>> powell delivered this clear message to the fed is going to do what it takes to get inflation down, even if that means paying for businesses and households. >> we think it is good the fed is doing what it is doing. it is on the case going after inflation. >> jobs going down, they will have to back track. >> have not seen the earnings collapse they have predicted. >> increased volatility, it will be a september to remember but i think we will get through it. >> this is "bloomberg: surveillance." with tom keene come and jonathan

ferro. jonathan: good morning, alongside lisa abramowicz and tom keene i'm jonathan ferro. .9% higher on the s&p this morning. tom: the fallout from jackson hole last night, my body got back to normal. jonathan: new cash cow. tracy alloway and joe on the podcast they were happy to see objection from jackson hole. he was not excited, rallying after the market committee. tom: i will keep my mouth shut on that. it is august and that is ok. it is one of the oddest market days we have seen in the season. we have a great guest deposit reset for september 8. jonathan: something to say about neel kashkari. lisa: he said outside what

everyone was thinking. fed officials probably look to the terminal app, to hear jay powell speak a month or so ago and say this is not what we want to see. it seems like markets got the message. it seems like jay powell was trying to make things brief and direct enough that there was no other way to go. it is stating the obvious. jonathan: is quiet, nice to finally say. he jumped on all of this, quibble equities, slashing on global equities. and the fed pivot goes out the window. lisa: i wish he was here today because he has been one of them -- different team, but how much of this is a global call versus a u.s. call? i was wondering how much is because of what is happening in europe and china, versus a

global feeling of the necessary response. tom: we did have our colleague patrick on yesterday and he maintained a sense of optimism that earnings would be good. off of the alloway wiesenthal stream, i put in a tweet that is important. he believes in the stock market and has an immense respect for the building of stocks. if you look at the vix, imagine where it was in june. it was way out there, 34.02. you come into the glory of 19.5. we are midway today. jonathan: it's like you are having a conversation with yourself. one of those numbers, tom? tom: those are the vix numbers. those are how pros look at the

numbers, they don't look at the dow, they follow vix. someone like tracy alloway is following the futures even more than the market. jonathan: we will get to it. about point -- .8% on the s&p, the last couple days down by about 5% on the nasdaq. it is here to bounce back. you can turn the last couple of days upside down, the bond market to, .67% on the 10 year. we get cpi a little later. it trades -- fades a little its next week. lisa: yesterday, they came out with an emergency plan to address the energy crisis in the region. how much of that is a linchpin for the euro? how much power does the ecb have?

today, what we heard from neel kashkari into the fed president, 8:00 a.m. and 11:00 a.m., two they come out and repeat they would like to see more of a tightening in financial conditions? i also want to hear what they have to say about the balance sheet. it is starting to take effect and accelerating this week. at what point do we see that trickle into the market? we will be very focused in the housing market. the pricing index for the month of june, house prices from s&p corelogic. at 9:00, consumer confidence and joel at 10:00 a.m.. how much of the job openings continue to decline? we're looking at the peripheral evidence of a softening in the labor market. the earnings continue before the market, hp and chewy at the bell. let's give you a sense of the insanity. shares up 131%. talk about craziness.

how much do they actually show fundamental performance, reducing some of the things that have been lowering the number? jonathan: overwhelming. it's easy to comment on the experience when you go into a store. lisa: i don't think you are wrong. a lot of people would agree and you are seeing fundamentally that they had to cut prices and inventory. jonathan: too much stuff from floor to ceiling. thank you. joining us is the portfolio manager for the global -- can you give me reasons to be bullish right now? >> good morning. bullish? how about, it could be worse. i think right now we are heading backups, double-digit gains, it is hard. we've got tighter financial conditions that are likely to

continue to tie-in. earnings are holding out but you can't be as constructive if the economy is slowing. and what is not bullish at least gives you some confidence. valuations, we probably have a reasonable sight of the -- and these corporate earnings have been resilient. it is probably a muddle through call. tom: it is august. even the trauma out there, is it better to be more or less diversified? is it time to focus on picking a few quality bets or spread it around? russ: i think it is idiosyncratic. it is a great question and we have spent a lot of time on. we have actually taken a lot of macro risk down. we ran close to mutual,

underweight in equities. we are underweight duration but not as much as we have been. the short answer is we have been increasing the risk associated with high conviction idiosyncratic bets. it is credit we are conferencing for could give us that portfolio or high-quality companies, stable growth with pricing power. between taking big macro bands and more idiosyncratic risk, we are in the latter camp. tom: this is so important given trauma, what you do with account and allocation in the portfolio. lisa: but how do you get scale especially from places like back -- blackrock? using credit in a time of little liquidity to generate the kinds of returns you need to offset having a low conviction of the portfolio. russ: it is hard. this is not a market you have

dries like that but it is giving you opportunities. we saw a lot of pain in the market, some of that you can understand. others we felt like the data -- the baby was being thrown out with the bathwater. there were good opportunities to pick out some of the stable companies we like. you have to realize this is probably gone for a bit. jonathan: how much cash are you holding? russ: we are holding less than we did. at one point we were well above 20% on cash level. we have brought that down now. it is still a cash balance, there are a few reasons we are doing that. one of which is having the dry powder. we do think volatility continues in the fall. but then there is the broadcast. no one loves cash, a hard asset to hold in this environment.

but in a world of treasuries, they are not giving you the characteristics they used to. cash is helping mitigate the portfolio risk. it is worth it. jonathan: russ, thank you, in europe they are calling for a 75 basis point rate hike on a september meeting. go to 75 and the stories changed quickly in the last week. tom: this is an important shock, different from the major one. they have taken a more conservative, not austrian effect, but they stick out like a sore thumb. it is the kind of bank you read just to make your mind go. they've got a different angle and when they publish it is important. jonathan: we believe the eurozone will face a recession. but we also acknowledge it is a

big situation to begin with with a worsening energy crisis. and then it tying into a big-time, we've gone from thinking they might hike 15 basis points to staring down the barrel of 75. lisa: quite a bit of tightening, at the same time, they could reverse a decade rates. how much are we looking at permanent fiscal support at a time of devastating energy bills? we talked about this yesterday. this is not a one-time bailout for the consumer. this will have a protracted effect on the balance sheet of europe and how you factor in the ecb role. jonathan: the shell ceo in the last couple days, it may well be that we have a number of winters we fight -- find solutions through efficiency savings, rationing and alternatives. but this is going to be somehow

easy or over his fantasy we should put aside. the shell ceo on the situation in europe and beyond. futures back up 1% on the s&p. good morning and live from new york city, this is bloomberg. ritika: keeping you up-to-date with news around the world with the first word, i am ritika gupta. the largest with the u.s. and taiwan in two years, preparing to sell $1.1 billion in radar support. this military capacity is likely to lead to more protests from china. president biden will deliver a speech sliming republicans for what he sees as fair threats to the u.s.. he was big about the continuous battle for the soul of the nation. trying to get democratic charters for the november election. and the ukrainian military says

the artillery russians have been using in one region, they will fall to russian troops. the european union in the energy market, almost tenfold in one year. the commission president ursula von der leyen wants to limit prices in the short term. in the long term, it will sever the link between gas and energy. a downturn in the u.s. housing market has further to go. they expect them to average 0% next year, a higher mortgage rate and they say the 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. ♪

>> i was not excited to see the stock market rallying after our last market community meeting because i know how committed we all are to getting inflation

down and i think the markets were misunderstanding that. i was happy to see how chair powell spoke at jackson hole. people understand the commitment to get inflation back down. jonathan: the minneapolis fed president speaking to our podcast, a fantastic conversation. to hear the quiet bit out loud like that, we call that refreshing. just say it. lisa: i was going to say the same thing. is there a gauge to understand whether the market gets it? yes, neel kashkari said absolutely, it is the market just like you suspected. jonathan: i'm not endorsing it, but basically they been doing it for a long time and they should say the quiet bit out loud. tom: yeah, we saw at jackson hole one of the great things was the giant lobby, hanging out with all of these people. bill dudley's over there, no

kashkari is over there. all of these presidents are uniquely different. this is an aerospace guide. this is not a phd economist hedging and all of that. he says what he wants. jonathan: he tells what he thinks. futures are back, up .9% on the s&p 500. i don't think he will give you the commentary on single day market moves. lisa: beyond. jonathan: he was lower about four basis points, 6% on the 10 year. elon musk sending and notice of termination of the merger agreement with twitter. the new letter highlighting additional reasons to terminate the merger agreement according to the filing. look at the stock price move, twitter down by about 2.6%. $39 in the premarket, 54.20 was the price and we are no where near.

lisa: people expected this. it shows whether or not there will be a billion-dollar breakup fee that needs to be paid and what the damages to twitter in the meantime. a lot of people quitting or getting pushed out. tom: the market down about 2%. -- jonathan: the market down about 2%. tom: we covered that. jonathan: i'm on board. tom: greg had his last note of the summer before he had a labor day holiday like lisa is taking. saying all of a sudden, the democrats have an advantage in the senate and have a hope in the house as well. emily wilkins has left the beltway and gone to the eighth congressional district in pennsylvania. it is really the story of this nation. mr. biden knows scranton is to a great affinity for him, and

southwest, this is the land of matt cartwright, which he won by 51.8%. this is a democrat who barely won in a trump district. what did he learn in his desperation to do it again? >> the fascination especially with cartwright is that he is a democrat who has done what mcats really need to do. he has won consistently in a trump district. this year will be difficult for him. when i spoke to him recently this past weekend, he seems confident about things. his ability to do so, some of the retail politicking, the local level. but democrats have a larger number of wins they can point to now that they have the health care and tax bill, the semiconductor shortage bill. they have a number of things they can look at and they are starting to feel more comfortable with inflation.

it is still a republican talking point and something they need to figure out a way to message on. but they were very relieved to see that july numbers. tom: what is so important here is this guy is so far from a liberal caucus. we talked to patrick leahy yesterday and so is senator leahy. he says the democrats have to move to the middle where matt cartwright is. what are liberals going to do between now and first tuesday of november? emily: it is interesting, because matt cartwright is part of the house progressive caucus. it is broad and it comes to ideological scope but a lot of this will be in the messaging. what issues do you focus on and how to they frame their campaign, what you they talk about question mark are democrats able to get away from the inflation message republicans are going to be pushing? to a certain extent, it is a great question. you have seen this particularly

in recent senate campaigns with lawmakers like tim ryan criticizing biden's move to cancel $10,000 of student debt for certain borrowers. you have seen this division between some of the moderate democrats as well, and from president biden. but part of this is going to be that everyone needs to run their own rates. it is a cliche, but when margins are going to be this tight end things are looking this close, it is true. jonathan: emily wilkins, thank you and washington, d.c.. we all have a question into your end, what are they going to do when -- not if, when unemployment starts moving the other way? this is what the white house press secretary had to say yesterday. we don't want to fit -- step on the federal reserve and what they do. our goal is to bring down inflation, and the economic gains we have seen the country make over the last several months. i wonder how long they can

maintain the first part of that if the second part is reversing. tom: i can't believe you read this garbage. what were the last lines she said? jonathan: "our goal is to bring down inflation without sacrificing the gains this country has made." tom: the life-changing gains is the integration that we have not seen in 40 years. lisa: i don't think it is garbage. i think it is relevant, inflation is a big problem for a lot of people and now it is the preeminent problem because we are not seeing the job losses you're talking about. this is the dual mandate. the fed has cover by the white house and by economics and where we are in the cycle to keep raising rates. but until when? that is what the market is betting. they're not going to have a cover next year. that is what we are yesterday,

megan said we don't think of the fed's reaction as a question, but the economy is not going to cooperate and they will have to reengage in fed rate cutting. how much is that what we are going to be seeing? jonathan: she agreed with the forecast yesterday. most people agree that senator warren is unlikely to be alone talking about the kinds of things she talked about over the weekend. claiming the fed, finding a scapegoat for the economy. she is in company. lisa: you are too early. jonathan: the white house is giving them cover for now. giving them cover for now. futures up what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data. and start crunching a year's worth of transactions against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks.

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jonathan: live from new york city this morning, good morning. last couple days upside down, back up .9% on the s&p, 1.3% on the nasdaq. the previous two days, we were up -- down 4% on the s&p, 5% on the nasdaq 100. this moment losses we have seen of the last couple days. yields coming little bit on a 10 year down basis point, 340.89,

came very close yesterday. the 14th closing time of two years and short of that yesterday after getting very close to 350 yesterday short of the high sessions. tom: i'm glad you bring this up. the same thing happened with dollar yen. yen did not break through the july 14 week yen moment. we are seeing a series right up against constraints. jonathan: the question i asked yesterday and i was again today, we can close to the highs of june 14 on the two year yield, to have to come very close to the lows of june 16 and the equity market? see how that develops to the rest of the year. looking elsewhere, the europe euro, sterling. a 70 basis points hike for the ecb.

stronger by.5%, spanish epi fading from the previous year-over-year. we are looking at german cpi in about 19 minutes. sterling very close to a 116, also stronger than the u.s. dollar but credit card growth this morning, the fastest annual pace of growth going back to 2005. annually, that is just 13%. the pushback from the likes of equifax, the credit rating agency basically same for consumers right now, things were getting so hard. you turn to credit cards in a rising interest rates time, very tough spot for a lot of people and getting tougher in europe. tom: you can see it in airlines, too. credit to liz and sanders -- liz ann saunders. international lane tickets are down big. jonathan: a crisis, tom.

good question. tom: david rosenberg will be here in a bit. we will advance the discussion with chief economist lindsay. i can do this with you, go off script. david rosenberg going -- known for his petition of inflation, slicing it into 10, 20, 30 different partitions. to see a price change that gets us to a rapid disinflation? >> it is very difficult. we're going to see meaningful retreat in price pressures given the broad-based increase. there will be some categories where prices will slow their pace of ascension and that will give the fed at least pause that they are starting to see the more positive implication from earlier policy changes. but we talk about a 1/10, 2/10 hike, that is not as meaningful

as the fed is looking for to change the accelerated asset they've been focused on. tom: let's go to headline inflation which i think viewers and listeners have in their head, that 13% in london, but the idea of eight or 9% inflation. is it an easy task for the microcosm or the microeconomics to get us back to 6.9% from 8.5%? lindsey: no, i think it's going to be difficult. the chairman touch on this in comments friday, noting price pressures are coming from the demand and supply side. and the fed can work to dampen investments, raising the call to borrowing and raising the federal funds rate will do nothing to address the supply side of the equation. so the fed is going to face a more difficult challenge this time van -- they backed out at

2% target range. lisa: how far does it have to rise in your view to get back to where the fed would like to get to? lindsey: a lot of it is about the higher rates, if it's going to take a year or longer to get below the range we have seen. i think the unemployment rate can go up near 5% or higher. right now, 3.5% is low. as the chairman said, he's expecting labor margin -- labor market continues -- conditions to continue to soften. lisa: i ask because there's a perfect soft landing scenario the fed is looking for. you got people coming back into the market, lowering the price pressure for wages and leading to a disinflationary nirvana where nobody has to leave their -- lose their jobs. is that likely in your view? lindsey: that is the utopia

scenario and a goal the fed is looking for. but the idea of a soft landing or a soft-ish landing has been reduced to a low probability now. they are anticipating a period where there will be ample pain for businesses and individuals. we are already seeing growth trending negative. the consumer in terms of real terms, after adjusting for inflation, trending down toward negative territory. even if we did see participation rise and absorb some of that artificial slack in the labor market, the fed will be able to navigate positive activity. tom: we have a banner that we are putting out in the dog days of august which is articulate. it is august. you're trying to get to september. what is the biggest data mystery

you would have after labor day? lindsey: i think there are big data reports, not only friday and awaiting the nasdaq report, but the august inflation numbers will really determine -- tom: i don't mean to cut you off, but is dallas part of that, cleveland inflation? what part of the inflation report is a mystery? lindsey: i think the fed is going to be focused on the headline number, driving market expectations and what the fed feels comfortable implementing come september. while the fed has left the door open for an unusually large increase, to use their words, they also said it is going to be meeting to meeting and with the market ping-pong going -- ping-ponging, one data point will be able to tip the scale in one direction or another. if we see august inflation numbers come in well under expectations in terms of providing a second month of

cooling and high-pressure, i think that redirects expectations back to 50 basis point or less and the fed will capitulate, allowing that increase and reduced market expectations. lisa: i have to be honest, the 50 versus 75 basis point discussion is not as interesting to me especially when the balance sheet roll off is said to accelerate. nobody is talking about it. fed officials did not address what they thought that ramifications would be except to point out this paper highlighting how much this would draw out of the market. what is the ramification in your view for the balance sheet to accelerate? lindsey: the balance sheet roll off will provide not necessarily upward pressure on the long end but provide a floor. as the fed goes forward continuing with rate increases, even as we see the intentional move to undermine economic growth, coupled with the balance sheet rolloff, i think the fed will be able to control a

massive downward thing we would otherwise see on the longer end of the curve. the fed is not necessarily focus on that because they do not see that as a primary tool right now. they are focused on raising the federal funds rate back to a more normal level. given the still modest level, the fed's focus on more traditional policy metrics. but should the fed need additional momentum, the balance sheet becomes -- taylor: -- jonathan: to build on what you are saying, she agrees it is much bigger than just september. the amount it has fallen, the slow economic growth and potential of rate of employment, that is what everybody has to grapple with. not just september, 50 or 75, it

is the damage to get unemployment up and inflation down. lisa: that is the point of the jackson hole speeches. we will hold them wherever they land. we have heard the megans of the world pushing back and sing the forecasts are wrong. even though they might go through with it intellectually, and a practical sense they going to cut rates. jonathan: a call from bank of america and the team. tom: yeah, this is important. beautiful club--, from giants one, about the homogenous american labor economy. i disagree. it is wildly partitioned and i would focus on part of the american economy, i would put it at an amateur 60% flat on its back right now. i don't think you can look at

this in an aggregate base. jonathan: it is more controversial when you start to see it. it's going to be very difficult to indicate to everyone that high unemployment is the pain to get inflation down. you can see certain politicians ready to basically frame the federal reserve as a scapegoat for what is going to come down the road. carol: lisa: talking about -- lisa: talking about elizabeth warren, how long does it take for monetary policy to take effect in the economy? once you see unemployment rising to that level we just heard, is it too late to reverse course quickly or is it something that has carried away? jonathan: good stuff. a bounce this morning of 34 of the s&p, up 18%. nasdaq futures up by 1.16%. live from new york with tom

keene and lisa abramowicz, i'm jonathan ferro, for our audience worldwide on radio and tv, this is bloomberg surveillance. ♪ ritika: keeping you up-to-date with news from rather world with the first word, i'm a ritika gupta. musk has sent a letter to twitter about why he wants to terminate his takeover agreement. he says twitter may have breached the deal in more ways, the letter alleges the company did not know or care to find out how many users were spam or robot accounts. the u.s. says a controlled shutdown at the ukrainian nuclear power plant has been seized by the russians and artillery shells continue to lend me the plants. the atomic energy monitors will assess the damage. the european union is said to meet its goal to months ahead of

its target. this is with energy prices soaring. it will help build supply shock, rising to 30% of fuel consumption. china is back to covid despite efforts to keep it out. at least one local covid case, the virus since early 21, restrictions have been increasing around beijing and in shenzhen. serena williams won her first match of what is expected to be her last u.s. open in new york. williams is 40 and says she wants to concentrate on venture capital firm. 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.

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>> the skyrocketing electricity prices are exposing different reasons, the limitations of our current electricity market. that is why we about the commission, are working on an emergency intervention. jonathan: ursula von der leyen, the european commission president on the energy prices -- crisis in europe. good morning, tom keene come out lisa abramowicz and i'm jonathan ferro. the nasdaq up about 1.15% on the nasdaq. yields coming down for basis points, we turn on crude. let's call it 95.20 on wti.

tom: 102 with a higher level earlier come the quiet story of august. jonathan: crude is back on this angle. tom: yeah, i think it is tangible. now someone truly engaged in the future of hydrocarbons. the director for energy futures, someone not looking at the macro and one -- what saudi arabia is going to do. it is the flow of the stuff use. i want to go to louisiana and where nine pipelines cross. long ago and far away, there was a district for texaco called henry hub. you are an expert there. what does it tell you about the price of oil in the dead of winter in february?

>> we have a couple of things working for us and against us into winter. last week, on the street it was distillate. basically heating oil. the worst performer on the street was gasoline. we are going to head into winter with storage at a low level. we are threatening to sue the storage fall below 100 million for the first time heading into winter. at the same time, we have plenty of gasoline, nestle and falling fast on the commodity side. and refiners have to figure out how to center those moving pieces. going opposite directions. they have to figure out how to make more distillate and still

not a lot of gasoline that kills the golden goes. gasoline kills the golden goose. tom: it is the golden goose in we went up to 120 and now we are at the midpoint. i don't want you to gain the price of oil, but the urgency that is out there even at this level, we need to do something. what is the actual do something of the distillate and downstream space? robert it is a tough: call. -- robert: it is a tough call. when you run crude oil to that, you make a barrel of distillate. right now it is worth $66. a barrel of gasoline this morning is worth $15. you can't make more gasoline. refiners are in a good spot. they're going to kill the gasoline market and they have a lot of gasoline. two times more gasoline storage

10 at distillate. you don't want to kill that work it. on the other hand, refiners are taking heed heading into winter because they are so far on distillate storage. at the same time, they are behind on distillate storage and natural gas is trading at close to $10 at a 14 year high. we are threatening really high heating oil prices heading into winter. we think we have an inflation problem now with gasoline, especially earlier in the summer. we are going to have an inflation problem with heating oil elements in wintertime that threatens to strangle people spill -- people's bills. lisa: that is one way to put it. on the context of jennifer's comments about not exporting the natural gas to europe in order to protect the pricing power and

the ability to keep things under control heading into the winter, how connected are these higher heating costs in the u.s. to what has been going on in europe? robert: it is very connected. there's a correlation everything. we are moving many molecules to make up for russian gas as we can. the europeans don't have a lot of takeaway. we can really jam anymore molecules of natural gas into the euro zone. they trying to catch up as fast as they can. they realize they have to get off the russian plane and join the rest of the world on lng. we were selling good amounts of lng to south korea, japan and china up to the price of ukraine and we had to switch those deliveries basically to the euro zone as fast as we can. it is not easy. those asian countries where

long-term deals. in the meantime, we lost some of our largest lng facilities. we are trying to catch up. at the same time, distillate, we blend about 4 million barrels a day, last week we spent 1.6 million of that as exports. a high percentage of our demand with -- was exported. that is what she was upset about. those barrel should be going into storage now. i can't stress enough how bad this is going in that if we fall below hundred million barrels let's say in october or by thanksgiving, how do we catch up? jonathan: that is why so many people are asking the question about how you reconcile that

policy goals with domestic energy issues. robert yawger there of mizuho america. we have the day, october 16. tom: another's surveillance and shanghai, the focal point. hong kong is not going to be the focal point, beijing is not the focal point of the location. shanghai will be the focal point of the kindest city, including all of the western cities that will react. jonathan: we took to china right now, october 16. can you imagine if there is a covid case ahead of that? lisa: to the the end of zero covid oryza going to be locked out after lockdown ahead of that? we are already hearing about those lockdowns even as cases decline simply because they do not have -- do not want a covid

outbreak. jonathan: we will see if we can get in. let's on gophers. tom: i can do it. it is not a big deal. lisa: we will be there for like three weeks. jonathan: i will discover the markets from here. futures spotted-- lisa: from here? [laughter] jonathan: from new york city, good morning, this is bloomberg.

lisa: powell delivered this clear message that the fed is going to do what it takes to get inflation down. even if that means paying for businesses and households. >> it is good the fed is doing what it is doing, it is going for inflation. >> if there are jobs going down, we have to backtrack. >> we certainly have not seen the earnings collapse. >> increased volatility, a september to remember but i think we will get through this ok. >> this is "bloomberg:

surveillance with tom keene -- surveillance" with tom keene, lisa abramowicz and jonathan ferro. jonathan: good morning, this is bloomberg: surveillance with tom keene and lisa abramowicz, a fascinating conversation with the minneapolis fed president. -- happy to see the stock market reaction to chairman powell at jackson hole over the weekend. tom: there's going to be a lot of it. neel kashkari, he wants to talk but i think it is typical, active economic textbooks, that the markets matter to monetary policy. that is iconic in the economic textbooks. jonathan: they can see the stock

rallying with the committee meeting. -- fed meeting. lisa: -- megan's waiver -- megan would say no. -- the economy is not going as gay posters as the fed thinks. you will see this inflationary shelf into the winter and things will get so bad by next year the fed is going to have to -- reversed course, pivot and cut rates even though they are saying we are not what to do that. how much of that is what you they are doing, not the fed, but fighting -- jonathan: the fed wants to reduce inflation and risk to -- tom: you will get all of it out there. it is 702, there is no question.

jonathan: the only reason to be both right now is if everyone acts bearish. tom: that is true and not a sufficient condition. i would suggest corporations will adapt it a shocking. jonathan: -- shocking manner. jonathan: down about 5% on the nasdaq, 4% on the s&p 500. yields were high, no lower. becoming very close to the closing high of the year. the euro-dollar, 100.34, .4%. spanish cpi, german cpi about 50 minutes away. lisa: how much are we peeking out south of 9% over germany, a shocking number considering where it has been over the past few decades?

in case you did not get enough of the weekend, thomas of the richmond fed and the new york fed president. i keep talking about this, speaking at 11:00 a.m. eastern, do they talk about the expectation of what they think we will see as we start to accelerate the runoff, which should happen this week? we have not seen a big drawdown in the balance sheet until now. we get a host of economic data, full housing data at 9:00 a.m. including the dutch -- starting to fall. we get consumer confidence at 10:00 a.m.. how much do we see that continue to come down, how much is that the software taking of the froth in the labor market, pretty down the wage pressures and helping with that soft landing goldilocks scenario?

they did better than expected or less worse than they expected, there shades of profits a little more than 11% in premarket trading. we also have hp and actually after the bell. hp in particular, how much is the demand from companies for hardware going down, started to pull back on expenses heading into whatever downturn people are expecting? jonathan: and the june pullback. here's a headline you never want as a policymaker. from the u.k., prime ministers a spokesperson. household and businesses -- you never have to say those things out loud. tom: they're talking about price. jonathan: let's talk about price. it's economical and that is a problem for so many people. they will have to close confronting these prices. tom: jon is living this in

real time as there are so many others on the continent. there's confidence in the 13% inflation rate quoted by citigroup. jonathan: they're looking for 18, 13. tom: there's an honest mistake. jonathan: once you get to 13%, that is dramatic enough, damage enough. but that point there is a lot of trouble. tom: it just comes back to this analysis, the fed is talking as one america below. jonathan: sebastian page joining us now, cio and head of global assets. i will ask when asked lisa, -- >> lisa said they expect a gang bus or economy.

i don't think that is the case. not only is the fed gone, but there is a sense that any good news is taken away by the fed's need to tighten. you are fighting the fed if you are bullish. it is hard to find anybody that is bullish now. i saw your prior guests. today i came back to a chip -- from a trip to australia, japan and i cannot get anyone to say anything optimistic about the economy or market. tom: this is the most important conversation of the day. because of your book beyond diversification, peter lynch called it de-worse-ification. into 2023, what character should we be now? over diversifying or a focused effort to guess the red instruments? -- the right instruments?

>> the number one question is, will bonds diversify stocks if we are heading toward recession risk? we have gone back to neutral. we have had a year were diversification between stocks and bonds has disappeared. the drawdown has been unprecedented and it has shaken investors worldwide. we did need to rethink portfolio construction. i would say we are going through a paradigm shift in terms of portfolio construction. lisa: i want to clarify what i was trying to get out earlier when i'm talking about the fed. there is a believe the economy is so strong it can withstand and require a big dose of pain in terms of how high rates go and how long they have to hold

them there. that was the message from jackson hole into they still reiterated this soft landing scenario in one fed official after another. the argument is pushing back against that, seeing the deceleration already here, that things are not require as much pain as executed by the fed. do you think that is what people are doing right now, and we should lead against that? >> i always say you should stay invested no matter what if your horizon is longer than 12 months. but we are underweight stocks at the moment. we are not ready to get back in. we are in stocks for the long run but we are underway. there are ways to play a soft landing, for example through small caps. i think they are already pricing in a deep recession. to the extent you get a

recession, maybe they will go down with the market. to the extent that you get anything not a spot is that, soft landing, maybe there is some point with small caps. it takes courage to lean in but the valuation spread, they are in the 90th person tile in the historical valuation relative to small caps. large caps are expensive relative to smaller. there's headwinds with large caps. so there are ways to play often, but i: playing aggressive defense. there is no doubt the toad was -- tone was hawkish. it was a short speech, no messy press conference to mix up the message but definitely a hawkish tone. you mentioned where a result, unconventional, powell mentioned

it 10 times, how many times did he mention unemployment? one was in the case of the costs of bringing inflation down. jonathan: well said. you see how many times on employment gets a mention later this year. really echoing things we have said over the last couple of days, the last time the two year yield was three fourths of the s&p 500 was lower. i have asked a question of times. if we have taken out the highs yesterday of the two year, the hiding to 14, doing belong in the lows of the equity market? lisa: equity markets in particular. they have rallied that much more than the 10% versus the 10% in mid june. jonathan: the headline from that conversation, you are fighting the fed if you are bullish, from sebastien page.

tom: there has been a game changer. jonathan: looking forward to it. up on the s&p, from new york, this is bloomberg.. ritika: keeping you up-to-date with news around the world, i'm ritika gupta. the largest transfer from the u.s. to taiwan and was two years. the administration will sell 100 -- 1.1 billion dollars in missiles and radar. it is likely to lead to more protests from china. ukraine has launched an offensive with this more. ukraine has said the artillery hit this commission around the region. it was one to fall to russian troops. in the u.k., working on additional measures to help business -- businesses with

soaring energy bills. >> we know we will see more because by december, january, into next year, there is still -- i'm preparing options for the new incoming prime minister to be able to do even more. ritika: the new prime minister will be determined by leadership vote and concludes next week. billion are elon musk -- billionaire elon musk sent a letter to twitter getting out of the merger deal. he alleged the company did not know or care to find out how many of its users were spam or robot accounts. 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. ♪

>> if joe biden wants to run again i will support him. he has had a lot of great legislation passed, he has lowered the deficit in many ways.

and part of me, -- most importantly, he brought us back into the world of nations. jonathan: a democrat from vermont, from new york city this morning, good morning. i'm tom keene -- with tom keene and lisa abramowicz i'm jonathan ferro. the nasdaq back more than 1%. 2.8% on crude, yields coming back and you can turn a last couple of sessions upside down. yields are lower now, just a reminder in about 42 minutes you will get cpi, a few of us going into the euro a little stronger. .4% on two dollar. jonathan: the german two-year -- jonathan: that was the prospect

of the euro intervening in the energy market and he sent they are prepared to consider the moment the market moves against germany. tom: if it is every nation for itself, as you could toward november, but january to february, it will be remarkable. you continue the american discussion, with emily wilkins of bloomberg government. we do this with patrick leahy who visited us yesterday. it was shocking to see patrick leahy hearken back to skip jackson and hhh of minnesota and say the liberals have to have a dialogue with the conservatives. emily: in some regards, yes. something has happened in capitol hill since january 6. it only seems like things are getting worse. it needs president biden in this

interesting position where he has to do two things. he ran as the unity candidate who will unite democrats and republicans, get over partisanship and get things done. to some degree he has. the infrastructure bill. you got this speech coming up in philadelphia thursday where the whole premise will be that republicans are bad for democracy, they have done -- gone to extreme and he's dusting off the playbook saying people need to vote for him because democracy is on the ballot. tom: this seems a zeitgeist thing. i don't care about the zeitgeist, i care about the polls. does it show a large body of america does not want to go for a core gop two? -- ethos? emily: it is divided. it still looks like republicans

can take the house but democrats are banking on showing that they are extreme, that she moments of the party, it is a message you are already seeing from democrats across the country. if you have the key swing states, they preach a message of bipartisanship and working together. it is every man for himself. it depends which methods you're going to pick up and use between now and november. lisa: there's a map of gasoline prices superimposed the biden pulling. gasoline -- how much boys left from the people speak with, who can deliver what people are

expecting? emily: as we've seen gas prices go down, we are seeing approval ratings go up. they have noted that short, gas prices are down from where they were this weird, but compared to last year or two years ago, they're still up and americans are still feeling pressure and pain, the grocery store. those things are still high and if you look at how the biden administration have moved to the last couple of days, the letters energy secretary, gas is very much on the biden administration's mind. it is good for democrats that has come down, but it is not going to guarantee them any win in november when you're seeing

inflation behind and gas prices higher compared to americans are used to. jonathan: not many people have come on this program and describes the former president as a great unifier. the current president said this. i pledge this to you i will be a president for all americans. what do you make of comments coming out of the white house and his party, including the governor, the united states and new york, republicans go back to florida, what do you make of the 74 million people who voted for the former president in the past election? it's based on interesting comments from the current president. emily: it is a good aspect to bring up. there's a split -- it does not

matter with these swing states are trying to be independent and members of the other party trying to figure out how to thread this needle. how do you appeal to your supporters while also appealing to independents and moderates? it leads to things like biden calling himself a unifier and then calling replicants -- republicans -- we will have to see how that will work to push this messages at the same time. jonathan: emily, thank you. we wonder whether president biden will address these things later this week. tom: they're sort of a mystery to it, maybe because it is august.

with all the focus of the united kingdom in the tories and the conservative party, i'm struck if i from a distance look at the labour party. how are they doing? jonathan: they go to the polls. better in the last year, given the trouble boris johnson has gone into. we will see if this turns that around. may have to do some big about offsetting the energy situation and the current president said we must be a president for all americans, whoever leads the conservative party has got to be a leader. for everyone in the u.k., facing tough times ahead. this is bloomberg. ♪

>> last couple of days upside down, up three quarters of 1% on the s&p. two previous days, down on the s&p. down by 5% on the nasdaq.

that seems to be the theme this morning. the minneapolis fed catching up with the market reaction, and he was happy with some of the reaction. there are not many gaps to fill. in the bond market, very close to the closing at about 3.267. just short of that level, down two basis points. that's the u.s.. the bond market in september, 50 or 75, you take your pick. the ecb, it is 50 or 75 and you take your pick. all of a sudden, that is on the table.

we see how punchy german cpi is. tom: i looked at the european union, bloomberg financial conditions and that, which is really good math, and i didn't realize we are almost back to the covid stretch, february of 2020, i believe. the speed of deterioration is just shocking. jonathan: in and around the basis points yesterday, we will see. for now, at least. tom: i considered the hotel just up from lake cuomo. jonathan: which one is that? tom: i can't pronounce it.

jonathan: that trip seems a little bit more interesting for lisa and i. futures -- tom: the report? lisa: the report for bed, bath & beyond, they just reported earnings. shares up more than 11%. shares are up close to 200% this month, and they are coming in on that even though they are facing strategic review later today. though shares up just marginally. what the hardware demand is like from individuals, really tapering off.

let's give you the twitter report. exit stage left, it is because the whistleblower who was called out, one of the chief members of the executive committee in twitter was fired. the level is really notable. how much damage has been done to this company? faster than expected results on investment banking. this i expect to see when we get to the reports coming up in a couple of weeks here. how much has that really removed some of the interest flow? and then we do have a little bit to see in the crypto space.

tom, the reason why it is interesting to me, and it actually is, how are you going to justify? i will say that it is interesting in terms of the appetite for the riskiest assets in the market. with the free money taken out, what remains? how much strategic risk is there? tom: was that the crypto report? jonathan: that is it, that is what happens with that coin. -- bitcoin. lisa: there is some digital moving. it is obvious, tom. jonathan: thank you. lisa: any time.

tom: doing this now from charles schwab, the chief fixed income strategist, kathy johns. kathy, help me here. it is august, i am reframing for the q4, reframing for ownership of fixed income in the 2023 and i'm totally lost. where does it fit into a portfolio? >> obviously it has been a very tough year and there's a lot of questions about whether bonds can deliver the benefits that they have for so many years, but i would argue that you are actually getting income from fixed income. the price that you have.

jonathan: --. >> we are very cautious on high-yield. up and down and up again. investment grade, we think is ok. some of the bigger companies should be able to deliver. as far as i see from incomes, locking some of that in, it is not bad for income investing. lisa: you look at some of the projections for the ecb raising rates by 75 basis points. how much does that change your

outlook, considering the regime that we have seen and considering how much pain we have seen transpire? >> the conviction this year is that it will begin. and it is more likely we ought to see that in september. that, i guess, reinforces the idea that it tightens aggressively into a very weak economy. that is more and more inversion. lisa: is this also the reason you are more and more enthusiastic about duration? what does that mean in terms of the likelihood of the credit decline? not only in the u.s., but also

in europe. what is the magnitude of the potential losses that you see versus simply strategically being away from them. >> it is more of a strategic decision. we are always a little bit cautious on that. this is not a time to the lowest. we've seen the fed widen 150 basis points so far in a high-yield area. that is just not a potential lot of reward for the risk that you are taking. we don't see quite as much, but it is difficult and this is not a time. tom: i agree that when i look at

the charts, everybody knows -- i look at the bloomberg total return index, it is now down 14%, even 15%. what concerns me, kathy, in the last week, it has rolled over again to lower price, higher yields. what are the ramifications if that index breaks through the june row? >> i think we are expecting is this combination of rate hikes and economic growth. i don't know that there is a huge thing. i don't think it is in and out based on levels anymore. anybody who wanted to exit fixed

income has probably done so already. but it is beginning to wear on this overall. not making money in stocks, not making money in bonds. i think that people tend to want to be in safer and safer aspects. jonathan: mr. piano. the piano behind her. tom: when i play the piano in tune, it sounds like it is not in tune. the surveillance pulpit. bond people don't know how to justify losses. 20 years of total return full markets. i'm sorry, i am looking at the bloomberg total return index.

it is three years minimum catch-up and it is rolling over with morning lows. i just don't get why bond people just can't get out of it. jonathan: on rent, coming up next. lisa: 2200. tom: i was thunderstruck. i looked yesterday for the first time in ages. jonathan: that is next from new york. >> keeping you up-to-date with news from around the world, the u.s. says that shut down of the power seized from -- would be an option. mondays will assess the damage. president biden will deliver a speech about what he sees as a threat to u.s. freedom.

the president will speak about the continued -- of the nation. he is trying to boost democratic chances in the november elections. -- at least one local covid case. restrictions have been increasing. and -- to beat wall street estimates when it was under pressure from slumping demand. tv, computers, and appliances during the pandemic. 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. this is bloomberg.

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♪ >> i think we've already turned the corner on the economy in a negative way, seeing things rollover. i'm willing to bet that by december, we will be dealing with real problems in the economy rather than inflation. jonathan: weighing in on this economy, he says things are turning a in the wrong direction quickly. look at this. 1486 is the median national rent for one bedroom. more than half of u.s. cities are showing double-digit rent hikes with some in the 30%. the median one-bedroom rent is

up almost 40% year-over-year. those with two-bedroom apartments are paying 46.7% more . the manhattan rent now, tom, monthly rent has climbed to $4212 over 27% over the last year. tom: there is a distribution here because it is not a dowsing curve of fancy people here and destitute people there. they are usually skewed to rundown apartments and it is shocking what they are asking for those. jonathan: we are moving to staten island, tom. tom: where is the nation moving? jonathan: given to some of the price action, you and i have talked about this. a lot of people locked in at a very low pandemic rate. they are at about a 40%, 50% increase.

tom: just remarkable. miami, $2700. so much for that. i want to go to the yen before we look at some of the other currency. i got it yesterday, almost up to a wonder 39 level. just a quick brief on the dynamics of the yen and why it matters for american and western listeners and you are are -- viewers. >> the big reason is a discrepancy is now in existence between the japanese monetary policy and everyone else. what we saw from the doj government was a real commitment to keeping japanese relations for a long time to come. and that is quite different to what we are seeing in other places.

now, talk of potential he 75 basis point hike next week. it is not going away. tom: that is where i wanted to go. multiple viewers and listeners can't even frame out 140, 150. is it a five figure move? what does that mean for china? >> chinese, remember, are at the 690 level. it is obviously not entirely driven by what the yen does, it is local factors, too. the bank of korea governor directing the impact on the yen, so i feel like all of east asia is linked to some extent to what the yen is doing.

that is going to pave the way for things going forward as well. lisa: the flip of this idiosyncratic move, the rest of the world is not partaking in it. and i'm wondering, considering the fact that we are seeing some stability above parity for the euro, do you expect that to continue for a more cohesive effort to really address the energy problem? >> i think that is right. what we saw,, that the valuation of the euro actually making a difference. again, quite different to what we've seen. we have seen supplies working at this point and even an attempt in a more direct manner.

right now, give the market some reason to hope that there is a potential to find some kind of stability at this point. you have enough to the market to do some short covering. lisa: a euro thai dollar is basically parity pricing in a 75 percent rate hike. >> only 75%, i would say, at this point. that is where the market is. if we actually get the fed to a basis point hike, i would imagine europe could push higher, particularly the market that is a sustainable new policy. if you're trying to bring down long-term rates, the euro could

be based around policy. but it it doesn't come, i think jonathan: we will go back. can i ask you the question -- if we do get an upset on rate hikes, how much of this do you actually have to lead to a stronger guarantee? >> that is the way i see it. i think once the data comes through from europe showing the very high recession risk, the euro will struggle to keep going up. i think it is certainly helpful to have that narrative out there. tom: i'm doing some fancy math here. a log regression of the

weakening of yen. two standard deviations is unimaginable. jonathan: it was unimaginable. credit suisse, thanks for looking forward to the ecb. lisa: how much is what we have seen in terms of the retracement not the prospect of --, but an agreement on how to bring energy prices lower? what is it? jonathan: great lineup. then it is on the dated version berg -- david rosenberg a little bit later.

the retracement of yields, that fades a little bit, too. i think year for the last place you would call safe right now. -- europe is the last place you would call safe right now. this is bloomberg.

jonathan: euro-dollar a little more capacity. john, cpi. month and month, 0.4% in line with the estimate. year-over-year, 8.8%. as we remain in line with the estimate of 8.8, eurozone cpi tomorrow. the ecb decision next week. we've got september 13, a couple of weeks why for cpi in america -- a way for cpi in america. september 21. that decision just around the corner. tom: 30 seconds, you've been waiting for this this morning. socially, 8.8% inflation in

germany. jonathan: 7% is too much. tom: honestly and all my history of reading this, that is more than anything, that is the biggest shocker. jonathan: you and i have been getting them for the better part of a decade. -- for other reasons. tom: david rosenberg is drowning us right now. it is a jumble in august, jeffrey. if you were adding the next cup of coffee with jerome powell, what would you say he needs to watch globally for september? >> globally for september, are they going to follow you, such a sustained time.

the market pricing and a quick, graceful move on the boe because -- is now looking at sustained, i rates. -- higher rates. jonathan: any goals? >> europe right now, trying to deal with the energy persuasion. then again, being in the u.k., we are waiting to plan when we know what will happen for good. jonathan: at some point things get better than expected. do you think the market is heading for that type of story

from your perspective? when they are ripped up, they are served relatively. so far, one person struck the positive narrative. that external demand may come from chinese formalization. that's what they are holding out for maybe six months or so down the line. lisa: housing prices, fully recession in europe. a downtime versus a recession. and a sub 3% gdp handle. they already priced that into global markets.

>> 3%, china, so it really depends. if i look at how tidy that would keep up, i think markets are actually looking positivity, making for hungry people, normalization due to cycle restrictions at the top of the chinese consumer, that probably not as bad. if lisa: that is the case, what would you like to see not be quite as eric's if the positioning right now is pretty gloomy? >> to not be bearish i think we would need a peek at the inflation numbers. on top of that, fed chair powell has already said they are going to keep rate hikes high probably

a little bit longer than expected. tom: you and i were trained that in finance, quad truth standard deviations is a substantial move and in medicine, six standard deviations is maybe level and because of the resiliency of the human body. german inflation reported moments ago at the long-term trend is a really elegant study of nine standard deviations. only extra care ourselves -- extricate ourselves. >> within apposition, many buying short or long, -- at 3.5

already. the market is pushing. we get a policy reaction and more importantly, a plan from the european commission for the energy benefit. jonathan: some of these numbers, this involvement this morning come in elation is up 22% during the u.k.. if natural gas prices remain elevated, the 18%. can you get your head around that kind of number in the u.k., 22%? >> going to be a struggle. looking at the consumption data

in the u.k. right now, we are seeing --. >> you just sterling trade -- reached major weaknesses of 1992. >> to try to make that comparison, if they want to the limits of fallout in exchange for --, and right now that could come as early as next week. especially on the lower income prices. the market anticipating that as

a new government comes short. jonathan: thank you, sir. thank you, david goodman for writing the story of it is all centered about whether cash prices in the u.k. stay at this level. the u.s. -- in january. that would put up inflation to 22.4% and trigger a 3.4% decline in that is one hell of a call. tom: and the backdrop is that there's two france to the ukrainian war. -- fronts to the ukrainian war. it is almost back where you are racing through the summer to prosecute. jonathan: if they get here, what

happens with gas? what is the big thing? lisa: especially as the coalition of european members work together. jonathan: futures right now up 7/10 of 1%. a beautiful morning here in new york city. this is bloomberg. ritika: keeping you up-to-date, i am ritika gupta. the longest -- logic transfer u.s. weapons to taiwan. the biden administration preparing to spend -- on missiles and radar support. still, it could lead to more protests from china. meanwhile, china airlines has only 16 boeing 787 airliners. deliveries are set to begin 2025. in europe, energy prices plunged as the e.u. intervenes in the

market. -- as much as 26%. -- trying to prevent the energy crisis from spiraling out of control by lowering costs. ukraine has launched an offensive. the ukrainian military says its artillery had russian positions in one of the first cities to falter russian troops. elon musk is adding reasons why he wants to terminate his --. the mayor breached that deal in five more ways. the company did not know or care to find out how many people had spammed or robot accounts. 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. this is bloomberg.

>> we think it is --, going after inflation, going to recognize and going to take longer as we look at for the fed to put inflation in check.

but the main thing is they are doing it. jonathan: jon stoltzfus. we keep asking people whether they have also found gold and they keep telling us they haven't. good morning to you. live from new york, on bloomberg surveillance, we are higher by seven tens of 1%. we are hearing from the richmond fed president, the fed will do what it takes to turn inflation to 2%. does not expect inflation to come down immediately. tom: let's be honest, studying in princeton under a guy named bernanke.

that is the issue that we address at jackson hole. adam thinks at some point we should accept higher inflation target. lisa: another headline, the pace of when the fed gets back to about 2% inflation is uncertain. tom: is that forward guidance, what he's doing? lisa: no, there is nothing forward about it. you said he is uncertain, that is giving nothing. tom: david rosenberg coming up. to the conversation we just had,

are you able? >> longer-term ima b -- ima -- i am a bull. we've got a lot of uncertainty. the federal reserve, expect some travel sessions. tom:tom: the nasdaq, it is about portfolios. what are you actually doing given the strategy within the portfolio? is it focused to diversify or spend it all out? -- spread all out? >> can is always diversified that we do have a little extra dry powder right now, that is necessary. but it also is about diversification.

from a portfolio standpoint, looking at areas of the market that have basically priced in that loan. we are not going to look over the next three or four months. instead, potential opportunities in the longer-term. the next 18, 24 months. lisa: has the housing market priced in peak pessimism? >> there is a long way to go with the housing market, unfortunately. with consumers starting to pull back, i don't think the housing market is in for a very good remainder of the year. not necessarily a bubble bursting, but we do need a housing correction in the near term. lisa: what kind of correction are we looking at and at what point will the lower the rent for folks like jonathan ferro who might be looking for another apartment?

>> i think you got a little more ways to go. what we saw a recently, you need to see that inventory buildup. once that inventory buildup really starts to increase, then you can see a moderation in that way. tom: where do bonds fit in? >> the bond market, we stay very short duration. we don't have a lot of credit exposure. in fact, i would be very concerned about credit exposure right now. short-term, floating-rate instruments. the careful of investment grade bonds. jonathan: thank you, you know a lot about that one, that is for sure.

tom: down from a previous number, and that nice little montage, you talked about the good news, bad news. the bad news is it is --. tom: if you getting weaker than expected number, people might see a basis point rate hike as getting lot in. and then what does the market do on that? does the market rally? that is when bad news can become good news and that is where i think we are in this market. jonathan: and the fed pushes back because this is what they want to see. lisa: i think it is only important number with cpi more important and more instructive when it comes to whether they hike 50 or 75 basis went. jonathan: basically, that is what bostick in atlanta told us. i want to go back to the

comment. the amount of -- rate in september is less important than the duration and the result of economic road and raised unemployment. lisa has been on top of this. what is going to happen when unemployment starts climbing? they are telling us that it is every action as a goal to get this. even if that is the case, we've got work to do to get lower. the tom: simplicity of these functions because of these functions cover these reaction functions and the answers, i think they are far more complex and if the unemployment rate goes up, does any number of conditions that can get you to 4% for other conditions that can get you 5% on limit. tom:tom: we've got the perfect

perspective. david is going to be joining us in around about five minutes time. just alluded off session highs in the s&p. a big high by about 24 points. later, that five percentage point. yields lower by a couple of basis points. for session is the risk and getting inflation under control. from new york, this is bloomberg.

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jonathan: you have to say that bounty is stating fast, the nasdaq high. yields, down about 2% on the u.s. 10 year. lisa, i will go through it again for you if you missed it.

the nasdaq stays around a little bit later this morning and then we get the consumer confidence numbers at 10:00. job openings at 10:00 a.m. eastern as well. i know that has become somehow an important figure for all of us, looking for that to back about 10.4 million or so. tom: david rosenberg joins now with rosenberg research, the best in the world at parsing inflation. i will not mince words about it. on the bloomberg, i can look at cpi inflation back to world war i and the average over the 110 years is 3.1%. part of that are the spikes up which are hugely sarcastic and come down quickly. will we diss inflate rapidly? >> i think we will, tom, and i think you are already seeing it in a lot of indicators. commodity prices, they are down

more than 20%. lumbar down more like 70%. the commodity complex, which hasn't shown up yet in that 40% chunk of the cpi, commodities are deflating. i mean, look at the dry index. the u.s. dollar is up 12% year-over-year. does anybody in the world ink they have seen that pass-through right from the dollar into those prices? and the answer is no. tom: explain to our global audience the symbolism of the cratering of the baltic dry index. >> i think a lot of it is the

path the global demand is coming under downward pressure. i would also say that we are seeing, not the ongoing war, we were starting to see you unclogging in a lot of the port congestion globally. where we are seeing that most evidently, there is certainly data on supply and delivery today's -- delays which has come down dramatically. it is very interesting from a fed perspective. five months ago, jay powell said we are going to operate policy blindly. we're just going to concentrate on demand disruption, or getting demand growth, low supply. but the supply side is finally

taking hold in creating this inflation. before we can see any of the impact that the fed has done, you have the supply curve become more elastic at a time when the fed can see a policy that is going to really kill demand. explained all these demand supply curves. how does inflation not absolutely collapse? they are looking at me like i am crazy. lisa: megan over at bank of america is still expecting break cuts next year and is not because she downs the reaction function from the fed, but she also see the prospect of inflation coming down very rapidly heading into the second half of 2023. at what point does this become in some ways good news for the market because they can start to price in a softer approach from

the federal reserve? >> also, what is going to happen at some point, and who knows when, you know you are in a whole new world altogether. what happens historically is the fed problem. the tightening cycle always ends. but then what happens after recessionary pressures take hold? then what happens with that cut rate, and you get another relief rally, and recession pressures take hold. you want to be very wary about the relief rally. the market does not bottom after the first rate cut. the market bottoms after the last rate cut. after you get the last rate cut

and the market sees the recovery, that is the fundamental low. that might be 12 months from now. they will cut rates and we will have a pop in the market in google think that the bull market is right in front of us, but if you want to pay attention to the historical record, the time for those to understand what the fundamental low is is actually after the u.s. rate cuts when the fed even the yield curve. median and mean, we are so long away from that right now it is not even funny. tom: lisa: lisa: to the point earlier in the show, jon said is being bullish fighting the fed right now? the market was rallying after that and he isn't terribly unhappy, maybe even happy to see

that the market is coming off the response to latest guidance. how much are we looking for a weakening, a tightening in the financial conditions and terms of transmitting their policy? >> that is the question. i think they are wrong. i think that powell has already told them we are operating policy without focusing on the supply side of the economy. of course, after a grand total of 60 months, it is still transitory, but that has given us information. we are operating policy without actually focusing on the supplies anymore. the question becomes do they have to contract?

how far do financial conditions have to tighten to get to that holy grail? trying to copy their model, the lowest on the s&p, 700 basis points. that is the matrix. that is the combination that we have to get to. more comfortable. tom: you gave us a little bit of the rosenberg humor this morning. off of jackson hole, in the complication of 2%, the idea that it is not one america. it is such a challenge for any central bank. what does the fed do about two, three, or even four americas? do they need to look at us as one of them, or can a study --

can they study 2, 3, or even four americas? >> monetary policy has to be national policy. you can carry on a policy based upon a couple of segments of the economy or a couple of socioeconomic segment. you really have to take a national approach. i do firstly say, by the way, with the unemployment rates where they are, that is what is going to be on the fed's mind, tightening the labor markets. it is a complete waste of time. both measures to geiser, the economy is flat. when you look at it from an income perspective, is basically a flat economy. 300,000 on payrolls? does anybody talk to the bank? why would a flat economy need to

be having any jobs at all? that is the reality. unless you think potential is negative, which to me, is ridiculous. at some point, and this is from the tightening policy by the fed is starting to see people at the labor market. jonathan: you just touched on it. the chairman in the past has demonstrated sensitivities for the political move at the moment. do you expect to see the same from chairman powell again? >> we will see the same chairman pallet, but do i think that the fed will respond to a loosening in the labor market? i think they are waiting for that. i think all of us have been waiting for at least the participation rate start going up nobody wants to see job loss, but maybe there is something to this long covid story in terms of how it is impairing the

greater participation rate. nobody wants to see employment go down, so that is going to be very critical. but things that go beyond the goals, i think that is all it would take. i think that would be enough to push that back on the front burner. jonathan: we appreciate you hear either way. lisa, tk, you know who we miss? the late, great alan krueger. we really need alan krueger. tom: he would be heated on the negative real wage and the social efficacy of bringing up minimum wage to help more.

jonathan: we will catch up. all of that coming to you soon. wife in new york -- live from new york, this is bloomberg. >> keeping you up-to-date with news from around the world, the u.s. says in a controlled shutdown of the ukraine nuclear power plant, shots continue to land near the plot. monitors will assess the damage and -- at the reactor. president biden speaks up as senate republicans threatened u.s. rights and freedoms. the president said that they continued battle for the soul of the nation is -- in the november election.

containers are spending more to travel. and goldman sachs warns that the downturn in the u.s. --. it expects homes -- to the high mortgage rates. but large price declines are likely. in california, the state senate has approved a bill establishing -- on reference to be set by counsel. amongst others, we still have to give final approval. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries.

>> i think the main thing is the end of retesting the june 16 low, but right now, our belief is that we do not have a lower low. right now, increased volatility, it will be a september to remember, but i think we will get through this ok. tom: cut from a different cloth. easily 100 years of strategic interest with the legendary father who invented the business, and of course, moving it forward. you're going to do that right now. we're going to have a difficult conversation. masters in business is smart,

smart, smart. there it is. what is new now called diversification. people buying index funds, are you thinking modest wealth, you are running it like helpers and overlaying that with -- of my youth. we are not talking 20. we are talking some big fees to run index funds. as soon as i had a blue morning to tell an intelligence analyst, vanguard has driven down the cost not just for their customers, but for everybody to ever compete. every now and then, you will find this anomaly of high price index funds, very basic

investment strategies, and it is perplexing that in 2022, this sort of stuff still exists. it should be fairly, reasonably easy to get affordable financial advice that isn't overly complex and labored with expensive fees. tom: we had a horrific bond historic bear market in the equity market. if you and i and others, the bottom line is we thought things were going to change. still, people have been managing to put a stake in a quarter for two points on this index fund that used to be the work. >> i have these unique strategy,

and that is what we are going for. if you want to take a little portion of your wealth to highlight game, go ahead. i don't understand why people are paying 2% fridges very straight up asset management. if you are adding financial planning, estate planning, tax management, ok, some of that is doing it for the health. but it is always shocking to find these accounts that are paying closer to percent and will essentially go to -- to make 50 basis basis point or less. lisa: i just am wondering if this is going to get out of the

market. if it is basically a byproduct of a couple of years where the famed head to the market and you could afford to lose a 2% haircut off of whatever your profits were, based on your returns, and people were not paying attention as much. >> in the past, and a lot of people used to say nobody really cared about the 90's. but if you look at the 2010s, that decade was when vanguard went from one trillion to 8 trillion. black rock went from 2 trillion to 9 trillion. so even in this very robust year , even with a very robust. strong buyers,'s people still have become very price-sensitive. perhaps that is part of the reason those indexes did so well.

tom: really smart which we don't talk enough about here. what is the ramification if credit gives way price stands? >> that is what we are trying to see about. if you are already seeing that, we're the canary in the coal mine but until now, i think will use it as a desiccation for the stock ride. at one point didn't serve as a canary for other risk assets?

tom: i just looked up the aggregate for the total sum bond chart index and we are right at the cost where it breaks down to new lower price, higher yield. lisa: we've been talking about how the bloomberg advocate index has declined by nearly 20% since january of 2021. we've seen a massive bear market unlike we've seen anything come of the likes of which we even had at the --. people don't talk about how much pain has been suffered. at the same time, people have been talking about the opportunity. people see the yield, they are not looking at the price. tom: the other thing that slipped through the radar is that hungarian central bank rate at 12%.

given all the shocks of europe,? > this is the conundrum. how do you hike rates into weakness and instability? >> and what is so important here, you can look at it as a part of a diversified portfolio. futures of 17. stay with us, this is bloomberg. >> welcome back to a special update can gain good tv. serena williams in flushing meadows. a packed house on arthur ash stadium cheered as everyone saw

the champion take care of business to reach the second round. it sets up a meeting with a net conservator -- kontuvait. the friends in new york don't want to say goodbye just yet. raphael the dollar hanging on in the big apple as he looks to extend his lead. the spaniard can claim the 23rd -- in new york. don't forget, tennis channel live at the u.s. open is daily. with everything you need to know from the big apple.

>> can we find a firmer footing following a two day rout? announcer: everything you need to get set for the start of u.s. trading. jonathan: we begin with the big issue. >> chair powell was direct, clear. >> they are aggressive. >> saying what he said and