>> really look at corporate health. corporate's are strong, they have a ton of cash. >> the delta variant has put us in a position that i think we will set up a second reopening. >> the fed will have to contend with inflation pressures or supply-side. >> to raise rates they want to see they have achieved maximum appointments. >> this is "bloomberg surveillance." tom: good morning everyone.

we welcome all of you. an important hour with economic data and an important hour where caution pushes against the many bull market calls we see. jonathan: 30 minutes away from jobless claims and retail sales in the united states of america. the final stop on the way to the fed meeting next week. tom: the fed meeting is what we drive forward to. we will get to the data in a moment. what's so important is we dovetail the american consumer into a really good claims trend. jonathan: and dovetail the optimism of wells fargo. a caution from our next guest in a moment warning about the level of complacency amongst investors. that's the debate at the moment. tom: let me go to lisa on that. you have been out front on this.

the boom in real estate and the equity markets. take it over to the fed and all of that money in the system. lisa: just to pinpoint that in the retail sales per what if it surprises to the upside. what if we see real power and people deploying from their savings account to keep buying stuff because that the american way? what does the fed do with that? jonathan: they would hike and the market would crash. [laughter] tom: to the two of you, lisa brings up this is about the shift from goods consumption to services consumption, that is the mystery. jonathan: the full sector service -- service sector recovery has been pushed back. september has become 2022 somewhere. tom: i'm going to get to the data check because we have to get to it.

i'm looking at the vix 19.0, it's stasis. jonathan: negative a quarter of 1%. yields higher by a basis point. 13107 on tens. -- 1.3107 on tens. lisa: michael o'rourke jones trading chief market strategist. is that what you call yourself, a bear? >> these days, absolutely. i am concerned about this environment. i've been in this business of most 30 years now and it was a prop trader, i haven't seen this level of complacency in my career. it is the company by evaluate --

accompanied by valuations that reach that 99, 2000 level. we are arguably the most expensive market for 100 years. lisa: if someone named jon ferro would say to you people of been making this argument for a long time and people of been overly pessimistic, what do you say is your counterargument of what could be a catalyst to change the backdrop now? michael: i have had my share of bearish calls in the past decade and it's been rough. but it's also been the past 13 years driven by monetary stimulus and now course this latest wave of fiscal stimulus on top of it. for me, the issue is i don't see how these valuations get justified without either a long basing process or significant correction.

we have an economy that is been dormant for the past 18 months. the valuations have been pushed well beyond levels that are historically appropriate. the market cap to gdp for the s&p 500 is 170%. we peaked at 120% in 2000. for the past 30 years it's averaged 85%. that to me as a little bit alarming. the difference now versus most of the past year is that we are seeing a monetary fiscal stimulus that will start to wane and that will be the 2022 story, that we face a monetary and fiscal cliff. those will be a concern for investors. jonathan: i'm not making a market call. we spend a lot of time saying what's can go wrong. what michael right as well -- what might go right? we talk a lot about downside

risk and not upside risk. right now the consensus arguably is we should have a correction but they all want to buy it. the difference between a dip, when that moment happens, if it's five or 10%, the people who said they want to buy it today run pretty quickly as well put with the difference of a dip you by and avoid? michael: there's a couple of factors. the level you get to in valuation as well as the growth prospects for the economy. that's my concern is i don't think either one looks really good in this environment. we have had more than $10 trillion of monetary fiscal stimulus thrown at this economy from 10 or 18 months. one thing i would argue here is you look at march of 2020 and there's an incredible amount of uncertainty and fear.

i would say today there's an equal amount of uncertainty when it comes to the economy because you don't know what the trend of business or economic growth is. tracy had a great story about how the semiconductor shortage is equivalent to the market where people -- in order to get an allocation. my point is people ignore the risks because the prices are higher and everyone feels good. in march of 2020, everybody saw the fear. tom: catharsis when things go down, there's a difference when things go up. do you have a buy limit order or a place if it advances like the bowls say you have to step in and participate? michael: yes and no. i think if you want to be

invested there are places you can be. i like the banks, i think they are the most attractive areas. they have significant earnings despite a zero interest rate environment. i think the value spaces ready to rally again. it started to rally a year ago and ran into resistance in march and may because chair dexter ron powell said the market were not ready to taper yet. you so that trade, back off. people -- trade come back off. there are places. tom: but on a technical basis, which of the sectors have the opportunity to participate if we keep advancing? michael: i would look at the health care space.

the financial space, the energy space is really interesting here. but again, i would be hesitant to chase this market at these levels. tom: good to cat -- jonathan: good to catch up and get your views. michael o'rourke on this equity market. there's a range of views out there. we seem to paint this picture that ever but you comes on the show says buy. it's not quite that way. we start the show by looking at what hsbc had to say. under appreciating the growth slowdown, comparing and contrasting from jp morgan saying growth is ahead of us, looks good. there is a divide out there. lisa: i think your point is well taken. when you push back against the bearish view is not a pushback on calls that things will be positive, it's perhaps that the pain point has been being

bearish. being bearish on the dollar and bonds. that's been the pain trade saying this time it's different. i think that is one of the pavlovian responses to the market that are getting complacent. they've been wrong when they have been anything but complacent. jonathan: what did the s&p do last year? up 16%. if you just ask someone on the street last year what was the s&p market given what the economy is done, they wouldn't say up 16%. tom: that's the cult of the bowls on the double-digit kind of returns. can i bring to your attention important research. citigroup making it clear he wants to buy the euro dip off the german election thanks. it sounds like inside baseball and not important. that is something underreported in primetime new york.

it's a call on the politics, a dip in euro he wants to step into it with optimism on the euro experiment. jonathan: down for tenths of 1%. lisa: i'm understanding -- trying to understand what the benchmarks are for the trade here? is it virus cases? it's been a moving target in terms of the metrics to follow. jonathan: you've got to make a forecast, i get it, but the range of outcomes going into next year. equities down by one quarter of 1%. should we talk about football? 19 minutes away from jobless claims. you know more than me now. tom: i've cleared my schedule. jonathan: down 11 on the s&p.

this is bloomberg. >> with the first word news. this may be the first start of a new era in human spaceflight. space access want for civilians on a three-day excursion. passengers and the dragon crew capsule include a tech billionaire and a childhood cancer survivor. the billionaires paying $200 million for the flight and is donating $100 million to charity. those latest cruise missiles tested by north korea this week were fired from a train according to the country's official news agency. it suggests kim jong-un has a new option to strike allies in the region. senate republican leader mitch mcconnell says raising the debt limit is strictly up to the democrats. mcconnell rebuffed secretary trout -- treasurer secretaries call for bipartisanship.

he says they will have to boost the ceiling on their own. the government could run out of authority to spend next month. the semiconductor shortage won't ease to the second half of next year. it left show rooms with fewer models to sell. the tight inventory is led to soaring prices. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta, this is bloomberg. ♪

>> right now what we are seeing is the question facing is this

too big to fail. and so what we will see is the potential for beijing to step in if not directly, certainly indirectly, step in and take on that debt. jonathan: wonderful to catch up with bill lee. good morning. alongside tom keene and lisa abramowicz, i'm jonathan ferro. jobless claims and retail sales 12 minutes away. yields higher. with quality basis point. euro is weaker. euro-dollar, 1.1760. tom: in 12 minutes, this is important for all on global wall street. jonathan: then we will hear from the president at 1:45 eastern time. delivering remarks on leveling the playing field in our economy. tom: i have learned that

submarines matter for a lot of reasons. one of them as they are really expensive to build. terry joins us. we are thrilled for you to join us after this agreement. we have the idea of the u.s. washington, london and -- joining together for subs. this is about general dynamics. my re--- my reading is they will be built in australia. how do you perceive u.s. sub burning technology will be built in queensland where the navy sits? >> that's a good question. i will not pretend to be totally familiar with australia's boatbuilding capabilities. they've got some. that was one of the first things i thought of which was they are talking about building this technology down there. my assumption is they will have

to provide submarines sooner rather than later just to start the alliance with the idea these are built in adelaide over the next couple of years. tom: these are nuclear powered, these are not nuclear submarines. around july 31 of this year, the second vintage was christened. it is our modern u.s. technology. from where you sit, with there be a debate in washington about giving too much away to australia in terms of cutting edge technology? ? terry: in washington they will be happy with this arrangement. folks should remember the trump china policy was the most bipartisan thing that happened in washington during the trump years. biden has shifted to a more containment strategy. china feels embolden for a lot of different reasons. it has shown that with military

exercises around taiwan and the south china sea. afghanistan probably emboldens them more because they see a hole in the middle of central asia. in the middle of all of this what you have got is this new so-called office initiative that is designed to improve deterrent -- deterrence and stability, built off of the southeast asia alliances. it has engendered a predictable response from china, asking to shake off the cold war mentality. and interestingly not building exclusionary blocks targeting or harboring the interests of third parties which is pretty much exactly what the west thinks china is doing. the net of this is pure military deterrence is going to be a significant part of response to

china's aggressiveness from a western perspective. lisa: i'm trying to understand the overall approach and priority of the u.s. administration when it comes to china. is it containment, is its chain issues, or is a technology driven battle where both countries want preeminence in the sphere? where do you see the biden administration putting most of its efforts? terry: i think the answer to that is yes. you have the three nodes quite well. i will not repeat them. containment i always thought was a big part of this. i think containment policy alone is part of the china emboldened mint. -- emboldenment. there are longer term issues that need to be dealt with paired the biden administration is making an effort to start that but i don't think they have been as aggressive as they need

to be. on top of that, what you have is the desire in the need to actually shore up purely military based alliances and given china's more military aggressiveness in asia, that is probably a necessary thing. lisa: one thing i love hearing is the probability you put on outcomes into mastic policy in particular when it comes to washington, d.c.. what is your most likely outlook when it comes to the corporate individual tax rates and how much they increase under biden? ? terry: i think the so-called human on -- human infrastructure piece is still 30% likely to pass. my base case is you don't see tax raises. certainly you don't see them anywhere near the $3.5 trillion included in the bottom line. if democrats eventually get to

something, and i mean eventually. they are not in agreement on what the number is, what they should be doing. those tax raises will end up being a lot more modest than that. you are looking at worst case scenario only about half of the tax raise or even less than that being talked about today. generally speaking that's a market plus. jonathan: we have some data to get to. from new york city your data front and center in just a moment. mike mckee in the studio early for this one. retail sales and claims coming up. >> they want to know what the outlook is for consumer spending , whether the economy is slowing significantly. jobless claims got down to the area where we don't care a lot. tom: this came up earlier, the idea of shift from goods sector

to service sector. where do we stand on goods sector consumption over to service sector consumption? >> there hasn't been much of a handoff as we've anticipated. tom: do you understand that he gets in at like 7:52. jonathan: he came in it 8:23. [laughter] jonathan: looking forward to breaking down the data with you. we will do that in just a moment. nice when mike mckee comes into the studio. you just know it's important. tom: headlines from the ecb. this is after david rubenstein's interview. jonathan: we are not out of the woods. the recovery in the euro zone is clearly underway. tom: that is what lisa said as we went to commercial in the last break. lisa: honestly try to translate

that. jonathan: back from the brink, we are not out of the woods. lisa: it means fingers to the wind. jonathan: you two are joking about it, not me. i don't want to get in trouble with the ecb again. lisa: again? [laughter] jonathan: this is bloomberg. ♪ ♪

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jonathan: moments away from economic data in the united states of america. going into that economic data, futures -12. a little bit of a dip going into the retail sales and initial jobless claims in america. that data starting to pour out. with it here is michael mckee. michael: little bit better than expected news on retail sales. down 1.8% for july. up .7% for august. july a little bit worse than it had been but august better than forecast. we are looking at decent numbers there. looking at the jobless claims numbers.

mine has not reloaded. there we go. 332,000, that is an increase of 20,000 from the previous weeks revised level of 310,000. going in the wrong direction, but may somewhat seasonally affected. let's look at the retail sales numbers and see what we are getting in terms of movement. the retail sales numbers overall .7%, excluding motor vehicles and parts, 1.8%. motor vehicles and parts were down. this was widely expected. food and beverage stores up 1.8%. grocery stores up 2.1%. could that be the fact people are spending more time at home? that is good news so far. then we are looking at food and

drinking places. tom: tell us about that. michael: no change at all despite tom's best efforts. you would think there would be a little bit of again given the way things have been going, but it does fit with that narrative that people stayed home in august because of covid. we did not see any hiring. tom: john, jump in with the market reaction. jonathan: it is a shrug and the equity market. push it through the bond market. a little but of a lift on the treasury curve, yields up by two basis points. 1.32 on tends, 30's at 1.88. how do you compare and contrast that? it is a strong beat for august. tom: might answer to all of this is on retail sales, the control group is what the pros fall back

on but does the control group work in a pandemic? michael: it does. basically the control group takes out things like auto sales because they are reported in the retail sales figure as a dollar number. sales of autos go down as business investment in gdp. they took this things out and gasoline we take out because it is so affected by price. not much this past month. the other one we should mention his non-store retailers up 5.3%. that is like amazon. all of those. up 5.3%. that is a big number. lisa: that is me, i am sure. you're the one always talking about the amazon boxes. tom said that this pushes against the disinflationary feel in the cpi report.

is that an accurate characterization? how much can we glean from this? thomas: is a marginal -- michael: is a marginal change because they do not adjust the numbers for inflation. if you put inflation in they would be slightly smaller but because of the drop in inflation it might be not much of a change at this time. overall over the past year and a half of retail sales have been buoyed by inflation. tom: michael mckee, thank you so much. red and green on the screen. in the bond market, the yield up to 1.33 gets my attention. thomas costerg joins us. thomas, you have buried in your note a really important sentence. you ignore consumer surveys. why?

thomas: i do. i think it was the right thing to do because we have seen retail sales data that the u.s. consumers are fine. i look at credit card data and i see the u.s. customer is fine. he is happy to spend and take more credit. i am a bit more dismissive of recent consumer surveys. i think they may be affected by the end of the jobless benefits. otherwise i think the u.s. consumer is fine and we have data to show the u.s. consumer is fine and can withstand headwinds like delta, like the end of qe. jonathan: hesitant to move on from retail sales too quickly. your view on the business surveys we get from the fed. we have the empire manufacturing survey out. the philly fed business outlook is a big upside surprise. this is for september. what is the early september data telling you? thomas: if you look at the

empire survey, i think they are much better than expected. the order books are looking fine. maybe too find because the risk in 2022 is we have so many orders that we have the risk of having fake orders as companies order too much and cancel orders. so far we are in the early phase of the accelerating business cycles and things are fine. there are some bottlenecks. bottlenecks affecting cars. they are niche products. otherwise the u.s. customer is fine. manufacturing chains are ok. given the supply chain bottleneck. otherwise the books look fine. i am positive on u.s. growth. jonathan: take the positivity and push it forward to the 22nd, the fed meeting. how does it feed into that?

thomas: the fed has telegraphed they intend to taper by the end of the year. i think they will not do it next week. i think jerome powell does not want to rock the boat. he does not want to rock the boat and move financial markets too much. they're going to probably wait until november. otherwise they think the pressure is there for them to taper given the strong data and ongoing strong inflation. i think the regional fed presidents are going to want to push towards a firmer schedule on tapering, and maybe they will put hawkish dots in there. lisa: are you saying even if the data supports tapering the bond purchases earlier jay powell would not do so in order to curry favor politically? thomas: what i'm trying to say is the fed is like a supertanker. you do not change direction so quickly. maybe we want to do it before year end.

i do not see any sign of a rush from chariman powell. i think he is going to indicate it is coming soon but they are not likely to do it next meeting. also we have the deadlines as well. lisa: that is interesting. jonathan: he is not the only one saying it. lisa: is the data backing a taper they will not do because of other motivations. jonathan: some people are asking that question. tom: it is out there. part of the mix in the data. last time i fell off my seat before today was over the price of a cheeseburger in zurich. this morning i fell off my chair because you're talking about a vulgar moment -- a volcker moment.

you have to be kidding me we will see it in a 3% or 4% inflation rate. thomas: i think the baseline is the fed will ignore high inflation, 2% to 3% inflation. the problem comes of inflation comes at 4%. tom: at 4% we will panic? lisa: it is unlikely but it is -- thomas: it is unlikely but not impossible. jonathan: thomas costerg, thank you. lisa: did he actually fall off his chair into zurich mcdonald's? jonathan: he did not go to mcdonald's. i can share where we go another time. a bit of a delayed reaction to a decent beat on retail sales in america. euro-dollar -.5%. an extra basis point lift on a 10 year to 1.33.

tom: i know you have to go get prepared for interview with cisco -- lisa: they rejected me. tom: with all we have done, i know there is to uncertainty, my head is spinning interview to interview over the different views we are receiving from well meeting people. jonathan: a wide range of outcomes for 2022 and beyond. tom: the only one here calm is lisa because she is looking at yields. lisa: i sense the sarcasm dripping out of your voice. jonathan: kathy jones is also looking at yields. she will join us. then i will check up with chuck robbins of cisco. that show begins in 20 minutes. tom: stay tuned for that on bloomberg television. kathy jones can frame out the huge issue over yields. jonathan: there's a whole

chapter in drawdowns dedicated to that is an experience -- dedicated to that zen experience. tom: i saw the cover for the book treatment that came in. ww norton would not publish it. it was totally inappropriate. jonathan: i thought it was a good photo. tom: i fell off the chair. lisa: at mcdonald's? [laughter] jonathan: from new york city, good morning. retail sales tidy in the united states of america. the dollar showing strength. inequities, we are down six. -.1%. john keene and tom ferro alongside lisa abramowicz. this is bloomberg. ritika: with the first word news, i'm ritika gupta. it will not be all sightseeing

for the first all civilian crew on a manned space mission. they will conduct some medical research during their three-day search. one of the passengers may have paid $200 billion for the flight plus a donation of $100 million to charity. president biden have -- calls that mark milley made to china in the waiting months of the trumpet ministration. a new book says mark milley spoke to china twice thing the pentagon would not go to world. president biden says he has great confidence in mark milley. some republicans say he should be fired. european central bank's will look at the trading operations as part of climate protests next year -- an assessment of loan books into the fallout from global warming. european banks already worn they are not ready for next year's test.

aversion -- the longest range electric vehicle. the agency awarded it an official rating -- that is more than the tesla model s. it plans to build fewer than 500 cars with those specifications and they cost $169,000. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> revenue growth has been fantastic because of a generational shift.

at the dust settles into next year i think it will be a focus based on which business -- who has the pricing power, who can hire the best labor, and who has more diversified supply chains? tom: the gentleman from south africa has always be holy -- has always folded the behavior of management into who will prosper in the stock market. this is a treat for lisa abramowicz and myself. it is nudge, the final edition. it gets thicker. richard thaler said we have to do it. cass sunstein and richard thaler, we are thrilled to bring you the laureate from chicago. i want to take nudge and your work to this baseball season. the cubs are in disarray.

the san francisco giants are ascendant, and the gentleman that has driven forward the san francisco giants experiment is a berkeley thalerite. tell us how the judge in the behavioral economics folds into the success of the san francisco giants. richard: moneyball is a book about behavioral economics. when cass and i wrote a review of moneyball, and that is when i first met michael lewis and that the stuff you've been writing about it moneyball, there is an academic you about taking advantage of taking -- about taking advantage of other people's biases. that is what led to the book. this makes total sense. bond could have been a very good behavioral economists. berkley is one of the top two or

three in that area. his mother was disappointed he got into baseball. tom: let's go to the bias and blunders of your informative must-read book nudge. what are the biases and blunders of covid? richard: we do not dwell on covid. we were writing it in the midst of covid. as we all have learned, it changes every month. there are passing references. the publisher says why don't you add a chapter on covid and we knew it would be out of date the minute the book came out. we talk about off and on. i think right now the key thing we are dealing with is how do we get people vaccinated and is nudging enough, and if not, what else do we need? my conclusion is we have now

reached the point where there are so many people with very strong ill-informed opinions that stronger measures are necessary. lisa: i have to say i thought it was funny that you called at the final edition so you would never be tempted to rewrite this than you thought it is covid after all, so what else will you do? why not rewrite this bestseller and preeminent book in the behavioral economics field. what was the biggest change in how you view the way we make decisions from the first addition to this final edition? richard: a lot of it was just getting rid of anachronisms. we had a whole chapter devoted to a very clever solution to the same-sex marriage problem. just legalizing it was even better. one of the things we stress in

the new addition, which is probably two thirds new is exactly this point that sometimes nudging is not enough. there is an entire chapter on climate change where we start with saying what we need is a carbon tax. i am with every economist in the world on this. if we do not get the prices right we will never get anywhere. i think it is ridiculous that the bill that is going through congress now has no carbon tax or anything resembling that. we will pay $4 trillion and not tax something that is killing the world is shocking to me. lisa: you said sometimes nudging is not enough. is the answer and economic one?

causing prices to go up dramatically, or is it just a legal one? richard: a basic principle of economics is it is more efficient to drive behavior through pricing. this is especially true for climate change because so many of the decisions are being made at the industrial level. how we generate power, how we manufacture, what we manufacture, how do we transport things around the world. these are all business decisions. businesses react if the price of fuel triples. you know, do we want our grandchildren to be able to live in a comfortable world or not? if we do, we will have to suck it up. sweden is proof it is possible. $120 per ton and their economy

is thriving. tom: we would love to continue this conversation but we have run out of time. i greatly regret that. i have about another hour of questions. he is a cubs fan, in therapy for that right now. the book, with the wonderful cass sunstein, "nudge." i love what -- few books can be said to change the world, but nudge did. we have to nudge ourselves towards a market. after three sets of data this week, red and green on the screen. lisa: you want to talk about where people are being notched, they are not being nudged by the data. the data is confirming their view and the belief in what will happen. i want to say this question of whether we all -- we are entering a softening or a transitory trent with respect to inflation and spending today's

retail report muddies the water a little bit. tom: i go to the moving average model. i never look at one month. the three-month month averages are probably safer. i will look to the 10 year basis. we will -- will we get to 1.27? richard: that is also kind -- lisa: that is also kind of compelling. there is a story about hedge funds restarting. i have to say the bears have been burned so time. at what time you set up a bifurcated market. tom: let's bury the bars -- let's bury the bears one more time. the shipping giant maersk readjust higher. they go from a $15 billion onto 18 billion.

that on earnings before interest and taxes. they jettison overboard the tea in the. stay with us on bloomberg radio and bloomberg television through the day. good morning. ♪

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jonathan: 30 minutes away from the opening bell. a big upside surprise on retail

sales, giving this market a little bit of a left. "the countdown to the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: we begin with the big issue. >> we are seeing a deceleration within the data. >> the reopening story being impacted a little bit. >> the short-term impact is clearly sentiment. >> sentiment is falling. >> passengers attending flights are being impacted. >> a decelerating growth environment globally. >> something the fed will be watching closely. >>