas pipeline. you have lived it at the khyber pass in west pakistan. the romance of the british, great gain and all that other malarkey. is china going to come in and take over the vacuum of the iran-pakistan-india pipeline as the u.s. exits? afsanch: you always go straight to the point of the matter. it is really interesting that you said i studied natural gas pipelines going through all the way in asia, but also in europe. no question that politics is always more important than the physical aspect of this thing. china is seeing a void. we saw the russians lose in afghanistan. we saw u.s. pulling out as we speak. and no question that the chinese are seeing big boys.

and they will take advantage because they will need a lot of energy to continue their growth. an that's part of their solution. tom: our corked memory here is cobalt in africa. how chinese came in and worked out long-term contracts on obscure minerals. how will they work with the taliban? will it be the same method? long-term contracts with some things on the back end that maybe will give them an advantage? afsanch: again, i'm not an expert on working with the taliban, but i think what we are seeing this time round is that the economic thinking on the taliban side is not something that's pure. they are not a group that works closely with the world bank or with multilateral institutions or with eight organizations. we have no idea how they will really behave when it comes to

having international agreements and sticking to it. those i would not really think about relying on. i think the question is where does the pipeline go? lisa: in the meantime we are looking at a jackson hole that has a very big effect potentially on the international community, the international community as it does fall within the international banking world there is a question of whether any kind of taper announcement would affect the international community arguably more than domestic markets in the united states. what do you think? afsanch: you're so right, lisa. the whole international point of jackson hole has been a little bit diminished in the last few weeks and people have not been talking about it. i think a lot of people are disappointed not to be there in person. my own thinking is that tapering is not going to start in this

meeting. and i don't think that it jay powell is going to go there at this meeting. it's more likely november, december. no question the conversations that usually take part in jackson hole at the margins are going to be the ones that will decide in terms of how the central bankers are communicating with each other, not just to the rest of the world. and those are the ones i would watch for. again, i don't think that they will be talking about it too much about u.s. tapering at this particular meeting. taylor: let's say you're correct and the fed does follow that timeline, what are the ramifications for merging markets, following a slow down in the bond purchases. afsanch: as we have seen a number of emerging markets have been already starting to increase their own interest rates. we have seen that happen over the last few months. and we have seen some more

tightening in emerging markets. the usual sort course of things the margin markets that have a lot of u.s. denominated base do not have a lot of exports that are u.s. dollar based would be the ones to get into difficulty. i think given the way tapering will happen, which is probably incredibly gradually and not sudden, probably the impact on emerging markets will be something that is slower, the third job of the fed, which is stability of the global economy, the u.s. economy, of course, but also the global economy will not be something that jay powell will be forgetting to consider. lisa: we have been having a lot of conversation about moral hazard. what is the level and risk right now of moral hazard if we don't do something, if we don't taper as quickly as we should? afsanch: i think the big problem if we don't start tapering whether it's in october or

november or december, more likely november, december time is the pressure of inflation. again, our thinking, my thinking is that the supply chain problems are still huge, so overwhelming, number one. and all the other things that are going on in terms of covid related problems in various economies. but they are the ones -- they are the things that are governing price increases much more than typical inflationary pressures. the issue is whether we are too late to move, but in general inflation is a slow process f besee it take off, i think jay powell and his pilots at the federal reserve have less tools to catch up quickly if they need to. not so worried about more hazards. tom: thank you so much. greatly appreciate it with rockcreek this morning as we go to jackson hole.

with all the distractions, we haven't talked much about t we are two days away from the powell speech. lisa: the expectation for it to not be that newsworthy. there is so much. i agree with that i agree with the hmmm because it indicates the level of surprise that could potentially be there. the market response to that also potential surprise. how much hinges on the fed policy? what is your impression of what a tapering would do at a time when the supply of treasury's coming out as declining? all things being equal, could it be a maintaining of the policy if they start to curtail the bond market purchases on the margin? tom: i think people understand i'm in a camp. taylor riggs, what's important is not the tapering but the calculus of the tapering. if they come out and say the first and second derivatives of those flows are going to be gradual and not damaging, that's mission accomplished. taylor: i have increasingly heard that the taper tantrum is behind us. we already had it. you could react a little bit.

to lisa's point maybe some complacency in the market. the slow and gradual, dare i say equal as i have been pressing a lot of our guests, equal treasury, equal mortgage backed security. tom: we don't do mortgage backed securities. too early in the morning. lisa, what's important here it's nonlinear from a negative 1.01% 10-year real yield i have to say in negative 0.3010 year yield. it really picks up with a wallop as you narrow that gap. lisa: i have to tell you, tom, i wrote this column about inequality and the ramifications of said policies. the pushback dramatic. i thought it was fascinating how many people challenged the assumption of those policies. tom: a marriage? we are doing three those this -- shows this morning. lisa: have some tang. meditate. tom: the point is good.

ritika: the biden administration has told refugee aid groups to get ready to help resettle 50,000 afghans. the refugees are admitted under a program known as human parole. those considered to be at risk under a taliban government. the house has adopted that $3.5 trillion budget resolution. without directly voting on t house speaker nancy pelosi avoided a showdown and use add procedural man ufere that deemed it passed once the house adopted rule governing debate of two other bills. they'll write the details of the framework into tax and spending bills. democrats will use the reconciliation process to push it through the senate without the threat of a republican fly ball. vice president kamala harris stepped up criticism of china. harris urged countries in southeast asia to apply more pressure to beijing.

it wants to upgrade its relationship to vietnam to a strategic partnership. they may gave them another form of by donating more coronavirus vaccines. hundreds of chinese companies listed in the u.s. could admit to more scrutiny or get kicked out. the clock is ticking. the s.e.c. plans to enforce a deadline that rares chinese to permit inspections. powered my more than 2700 journalists and analyst in more than 120 countries. this is bloomberg.

>> i think this market it's priced to perfection and if i look outside the window, life is

not perfection. my team just started getting a little nervous about this equity market in the last couple of weeks. doesn't mean we are going to be underweight. we are certainly not going to be overweight going into the fall and going into jackson hole on friday. tom: christopher alledman with a lot of responsibility in the pension areas. his goals to make the actual assumption and other goal to be in the markets that are surging, surging, surging. always an interesting conversation. i forget about the assuming it's been the missed call the last 20 years. a single digit world. yeah, with ander wouldful turnover of the tragic death of david swinson. there's a huge institutional body watching this show, listening on radio who really care about making the 6% bogey. lisa: 6%. 7.5%. which is down from 8%. how do you get 6%. in a yielding world of a 10-year

at such low rates. i got to say, he was making a point about the economy and how the real economy does not reflect the rosy scenario you are seeing in markets the stock market is not the economy. how much they diverge and what that means remains to be seen. how closely we have to track the economic data and what this means for markets is getting less and less clear. setting up a new play book for a lot of people. tom: which is the cart and which is the horse? which is completely unfair. someone that's grizzled on this this and wrote that famous equity book, horse before cart, david willson joins us. we are going to tear up. i'm getting weepy eyed because we are going to be talking about something from another time. margin debt. have you ever had a margin call? i enjoyed margin call. they are no fun. david: i never borrowed to buy stocks that. would explain why i never had a margin call. tom: i enjoyed losing money. continue. david: whatever does it four. let me tell you, you go through

the monthly numbers that come out, the financial industry regulatory authority. they went for 15 months in a row starting in april of last year when basically the bull market. tom: you leveraged up. david: absolutely. you are talking about an 84% increase over time. but that stopped last month. that's got banc of america thinking, maybe we have reached a peak in margin debt. he's done the miss hiss torqual analysis that shows when you get to a peak like this, assuming it is this time around, note a good thing for stocks. tom: is it a change of milieu? the e.t.f.'s. the percentage of the new york stock exchange is not individual securities. you have to diversified input in the nyse. does margin debt still matter like it did? david: it matters. it's just it's one of a number of indicators arguably. you have to remember that. that was even true back in the

day that now you can look at companies that have became public and they havedown down -- been down recently. there are all kinds of ways you can see investors are taking less risk. the amount of trading going on in u.s. stocks not what it was a few months ago going back to february. there are any number of indicators that analysts are pointing to suggesting that even though the s&p 500 keeps setting records, number 50 for this year coming up yesterday that there's not necessarily a broad strength in the market. you throw the margin debt numbers on top of that. it's another reason for concern. taylor: concern meaning what? we are not going to chart another 15 in the new highs. or concern we are going to see some drawdown. it doesn't seem like concern is translating into anything that's significant in terms of what a

potential drawdown would look like. david: maybe not at this point. you do have to remember that going back -- last october as the last time you had a drop of 5% or more in the s&p 500. at some point it has to happen. people are kind of looking for signs arguably that it's coming. and the drop in margin debt, 4.3% we saw in july is being interpreted at banc of america as one of those signs. taylor: what is the aaii survey telling us in terms of the difference between how institutional investors are bullish or bearish and what the retail investor is thinking? david: taking a quick look at the numbers, taylor, boy, you talk about even split. in terms of whether the retail investors, the individuals are bullish or bearish or neutral. it does show you that the bearish comes up. it is a pretty even split.

and arguably, that's reflected in the kind of contrast we are seeing between the performance of the s&p 500 and some of the indicators out there. tom: thank you so much. back to margin debt. margins is tough. there is an academic paper, lisa, out years ago, i unfortunately can't cite it, basically it's 1.38-1. a lot of work done. i think it came out of vanderbilt my recollection where when you get out over margin exposure and leverage exposure, 1.381, you got a timeline to where bad things happen. lisa: there is also an issue that dave wilson raised which is what is the leverage being built into markets? is that leverage coming out of the system? you are seeing that on margins. what is it stock did-apalooza. how much are we seeing those pockets slowly deflated. at what point is there a seismic

jump in the response in the market? tom: to both of you, i'm soarry, it goes to the family office tobacco at credit suisse. taylor, we didn't have transparency of margin or leverage. taylor: yeah. that's certainly the case. i continue to just go back to what bob michele says about moral hazard and what is the risk. i think muhammad has been really strong on this. what is the risk of not doing something. lisa, to your point earlier you asked the question, if it's not doing a lot, $120 billion a month, why are we still doing it? what is in the risk of a small little taper if it's not that big of a deal to begin with. lisa: i wrote this column about inequality since that is the topic of discussion at the fed. i bring this up, it's relevant to what you are saying, this idea of what effect has the fed had on markets. what effect has the fed had on inequality. i got to tell you i was shocked, tom, at the degree to response

and the bifurcated response some people sayingest. other people how could you. the fed hasn't had that much effect. that to me highlights how much disagreement there is on a basic assumption that loot of people talk about. tom: i would assume this will come up at jackson hole not in the speech if the papers. the basic idea is what's the mandate of the fed. the mandates of the different central banks are all different. they center around jobs and inflation/rates. where does inequality come into that mandate? lisa: how much are we dealing with fed making it self vulnerable to politicization. at the same time how much are they basically just financing -- tom: taylor, weigh in here. taylor: do i have to weigh in. 8 a.m. i'll do t moral hazard. i'm on team bob michele of jp morgan. tom: that goes back to the basic idea here expect the unexpected.

which we will do in the q 4. and into exciting and interesting 2022. truly these are historic times. red and green on the screen here. the yield is the story of the day. 1.31%. ferro may have to come off his writing vacation. this is bloomberg.

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>> powerful growth will continue into next year and it is still too early to get positioned on the market. >> this growth could be extended as we continue to deal with the bush for covid. >> earnings growth not valuations will drive markets higher next year. >> the fed starts to taper in november. maybe december. either way they are tapering. >> we are adding interesting point right now with chair powell and the fed in the crosshairs of what's going on in washington. >> this is bloomberg