>> i think the bank of england is being back to some extent into a corner by unorthodox fiscal policies. >> the bank of england has to keep an eye on controlling inflation. >> the market is unstable, inflation change everything. >> the global market moving 20, 30, 50 basis points off one gas point. that is an indication of dysfunction. >> today the economics are pandemonium. >> this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. jonathan: what a messy time.

why from new york city, good morning. alongside tom keene and lisa abramowicz, on jonathan ferro, futures down 1% on the s&p, this market all over the place. tom: but john it is different today, there is stability in the market as everyone hangs on every word we could hear from the prime minister and the chancellor. jonathan: that might be the headline next week in the week after. i think they framed it perfectly, the bank of england, how do they tackle inflation and this risk at the same time? tom: they're trying to redux reaganomics two and reaganomics

one. i would point out this is a seven deviation move that caused this. carl weinberg will join us later with the best clarity of anyone out there. he said it is simple, you liquidate bonds for cash. and harkens back to the crises of the 90's. jonathan: when risk is in, risk-free assets. lisa: there's a great point that jim reed at deutsche bank made, how could you have earned a 42% return to make a aaa rated investment? simple, anytime you just have to buy forty-year guilt and you are fine. and how much this highlights a volatility in the market. to your point, benchmark securities are flipping around as though they were going. jonathan: bank stocks all over the place. tom alluded to the concept of fiscal dominance. and the banks have contributed to fiscal dominance of the u.k.. that is something they have pushed against hard.

lisa: i asked him, he said what he would do is a 100 basis point rate hike by the bank of england to try to shore up the credibility. your finding after decades of monetary policy being able to plug deficits and plug the gaps by fiscal policy, they run out of time. all of a sudden, deficits matter in a way they have not in the past and it will be seen not just for the u.k. but at many developed nations. jonathan: equities down by .1%. big gains on the s&p income of the nasdaq down by 1.2%. yields higher by 10 basis points, 3.8 360. the euro-dollar negative 1.4%, 96.92. lisa: the way things are moving around makes it difficult to pin down what is even important to be watching. at a time when you get some u.k.

emergency intervention and perhaps -- possibly uncapped -- rate hikes, it is hard to see where it is going. the thing that came out earlier this morning seems to be that 10% cpi is germany. the highest going back into out of the 1990's and beyond that. how much of this changes the scenario? a lot of central banks don't want to see senate dysfunction, but they also don't want to see 10% inflation. especially when it is unclear what will stop it. 8:30, u.s. jobless claims, there is consumption and corp. eca -- core pce. was he and saunders put out an interesting chart yesterday, an

interesting article where she was talking about there are signs but there are not cracks under the surface here. they are losing and they are going to part-time employment so that a lot of companies, it is something she has been observing. today we get earnings from retailers. 7:30, and the nike, how much does this edify the feeling we got from apple that we will get a slowdown in demand for smartphones and devices? the slowdown in demand for cars? how much of this highlights the other side of the big tech story. the earning side that will be the other shoe dropped. jonathan: we have been talking about it for a number of months. joining us, the founder and ceo of macro risk assignment. what do you do when the risk is in the risk-free asset?

>> this has been anything we've been looking at closely for over a year. the observation you could make is that they are transitioning from the environment in which the correlation between stocks and bonds was so friendly to the portfolio that they mitigated one another, these assets. the key is volatility -- for the portfolio it is quite an accelerant to the overall portfolio. there are a couple of things you're supposed to do here. first, when market prices react as violently as they have, you have to recognize these are not just a cause. they motivate action from the boe. i think you're supposed to really set back and first

observe equity prices are lower so the entry point is better. we really don't know what is going to happen. but we obviously see there is a lot more in the market. doing nothing, but would reflect. you're supposed to do you risk the equity portfolio and move up in quality, i think you are supposed to take a look at holding powder trains -- pattern trades. this is not about place to be. at the end of the day, financial dysfunction it's bad enough the fed will have to do this. every bank, boe has some rolling stability. tom: there is a choice in my hand. 2008 as we look at all of these dynamics, you did the same thing. you just said this comes over to central bank policy and theory. back then it was 84 standard deviation move.

yesterday we had a seven standard deviation move on u.k. guilt. it is not enough to move chairman powell to amend and adjust the dialogue and the policy? dean: i don't think yet. but moving to the back of the yield curve is as shocking as can be. we are all onto each other in terms of the stats that resonate the most. i will throw mine in, the five-day realized bond on the gilt market. the 30 year, the 10 day and the five-day on the coin. these are volatile times. i think one of the things we are supposed to watch his correlation with respect to rates and other risk assets. i think if you see u.s. real rates rise to the extent they have and this be they have, and the negative reaction to equity, at some point, it is hard to know when, but at some point

even the fed blinks. we don't know when but we are supposed to take a look at your equity portfolio. we specialize in derivatives. the derivative markets are providing some compelling entry points in what i would call risk managed equity. there's an old trade called the caller. you buy a flip and finance it by selling a call. the set up is as compelling as i've seen in two decades. if you are going to dip your toe back into the world of risk, using this as the starting point, you can put the guard up on your portfolio and efficient prices. lisa: is this a black swan trade? i ask because john started by saying what do you deal with the risk is in risk-free admin. that has been the recipe for a massive financial market meltdown. that is the recipe we have seen, when the risk is in areas that were perceived to be risk-free.

how much is the black swan trade you need to be putting on? dean: the black swan trade in terms of impact. when you look at correlations, they are all wrong in terms of u.s. rates and what it imposes on all of his corollary asset. and of course the dollar. everything is wrong way coordinated to the dollar as well. if you are making the blocks ron trade on the risk-free asset itself, you're going to be up against the bank of england. at some point, these prices matter and they will react. the central banks can overwhelm the market as they did yesterday. you are finding -- fighting a very difficult battle there. the worst they get, the more likely they are to respond. better is the focus on the impact on higher rates. move got earnings seasons coming. how much of the mortgage

payments shock, how does not reverberate through the u.s. economy? we are still printing record earnings. we still have a very tight labor market. the question is, how much of this plays into u.s. economics and u.s. corporate? i think that is what you're supposed to play for. jonathan: also educate your thoughts. dean curnutt of macro risk advisors. they have made a comeback in the last few weeks. tom: we have to keep the show moving but it really shows the vigilante-ness of the moment. this is the naivete of politicians. they don't understand the market and critically the market plumbing all of a sudden forces clarity and new decisions. jonathan: financial stability

risk front and center. on the s&p, down 1%. from new york city, more coming up in the next hour. looking forward to that with tom and lisa abramowicz. jonathan ferro. this is bloomberg. ♪ >> keeping you up-to-date with news from around the world with the first word, i'm lisa mateo. ian has been downgraded to a tropical storm after coming to florida with a deadly surge of water and tropical wind. it is said to be one of the most costly storms in u.s. history, about 2.3 million homes without power. it is forecast to move around central florida and merge over the atlantic ocean later today, approaching south carolina on friday and moving inland again. british prime minister liz truss is looking at the package that could send markets into turmoil. the u.k. is facing difficult economic times and the

government had to take urgent action to get the economy growing. despite the collapse of the pound and the search in darwin costs, liz truss says she has on the right thing. porsche has gone public. shares of the car maker -- the parent volkswagen raised more than $9 billion at the top of the range. >> if we regulated -- the porsche will decide in the future, completely independent from vw. it is a great situation for us. we want to look at their potential of course. but we will work together with the vw brand in the future. lisa: they value porsche at $78 billion.

-- $78 million. 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 am lisa mateo. this is bloomberg. ♪

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>> we have to buckle up our seatbelt even tighter and recognize that policymakers are no longer progresses of

volatility but they contribute in this journey can be healthy. jonathan: mohamed el-erian fantastic on tv yesterday from queens college, cambridge. live from new york, tom keene, lisa abramowicz, jonathan ferro. futures down 1%, earning one of turkey saying the british pound has blown up. the central bank rate will have to fall further. this is our situation at the moment. yields elsewhere higher on the 10 year by another 10 basis points. yields have been all over the place. give me the range of a 10 year treasury in the market. for percent the high yesterday, 4.01%. the lowest 3.69. quite a range on the morning without data. tom: and -- i think they did a

good job on what the fed will do. it is underreported. there has been an adjustment in the market. jonathan: the bank of england catching down perfectly yesterday and that is what our guest addressed. bank of england trying to preserve financial stability and on the other hand set to raise interest rates perhaps aggressively. which one went down? tom: we digress because we have to. if you were a red sox fan like me you saw ted williams of the backside of his career. annmarie hordern and it select group of bloomberg surveillance community are watching primetime with the kids from fresno state. what was it like to see number

61 and now that she is marrying the yankee guard? annmarie: i had to troll you and where this today. everyone has been waiting, he give it to his mom. it is an incredible moment. and roger merrick was there. tom: after what i witnessed as a child, he was a class act. should we see mr. judge greeted by the president of the united states? annmarie: i would love to see that. that would be amazing. i would have to go into the oval office without one. tom: it would be so embarrassing. jonathan: this guys just a monster. 282 pounds and when he steps up to the plate, it is phenomenal

how big he is. ridiculous. tom: in is the size but also the mechanics and the grace as well. i had the great privilege, the first time i saw him i was two feet from the on deck circle. it is shocking to grace those with the size. -- that goes with the sides. i want to talk about -- size. i want to talk about a painful note this morning on the state of a near 80-year-old president. this is delicate. these are delicate issues. i was the president doing, how does he get through each day? annmarie: it is getting difficult in the sense that there is a lot on the president's plate and the events keep coming in. there was a delicate but embarrassing moment for the president yesterday when he was calling out a congresswoman, a late congresswoman's name

thinking she was in the room and obviously she had passed away in a fatal car accident last month. and the way they spend it was this individual was just top of the president's mind. obviously mystics like this can happen, we don't know what was on the teleprompter and the like. but it does draw attention to a president who when you look at the polls, most democrats are saying do not want him to lead in the election. lisa: less on the political back-and-forth and more on what is going on with florida. the reason is from a political standpoint with ron desantis having to ask for aid from a president who he might run against and has been vitriolic against. and this question of what to do when we have massive population at the forefront of the risk. what is the forefront from the

white house? annmarie: the white house has made it clear there there for florida with any support they need. the president has talked to the various mayors and governor desantis. obviously when you have natural disasters like this, politics is put to the side and this is about making sure that fema is in place. the president this afternoon will be at fema headquarters giving an update on hurricane ian. it has been downgraded to a tropical storm with the damage it has done is incredibly destructive. on top of that, at this moment, more than two point 5 million businesses and households are in the dark. -- 2.5 million households and businesses are the dark. and how he handles this may impact one of the lasting moments before voters go to the polls. tom: questions on the population growth on the west coast of

florida, a viewer, a listener, the famous bramo emails. bramo says judge looks good. annmarie: he's a team player. he was not swinging at things the past five or six games to make sure he gets what he wants. he is about winning. jonathan: stepping up to the plate. lisa: if you stop winning, it is good to go to the mets, they are winning right now. jonathan: between the two futures. annmarie: lisa, upper west side, how does she become a mets fan? lisa: not particularly. but it is nice to refer the underdog. and if they win... jonathan: are we done?

lisa: we can be done. jonathan: it was football time over the past 10 years. a delicate moment yesterday for the president. in the meeting with the press secretary. it did not go too well. tom: really delicate and major kudos for the person who raised the dialogue on the issue. the note from ngf is gentle. jonathan: futures down 9% on the s&p, looking forward to the next. why from new york, this is bloomberg.

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jonathan: live from new york, equities lower on the s&p 500, the nasdaq up -1.3%. we take some of it back this morning. a wild couple of weeks in the bond market. yields higher by 10 or 11 basis points on the year. up eight to 421.50.

sterling very much in focus. the british prime ministers standing by and defending the latest policy shift, down about .4%. tom: by the technical range, we will have to see based on the news what happens. bringing to my attention where they appreciation this morning may have some form of ballet today. right now the belly outside of the bank of england in london, lizzy burden joins us. -- lizzie joins us. the prime minister needs to quote unquote address the nation. how is she doing that on local radio this morning? >> it is her choice to go around to local broadcasters and speak to them. she is dodging difficult questions from financial globalists. she's going to talk to us but

there is a lot of difference of local rates and they seem to be good -- doing a good job. in the she was asked how she slept last night, told all of the things that it going on in recent days and that she was asked where have you been? they are doing a good job of putting pressure on her. her answer has been, i believe in my tax cut and we need to keep going with them. that is not going to read -- reshore financial markets. jonathan: do they understand why financial markets work whipsawed -- more whipsawed in the last couple of days? lizzy: i can explain if they understand it. she seems to have a clear understanding of the impact of the gilt market not only on the government but ordinary people. but the whole point of this was the government thought that because it had a relatively low

gdp ratio, it could get away with it without staring -- scaring off the market. they were funded by borrowing and there was no forecast from the office of sponsored ability. they do seem to have acknowledged that problem. because now the treasury has said we will get that economic assessment. jonathan: thank you, lizzy burden outside the big of england. november 23 for the budget, november 3 for the bank of england and we are not even in october yet. dartmouth is going to be very long. -- about month is going to be very long. -- that month is going to be very long. tom: i don't think we have a week. the idea that any president would go out and discuss this. surreal is the rate word. we continue to bring in and

gather people. john mentioned our guest yesterday. i also thought ruskin was wonderful with deutsche bank. out of the lawrence klein unit at the university of sylvania with real-world work in the rooms as these things get worked out. carl, you nailed it this morning by saying it is liquidation of bonds for cash. how will politicians respond to the threat of quotation of bonds through cash? carl: good morning. i will turn into your introduction. what government can do is give people a better reason to hold on. the prospect for thinking that inflation will come down and that will bring down bond yields, a prospect for thinking public financing has stabilized. that will bring down bond yields. plus once inflation is under control and they will be able to

resume, that will bring down bond yields. right now we are not seeing any of that in the u.k., at least not in the judgment of the markets as we are seeing and with their politics it seems to be the markets of the fed economics. lisa: how does the market respond in terms of hiking rates keeping the front end high and using bonds to basically monetize the fiscal response? to monetize what policymakers and government will be doing without upending the economy. carl: good morning, lisa. that is all the right questions. the bank of england has done a great job convincing everybody that inflation is rampant. whether i agree with that or not or that is what the market believes, that is what the market expect. having convinced the public and generated expectations in the public that there is a problem and the rates, the bank of

england has no choice but to deliver the remedy for the problem it has defined and continue to raise interest rates. and they have to raise it by a lot. if you look at their inflation forecasts, which they aim for an accurate forecast, real interest rates are nowhere near the positive, letter known -- let alone tying in the economy. and they have to deliver the promise own order to -- i think the market will find equilibrium. lisa: have we reached the limit of the financing? carl: in the u.k., the market is not buying what it is selling in terms of debt relief at this time. in the longer term we can probably find a lot more than we

are now. but to amp up the game at a rapid pace under these circumstances, which is to say in opposition to the stated policy goals of the ventral -- central bank, ignoring his committee in his analysis and ramping up spending anyhow, that seems to be the push beyond credibility. tom: september 1982, their commanding heights. what does truss-enomics look like? how do you get to reaganomics two, how do you get to truss -enomics two? carl: as i'm sure you have mentioned many times, the reagan administration has cut like mad in the early days of his

administration, and all of the promises of supply-side economics or whatever you chose to call it, it did not seem to work out. i suspect that someday there will be a day of reckoning in the u.k. where they will have to unlock some of it. but it is clear from the prime minister's statement that is not going to happen this week or next week. tom: we've got to continue. jon, jump in. what does the committee do under your odd government in britain? jonathan: a lot of people are trusting their mind. this operation from the bank of england goes until the middle of october. fiscal dominance. walk us through that. how well do you think the bank of england can push back against it? carl: the bank of england, it

can raise interest rates to a million percent if you want to to achieve the goal. it said what it wants to do and how it's going to do it, and i don't think it can roll down in terms of the government, there's the battle of the bank of england, whether the economy -- or not. more conscious of this more so than i am, that the fed gets -- restricts its independence. that on that day they yields will go to levels we can't contemplate. jonathan: there was a whisper in august and they try to address it. carl weinberg of high-frequency economics, thank you. there's conflict across the board and between the rest of the world, there is conflict

within the united kingdom, within the u.k. between fiscal policy and monetary policy, there is now conflict within the central bank as they try to -- how do you preserve financial stability coming into the gilt market? high interest rates are potentially there. tom: since the advent, 1907 to 1912 ventral banking, the conundrum here real simple. time is the friend of policymakers. as weinberg predicted for greece, he was two years up from a lot of people, you work that out as well john. but the bottom line, time is your friend and truss has to

understand her solution to winnable policy is to expend -- extend the fx. that's number we are seeing. jonathan: you're not alone saying that. a lot of people have said that perhaps this policy might have been the right policy in nine months time or 10 months time. it is a running time to cover the markets. tom: i can't keep up with guy. too posh. jonathan: i can't keep up with him either. he's fantastic. tom: got claims coming up tomorrow, economic data today and i still have to go back to the system, sterling is not broken, it is at 108 levels. jonathan: we talked about this, we've got global core, core government bond market trading like crypto.

futures down 1%. live from new york on tv and radio, this is bloomberg. ♪ key lisa: -- lisa: keeping you up-to-date with the news around the world, i'm lisa mateo. hurricane ian has been downgraded to a tropical storm. it devastated part of florida, knocking out power to more than 2 million people in flooded homes. it is one of the costliest storms ever, costing billions of dollars in losses. it will go over the event to goshen. the u.k. is trying to convince liz truss to dial back dramatic tax cuts. the treasury market is concerned about the volatility of the financial market.

they're working to put pressure on the british government. russian president vladimir putin is pushing ahead with annexation of the part of u.k. that is hard to control. that puts the kremlin on another collision course with the u.s. and allies. there will be a ceremony on friday. retired at super bowl quarterback ui manning has scored his first private equity yield. the firmware he is a partner, has acquired mistake. we have learned the transaction value, $145 million. and aaron judge of the new york me he's -- yankees had his 61st home run, does the success help him negotiate a new contract when he becomes a free agent after the season? he reportedly turned down a

seven-year $200 million offer from the yankees. 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 lisa mateo. this is bloomberg.

>> the fed was aware and is aware of the contagion effect of monetary policy. but that will be enough to deter this federal reserve from their current pathway. their focus is reigning in inflation and reinstating the economy with price stability. jonathan: lindsay piegza, chief economist at stifel. the s&p down, yields higher by nine basis points on the 10 year, 3.8 to 18 for those of you interested in where the gilt market is trading. on the front end, it is up 20

basis at the two-year. at the long and we are down a couple basis points. in the gilt market right now, if you look at two spent 16's, feis 2, 10 and 16's, there's all the stuff central bank is buying, the longer stuff. 30's, 40's and 50's pretty stable. it is clear on my screen right now. tom: we will continue this off our credit desk in london as well. surveillance correction. a senior moment. president biden doesn't challenges well, i surveillance correction. i thought it was wednesday. jonathan: it's thursday. tom: we have our american indian in the control room, and she said to me, tom it is thursday.

less than two hours, they will be important. she is ukrainian and that means something different when you are the atlantic council and deputy director of european energy security joins us with bulletproof views on the environmental tight line, she is definitive. although, honored you are with us this morning. -- olga, honored you are with us this morning. can russia blow up any pipeline they want to? olga: hopefully not. every effort right now, all of the energies, the eu, the wider corporation is being focused to make sure that does not happen. greater visibility and what they are, both are at risk right now. having a clear assessment of what is happening to identify what the structure is and what is more or less likely.

that is what the allies are focusing on right now. lisa: why would russia, we were talking about this before coming on, why would russia sabotage the nord stream 1 pipeline? it is unclear if they did, we have not gone that confirmed. we had some ambiguous, out of the kremlin today saying it could be state terrorism. what is going on? olga: we do not no one hundred percent this is russia but everything is pointing to russia. when i first saw the headline, i had to give a few seconds to think why would russia destroy its own billions of dollars worth of infrastructure, when on the other hand, it is pushing to have more gas flowing to nord stream 1 and nord stream 2, reducing sanctions. but if you look at the bigger picture, nothing is moving to nord stream 1 or nord stream 2, so there is not really any income on the gas moving through the pipeline. they are also creating this

uncertainty and the prices, just when the prices started to come down, as europe was shorn of its storage, it is giving up to 9% in the country. it is still going to be rough but the press is starting to level down. with the recent explosion, we are seeing the prices go back up. and because it is does, nord stream 1 and nord stream 2 did not have any gas flowing through it. and russia can still increase flows and offered a ukrainian pipeline network as well as the turkey. the reason it is a reaction the way they are is because of what you asked earlier, the risk on critical energy infrastructure. lisa: one of the hardest equations right is extrapolating the energy story and the economic story in terms of how much slowdown there is going to be. the network regulator today came out and said it was well above

last week. temperatures have been dropping, you're starting to see the winter effect come into play. there needs to be a savings of 20% to avoid some shortage this winter. how much have people really accounted for the slowdown, idling factories and unheated stores in order to save the energy? olga: right. a lot more will have to be done. the storage being full is one of the things, people are going to be ok. but back to your question on the economic impact, it's going to be actually tough on a lot of the industries that are carbon intensive and utilizing natural gas, whatever they are making, whether it is germany, the economy has heavily relied on industry production. the sacrifices, such as putting your thermostat at a level you would be comfortable at, what

could you weatherize for the next couple of months to ease into that? there's quite a few coming in on line in the next couple of months and the next year or so. they are looking into alternative options, alternative supply. but there are only some of the options and what can be done the next couple of months. it will be tough on the economy. jonathan: a fiscal winter on russia head. it is not winter yet. cpi out of germany had a breakdown early this morning. some regions, double-digit inflation in germany again. the headline number comes down and we are about out of time and we can see a big number thereto. lisa: some people struck by the 10% figure. this is a country that has not structured itself around not having inflation and they are facing inflation at the absolute worst time through commodities, to a slowing growth. how do you deal with that?

it is going to be a game changer when you talk about electric blankets flying off the shelf because that is how people are preparing for a winter. jonathan: as the u.k. experience it, there's the difficulty with inflation and preserving financial stability. at the same time, we've got an italian 10 year. tom: it's important. lisa nailed this earlier this morning. this is something not only in germany but frankly in the united states, if we get inflation not giving like in the next five minutes, that is another indicator of the frontloading required right now. jonathan: yields up in germany and inflation could be as well. we will bring in that number in 50 minutes time.

the cio and head of assets, looking forward to catching up with him. the nasdaq 100 down by a little more than 1%. a 10 year yield that is higher on eight or nine basis points. we talked a lot about that range. it has been huge, not quite guilt but still impressive. lisa: yes but more volatile than bitcoin. this is a pretty high bar in terms of volatility. jonathan: from new york, this is bloomberg. ♪

>> i think that bank of england has been backed into a corner by unorthodox fiscal policy. >> the boe needs to keep that hawkish i on inflation and controlling it. >> central banks will try all kinds of things. >> moving 20, 30, 50 basis points off one data point. that is an indication of dysfunction. >> the dollar is pandemonium.

>> misses bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: what happens when the bond market is trading like a big stock? for our audience worldwide on tv and radio, misses bloomberg surveillance, tom keene, was a bromides and i'm jonathan ferro. -- lisa abramowicz and i'm jonathan ferro. tom: it continued a few months, maybe not the fire that was evident yesterday, wednesday or tuesday as well. but there is real tension in the market. i would link it over to everyone hanging on every two and three word syllable word from the prime minister. jonathan: the prime minister and the governor of the bank of england. it is a long way away. we've got to wait for a budget in november, bank of england decision in november.

my question is do we have to wait for those things? tom: i don't think so. we've got a lot to accomplish. i would watch what needs to watch as the spread market is almost a thermometer of the belief in what jerome powell would do. jonathan: the conflict is there for all to see. lisa: the leverage is built around markets that were considered free. you asked this morning, how much is this a problem that we are seeing the risk in risk-free assets? i would argue a massive problem. that is the cause of financial crises because of things like pension folks. -- funds. it had the long end of the curve in the united kingdom. how many bailouts can you achieve given some of the structural issues? jonathan: asking that question the last 24 hours, can you

tackle inflation and adjust financial stability simultaneously -- address financial stability simultaneously? lisa: it is tough without cooperation. if you don't understand the root cause it becomes a challenge. 10 central banks continue to hike the front end while engaging in mass quantitative easing potentially on the back end. tightening and easing. it puts it in a new light. jonathan: good morning. we are lower by .9% on the s&p. the nasdaq down by 1.2%. yields are higher. the dollar showing a little bit of strength, the euro-dollar 9713. lisa: the intervention on a global scale. it comes with inflation we have

not seen in decades. the latest coming out. the expectation could be 10% on average. how do you deal with a nation that has not seen this since world war ii? this is the full structure of the economy avoiding this, not spending too much. and now spending more to stave off the pain. the conundrum around the world. u.s. initial jobless claims and the core pce for the second quarter as well. we're talking about this thursday. how much do we actually get after being in the labor market? what you are hearing from these local economists is looking under the hood of households taking on more jobs, companies that are not necessarily hiring as much, shutting off from those openings or per -- possibly reducing the hours. this is a picture moving very quickly and we could get the underpinnings of that with earnings with bed, bath &

beyond, about half an hour. and this technology speaking to some of the follow-up in demand for chips. tom: i would take it and push aside the financial stability questions for now. jonathan: i am with you. we are on the same page in a major way. sebastian page, cio at -- can you preserve inflation and financial stability at the same time? >> it is hard. it's like having a foot on the brake and a foot on the accelerator. you are printing money while buying long and bonds while tightening interest rates. the problem, and you have hit the nail on the head, his financial stability.

one sent me overnight and analysis that suggests if the boe had not started trying those 30 year gilts, about 90% of ldi, liability driven investing pension managers, would have run out of collateral. we are really talking about financial stability here. everyone is criticizing this, putting the foot on the accelerator, it doesn't make sense with macro policy. but at some point the take away is not whether it can work or not. you have to do it. you have no choice. tom: -- does this imply we will have a permanent inflation into the system which will give us a better revenue stream and equities become more attractive? sebastian: not quite yet. we are trying to tighten

monetary conditions and i don't think this is forcing a fed pipit anytime soon. but you will have to try to do both. i do think the stickiness of inflation is going to persist. i have been coming on your show for a while, saying we are underweight stocks, we're getting there, we like to be contrarian. today i'm still saying not quite yet. partly the last inflation in the u.s.. month over month core cpi with inflation and housing. the number two cap markets today is the one-year break even. it is below 2%. my friends or economists tell me don't look at the inflation expectations. it is technical and so on. but one of our members said at the last meeting that if we have 2% year-over-year, they are going to eat their hat in our

committee meeting. that one-year break even looks out of place. short answer, inflation is going to be speaking and we are in a new era for inflation. lisa: i'm trying to do some mental gymnastics on the idea of buying bonds and rate increases at the front end. but the willingness to allow the market to crash and allow financial stability to unravel, prolong inflation by monetizing edition's debt. -- a nation's debt. sebastian: i think it does. we have choice. this is the third leg of the risk in financial markets we are just starting to see. on the show today you are just starting to see it. we have at the rate shock and the repricing of stocks. everyone is worried about the growth shock. in which case long and government bonds should do ok. they should be a hedge for a group -- growth shock.

and the third leg which we are all worried about, maybe that is where we are not leaning in right now on stocks versus bonds, as the financial stability. think about the covid experience in march 2020. you have no choice but to get in and solve the plumbing issue. we are talking about systemic risk. it makes the fight against inflation and issue. it will have to be persistent at least over the last 12 months. everyone has come around to your view. i think it is hard to make a bullish case right now. i pledged this with our allocation committee and this is looking like a recession. earnings surprises, leverage

much lower. pmi levels still above 50. if you compare the data to march 01 and december 07, you're not in crete recession bulls. -- prerecession levels. but these are treacherous markets. jonathan: he could do consultancy he wants an advocacy -- and advocate on the committee. turning back to sebastian page. gone, sir. -- go on, sir. sebastian: they get bullish right now. they are struggling to make a strong bullish case right now. but at some point, it is the most anticipated recession in history. jonathan: i'm not sure that is right on the bullish side.

lisa: there was a bullish commentary. it was saying basically it was a washout but it is starting to look like a lot of the bad news is priced in. that is as good as you can get in terms of optimism. jonathan: the pipit is what they are all excited about. the struggle i have with that, if they are pivoting because of recession and by that i mean pause, because of recession on financial stability risk. is that bullish? i don't know. lisa: forgive me for the derivative here. but what that means is longer-term inflation. retire for longer. it is the long and having trouble and it ends up with them not seriously fighting that issue. this is not an easy or comfortable situation for risk assets. jonathan: futures down eight or .9 10 -- 49%. information from the white house, the president approving a

florida disaster declaration. the latest from down in florida shortly. from new york city, this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world with the first word, i'm lisa mateo. hurricane ian has been downgraded to a tropical storm. the deadly surge of water and catastrophic wins, when damages are added up, it is expected to be one of the costliest storms in u.s. history. about 2.3 million homes are without power. it will emerge over the atlantic ocean later today. expected to approach the coast of south carolina friday and moving linda again. liz truss is defending the tax cuts that say markets were in turmoil. the u.k. is facing difficult economic times and the government has to take urgent action to get the economy

growing despite the collapse of the pound and for surge in borrowing costs. liz truss says she is confident she said the right thing. vladimir putin pushing ahead with the annexation of parts of ukraine they controlled after the election. that puts the kremlin on a collision course with the u.s.. russia will have a ceremony friday. and talking about cutting oil output next week. the size of the potential cut is still under consideration. a fragile global economy continues to put pressure on oil prices and opec-plus showed this by making his embolic cut. and shares for a carmaker began trading today after the largest ipo in a decade. parent volkswagen raising more than $9 billion, -- $900

billion. the operating of porsche -- 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. ♪

>> the federal funds rate next year would increase to 4.52

4.75. everybody has in mind and increase like march. jonathan: overtaken by the fed. charles evans, the chicago fed president and the fed hose of the london school of economics. session lows on the nasdaq 100, down .9%. yields higher. i will bring it up online, the bloomberg terminal. the display in the gilt market right now, they have the operation daily down to the middle of october. when you look at guild, what you will notice is that 30 year plus is trading from her when yields are lower and everything counts, tends down to two's. all of these stuff from tuesday tends is stuff they are not

doing. tom: i like that. looking at this, sterling 108.75, range bound right. annmarie hordern joins us, washington correspondent. there is a hurricane. george bush junior never recovered from a hurricane. every politician -- give us the tension between the president of the united states and the governor of florida. there on the phone on this natural disaster and other than that they have nothing in common. annmarie: they have nothing in common and it is not lost on anyone that these could go face-to-face in a 2024 presidential election. things are tense. there have not been the nicest words or politics.

but they put that aside in what is going on in florida. the president declaring this disaster. he is unlocking federal funds for loans for housing and anything the state needs. even yesterday, with an event last night, he did start by talking about he wants to give an update on what is going on with the hurricane. he wants to make sure, he is seen a number of these readouts, he is leaving messages is one of the readouts said. this afternoon he will be getting a brief on the damage that was done and at noon with fema. tom: do you have any sense of a federal -- federal policy to end lots of development amid areas where there can be a natural disaster? whether it is a volcano or a hurricane, whatever. i don't detect a policy, do you? annmarie: i don't and i'm not

sure that would work for politicians. especially when they are trying to talk about bringing back jobs and investment in building new homes, if that would actually work. it does bring up a good point. you have a number of these cities absolutely flooded in florida and the way the world is going, what scientists essays that we could and should expect more natural disasters due to climate change. lisa: to tieback to events we have seen happening, the idea that nations have to be spending some real money to counteract real things at a time when money is much more expensive. how much can the united states spend, 70 billion some odd dollars some people are estimating the cost to repair, and keep the rest of the budget? it is easy to spend and borrow more. annmarie: it's a great question. you have legislation that has

come in over the summer that is going to be toward putting money toward investment, whether that is the heart inflation reduction act last summer or this summer money going toward clean energy. it is a great question. but when it comes to natural disaster yield -- natural disasters, you will hear from politicians at this white house that they will do whatever it takes to make sure they can help people rebuild. but we do know and we have seen for years after hurricane katrina, people were still struggling to get back on their feet and get their homes rebuilt. jonathan: we appreciate your coverage. she will keep us up to speed as the news continues to come in in florida. we hope you're doing well. stay safe. things are difficult at the moment. they can take a few days or a week for the damage to reveal itself like this. tom: this is far worse than what

i personally witnessed, 1990 or whatever hurricane bob. this is not weeks, it's months. there is a fiscal impulse to rebuild. but far beyond the impulse to rebuild is the damage, particularly not to the fancy people we talk to every day but people just making a go of it, the middle class of america. jonathan: we need to talk about the markets, too. we come back to that this morning on bloomberg tv and radio. stocks down about .6% on the s&p. the nasdaq 100 down .9%. the yields of basis points, the 10 year, talking a lot about a gilt market. it is split in the gilt market between what the bank of england decides and what it looks like at the moment. that guilt operation yesterday. lisa: how must -- much does this

save the market, operation safe pensions? and a lot of people have been writing notes about how the u.k. is a front runner, not necessarily an outlier, with respect to the conundrum of trying to deal with fiscal policy that can no longer be purely on deficit spending. jonathan: ultimately, rates are going to go up. the question would be how much? i asked mohammed that question. he said 100 basis points baseline and perhaps more. lisa: it will go up more directly and more immediately with rate hikes. that said, i what point does that become a financials debility problem? if you get a housing market crash this dramatic, it goes to the question at they were asking. are these goals contradictory of

suppressing inflation and preventing a systemic crash? jonathan: that's where it started with the ecb, raising interest rates and talking about containing spreads by italy. tom: in the geography, including a specific room, there is still a war in europe. that is the heart of the matter. there is a war going on. jonathan: energy supply. top of mind for europeans. equities down .6%, yields up. from new york, jeff carrier from -- jeff from goldman. this is bloomberg. ♪

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so i decided to go with golo and it's changed my life. when i first started golo and taking release, my cravings, they went away. and i was so surprised. you feel that your body is working and functioning the way it should be and you feel energized. golo has improved my life in so many ways. i'm able to stand and actually make dinner. i'm able to clean my house. i'm able to do just simple tasks that a lot of people call simple, but when you're extremely heavy they're not so simple. golo is real and when you take release and follow the plan, it works.

jonathon: live from new york city, it's not ever. three more months of it. a whole quarter. equities down .6% on the s&p fear. the nasdaq down about .9%. i will tell you what stocks are where you can get for the bond market is.

381, still 20 basis points down from where we were yesterday. gives you an idea of and for the last one for hours. let's call it for 20. just wanted to reveal the split in the gilt market this morning. the bank of england announced yesterday it is basically buying bonds with maturity of more than 20 years. what you are seeing today is everything 20 years plus, the bank of england is not touching it in this operation. look at this divide. up 16 basis points, two-europe 20. lowering bond market because the boe is going to be in here for the next couple of weeks. tom: this is really important. i don't want to do the chart here because it is too important to get to jeff currie. the confidence to own that thirty-year paper, it was blown

up by the prime minister. jonathon: in a big, big way. we will see if we get comment today. net sales stand 20% year-over-year. adjusted loss per share is 322. estimate was 158. lisa: it is going to be down. we can take a look at that right now. bed, bath & beyond having an execution issue. is this retail really getting squeezed or is it something that i noticing is sometimes earnings projections are coming down, even though they are fast and furious. we will watch that beth be on after the bell. what is particularly interesting is it gives a bellwether view into the semiconductor field, as well as into apple and the big tech companies manufacturing products that need these chips. we are looking at a lot of major

semiconductor producers, from intel to amd, all down from 40% to 50% year to date. apple is down 14% year to date. at some point, it was down a bit more, how much do we have more weakness to price and at a time when you are looking at dramatic provisions. tom: a day down. dell shocked to 29,000. right now, micro economists from university of chicago, jeff currie, goldman sachs head of commodity research. you have something that i would suggest to our listener in viewers that don't understand. commodities year to date in japan up 51%.

year-to-date in the united states, up 22%. the dollar matters, doesn't it? >> absolutely. we are dollar dominant. the main point there is is the u.s. hikes interest rates faster than the rest of the world, you have diversion and global interest rates, which then puts upward pressure on the dollar, so finding a cost of dollar increase, then people deleverage dollar denominated commodities. you would rather liquidate that in full cash, faang -- paying 5%, than gaining the risk of that. the inflation, then deflation increases real u.s. incomes, which puts more upward pressure. it is a feedback loop.

tom: i guess we can go to the next opec meeting if we really wanted to. but do you throw general equilibrium studies of oil out the window because of this excess dollar movie? >> really good question and it keeps me up at night. here's the way i am thinking about it. let's go to the definition of inflation. too much money chasing too few goods. too much money and too few goods. we still have too few goods. inventories are low, but what is happening is money supply is shrinking. that is taking the price level and driving it down, even though you have too few goods. we look at the fundamental picture and our base case says it will continue to tighten as we go into year-end.

you get stabilization in china, oil to gas substitution in europe, and this market is going to get tighter and tighter as we go into the winter months. we need to see some stability and money supply or in the dollar, in terms of thinking about that liquidity issue, than those fundamentals can press higher. right now, you really need to separate what is happening on the money supply side and what's happening on the fundamental supply and demand side. lisa: one aspect that has gotten a bit lost in the turmoil of worrying about a recession is the possible capacity to produce. there was a story out today talking about how opec-plus may actually cut its production at its next meeting. how much do you expect something like that, not necessarily in response to the price going down, but in response to a lack of capacity to continue to produce at the levels they are doing now? >> if they are data dependent,

if they are going to cut production, they are doing it because they look at the market being in a surplus. but in terms of thinking about overall capacity, that should not affect long-term prices. we are bullish on that. you have long-term capacity, which means forward investment. ultimately, that can serve those problems -- solve those problems. ultimately, you need higher prices. we recommended going long on oil for that reason. lisa: what about natural gas? we are seeing a bit of overlap here as europe faces a winter where they are flat on their backs. where is the extra margin of supply that comes from europe when the u.s. is exporting more than ever has and is facing constraints in production there? >> the answer to that is to look

domestically. we are bearish for european natural gash -- natural gas doing into january and february. why? i want to point out that no one ever gets hit by the train they see coming. the disruption happened in august. you are able to make adjustments by reducing demand, destruction, making substitution into other fuels. we believe, barring an absolutely freaking cold winter, they're going to try to moderate and you will have a problem. to your point, you have to have the supplies, whether it is through export development or domestic and -- domestic investment. unger term, you have a problem in europe. tom: it is unfair thursday. what is the bottom price of a barrel of oil for opec? >> if you look at where the

equilibrium price should be, it should be somewhere in that $85 to $95 per barrel. that is probably the cost structure in the u.s. why have we not gotten somewhere in that vicinity? because rates were rising when we were above $100. now, we are below that. they are up 20 or 25 rigs in the last three or four weeks. down to these levels, you are now below the equilibrium price. somewhere in that $95 or $100 per barrel seems to be aware the market is functioning. we also look at that's where our price targeting is, too. the potential for upside around that is substantial, going back to the point that we are out of spare capacity. jonathon: wonderful to hear from you. jeff currie there. wonderful to hear from you.

the nasdaq is down by more than one full percentage point. yields are higher by nine basis points on a ten-year. dollar just a bit stronger. euro-dollar 9728. at the moment, 30's, 40's, 50's, pretty well behaved, given the gilt market operations running through the middle of october. the front end up another 20 basis points, up 21 on twos, and tens, and 16's. i keep coming back to that. we have the u.k. bond market, a difference between what they will touch and what they won't. tom: i think it's an interesting ballet with the bank of england. this is about policy. this is about politics away from the bank of england. i am monitoring very carefully what i see off the british

press. liz truss's comments today, she is, i guess the nicest way to say it is, you are no winston churchill. jonathon: the bank of england stepped in yesterday. it is time-limited. it goes to the middle of october. if you look at what the debt management office of the u.k. revealed last week to accommodate this extra lesson, it is going to come at the front end. [crosstalking] that's not what they announced yesterday. tom: it's targeted and whatever other fancy phrases from the phd's. it was targeted and they are almost back to 145. 146 at the sales invention -- intervention. when does that occur? jonathon: none of that undresses the underlying problem, none of it, and that is what you need to address to really clear that out. jeremy stretch will join us

shortly. looking forward to that. stocks are negative, lower .75%. from new york, this is bloomberg. ♪ >> keeping you up-to-date with news from around the world. with the first word, i'm lisa mateo. one of the storm's hurricanes ever to hit the u.s. has now been downgraded to a tropical storm. ian has devastated parts of florida, flooding homes, knocking out power to more than 2 million people. it is expected to be one of the costliest storms ever, costing more than 67 billion dollars in damages and economic losses. the storm is forecast to move across central florida and emerge over atlantic ocean later today. u.s. is now seeking ways to encourage british prime minister liz truss's team to do those dramatic tax cuts. the u.s. treasury department is concerned about volatility in financial markets. it is working with ims to put

pressure on the bridge government. another leak has been found in the nord stream gas pipeline in the baltic sea. that brings the number of ruptures to four. several governments have called it sabotage. the pipelines carry gas from russia to europe. we were already out of action, but any hope of the kremlin might turn gas flows back on have now been crushed. japan's soft brink has begun laying off employees. bloomberg has learned it is expected to cut at least 30% of its staff. they have about 500 employees. it recently posted a 23 billion-dollar loss, with most of that coming from a plunge in alleyway should of portfolio companies. over in baseball, erin judge of the new york yankees hit his next home run, tying the record from 1981. this could help him negotiate a new contract when he becomes a free agent after the season he

reportedly turned out a -- turned it down a $213 million deal with the yankees. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪

>> what we have done is taken decisive action, first of all to make sure that nobody is paying more than a typical fuel bill of 2500 pounds. that will come in this saturday. what also to reduce our tax burden, so we can also curb inflation. that is so important. jonathon: the market putting this government under a lot of pressure. that was liz truss, the u.k. premised her. we are down by almost .8% on the nasdaq. nine basis points on the tenure in america.

the dollar is stronger again. 9737. i know you would like to know where sterling is, but i can tell you where it was. all over the place. that was monday morning. the high was 10 916. where we are presently is just short of that level at 10873. tom: the launchpad screen i use is ritual today. we were talking about this. i haven't done a lot about it. that is what looks like. it is different today. jonathon: symptoms of underlying issues. tom: thank you. jonathon: guy said the words yesterday. tom: there is a tradition in toronto from cibc of research that is always thought-provoking. think of their wonderful regimen call, who is exquisite on

american small business. a brilliant note yesterday, jeremy stretch joins us today. jeremy, it is anarchy in the united kingdom. what must the prime minister do? >> i think it's very interesting to listen to those words from the prime minister this morning, where there is no sign -- remember she has only been in this for less than one month. the government has put into place a very risky strategy. until there is a degree of backing up that strategy, and mechanisms to sum that up, it is part of the problem. fiscal easing without any plans to raise additional revenues. until there's any signs of market confidence, it seems to be the case that the market will continue to pressure the u.k. government. also, ultimately, i think it

will result in higher currency as well. jonathon: you've got an idea of what kind of price we need for this to clear. how low do sterling need to go? how much does the bank of england need to do? >> values the ultimate question. as far as the bank of england, the prices could be 6% or 6.25%. i'm not sure we get maximum magnitude. that might be as far as the bank of england can or should go. we are receiving very substantive reduction. we are probably going to decline by 1% or 1.25%. inevitably, it is probably going to go lower. the session on monday will be tested. those parity probabilities continue to explode over the last few sessions. i think we can and will see that

level being tested, but i'm not sure necessarily there is a magnitude of additional setting that will take us substantially beyond that. but i think it is very much the case that they will remain on the defensive in the near term. the bank of england will continue to be pressured to do more. they will be very reluctant. the bank is still very scarred over the events of 30 years ago, when the bank hiked and spent all the currency. jonathon: it seems like it is a lifetime away. november 3 is the bank of england decision. i believe the end of november is the budget. october 14 is when this tilt market operation is due to finish. i just wonder if those will get ripped up and we have to rethink this whole thing. lisa: especially as liz truss continues to double down and is not thinking at all, and the markets will do what they do. how much is there a pressure point, a pain point at which liz

truss has to respond? and her, then the bank of england, even where the pound is headed in your expectation? >> there is a disconnect in all those things you just mentioned. there is another review coming on the 21st of october. that does underline the risk of a downgrade as well. there is enormous pressure on the government. expectations are showing no sign of reversing, but remarkable in terms of the market pressure thereunder. it is very much the case that we are still heading lower. i think the bank of england will be very low to be forced into interaction. i think we will see another 3% or 4% intraday move, as far as moving lower. it will be very difficult for the bank to ignore that and they will be pressured to come in and

put some of the interest rates lower in the market. jonathon: jeremy stretch, thank you, sir. tom, october 14 is when the scope market operation finishes. that is the schedule. november 3 is the bank of england rate decision. later in november is the budget. does that get ripped up? tom: i haven't done a standard deviation studied this morning. we heard from one of our guests earlier that you can think it out all you can, but you never know where it is going to come from. none of this even talks about, while michael is brilliant, but none of this talks about the real upset. i don't know where it is going to come from, but i cannot get out to november right now. jonathon: and italy as well. lisa, we are at 470 on the tenure this morning. lisa: all different sides of the same story.

how much more could the dollar possibly rise in strengthen versus all these other currencies, forcing them to raise rates to attract funding at a time when they need it? their economies are facing this energy crisis looming over the winter. at what point do you get a realization of population? it becomes much more of a political issue. jonathon: there are several dimensions within the united kingdom. he of a policy conflict and it has been the story for months. the central bank is trying to claim a strong or currency. brilliant this morning. everything else is noise. we have to wait until the u.s. decides it is time to clobber. lisa: is that a positive or negative? the u.s. is flat on its back

with positive growth income. that is to what we're hearing from a lot of them yesterday. there is more work to do. tom: i really want to point out that ella from morgan stanley said, a fancy pants chart on this, but it is not enough of an excessive move yet. the conditions now are so different than the early 1980's. jonathon: will you share that fancy pants chart with us later? tom: there is a home depot downstairs. they can make it. jonathon: this is bloomberg. ♪

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there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician. i was 424 pounds, and my doctor was recommending weight loss surgery. to avoid the surgery, i had to make a change. so i decided to go with golo and it's changed my life. when i first started golo and taking release, my cravings, they went away. and i was so surprised. you feel that your body is working and functioning the way it should be and you feel energized. golo has improved my life in so many ways. i'm able to stand and actually make dinner. i'm able to clean my house. i'm able to do just simple tasks that a lot of people call simple, but when you're extremely heavy they're not so simple. golo is real and when you take release and follow the plan, it works.

>> policy is meant to be boring. it is meant to calm nerves. >> no doubt we are seeing dysfunction in the markets overseas. at this point, the fed is primarily focused on those

inflation figures. >> investors are becoming increasingly concerned about not just the u.s. economic outlook, but the global outlook. it will probably get stuck in 2023, when the u.s. fed cycle eventually comes to an end. announcer: this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: historical markets. we will look at the currencies in the moment. commodities are one of the giants of the industry. right now, i'm going to call german inflation, i'm going to call it may be a little elevated over what we have seen and what the survey predictions have been. jonathon: double-digit inflation in germany. truly historic. double-digit inflation. put in the diary. the next meeting is october 27. people will want qt and a monthly rate hike. we have seen this policy

conflict play out between financial stability and monetary policy in the u.k. unless 24 hours. does that play out in europe any more pronounced way, with some of the committee pushing harder for bringing inflation back down? at the same time, ec financial risk bubbling away in the market. tom: this is so important. thank you for all the notes on radio and tv over the quality yesterday. we will continue in this hour. michael spence will join us later in the hour. jonathon, i want you to frame right the political dialogue you hear from britain this morning. jonathon: i don't hear a lot, and that's the issue. there is no bank tracking care whatsoever. policy conflict is the way we are all flaming this -- framing this, and it has been that way for the last month. monetary authorities try to get inflation lower. something we talked about yesterday that is really important is any policy conflict now within the bank of england between a set of individuals who

want policy to attack inflation and bring it lower, and another set, perhaps the same, who are very concerned about financial stability. the question we are asking is whether you can tackle inflation by raising interest rates, and whether you can isolate risk by buying bonds. tom: i didn't see a spread analysis and conventional analysis just on price paid we sell standard deviation move in the long term gilt market bloomberg index. it is just about the price of bonds priced lower, yields higher. lisa: these are markets not expected to move like this. we have been talking about it at the beginning of the show with this. this idea of what happens when taking credit becomes the most risky part of the market. it becomes very difficult to find conviction. even though yesterday he saw the biggest one-day gain on the aggregate index going back to at least 2000, even though you saw

those big gains, that is usually what you see in a air market with very little conviction that will not necessarily be met with the same policy rescue as in the past. tom: jonathan, the german two-year is what i would look at. jonathon: yields are up around the world on the 10 year and italy, roughly 21 basis points. you can rounded up tell most 472. the euro is weaker, dollar stronger. in the gilt market, we have talked about it a few times, a clear divide between the stuff in the gilt market and the stuff announced yesterday. the 50 year is down by just a couple of basis points. the 30 year is up only four. tom: i also had the joy of working with a guy named john henry of years ago.

esther henry was what we call a turtle trader based on trend and commodities. he ended up owning a small baseball team in boston. there is a soccer team in liverpool, i think, that has been doing fairly well yesterday -- recently. jonathon: the last few years. tom: we have kenneth tropin and we are thrilled he can join us this morning. how do you trends in investment and commodities? a cta structure, given all the financial instability at the moment. >> look, the systems we use are pretty long-term in nature. some of the short term we are seeing over the last few days, it is going to help us one day, hurt us another day. hopefully over some period of weeks and months, it will work out successfully. i think it is important to note that we do both discretionary trading and systems trading.

they're are very different and how they react to short-term market behavior. tom: short-term market behavior is backed by this concept of hedging. hedging in 1998 did not work out because of the substantial leverage. do you detect another shadow, another ghost out there right now that would be like excess leverage in 1998? >> i'm not so sure it is a leverage issue. i think you have a profound problem, which is that central banks for 11 or 12 years between 2009 and the financial crisis, and 2021, has globally coordinated easy monetary policy. now, we have a very inflationary reaction to 12 years and very, very easy policy. it is a very difficult spot they are in, to try and get a control on inflation in an environment where the market is used to easy monetary policy.

you can see some of this volatility is really a reaction function to that problem the central banks are having. jonathon: -- lisa: can you call this volatility in the short term crazy? i am wondering, even the crazy volatility if there is a trade to put on, or the safety is, or if it is just in cash, pile it up, sit there, and wait. >> there's a lot to do in the markets. it is kind of interesting being at the helm of a hedge fund, which involves a lot of shorter-term reaction on the part of our traders, and our systems are so long-term in nature. for example, after yesterday's move, or we saw unprecedented price volatility and u.k. fixed income, but global fixed income, most of our traders sort of clear the books and decided to step aside. i kind of like that in a trader,

or they don't have a hero mentality, they have a survivor mentality. on the other hand, our systems, which are long-term, they kind of ignored the volatility yesterday. as markets get more volatile, we sometimes will increase them when markets get less volatile, but the reaction was handled well. lisa: given the fact that your traders stepped away, and they were not alone because a lot stepped away, the liquidity is getting less and less, even with some of the most liquid instrument in the world. how concerned does that make you, to the point of financial stability? >> it is something we focus on every day. we have a risk meeting every morning since 2007. one of the things we focus on is what is happening with liquidity and how it has changed since the last period. is there a problem spot for any the positions we might have on you? we want to be the first to get out there.

i think liquidity is down. it has not evaporated. there is plenty of liquidity in most of the big markets. but it is something you really have to keep an eye on. tom: i want to go back to what john henry and you and monro and others invented. there was a time when there was an actual ratio, and actual-free rate. that all went away and evaporated. the gravity has come back to our physics. do you shift what you are doing now because we finally have a real rate, we finally have a risk-free rate, we finally have gravity? >> i think the most important thing to look at is that we have significant inflation. significant inflation means that central banks have to respond, and that creates trading opportunity. that is the way that i think about it. sure, we are generating on fed

funds with significant income whereas one year ago, there was not. i think the most interesting comparison i can give you is, if you look at the performance of equities from 2009 to 2021, it was sort of a golden period for beta investing. you had plus 10% average returns for stocks at least, at a time or interest rates were almost zero. the difference between the rates and what you made, it was the highest in history. now in an inflationary world, where interest rates are rising and equities are having a tough time, that relationship has flipped on its head. jonathon: i wish we could have a longer conversation in the future. kenneth tropin there, of graham capital. just 15 minutes or so after we

heard from the government, the administration financing the latest intervention in energy, helping to offset the impacts of the coronavirus pandemic. listen to these numbers. bolstered with new borrowing of at least 116 billion euros to cover the cost of the gas price cap, according to people familiar with the matter. yields on a 10 year are to 27 in germany, up 15 basis points on the session. last december, they were negative almost 40 basis points. that gives you an idea of the change we have seen in the last 12 months or so. lisa: they're the highest at one point going back to 2011. that is the height of the euro debt crisis. take a look at some of the risk adding priced in. this is the conundrum. you have central banks that want to fight inflation, you have governments that need to provide some assistance and want to borrow to do it. and the bond market is rebelling. jonathon: everything seems to be in conflict with the pandemic,

and we are supporting each other. what a time in this market. equities down 1%. you doing all right? you're so happy this year. it just gets better and better. tom: i am almost double digit. i am not there yet. [crosstalking] jonathon: you are not raising cash capital. tom: i do a two and 20 split. jonathon: this is bloomberg. lisa: keeping up-to-date with news from around the world. with the first word, i am lisa mateo. assessing the damage from one of the most powerful and costliest hurricanes in u.s. history. ian has been downgraded to a tropical storm. it is now expected to keep battering the state with winds and torrential rains before moving out into the atlantic ocean. from there, into georgia and the carolinas. an estimated 2.5 million homes and businesses are without power. russia's president vladimir putin is pushing ahead with the

annexation of the parts of ukraine that his troops control, after elections. that puts the kremlin on another collision course with the u.s. senate and allies. there will be a ceremony on friday to observe the regions. another leak in the nord stream gas pipeline. that brings the total to four. it has been called deliberate and sabotage. they were already out of the action, but any hope that the kremlin might turn gas flows back on has now been crushed. porsche has gone public. they began trading today after the largest ipo in decades. volkswagen raised more than 9 billion dollars, pricing and stocks that the top end of the initial range. they offer for the value of porsche is $73 billion. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries.

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>> the market is really pushing them into a corner to do something. without them asking in that way, effectively the pound is going to go down further. it remains to be seen how much will be needed on the day itself, but i would suggest at least 100 basis points are going to be needed at that point. deutsche bank. a day south, he is talking about. the bank vaguely monetary policy, it feels like a lifetime away. futures -1% on the s&p.

the dollar is a little stronger, the are a bit weaker. 20 minutes ago, inflation in germany, double-digit cpi, double-digit inflation in germany. tom: just one of the events that shows data dependency becoming data reality. that is what madame lagarde will face in the coming days. it seems ages ago, given all the financial turmoil, but joining us again with his wonderful prickle thinking skills across economics and finance, from bank of new york mellon, geoffrey yu joins us. thank you for taking time with us today. starting as a student, black wednesday in 1992, in the theater, market participants could corner the market. george soros and others did back then. could the markets corner the prime minister of the united kingdom? >> they are certainly trying to

do that within the currency market at this point. but the bank of england is providing some relief. their reserve this time around, they are not even going to try with the eastern european countries at this point, but they can get into the gilt market, which is something much more within their control. jonathon: this is a band-aid. and a band-aid gets worked off again on october 14. what will things look like by the time we get to october 14? >> that is a lifetime away. monday is the immediate risk. now, it appears the chancellor and the counselor, 4:00 p.m. u.k. side, they will be speaking and really doubled down on the tax cut. i think he is actually going to

go for that, and that will be the next risk event. it is really monday. jonathon: do you think that 14th, that day the diary, just gets scrubbed as this continues a whole lot longer? >> remember the issue before guidance was just a squash all the volatility with the index. that is the exact same thing happening right now. you're going to push all the potential gilt market for the 14th. when they look at the leading indicators, the boe could realize that without changing the fiscal part of things, they're going to be keeping the same problem. i do expect this to extend, pending decisions. lisa: how is this not basically just financing through monetary support the deficit and the financial plans of liz truss? >> the initial allocations are relatively small. the boe has gone through great

pains to stress this comes from the sec. this is something time-limited and quantum limited. if this gets extended, the policy gets more extended as well. they're going to go through sterling. lisa: but it raises an issue we have talked about all this morning, trying to lower inflation and combating financial instability. are we looking at inflation that is going to be much higher for much longer because there is an unwillingness to allow markets to just completely grind to a halt, which could be the consequence of some of the rate hikes being projected? >> the boe assured us yesterday it will not be at the risk of financial stability. global central banks are making very strong arguments. 2008, regulation and capitalization, they are not looking at the 2007, 2008

scenario. they can push the envelope a bit more and where the risk is, you don't know. tom: so, where is the opportunity right now? is it an obscure effects trade off the pacific rim? where's the opportunity within this clamor? >> it is basically, when do you call this? we are under sufficient markets. a lot of times, and china, we get this earlier than expected. he at these allocations that will go through into those areas. they are very under position right now. [crosstalking] tom: how do you deal with korea as the non-china? has korea won the mother of all buys right now?

>> not yet. all those china proxy currencies, you cannot increase allocation with a clear growth story from china. when you have them backing into trying to contain depreciations of currency, i don't think they are there yet. if the depreciate 5%, you will not get that in the korean market. jonathon: we have a responsibility to talk about this delicately. how close did we come to a real accident yesterday morning? >> yesterday morning, we did get close to an accident. how big of an accident, i think you can't prove. but based on the allocation in the operation yesterday, maybe it wasn't as big an accident as others made out to be. we are very heavily regulated. the boe was always going to react in force. if it was a real accident, we

won't see them come in late in the day. it would not be unlimited duration. they could have added. when it comes to financial stability, it is whatever it takes. jonathon: thank you, sir. whenever it takes. does that mean it is no longer whatever it takes to bring inflation back down? it kinda seems like whatever it takes to bring inflation down and preserve financial stability. lisa: the answer probably is no. is understand -- it is hard to understand how they can have their cake and eat it too. how much is it going to work in contrast with each other if they want to fight inflation, but aren't willing to allow the market to do what it does as it raises rates? then we get them backing away and the yield have to go up on the long end. they would have to logically go up. jonathon: the struggle to normalize, to find this new

equilibrium without central-bank distortion, it is going to be so, so hard. this is one of those fractures, a big fracture, i would argue, along that asset. tom: i'm going to go back to the boring thing i said on and on. they're coming out of a natural disaster. we have a war on top of it. think of greece a couple years ago. extend out the x axis, and that is the only political way. jonathon: ray farris will join us shortly. equities on the s&p down 0.9%. ♪

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jonathon: waiting for some economic data here in the united states of america. equity futures going down to .8%. michael mckee, i will butcher these numbers for you and just a moment. up five or six basis points on the 10-year. a big downside percent -- surprise. can we sit on that?

193,000. it is 215. 193 on jobless claims in america. lisa: this is not what the fed wants to see. it is great for the employment picture for the united states because it seems like very few people are -- people, possibly the fewest for filings of new employment claims, getting unemployment benefits, but this seems to be moving in the opposite direction from a fed that wants to see a tightening labor market, that wants to see employers having an easier time hiring people and not having to fork over such high wages. amazon, by the way, just raised their minimum wage yet again to attract people, even as margins are getting squeezed. not the picture this central bank wants to see. jonathon: consumption data, relative to the expectation, one point. that extra week we just got comes at 2%. claims at 193,000. that is a tight labor market. tom: a four-week moving average,

that's what we like to see. i will just roll it out as 250, down to 240, down to 222. about two hurt 17,000? the economy is terrible. can we have a moment of silence for glassman of jp morgan? he has killed this. he has absolutely nailed this. a few other people as well. jonathon: getting a third rate on this whole host of indicators. what is here is the initial data on jobless claims. still higher on the front end by six basis points. tom: futures negative 35 for the doubt. credit suisse included a giant over missoula. , the only high ground on

pacific rim analysis and also foreign-exchange in london for the shop, we are thrilled that the chief economist joins us this morning. i'm going to cut right to the chase, ray. yesterday was original. what is the original solution for the prime minister? >> i am thrilled to be here. i have been a long time listener of the show. i just want to address the elephant in the room. that is a fantastic bowtie and i love it. i think it was set a little bit earlier by one of the guests, the u.k. really needs to be viewed in the context of an emerging market situation, not that they are going to default on their debt, but the economy has lost a nominal anchor for the system. that, i think, is why investors don't want to hold bonds and currency. the fiscal agent looks like it is a little out of control. the bank of england is not stepping up to the plate to

regain control and saying they don't care what happens on fiscal, they need to control inflation. what needs to happen here is the bank of england needs to set them and be aggressive with their next rate hike. it will be better if they moved before november. they will signal they need to do more before that. pressing and high rates as the terminal rate, they don't have to get there. tom: you have a huge credibility with asia and china, japan. and you come out and calculate 1.6% global growth for next year. are we pricing for that? >> no, i don't think we are, certainly not in equities. the way we look at equities, and i wear two hats. i'm the chief economist, but also the chief investment officer for the americas. about three weeks ago, we went underweight in our investment vision equities. that is the first time since 2013. that is a huge move for us.

when we look at equities, we think, as we just published yesterday our new economic quarterly, the worst is yet to come. that is all about the fact that nominal growth has been slow, but costs are going up and wage growth, the persistence with a lot of costs, they're going to be there for another few quarters. profits are going to get squeezed, margins to high. lisa: to that point, let's go back to some of the data we just got. initial jobless claims 193,000. it was an expectation of to hunter 15,000. here the fed saying they want to see a little bit more slack in this labor market or even a lot more, with a projection of 4.5% of the on employment rate up by next year. how far away are we? what kind of fed funds rate do we need to get to the type of loosening tapering inflation down? >> the fed is absolute going to

be angry about these numbers. we have a forecast of 4.5%. we are really four and 5/8. we really don't know where this will peak. there is an asymmetry, still, in the fed to reaction function to the topside. they have shown that they aren't going to ease just because numbers turn a little bit less hawkish, just because they get a bit better. they will respond aggressively if the numbers are not so nice with the august cpi data. could they hike beyond what the market has priced, 4.5% for the terminal rate next year? yes. i think they really dislike the idea that markets have a cutprice for 2023 and will continue to argue against that? absolutely. lisa: we saw from bank of england the conundrum that is becoming global. they may say this federal reserve, which is when you reach

the breaking point, how do they counteract that through a financial stability perspective? what is the breakpoint when it comes to real yields, which we saw hit 1.6% just a few trading days ago? where is the breakpoint for this market, then for the federal reserve to have to step in on a stability stance? >> let me had and if i three to for things here. the first is that one of the key reasons i think real yields are going as high as they are, there is a vacuum in the territory and balance sheets in the united states, especially within the housing sector, you are sitting on a metric between 20 years and 30 years. the fed has to push up yields much more than we would have thought 1.5 years ago, to slow things down. the second thing is, i am here in dallas. i was meeting with a lot of retail corporate yesterday. when i asked, are we in a recession, everyone put their

hand up. the goods sector, the cyclical component of housing and goods, we are already in a recession. services is doing just fine, and that is where you are getting this continued labor force growth, now seeing real income growth. the fed is just going to have to keep pushing to get this. tom: negative one point 4% on the s&p futures. the stress is out there. off of the good news we saw, i want to speak to you about the u.s. economy and the fed's path forward. if we get a real rate up to two point 05%, which is my calculation of a great financial crisis average, do you suggest they need to overshoot on the real rate to really turn things around, or can they go to just above 2% and stabilize, sit there?

>> our base case is that they are going to be able to pull off a tiny bit of growth. a lot of that is because of this balance sheet position at household rn. if we are going to go into a recession in the next 12 to 18 months, it is not going to be because we have forced them to buy financial distress. it is going to be because consumers choose. but with this type of employment growth, they are probably not going to do that. do we have to get the now very fashionable vacancy to on employment ratio down a lot to get wage growth to come down? you can see unemployment doesn't actually forecast wage growth very well. we think it is going to be a tough fight. probably 4.5%, including a bit above that. we have got clement growth, payrolls coming down to 150 or so by early next year. then, the risk is that we may be go a bit softer.

goods and inflation are going to come down. it looks like housing on a forecast basis has already peaked. services are going to be a problem for a walk, but they will hedge off. we think by the end of next year, the fed is going to be much closer to where we want it to be without necessarily having to pull the economy into a recession. jonathon: tom is going to send you a signed bowtie. how would you like that? >> that will be incredible. jonathon: how much did you pay for that? tom: i was in zurich and went into the ms there. ordering it from zurich is where -- [laughter] jonathon: take a step back. think about how people outside of this world would observe the conversation we just had. the federal reserve would be angry about the jobless claims at 193,000. people need to understand why that is part of the conversation. can you imagine the rest of the

electorate hearing this car station and the hear senator warren say things like this fed is trying to push us into a recession? it is a really hard thing for this fed to communicate. i will keep going back to this. how does this at once these numbers turn the other way communicate to people that we have to get prices lower and this is something we have to do? tom: i think warren is onto something. she is an arch expert on bankruptcy law in america. she is the real deal. people criticize her when she comes over to economics, when she comes over to centrist politics, but the answer is she is dead on, on the pulse of america. we want to increase the unemployment rate. really? jonathon: that is a hard thing to process, especially going into midterms. i think we will hear a lot more on this. lisa: especially if you end up with a situation where the fed explains this is the reason they have to hike even more, because

it is not moving in the direction we want to see. jonathon: you know who is looking at these numbers? all the other central banks. jonathon: coming up, michael spence is with us. this is bloomberg. ♪ lisa: keeping up-to-date with news from around the world. with the first word, i'm lisa mateo. florida woke up-to-date to a disaster. ian has been downgraded to a tropical storm, but it has left misery in its wake. there/flooding, 2.5 million homes and businesses without power, and parts of the state are still getting drenched. ian will go down as one of the most powerful and costly hurricanes ever to hit the u.s. potential losses could approach $70 billion. british prime minister liz truss is fending that package of unfunded tax cuts that sent markets into turmoil.

trust spoke today to a local radio station. >> is a difficult time. we are facing global economic crisis brought about by putin's word in ukraine. what was right is that britain took decisive action to help people get through what is going to be a difficult winter. lisa: liz truss said that higher taxes are even more likely. it will lead the u.k. into recession. moving to limit the impact of storage of energy costs. there will be a cap on natural gas prices and germany will pay for that by redeploying a fund created to health upset the impact of the current virus pandemic. plus, bloomberg has learned there will be new borrowing of at least $146 billion. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

>> a lot of the u.k. debt is inflation-like. that is something very different to any other market around the world. the boe really needs to keep that hawkish i on inflation, and in controlling inflation. it is not just in order to create price stability, it is actually also to control debt cost. tom: just brilliant yesterday on institutional responsibility to protect shareholders with prices plunging. lisa abramowicz, tom keene, jonathan ferro getting ready to report at the 9:00 hour. futures down. 31.99 right now. our team is committed to

bringing you voices within this crisis. there is none on policy and economics more confident in this world than michael spence, the laureate of stamford new york university. professor spence, thank you for joining us this morning. i want to go to another time and place when you were studying with john hicks long ago. let us go to 1981 in william crider's classic the atlantic essay on a very young david stockman. the whole thing is premised on the inflation premium melting away at like the morning mist. a great battle over the conventional theories of economic performance. david stockman in the middle of reaganomics. michael spence is the tumult of the last 24 hours seeming like a reaganomics redux?

>> it may seem like it, but i don't actually think it is. ronald reagan and margaret thatcher were dealing with a situation in which you had bad inflation, but also a stagflation pattern with low growth. they were trying to remove the constraints and obstacles to higher rates of growth. that meant cutting that government and cutting back unfortunate and dysfunctional regulation. i think this is a completely different situation. we have lived in a liberated economics world for a long time. we are actually going a different direction. policies are always context specific, but i don't think this is analogous to that situation. tom: so, what situation is this? what is the policy prescription for the united kingdom, china, or any others? what is the new spence prescription? >> the start is recognizing that

for a whole variety of reasons, we have quite suddenly shifted into a supply constraint world. growth strategy is based on expanding demand and that doesn't make any sense. i think that is the core of the mistake that has been made in the u.k. you don't cut taxes at the supply side respond, especially the central bank. we start to get nearly out of control inflation back under control. i think you have to face the fact that in the short run, we don't have any choice. the supply-side that we really need, reversing the productivity trends isn't going to happen overnight. the central banks are a little late the game. but we just have to deal with the inflation by trimming back the demand side as best they can. and as delicately as they can. but in the rest of the agenda should be focused on real supply-side constraints, both domestic and global.

there are a lot of aging populations dating deflationary pressures from emerging economies diversification and global supply chains, energy transition in europe. the list is very long and i will not bore you with the whole thing. but that is the situation. the bottom line is, we need a productivity surge. lisa: without that or to get there, there is also a problem with how to physically arrange a situation where deficits are not easy to finance anymore. how concerned are you about the inability of a lot of nations finance some of the developments required to increase productivity, required to increase growth, in the face of inflation that is persistent? >> i am very worried. one of the other constraints that you talked about before, lisa, was the rising levels of southern debt. in a rising inflationary

environment, that in many countries, maybe the united states is uniquely an exception, there are severe constraints on cutting investments for a portion of sensible growth strategies, supply-side oriented growth strategies of the type of the bills we have passed recently in the u.s. i think that is potentially a reason why we may not be able to dig our way out of this hole all that fast. tom: you have some recent writings on investment. i am going to assume that one man from stanford was a disciple of spence. he has something on productivity, and that's all great, but what about capital deepening? how do we do that? >> you make sensible choices. the first thing you do not do is cut revenues. if we are going to get out of

this, we all have to pay a price. the politicians have a tough job convincing people that is right. we have demands and investments we have to to get, and that means probably at least holding fast on the tax situation, if not increasing them. tom: michael spence, thank you so much. always great to have you with us. lisa, i really cannot say enough about how every research note from smart probe comes back to something you don't want to talk about, which is the complexities of productivity. just moments ago, something published echoing what we just heard from mr. spence. lisa: it is not an over exaggeration to say this is a change. it is a new era where fiscal policy cannot have the new -- cannot have the same effect as it has in the past. it is very difficult when suddenly the policy

prescription, the knee-jerk policy perception of the past does not work. it is counterproductive at this point because inflation has suddenly reared its head in a way people have not seen for generations. tom: these times are just so, so unusual. in the blur of the screen, then with a certain frenzy to it with this crisis today, i continue to go to tom starling, 10880. a little bit of a lived in the past 20 minutes, not that that matters. but that is my observation. lisa: and how much is this an inflationary story? how much are they leading the way in terms of what other governments can expect? perhaps a more extreme version. if you are trying to juice growth, it is not easy to do so. it is not cheap. and that is why michael spence is saying he is concerned we are not going to dig our way out of this hole for quite a while, which leads to a whole lost decades of profits.

tom: earlier, suggesting morgan stanley is distant from dollar access, at the same time saying the plaza is here. that is the kind of tension out there. lisa: right now, the administration of president biden has come out saying there is no need. the dollar's hoping bring down inflation. what is there to offset that? tom: claims down, showing a fully employed america, i believe. stay with us on radio and television. this is bloomberg. th at fidelity, your dedicated advisor will work with you

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three months of it. this premarket down hard. -- this equity market down hard. the countdown to the open starts now. >> this is bloomberg: the open with jonathan ferro. jonathan: we begin with policy in conflict. >> you are printing money by buying long and bonds while you are heightening interest rates. >>