>> it feels like they are sort of locked in for this july hike. >> if the inflation rate buttons at three and drips higher, the fed will find this unacceptable. >> inflation without the growth in unemployment is the goldilocks soft landing narrative. >> we are expecting a soft narrative but it may be harder than others are thinking. >> we may see a recession and it may be harder than expected. >> this is bloomberg surveillance. jonathan: bongiorno. tom: folks, for those on radio, i'm pointing to jonathan ferro. get a life. jonathan: live from new york

city this morning, good morning, good morning for our audience worldwide, this is bloomberg surveillance. a belated happy fourth to all of you stateside welcome back to work. negative -- futures negative by 0.1%. payrolls on friday and then notes from the fomc around the corner. tom: thanks to katie greifeld for killing it monday with ellen centenary. it's a wicked work week and all that economic data and we've got to get to the inflation report before the fed meeting. jonathan: a lot of people are pricing in a hike with very little data between the last meeting and the next meeting. morgan stanley is setting the bar with what we need to see for payrolls friday. something below 100,000 on payrolls friday. a soft cpi print next week as well. tom: we are distant from sub

100,000. do you get there suddenly? i would like to see 180 four 170 before i worry about under 100,000. while you were gone, jonathan: how many times are you going to do this this morning? tom: a host of characters and myself decided that earnings really matter. july 14 matters like it has never mattered before. jonathan: jp morgan coming up and we need to talk about the data in china as well. it's how manufacturing converges services over the next several quarters, the weakness in china overnight in services. we seen the weakness in manufacturing in the united states and we've seen the robust nature of the data services site in america. how does that converge over the coming quarters? that holds the key to the recession debate for the rest of this year. tom: leland miller a few years

ago with the beige book agrees with the caution on china but says it's a domestic international partition. he says domestic china is doing better than the gloom. he takes the point of manufacturing being a huge challenge. remembyi is pretty quiet. jonathan: let's get to the price action. looking at the bond market, the two year yield came close to a five handle on the two year yield. the 10 year packed down a couple of basis points. year to date, the euro averaging about $1.08 and not a million miles away from that right now. tom: most of fx did not move since you were away. foreign exchange has more value to me now then the fx analysis. we come back a little bit from the shock of friday and monday

but at 0.2% spread. that's a jaw-dropping number even from what we saw friday. jonathan: you go back to where the two year was, 5.08% before the banking delays of march into april. we've taken it back since then over the last couple of months. tom: i look at the 10 year real yield, 1.58 percent and it was 1.06 and we've eased off on a wednesday and maybe it's a set up for the jobs report. jonathan: going into the second half, the nasdaq up 31% and the s&p 500 up 16% in the first half, what we were told is the first half we would dip in the second half we would rip in the first cap was off to the races just like that. the equity strategist at barronb erg joins us now. people are wondering what they should do. >> the dip and rip hasn't

happened. european indices are up 50% from last year. the nasdaq is up a short 40% year to date. it's been driven by gdp upgrades from economist at 2% at the global expectations this year, earnings resilience is number two and the dollar liquidity globally has been very supportive. looking ahead to the second quarter, we need new narrative. we find that hard to see so instead of the dip and rip, we get the rip and dip. jonathan: are you suggesting de-risking and how should people do that? >> we wrote a note last week on price protection which involves

some of the risk in market but looking at active protection strategies. the u.s. center of attention remarkably is heading towards 20 times forward earnings. we've only been higher than that twice in 50 years when we have just had liquidity dripping -- driving bull markets. historically, there is been 100% twelve-month ratios and earning tech at these valuation levels has to be different this time. otherwise, you're looking at active protection. we look at the balance sheet strength and repair that against industrials to get ahead within markets. we think markets are trading at risk for the rest of the summer. tom: if you double barrel the relative risks and the energy sector, i am taken by the u.s. valuation call.

you published you got u.k. equities at about a 40% discount , 10.6 and p as well. while we are afraid of u.s. stocks, do we want to buy united kingdom ftse? >> that's a good point. u.s. clearly is the multiple when it comes to equity markets and keeps on growing, the u.k. is a relative minnow but that gap is historically wide. we think it gives the u.k. some resilience as we get headwinds over the next couple of months. we look at the fundamentals within the u.k. in the corporate sector balance sheets are strong so it's a market that's on love partly for micro and partly for political headline reasons. that doesn't necessarily change overnight but we think of these levels, we're certainly getting a good offer out to international investors to look for a cheap and big equity

market. tom: what is the distinction between u.s. big oil and eu continental and u.k. big oil? >> what we've seen over the whole energy space over the last few years is been increasing pressure from the green machine, from the esg lobby and that changed different sub industry groups in different ways. we started seeing a push back over in europe from at least one of the majors which is heading back to grassroots. when we look across energy in general, u.s.-u.k. really matters. some of these free cash flow yields are in the teens.

tom: tech is the same combination of free cash flow yields. don't they have a growth model that's far superior to energy? >> correct and then it's the valuation. we are at a point protect were historically it's been big exposure with an incredible run. looking at the technicals suggests the same thing. remember, tech has rally this year against the backdrop of 10 year sideways. to say we will get another like on the tech rally, given the macro relationship, 10-year gilts should be collapsing and that should be macro negative in the u.s. the final point on fundamentals is technology, u.s. tech was awesome post gse because it had

additional surface cash flow and also a big yield pickup to to your money. now it has neither so we argue that fundamentally the data supporting tech is no more. jonathan: let's finish their, the homebuilders america on the s&p 500 are up 1% so for this year. the two year yield is close to 5% in the federal reserve is threatening to hike more. what evidence is there that monetary policy is sufficiently restrictive with homebuilders? >> we have spent a long time looking at yield curve relationships and deltas on rates., the tightening we've seen in the last three months, we've seen an additional one basis points attitude twelve-month out with short-term rates around the world. the market has been incredibly resilient around that.

central banks perhaps have not gone far enough so they need a little help from inflation if we are to see peak rates anytime soon and even more help if we get it traditional significant fall in rates over the next two years. the markets are suggesting that perhaps central banks will have to push further or remain quiet for longer and that's a headwind that markets have to digest. jonathan: great to catch up to kick off the week. u.s. is getting back to where futures work, slightly negative. look at some of these cruise operators in america. carnival up 67%. tom: did you go on a carnival cruise? jonathan: there was a cruise. you will never catch me on a cruise. never, ever, ever. tom: i've never done that. jonathan: it's nothing for me. can you imagine being trapped on a boat together? tom: that's like three hours.

jonathan: i will take a hard pass on that. tom: stocks are doing well but we get back to work and that's what america does and you look at the shock of the first six months of 2020 and corporations adapt. we get back to work and adapt. the great trend for me, jeff curry nailed this at goldman sachs, is this new rate regime which is 16 years old affects everything out there including the banks. it affects the new rate structure and because of that the people have to get back to work jonathan: who is paying 5% right now? a great study from the team in the u.k. from bloomberg. at current interest rates, savers collectively are earning 24 billion sterling more per year than november 2021. mortgage borrowers are paying more in debt interest. at the moment, it's on must a net benefit. as time goes on and a lot of

people are starting to see their mortgages and agreements of those banks renegotiated again it will kick in the other way but currently, that's the story. that's the u.k. and we will have this conversation stateside as well. tom: it's everywhere and as time goes on, we adjust out. i will suggest that american corporations can adapt better than anyone. it's not for me to be bullish or bearish. the humbling nature of this rally off the october bottom, i don't hear many people studying the second leg of a bull market like 1975 which was a shock no one expected. jonathan: 225 for payrolls is the estimate. that will be a moving target is more estimates for in. it was previously 339. the estimate for the unemployment rate is 3.8 percent. tom: thursday we conflate

continuing claims. we get jolt, ism services and adp altogether tomorrow. jonathan: times this week. tom: it's a short week. jonathan: next week bank earnings as well. tom: watch poldark. he was brave. jonathan: you're still watching a check tom: yeah,. jonathan: nice. ♪ dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

>> we can work with china but they are also a competitor and rival on many other issues. we are advocating for a comprehensive european approach vis-à-vis china. we don't want to decouple and we cannot but we want to de-risk. jonathan: the great prime minister there with the brilliant francine lacqua, an exclusive conversation over the last couple of days. a comprehensive european approach to watch china. so how difficult will be to get one of those? tom: it's interesting because it's europe and what i noticed over the weekend was the french riots and all that. there is also the french-german polarity.

germany basically flat on its manufacturing back. if those two can't get together, how does greece help out with the china dialogue? jonathan: domestic issues in europe are really blowing up in macron's face. it's strange to hear that comments from the chinese leader. he says he calls in all nations to reject decoupling and severance supply chains. those comments follow real action, china's decision to control the export of to keep metals which go into chips. tom: the metals thing is huge. so massive deal. -- it is a massive deal. maybe that's the thing. it's not wheat or other things we talk about. maybe it is the metal issue.

jonathan: we will catch up with amh little bit later. tom: i was watching the reds-nationals this week and i swear i saw her behind home plate. jonathan: that's work. tom: she is out there with somebody from the pentagon. jonathan: who won? tom: the reds are killing it. i don't know who the football equivalent is. the cincinnati reds are just fun. jonathan: what about the red sox? tom: we don't talk about them, it's painful. the average age of the ridge -- of the reds is 24. greg valliere is wondering why we are talking baseball. good morning to you. janet goes to china, does she have the same energy about the trip as the prime minister of

reese? >> i think she has a lot of energy. let me go out on a limb and make a fearless forecast. this will be a fairly successful summit. they will not have explicit deals in semiconductors. that would be way too optimistic , but i think they have a good dialogue and you set the table for further talks this fall including axi-biden summit later this fall. i think when she leaves, it will have good results. tom: to me, the whole thing is the urgency of beijing to communicate whether it's to greece or athens or washington. what's the new urgency for china to speak to janet yellen? >> i think the new urgency is their economic data has been awful. it's been sputtering. they have not really come back from the post-pandemic slump. in the u.s., we've got two new stories that make our economy

perhaps a little soft. one is growing liver problems. it doesn't get enough publicity. southern california hotels, ups and we've got a real drop in real disposable income because of the student loan repayment that started in the fall. our economy could use a little boost as well. jonathan: before we get to all of that and speak about the u.s. economy, and we sit on the latest decision around trade from china and potentially from the united states as well? we understand china will restrict the export of some metals. there were some reporting yesterday from dow jones that maybe there will be restrictions around cloud computing. what is your read on how severe this could be? >> they are talking tough now but i think maybe they will get watered down a bit. i still think the biggest problem of all is chips. computer chips is a big issue. u.s. is not relented.

we have relented on the donald trump tariffs so the chicks maybe the biggest issue. jonathan: what does the word risk mean? they say it's not about decoupling, it's about de-risking, what does that mean? >> first of all, there's big currency issues i think the chinese may have to offer some assurances to janet yellen that they will continue to weaken theremembyi plus there are all these loans that third world countries have from china that china has not restructured. i think that's a big risk as well. tom: part of this is the travel and it seems every president -- we have a president now enjoying the distraction of international affairs. over a painful fourth of july weekend, what have we learned about our domestic politics? set us up for july, august and if we daresay america will get

to labor day? >> i think it will heat up quite a bit. i'm surprised donald trump did not campaign during this holiday and biden barely campaigned. it is left up to a lot of second and third tier candidates. the republicans will have to start winnowing down the field. i think they are up to 12-15. jonathan: that's the republican field. what will drive that, what will drive them getting around the table and saying some need to drop out? >> it's the polls, they will show that people are just wasting their money and time running. if you are at 2% and you haven't raised much money. i think chris christie will be a player. i think he is so blunt and kind of fun to watch but i think he will stick it in this race for quite a while. jonathan: the first debate i believe is next month? >> yes, late august.

jonathan: how many people will be on that stage? >> probably a dozen. most interestingly, maybe not donald trump who many feel has got nothing to gain and everything to lose by being in a field that big. jonathan: build on that more, you think former president will not go on that stage in august? >> lost public -- he loves publicity. at the same time, i think you might feel he would get lost in all of the babble that will go on. if you are up by 30 points which he is, why take a risk? tom: you are up by 30 points, i think we are missing something here. i don't even have a summary of the carnage in america this weekend. i've got a geography of i think philadelphia and someplace down south. it's almost like we becomenumbed

by where we are in domestic politics. will it be a benumbed campaign? >> we are in an odd numbered year and you have new jersey and virginia and that's about it for cuba and oratorio races -- for gubernatorial races. this is not surprising. the issues will be fascinating, all the shootings we had this weekend, china, lots of issues will be interesting for us to talk about. you got to get that republican field cut in half by the fall. jonathan: great to get your input on this. amgh will come up in about an hour from now to weigh in on some of this. was that cocaine in the white house the last couple of days? tom: i'm glad you brought this up.

all the british people take like four weeks off. jonathan: it's the continental europeans. let's be clear about that. tom: on the road for four weeks. we need footage as well. we have footage of sojourn ferro. jonathan: as you get that? tom: t6he bramo cam. jonathan: is katie coming back anytime soon? jean foley is up next. ♪ do live to 100 we don't have to worry. eh, not worried. take control of your financial future to empower what's next. somebody would ask her something and she would just walk right past them. she didn't know they were talking to her. i just could not hear. i was hesitant to get the hearing aids because of my short hair. but nobody even sees them.

our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years. when i finally could hear for the first time, i started crying. i could hear everything. call 1-800-miracle and schedule your free hearing evaluation today. (announcer) enough with the calorie counting, call 1-800-miracle and schedule carb cutting, diet fatigue, and stress. just taking one golo release capsule with three balanced meals a day has been clinically proven to repair metabolism, optimize insulin levels,

and balance the hormones that make weight loss easy. release works with your body, not against it, so you can put dieting behind you and go live your life. head to golo.com now to join the over 2 million people who have found the right way to lose weight and get healthier with golo.

jonathan: live from new york city, welcome back stateside and a happy july 4. tom: how are the airlines? jonathan: for me, no big delays and pretty smooth sailing. domestically, i've heard all the stories in the united states. tom: we are trying to get scott kirby on. scott is in the news and has been a big friend of the show. i agree with the partition. jonathan: just to be clear, he flew private when flights were delayed? tom: that is the scandal but far more, is the outrage of a family. bramo tried to go somewhere but

she is stuck in an airport somewhere with regrets. jonathan: she flies delta. tom: i didn't know that. i got an email from her. they are not even away. jonathan: they are stuck the last couple of days. tom: it's painful. jonathan: hopefully, she will come back soon. futures are a little bit softer, overnight data out of china on the services side not fantastic, down about 0.4%. we will see if that sticks coming into wednesday. here are the scores -- going into the second half of the s&p 500 up 16% and big moves. some of the more focused players on travel, you talked about carnival and caribbean and norwegian, homebuilders on the s&p and those numbers are flying. tom: while you were gone, i did

a banner of 24 months. we are looking at a six-month track record instead of a 24 month track record which is down we went and we barely made it back. jonathan: what happened to the banking crisis? you look at the front end of the yield curve, the two year and 10 year art negative. tom: it was $1.10. jonathan: the two-year came close to 5%. we were north of 5% going into the banking delays and would come all the way back up area more rate hikes from the federal reserve. i'm really worried about the new york times article that the islands in greece will get spoiled. tom: i was pronouncingiskia

wrong. did you have a tv on the boat so you can see sintra? jonathan: i didn't watch it but i read the wrap up. seth was there and made an interesting point, it was about what they didn't discuss, financial stability. that's almost unthinkable compared to where we were couple of months ago, that you would go to sintra with all the central bankers and they wouldn't talk about bank failures. tom: we get a report on what the dollar will do. the central bank confusion we saw, what is your gross dollar call out 12 months? >> in terms of the pattern of the dollar, we had anticipated it would peak around now. as we go to the end of the year, we could see less because the

market will anticipate that the fed will be cutting interest rates into 2024. a large part of where the dollar will actually lie depends very much on this debate with this friction between the resilience of the economy and the perceptions that really we could be going into recession. the first half of the year is dominated and when will the recession get the upper hand? if they do, that will chase the money out to risky assets and support the dollar. i see the dollar selling off heavily in the second half of the year. that will support it is a safe haven even though the market and to dachshund anticipates they will be cutting rates by 2024. tom: you take germany with a

manufacturing slow down. what do the flows look like over the next 12 months and how do they change the growth dollar call? -- the gross dollar call? >> in terms of actual trade flows, i think that's pretty evident in terms of manufacturing, particularly when it's slower there. we see the german export number slower and that's reflecting that the slower growth in china. we can see a number commodities as well with shipping prices, a lot of the supply constraints that drove inflation in the early parts of the pandemic have more or less been repaired. there is evidence that flows have altered. with respect to the dollar, it remains at 80% of all trades.

it remains at that dominant currency even though the flows may have slowed. the dollar is still very dominant. in terms of fears of recession, that is something which will support the outlook for the dollar. jonathan: what about sterling? we broke it down year to date. sterling, the big winner of 2023 and the dominant player. when i look at yields in the u.k., the two-year is about five dollars $.29. in september, on number 10 downing street, we were pushing for dollars $.70 in sterling was down 103 .50. why have we got sterling strength now and tons of sterling strength back then? >> >> that raises some

interesting points. when we first started to get sterling strength this year, we began to see some better-than-expected economic data. then we quickly realize the bank of england forecast of late last year of a five quarter recession was not going to happen in the economic growth would be better. you get this repricing of sterling and that has continued to early june as the market priced and even more interest rate hikes from the bank of england. i think there is a "but". even though u.k. fundamentals have improved relative to where we thought they were last year, it's still not a great lineup. we still got too much inflation and pretty weak growth. you still got a current account deficit at with low investment

growth in those mean now we got long sterling positions we don't want to extend the more because the fundamentals are not good enough area jonathan: you said to get to the point where people think it's gone too far. is $1.27 that point? >> i think we may be at that point already. these speculator positions in sterling are at multiyear highs. is that justified given the u.k. fundamentals? that's really debatable. we may be at the point where it

will be difficult to push much further. tom: i look at where we are and that hedging around the broader macro, where is the opportunity -- opportunistic trade right now? we will make four figures in a given pair? >> i think you got to look at is probably some choppy ranges. tom: come on, jane. >> i think this is the reality of what we got. if we look at the debates going on in terms of the outlook, it's highly polarized. people think we have all this resilience and maybe we will have more on that and the other half says maybe not. tom: i know that but it's wednesday, give me some numbers. >> i think we can wait until the end of the year in weight further and i think the aussie

will be a pretty good play but probably not yet. australian fundamentals are better than the rest of their peers but the market is so focused on the interest rate debate. nobody is going to go in and heavily by a currency when the market is speculating the central banks are going to pause. i think later in the year, some of the fundamentals will begin to shine through. i think the aussie later in the year into your could be a good one. i think the market is trying to get its head around his polarized debate. that means choppy range trading but i don't think we will have too much in terms of huge directional base for the long-term. jonathan: a big topic of debate in the u.k. is australia. when to these housing markets blowup from interest rates this i? >> -- this high? >> six months ago, they have probably said it already

happens. in some countries and the u.k., there are technicalities behind that, a lot of landlords selling because of regulations. there are demographics which mean there's generally a lot of demand, a lot of people living longer and more single person units then perhaps there was 20 years ago. right now, i think we will have a slow down in the property market in the u.k.. perhaps not as drastic as many people would have anticipated given the scale of the interest rate hikes we've seen. jonathan: certainly not where we were expected to be a year or so ago, thank you. this data comes from ups. 1.4 million in the u.k. due to

remortgage this year. it sounds like a lot but it only represents 5% of the number of households. those are the numbers for this year. the pain point indicates it's further out. tom: it's dramatically different than the united states and to conflate the analysis is a problem. jonathan: 30 year mortgage in the united states, it's been the same for decades. tom: there is basically nothing for sale. jonathan: that's way home are up so much. tom: i saw this in the 60's and 70's. jonathan: have you been to the new store? tom: i have and i got a tour. it's really something in their replicating it worldwide. you should see the tiffany

store. jonathan: i haven't seen that yet. tom: the numbers are outrageous. we've got a video here. we wanted to give this to you two or three weeks ago when jonathan was deep into his trip. this is a vivar aquaama. jonathan: they are beautiful boats. guy johnson has been on one of them. tom: that looks wonderful. jonathan: you use those boats to go on a lake? tom: this is like sophia loren. jonathan: have you got any video of guy johnson on the boat? tom: seriously, these gorgeous

boat at $500,000 each are lake boats, not ocean boats. jonathan: there i am in a marina and looking at these three yachts next to each other. it doesn't matter how big you are, there's always someone with a bigger boat. jerry jones pulls up. that boat is a monster. it's an absolute monster. tom: i tried to get an uber past blend. can i get one please? it's a 40 minute wait. ♪

3a health customers surveyed reported taking healthier actions. more exercise. eating healthier. and simply getting more sleep.

because they know health isn't just a future state. health happens now. with over 150 personalized genetic reports from 23andme you can start your dna-powered health journey today. >> people sometimes ask why did you have to do a cut in saudi arabia? i answer is simple, we had to do it because there was another ask for the market, a more immediate

ask, more immediate expectation of the market jonathan: jonathan:. that was the crown prince, the saudi energy minister speaking of the opec summit in virginia. a bit softer on the markets as we kick off a shortened trading week tom: those who took monday off. jonathan: some of us didn't. just to be clear, i knew this would come up today. we went through the internal records, you have had 10 days of this you -- this year. and i have had 10 days off this year. tom: you used to put them around vacations. jonathan: that's strategic, that's what you should do. you should do the same thing.

in the bond market, yields are coming back in touch and going into payrolls friday and looking for a number in and around 200,000 to set us up for the fed to hike in july potentially. only one cpi report between now and then and only one payroll support. the cpi report comes next week and the tenure at the moment is about 3.84. tom: if you look at oil, you will notice a change called 1986. it was the fear, the skeleton in the closet for opec and opec-plus and manus cranny who joins us now on his latest junket to vienna. we are jealous as well. good morning. how much is 1986 ponting the discussion -- ponting the discussion for the royal family of saudi arabia? >> they are haunted by 1986

which was a brilliant year. i went to queens university and it was a brilliant year. they are wanted by that h --aunted by that because there is a major political mission to deliver on oil which keeps them in an accelerated state of economic dreams. what's most prescient this morning about what he said on the podium is that russia, they are a big plus and they are coming on board and they are squaring up a promised drop in production. oil has done nothing, $74 and no change but the political narrative has changed between

riyadh and moscow. tom: i want to understand around all of the politics and you're an expert on this, is korea driving the opec-plus right now? >> yes. in a way. they've always been driving it, there is nothing new in that. when the oil market looks at this and they say $74 and the russians are on board, that is 3% of global supply off the table. you cannot put lipstick on a pig. we have a global manufacturing recession globally. you can address that up. tom: this goes back to the brilliant work years ago in helsinki at deutsche bank, you have to keep track of where the supply is, for a guy like you,

do we know what global supply is or is it an unknown? >> it's 80% known and 20% is your variable but that's a high unknown known and i'm talking about iran at a four-year high in terms of production. they met with the uae. he said we are not joining in on the voluntary cut so there are dark pools of oil around the world from various factions. those are the known unknowns which were weighing on this market in terms of dark supply. does lisa have a day off, is she there? tom: the only one you can rely

on to be here is me because i'm the one with no life. continue. jonathan: just a final question -- tom: don't start talking italian. jonathan: i'm not going to do that. tom: i have to say from my perspective, the tally sounds more irritable. when i hear about your coverage in your situation to get in there and being curtailed over the last couple of months, can you tell us was going on? >> this is a very empty press junket. let me stand aside for one second. ok? there is me. i am here. i'm standing outside. people do talk to us on the way in but the bottom line is, they are worried that they are incredibly worried. is the generosity of societies

of a million dollars per barrel in terms of cut but the emirates are not getting on board with that. an extra 200,000 barrels in the uae. they want to get extra quota for themselves. there is a disquiet we have not made better headlines from a near 3% drop in supply from where we were a month ago. i am a lone ranger. it's 28 degrees. i will survive. jonathan: manus cranny, thank you. in vienna for the opec meeting. tom: that report was longer than the meeting last time. jonathan: it was like 13 minutes. tom: i thought we were going to get him going on 1986. tom: they have this paranoia, never forget 1986 with -- where

the price cratered. that's something no one is looking for that opec actually loses. jonathan: what do you make of journalist being locked out of the room? these organizations have been pushed out of the room. what do you make of that? tom: i think the rest of bloomberg is all over this with other news organizations. they are saying this is the way we do this, it's an institutional meeting and we need this. they are trying to run the rulebook. what i remember about 1986 and with liverpool did to the tots was awesome. that was beginning of the liverpool magic. jonathan: that was the dynasty, the mid-1980's.

tom: you could see through the floor, it was great. jonathan: coming up shortly, david leibowitz at morgan stanley and looking forward to that conversation in tons to talk about with him. this start to the year was unexpected by so many people. if you go back to december with the year ahead outlook started to drop and people talked about a tough first half of maybe a better second half in the first half, phenomenal gains. tom: out of the pandemic, there is no theoretical structure and i did not hear a coalesced monetary theory atsintra. they are flying by the seat of their pants. jonathan: the latest data suggest they should do more. jackson hole will be interesting. tom: we will talk about jim bianco's call is stunning. jonathan: whether jerome powell

can set up a pause in late august. that was going to take place a couple of months ago and that's not where we are now. you're very sensitive about time off. is it a british thing? tom: i think it is. jonathan: are you slowly coming on board with this time off thing? tom: they said you have to lecture the interns. it's the high point of the year. 80% of them have air conditioning. we are worried about the other 20%. jonathan: that's how the show works. did you have that little pink drink? jonathan: a spritzer? ok. ♪

hi, i'm jason and i've lost 202 pounds on golo.

so the first time i ever seen a golo advertisement, i said, "yeah, whatever. 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. it's an amazing thing

when you show generosity of spirit to someone.

and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> it feels like they are locked in for this july. >> the fed is going to find this unacceptable live the treasury gets to three and drips higher. >> unemployment is the goldilocks offline the narrative. >> we are expecting a soft landing but that may be harder than others are thinking. >> we might see a recession but it might the mild. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: good morning, good morning. for our audience worldwide, this is quote bloomberg surveillance." i am alongside tom keene, i

and jonathan ferro. it is a friday, -- i am jonathan ferro. manufacturing worldwide is not great right now. services around china is disappointing. tom: china is the backdrop that the secretary-treasurer will visit and talk about the economic slowdown and what it means for the dialogue. more importantly is this wicked holiday shortened work week. it starts today, wednesday, and where we are in 72 hours, i have no clue. it is not just about a job's. a lot of economic data and how the market reacts. jonathan: we can talk about where we have been, and a lot of people have been talking about that they were around the table with their family. the gains here today, the amount of people that would have missed on a 40% move in the nasdaq 100,

16% move on the s&p 500, 40% plus on homebuilders in the american s&p 500, what is that about? tom: this is a huge deal and will address it in two minutes with someone really qualified, david leibowitz of jp morgan. i agree, the reset of june 30, july 4, is never like it has been in all the time i have been doing this. jonathan:jonathan: and the reset in the bond market, again, banking crisis. tom: who do you call up and fire today if you are bond? jonathan: is that when you are suggesting people do? tom: no, but somebody at the fourth of july picnic is on the phone on wednesday -- we missed it, and what do they do? -- we missed it and what do they do? i thought it was ridiculous, katie did a bitcoin 40 minutes and dove. jonathan: what did she say? tom: i think she was being responsible for me, all crypto.

this is not about making crypto. this is someone who is retirement plan off the pandemic is action rarely behind by 150 basis points, and they just had to catch up but did not participate. jonathan: morgan stanley talked about this repeatedly. they said they are 5% in cash and it feels good. all of a sudden, it does not feel good anymore. tom: i agree. jonathan: we are at that point in the second half. tom: and the other thing i identified, which was a big toppers we came off the october low, -- which was a big top, we came off the october low and how do you form the leg of the old market -- of the bull market? jonathan: some people are still calling it a bear market. a bit softer worldwide in the futures as we get toward payrolls and fed minutes a little bit later. most people expected july hike. what would it take to take it away from the federal reserve?

look to payrolls. morgan stanley sat around .2% month on month in cpi and that may be enough to say to the federal reserve, don't do it, but a lot of people think the federal reserve will hike. tom: and some recalibrated and went back to a july lift. mckee mentioned the wirp functions adjusted with the beautiful chart that shows we are still modeling rate cuts. really? jonathan: two you're right now and david leibowitz is now joining us around the table. wonderful to catch up post july 4. hope you had a wonderful holiday. let's start there, you missed it. what do you do now? david: what is interesting is we all missed it. people came into the year with a view that maybe you get a little bit of a bounce because 2022 was so bad but certainly not 15% on the s&p in the first half of the year.

i think what you do is you actually do not do all that much because what we do not want people to do is to chase the rally. we do see storm clouds on the horizon, and we think the risk of recession has risen. i think the fed will continue to hike rates. yes, we have had a good run in risk assets, but i would not chase this rally too much. stick to your plan and allocation rather than moving things around. tom: but you have to identify a second leg of the market, as jp morgan allowed do say we have the underpinning of what could be a legitimate, broadening out full market -- bull market? david: two things give me pause on the possibility of broadening out from old market perspective. the first is that the majority of the entirely effectively of the rally has been driven to schedule. earnings has not participated. what we need to see to remain constructive on risk assets is evidence that the potential downside on earnings is

potentially not as bad as what a lot of people would expect if we do hit a slower patch of the economy, potentially a recession, you are looking at turning estimates signaling that it will continue to rise and that is a tough pill to swallow. tom: in the real world, sitting around when the colonies won, having ketchup, not mustard on our hotdocs, one guy is livid, picking on jp morgan, saying, what is the plan to catch up if i was above average quit and if you like what it will do to you? david: i think the best thing people can do today is preserve their optionality. we would encourage two ways of doing that. first, not forgetting about fixed income. we talked about how sitting in cash feels comfortable and you get paid from the bond market once again. we still think maintaining a relatively short duration could work in your favor because if you get a big pullback in equities, you can deploy the

capital and try to catch up to your question. the other thing, we would maintain the shorter duration on the equity side and focus on dividend payers and high cash flow companies. there is a lot of excitement and enthusiasm about things like artificial intelligence. i think it will boost productivity over the long term but i am not sure it will boost productivity tomorrow and avoid some soft patch in the economy over the next 12 months. this feels sentiment driven, and that is why we are focused on profits and the optionality cash flows can provide. jonathan: nvidia and meta is making money, greatest tech fit into that? david: we talked about this a couple months ago. what was interesting about watching tech into 2022 in the beginning of the year is they have been taking their medicine, laying people off, defending the margin. they do not necessarily have the pricing power that you have from the airlines in the current environment, so you are seeing tech margins and gain their -- tech margins hang in there.

even if inflation is above the fed's target and real growth is slowing, tough to see how earnings in aggregate expand. jonathan: we just went through the top 10 on the s&p 500, nvidia, meta, and you have cruise operators, carnival up 135%, royal caribbean up 109%, norwegian up 79%, and there is a homebuilder up close to 70%. what is that about? david: this is the big question and part of why so many people have gotten the market wrong this year. it feels like we are seeing rolling recessions in the economy, where first it was procyclical and rate sensitive parts like housing, services were shut down during the pandemic and things that continue to bounce nicely there. the path to a soft landing is that everything fails to roll over at the same time, and we see these many explosions and soft patches, which is not

unfeasible, but i think what you are seeing in terms of top performers outside of tech, services, people are still going on vacation. i was in orlando the other weekend the airport was full. you look at homebuilders, when it comes to mortgage rates, it is the big move that puts things on ice. people look at the numbers and say rates and the houses are more expensive, but i don't think they will continue to rise. you are beginning to seek stabilization in those parts of the economy. i think that is why people continue to gravitate toward the soft landing thesis, although it seems like a surge for us. tom: 40 do bonds fit in? david: bonds -- where you bonds fit in? david: bonds, for us, the shorter end of the curve looks more attractive. when you get a 10 year that edges of ports 4% makes a lot of sense because over 12 months, if rates fall, that will work against you. tom: if the zeitgeist this week was simple, people are stunned at how retail is all in stocks.

the lessons we learned, cfa kind of chitchat, it has been thrown out the window by public buying and buying stocks. jonathan: so this is when we talk about something that comes up a lot. you will hear people talk about triple digit inversion, two year, 10-year, the curve adverted is dangerous and bad, isn't it? does that mean, -105? david: that is as close to as inverted as the curve has gotten. we have to go back to the 1980's. think about history and it does not always repeat itself but it tends to rhyme. with the yield curve is telling us that a lot of people know this in the back of their minds but hesitate to wrap their arms about is that squeezing the last little bit of water out of disinflation sponges probably going to be more difficult than a lot of people expect, and it is arguably going to require a recession. i think that is what the yield curve is saying, the fed recognizes that they want to

prioritize controlling prices, they will need to potentially crash the plane and i think that is why you are seeing it as inverted as it is. jonathan: does the fed have to solidify 50 for a longer time than expected? do they have to go higher than 5.50 and closer to 6%? david: my boss' boss thinks that 6% is in play and it would not surprise me, but at a minimum, what investors need to be prepared for his the fed going around 5.50 and they not blinking into the labor market deteriorates it away and they can no longer ignore it. 3.7% on unemployment will not catch their attention but 4.5 will. tom: it is a slow news day, can you state that mr. diamond is looking for a 6% level in fed funds rate? david: he came out and said that, he thought we were going to 6%. jonathan:jonathan: i tried to get him in trouble? tom: i don't know who david writes his letter annually to? they call up leibovitz and say,

right this for us. david: what is interesting is that it was not too long ago that people were highly skeptical we were going to five. the fed has taken the inflation problem personally. they already made one policy ever and they started too late. we are in the office five days a week. tom: are you going to get a view of park avenue or are you going to be looking out over new jersey and the hudson river? david: i think time will tell. it is how good i am calling the fed. tom: 6%. staroffice review. jonathan: david lebovitz of jp morgan, asset management. welcome to the program, the s&p 500 negative by 0.5%. coming up at 8:30 eastern, about one hour and 15 minutes, a wonderful conversation.

there are certain people use it alongside that you look forward to hearing. ed hyman coming up in about one hour and 15 minutes, coming up shortly. tom: we will talk with mr. hyman about his call for recession, particularly his call for disinflation. jim beyonca won monday pushed against that big-time -- jim beyonca pushed against that big-time on monday. bianco is saying the shock into 2023 and 2024 is the stickiness were inflation rates might on spec higher. jonathan: just to build on something david told us, it reminds me of what does fargo said several months ago. the last part of the inflation fight is going to be tough. tom: i the reset academically, and this was not addressed to my chagrin, but the reset here of this academic debate over where

the new 1.8% is off of a 2% model is huge. jon, i am learning new things every day. thank god you told me on the brake that you do not put purse echo in -- prosecco in a spritzer anymore. you just have a nice, fancy sparkling wine. you don't do it. jonathan: this is what you have been learning. tom: ugly americans drink spritzes. jonathan: i love a bellini. it is nice. ♪ you know doug, ever since switching to workday you've been a real rock star. rock star? what do you know about rock stars? billy idol? i mean where's the skin-tight leather? my shoes are leather. where's the unnecessary zippers?

that thing! billy, rock star is just how doug feels when he uses workday. thanks, rory. i'll show you rock star! be a finance and hr rock star. workday. for a changing world. billy idol just stole your golf cart!

76% of 23andme health customers surveyed reported taking healthier actions. for a changing world. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme.

>> i think she has a lot of energy. let me go out on a limb and make a fearless forecast, this will be a fairly successful summit. they will not put explicit deals on semiconductors, that would be way too optimistic, but i think they have a very good dialogue to set the table for further talks this fall. jonathan: janet yellen taking off and heading to beijing later today. that was greg, the chief investment strategist on the trip to china, following communists from changing pain, calling them to sever supply chains, after there were moves from china to curtail the export of two key metals. on top of that, the dow jones

publication reporting that may be we restrict assess to cloud computing stateside. a lot of back-and-forth, tensions some marinas janet yellen mixer we over there. tom: long ago and far away, we were at the imf and the bombshell there was a five-year year, 2028 view of i will call it global lethargy to get away from the hysteria of it. the backdrop of this for china as if you model out subpar gdp but what do they do with all those people? i don't see it. jonathan: services not great overnight. manufacturing has a big break for a while with this talk of stimulus out of china and a lot of people are focused on the same thing. tom: in social media, you see young kids graduating and they deal with a lethargy thing, it is a tiktok thing. jonathan: what is that? tom: they are protesting that they don't have jobs or something. jonathan:jonathan: because youth unemployment is so high.

tom: it is not on tiktok because it was not invented, but maybe early twitter, where, recorded is sleeping on a park bench because she is protesting because she cannot get a job. jonathan: that was her protesting back in the day. what kind is that? tom: that the economy sucks and i cannot get a job and that is how a lot of chinese feel big-time. joining us now, our bloomberg protest respondent, surviving the fourth of july, i thought i saw her sitting at red siphon nationals baseball -- reds-nationals baseball, and recording joins us this morning -- annmarie horden joins us this morning. if we had a republican president and the secretary of treasury of a republican president was traveling to beijing, how would it be different than secretary ellen as a democratic secretary of treasury? -- secretary ellen as a democratic cemetery of treasury? annmarie: i don't think there is

a lot of communication when it comes to policies. the biden administration captain to place the trump era tariffs on chinese consumer goods and then they ramped it up since then, whether or not it is export controls were more penalties, they are looking at by the end of this month, potentially, that is when you get that executive order on outbound investment, the wall street journal is looking at semiconductors needed in the ai space, as well as potentially companies like microsoft or amazon having to go to the government before they can have contracts when it comes to cloud computing in china, so you were going to see a lot more of this, whether or not it is republican or democrat. when you have the treasury secretary going over, this is just really setting more of these guardrails. greg valliere said he thinks it will be a productive conversation with janet yellen heading over there today. tom: if the foundational theories we have of their

relationship across the pacific, and i will go to the man now at the bank of she codified our dysfunction and our codependency. forget about the tom keene world on the jon ferro world, your world of politics, what is the political codependency that we have with beijing? annmarie: well, it is that, and we will see it on full display into 20 24, and that is that china is an easy target politically from the right and left, which is why many would argue you saw the biden administration keep the trump era tariffs on consumer products, even when inflation was incredibly high. they kept them on because china politically, you need to continuously be talking tough and taking tough actions on. it is also why the house of representatives, not just the policy work they want to do, but the messaging and the socializing they want to do with a china select committee, so

this is only going to get in terms of the rhetoric more heated as we go towards november of 2024. jonathan: and, of course much more interest in the action, so let's talk about that. you mentioned it a little bit, china's decision to control the export of two key metals. how is the white house's bonding? there was a suggestion and "the wall street journal" that perhaps he would get some restrictions around cloud computing. what are you hearing? annmarie: i am not sure it will be an exact tit-for-tat for these two radical metals but the white house, they are going to be tracking this. what china is doing, which sounds similar to some of the reasoning in the u.s., says this is off national security concerns but we should talk about how key these two metals are, germanium and galeon, used in the energy and defense sectors, think night vision goggles materials, think cyber

object fiber-optic cables. a number of critical uses for the metals, and china has the outsourcing of this, not just the raw materials, but the processing of it, and it is incredible how much they dominate this market. for one of the metals, it is almost 95%, and the u.s. for most is a net importer, so this could be a problem. i would say when we saw this happen in 2010, when china started to potentially loosen up -- tighten up some exports of metals, with the u.s. did is they wanted to take it to the wto. they started to strategically make sure they were starting to build their own supply chains for metals, so what you are going to see the u.s. do is go to places like canada, africa, make sure that within the u.s., they set up processing plants. i am not sure at the moment we will see a tit-for-tat or at least they will not socialize it

as a tit-for-tat, but the ramping up on the u.s. wanting to make sure they are conducting their business with china is going to continue. jonathan: xi jinping is calling on nations to reject decoupling. the europeans are saying they want to de-risk. i would love your view on this, what does that mean and what is the distinction between decoupling and de-risking? annmarie: it is a great question. we ask a lot of officials this. i think for the u.s. and europeans, decouple seems more severe. we will completely sever ties in certain industries with china. de-risking has this idea and how they explain it that we are just looking to continue business, some business with china and we also need to look at the data. there is massive amounts of business between the u.s. and china, europe and germany and china, but you're also at the same time going to make sure we are fortifying supply chains outside of china around the world and make sure those supply

chains and those business ties are strengthening. look at what is happening with india, the u.s. just had a state dinner for modi, where the g20 will be held, a critical player in terms of fortifying supply chains outside of china and that is what you see businesses and countries continue to do. jonathan: g7 or g20 next year and italy? i went to secure the date. annmarie: g20 will be in india in september and g7 will be in italy. the italians are hosting the g7. tom: are you kidding me? give me a date. annmarie: [laughter] umm, i am not sure the exact dates off the top of my head. tom: ok. annmarie: but -- it is not far, what you need to do is take the train to naples and then take a ferry from naples to ischia. tom: i am tried to get the train

to lexington and 59th. jonathan: you have campagna on the others, and then you take the boat, as annmarie suggested. we are going to go to that next year i think. tom:tom: can we on wooden boats? jonathan: you want to go to a reefer boat. tom: i will wear my speedo. jonathan: i will take you back to the ritz. would you like that? tom: i would, seriously. that would be great. jonathan: the romance of it all. futures negative. this is bloomberg. ♪ i was hesitant to get the hearing aids because of my short hair. but nobody even sees them. our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years. when i finally could hear for the first time, i started crying. i could hear everything. call 1-800-miracle and schedule your free hearing evaluation today.

and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com bridgett is here. she has no clue that i'm here. she has no clue who's in the helmet. are you ready? -i'm ready! alright.

xfinity rewards creates experiences big and small, and once-in-a-lifetime.

jonathan: mid-june, 2024, tom? tom: i can make that. jonathan: next year, we can make that happen. what a beautiful location for that to take place, 12 months from now. tom: you wonder where southern europe will be with francine lacqua's conversation with the prime minister of greece, and italy in turmoil politically after the death, and you wonder where they will be. jonathan: france in turmoil. tom: yeah, where will the whole set of the european continent people bein a year? i don't know. we have a major issue and we have to stop the show on equity funds, commodities. i did not know this, besides i

am mispronouncing it, stop mentioning ischia. it is an island, like martha's vineyard? jonathan: no, it is beautiful, not that martha's vineyard is not, but it is less busy and really big. it is a big island. it is a beautiful island. tom: what do you do, you go fish? jonathan: you go out to fish in the afternoon but that is not my breakfast choice. there are some beaches. stop mentioning it because we do not want it to get busy. we like that it is quiet and there is more romance there than maybe the champagne popping of the quicktime grammar. tom: do they serve s pritzes? jonathan: i am sure our producers are very angry with this. tom: they shouldn't be, it is a magical moment. jonathan: let's get to the boards, the s&p, i missed you,

0.5% on the s&p 500 after a three-day winning streak coming into wednesday. on the nasdaq, down about 0.6%. small caps down by .75%. just a wow performance of the nasdaq 100, monster moves, up 39% year-to-date. the s&p up 16%. the two year almost reclaiming 5% and not really making it dent in equity market, 4.91 on the two year. the curve steepen is just a little bit. look at this curve, two year, 10-year, -104. call it -105 basis points, unreal. tom: i just noticed this off the launchpad when we looked at equities, bonds, currencies and commodities. the bloomberg financial index has moved up evermore accommodative. that is not what chairman powell wants. jonathan: he is leaning into the idea that the majority want to hike again, two more stops for

that debate, the payroll on friday and cpi next week. to check in on the fx market, the euro against the dollar, just south of 1.09, unchanged on .08, just a bit of a turn -- unchanged at 1.08, just a bit of a turn. tom: tom joins us now, head of fixed income research, you have the advantage of working with jay turner, who does beautiful stock, free cash flow, consistency of profit analysis. you guys own the high ground on equity analysis into your bond analysis. what does your bond analysis say about a second leg and the bull market? tom: highly unlikely. we recognize the equity market seems to disagree with the hypothesis but when we look at that inverted yield curve, what

we see is a market and economy which is already pacing excessive tightening from the federal reserve and as the federal reserve has already tightened where mainstreet is feeling the pinch, but as you mentioned earlier, with financial conditions easing, you also see a financial market where the fed has not tightened enough out of wall street, so one of the ways we phrase this is when you use the fed funds rate to tighten, you put it on mainstreet. the fed has not tightened enough on wall street by using the balance sheet to reduce liquidity in the financial system. they have already tightened excessively on mainstreet, so a recession still seems inevitable to us in the second half of the year. that has got to impact earnings on equity side. tom: i am going to look at the inflation-adjusted 10 year yield, act 1.58%, maybe it was

1.62%, getting lofty, do you anticipate that will break out a higher real yield, and what level is normal of a higher real yield? tom: a normal -- keep in mind, we only have 25 years of actual data on real yield. normal might be 150 basis points, so we are roughly at what you might expect to be a normal on 10 year treasury. with that said, we do not expect 10 year real yields to rise much from here because we expect inflation expectations or inflation itself getting close to bottoming the cycle. we think it will be difficult for the fed to get inflation below 3%. tom: and the headline there, it is on the edge of bianco, the second time in 48 hours. jonathan: i almost thought you misspoke, you think inflation expectations are bottoming for the cycle? tom: yes because we buy into the hypothesis that inflation will remain sticky in the fed does not have the stomach to do what it takes to permanently bring

this structural inflation back to a neutral. by that, we mean do excessive damage to the labor market and bring aggregate demand well below potential. that is what is required and that is a deep recession. we don't think the fed has the aptitude to do that. jonathan: you don't buy into the bulk of risk delivery of chairman powell of last year? tom: no, if they were serious about bringing inflation in line with long-run targets, they would have reduced the balance sheet at times the pace they are going at. jonathan: on the balance sheet call, you think they should be more aggressive with qt but you do not think they will be? tom: exactly, -- yes to both. we think they should have been more aggressive but we think they will not be. tom: i am fascinated, jim beyonco out of chicago, and you have a call of a dis-disinflation, where we will decipher and inflate, come down and then at 3%, do we reverse and go up? tom: right now we expect the bottom around 3% year-over-year

of headline cpi on a quarter over quarter basis where we might see inflation diplo 3% easily. but you start to see around 3%, the fed gets weakening his. you see -- gets weak knees. to bring inflation down lower, you have to do a substantial amount of damage. businesses are no longer hoarding staff, they are laying off staff they do need and that is demand destruction, and that is a bigger recession ahead of 2024. tom: but you bring it over to jason's work, if i have a sustained 3%, maybe actually higher, that gives me a nominal gdp that is extraordinary. does that support well-run companies? tom: that supports companies with low borrowing costs, bargaining power or pricing power in their industry, and strong management, and basically have barriers to entry, as well. it does not support companies.

tom: this describes tom ford's. tom: 45% of the companies in the russell 2000 do not fit that. jonathan: these are big calls, if you expect inflation expectations to bottom out, where does that leave fixed income for people sitting in the 10 year now taking on more maturation, what do you tell them? tom: essay a year treasury at 3.85, that looks attractive to us in an economy where the u.s. goes into recession and real yields come down, and inflation expectations might go up. you still have downside and 10-year treasury yield up to 3% and 3.25 percent, but the average recession sees a 10 year treasury drop 225 to 250 basis points. that probably will not happen the cycle. at most, we are looking at the tenure going from 40.30 where it peaked last year to 3.223%. jonathan: what we are discussing is how the bond market will behave.

you described it in inflationary wealth, is that correct? tom: yes, and we are looking at positive total return in a 10 year treasury, we will call it a 7% total return upside when yields drop. if you are levered three times like many funds are, that is a 20% return offsets may be a 30% loss on the equity side. but you are not looking at a 50% return in treasuries. you are looking at a 6% 7% leverage up to 20%. jonathan: amazing, just amazing. tom: i really cannot say enough. we are making jokes about it. we are into the summer, getting lazy like everybody else. it is an incredibly holiday shortened week, compressing three days of serious economic analysis. i have got two competent shops saying the same thing, that we are going to -- i am making the sword up, but we are going to dis-disinflation, that is brand-new. jonathan: just the idea that inflation expectations are bottoming out for the cycle.

that not with the federal reserve wants to hear, so 25 in july is what most anticipate. some say maybe another 25 and the committee suggest that might be the direction of travel. and you think that, as well? tom: i think so. the higher they go with the fed funds rate, the more likely they are to reach their target of 2% inflation. we do not think they have the stomach to keep doing this. there is going to be demand destruction. you have to look at the second half of the year. the two stories, recession risk is one, and the other is you are looking at massive liquidity drain from the treasury raising cash and adding back to its treasury general account, and you are looking at the fed continuing to reduce its balance sheet, albeit at a slow pace. if the fed were going to go to a 6% fed funds rate, the chances of them bringing inflation down a much higher. but i do not see them doing that because there is already liquidity drain coming in the second half. jonathan: you are calling recession anyway.

and recession that comes without rate cuts? tom: for now, yes, because i think where the fed will be sticky -- i don't think the fed will go to 6% fed funds rate but i think they will hold the funds rate that whatever they terminate, 5.15, 5.50, they will hold it there as long as possible. and then they will cut. that means we are now looking at those first cuts probably coming in february next year. jonathan: the world you described, stagflation, the fed not willing to question inflation, sounds pretty dreadful for risk assets. recession. all the calls you have got. tom: it absolutely does. i think the silver lining here is that eventually they do cut. because you are looking at an economy relatively balanced at this point, you are not looking at extreme excesses in housing, energy investment. your recession is shallow and there should be more of a v-shaped to bounce off of it once we reach that trough. jonathan: how do you get the v if it is shallow? tom: because you get a fed that

eventually cuts aggressively into the 2024 or 2025. jonathan: this is a conversation today that i will replay a listen back to. thank you, tom tzitzouris with some big calls on several fronts. on monetary policy, economic drop, all of the above. tom: this is something new for the end of june, and into july, this dis-inflation is a huge deal if that is an outcome. no one is modeling that in. i do not want to say no one, but next to no one. jonathan: time, thank you. if you are just tuning into the program, welcome. the s&p 500 right now, -0.44%. coming up in about 48 minutes, sitting down with ed hyman of evercore isi. huge debate. tom: it hyman will talk about -- ed hyman will talk about

disinflation and it dovetails nicely into what tom said, so we will have a lengthy conversation with ed hyman and i believe michael mckee will join. we will really grill him on where we are because he has done so well with the tendency here, and the optimism on america. thank you for the response, folks, by twitter and email to the italian islands. did you visit the castle in ischia? do they have a castle? jonathan: they do. tom: they filmed "cleopatra" there. when i was a kid, "cleopatra" was a huge movie and i was not allowed to see it. that is where they filmed it. jonathan: lots of movies. have you watched "il postino?" that is on the island nearby. tom: also, they talk about how it folds into your jet city life , ischia and the talented mr.

ferro. jonathan: it is about taking vacation, you should dabble. tom: how do you get ischia? you flightaware? jonathan: naples. and then you can get a ferry. that is the latest information. tom: on arsenal, september 2023. jonathan: we will try and make that. we will go. ♪ and rescue us, the people on our team and in our family. it can happen to the people who serve us and the people who served. the people we work late with and stay out late with. it can even happen to the person in the mirror. opioid use disorder is a disease that can happen to any of us. it's possible recovery can happen to any of us, too.

>> billions of people depend on our commodity, oil, for daily life. this is an escapable reality that warrants respect. that is what opec pursues market stability. of course, as an industry, we want to ensure that we have

an emissions free future. jonathan: i would love to know what that means and hopefully he can explain that one day. that is the opec seminar. did you make sense of that, we want to ensure we have a emissions free -- tom: it is a cartel. jonathan: aren't they the oil business? not that i have a problem with the oil business. that is not for me to make a suggestion that i would, but what does that mean? that we want an emissions free future? so they do not want us to use oil anymore? tom: we have lots to talk about, but i am lost in the first half of the year, did we see a climate change debate adjustment, amendment, or persistence i should say on esg? jonathan:jonathan: yes. from financial institutions, as well. the politics are getting interesting. tese are things we can talk about. saudi oil and focus at the opec seminar. it is their football league

making headlines, too. cristiano ronaldo. bloomberg's wrote the following, the saudi pro league is discussing the options of new broadcast deals, partnerships with private equity companies to grow the competition's appeal as the kingdom works to become a powerhouse in a world of professional sport, according to people familiar with the strategy. it is not just football. it is called, as well. tom: everything. -- it is golf, as well. tom: everything, and flushing money. this is a special treat. i was hugely influenced years ago in reading five books on the kingdom of saudi arabia, all the way back to lawrence of arabia millions of years ago, but this experiment that is the saudi family. we usually talk to ellen about the major revenue maker, which is maybe oil, maybe ramp and -- maybe aramco and formula one,

but we will speak of the royal family and what they are doing to global sports. are you surprised that the saudi's would like to acquire entertainment prestige? ellen: no, i am not to. i think this goes around well with their general search for global prestige, especially in terms of the west, and they are not really getting it from oil anymore. yes, they still are providing this incredibly vital resource, as you mentioned, to the world, but it is not necessarily come with prestige. in fact, it comes with a bit of the opposite, given how prominent the climate issues are today and how prominent they are in discussion. you even saw that the opec secretary general made reference to the fact that, of course, we want an emissions free future? aren't you a bunch of oil producers? i think they are searching for

other avenues to acquire prestige and that generally involves throwing money at it. tom: my amateur take on this of lacey and your work is the basic idea that these are tribal plans, tribal families with the united arab emirates, originality of the experiment in jordan, etc. give us an update on the power structure of the royal family in saudi arabia. visit hearken back to faisal or is it some -- does it hearken back to faisal or is it something new? ellen: i think it is a combination of both because the saudi's have always looked for ways to show their prestige. way back, before there was oil, the way of showing his wool and printing it over the various tribes in saudi arabia was to go

around and promised them stuff, so people wouldn't show up and he asked for things they would promise them, but they would have to promise is treasurer and the treasurer would have to dole out money. before oil, there was not much, so he would pack up and slink away before it was gone. still, the saudi king would keep promising things. now they have tons of oil and tons of money, so they are promising things in terms of going out and trying to acquire big-time footballers or do this deal with pga, which essentially will allow them to bankroll this commercial entity for golf around the world, and it is basically a way of ensuring people do not say bad things about them, but also insuring to people, hey, we are doing all this great stuff, and we are behind it and we are finding it. jonathan: none of this is new, as you illustrated, that china tried to do this with football

and it was not successful. russia has tried to use export as a vehicle to basically achieve certain goals, whether it be the winter olympics, a formula one race, football. i would like to understand what would success look like for the saudi's? what does that actually look like? ellen: i think success, partially it is winning, so their sports teams have to do well. there was a big controversy about the saudi's trying to acquire a football club in england and then they did not get the one that they wanted, so they got a lesser one, so they have to do well, but they also have to make money out of it, so even if they do not win, it is not so much about winning but more about being on tv and getting that prestige, and people showing them deference. big-time people get invited to big events and they show them on camera and they say good things about them, and nobody says anything about them. this is a way of ensuring, oh,

that thing that happened back there, nobody remembers that because now we have the pga golf tournament and they will show people on camera and they will not say bad things. jonathan: are you expecting the west to close the door to this? ellen: i think there will be pushback but money is a motivator and it is hard to say no when there is a deep pocket. look at pga. as long as there is no kind of major human rights issue that pops up, of course, i think that kind of thing is inevitable. there will be another big human rights issue, and the issue will be, will these leagues be able to say, no, we do not want your money anymore, or they will say, we do, we just want you to bankroll it?

tom: what is your price, barrel of oil that you think the royal family needs in saudi arabia? do you have a brent crude price that gets it done for them? ellen: i think anything above 60, 65 is getting it done for them. they do not need to cover their budget with the price of oil, so i know the imf says they need 80 or $85 oil to cover their budget. that is not how the saudi's are thinking. they do not need to cover their budget with oil. they can take loans, they have done that, and not necessarily that they have other sources of revenue, but i think they would love 80 or 85 in order to keep expanding their investments and to keep having more money to just throw at these prestige things. to be perfectly satisfied, i think they are fine with 60. they can make it even at 40 or 50. jonathan: on the record,

newcastle united is a lesser team, is that right? ellen: i am not really up on my british football teams. jonathan: that is what i heard. deeply offended. ellen: i pretty sure they try to get manchester united. tom: my soccer talk was so lame and bramo really helped. we talked to ian shepherdson we tied it into saudi arabia's investment with newcastle united, and it was fourth-place finnish? it was great. my question is, we have another 15 minutes with ellen -- i'm kidding. we have to talk about aramco's investment there. that was brilliant. thank you. jonathan: you see max over the weekend? tom: it was awesome. jonathan: just to go around and give the fastest lap. tom: for years, ken prewitt

said, watch out, tom, and you got me into this. i love it. jonathan: i am please do got into it. should we get maximum program -- max on the program? tom: simon is just killing a getting usthem. jonathan: equity futures, -0.5% in and around session most. -- session lows. >> welcome back to another wimbledon update, carlos alcaraz raced into the second round with a very impressive straight sets wi overn jeremy sade, closing out the victory 7-5 in the third after 1.53 on court. the u.s. open champ headed into the all england club after clinching his first grass court crown at queens club last week. do not forget, you can watch all of the action from london daily at 5:00 p.m. eastern on tennis channel. ♪

back in the day, sneaker drops meant getting online to wait in line. now with xfinity mobile... ...we get the fastest mobile service and can get the freshest kicks asap. i got this. save hundreds a year over t-mobile, at&t and verizon with the best price for two lines of unlimited. nice job, little sis! they grow up so fast... i'm a fan. from xfinity.

>> we've seen a big credit shock

and we will continue to see that. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz, and jonathan ferro. jonathan ferro returns and when he returns is a conversation on the path of nation in this week of the jobs report. we heard from jim on monday. the discs of disinflation were inflation comes down and sits there. jonathan: thinks that inflation expectations are bottoming the cycle. he thinks inflation is going to be a lot stickier and even with the recession he's anticipating now as for that recession what recession has been the conversation. because the surprise of the year so far has been this monster performance of equities. nasdaq, s&p, and not just tech

sick a look at caribbean. take a look at what is happening with homebuilders. tom: it's great. she's got an entire room with three terminals. jonathan: looking forward to that conversation. these are big moves here today and the federal reserve for starting to talk about more hikes rated tom: we begin q3 here in earnest on this wednesday and that is the recession call. i wonder with the discs disinflation does to recession calls around the world. what does it do to china, united kingdom, i'm told london is booming. jonathan: we have a recession in manufacturing, we don't in services read tom: i miss this. jonathan: they think services converges done to manufacturing.

tom: you get just inflation. global wall street stay with this we are thinking 8:17. jonathan: we are trying to track him down. tom: i will explain who its failure but if you are not part of wall street ed heineman's have the adults thing forward to and he's been with your guys at jp morgan looking for disinflation. jonathan: we get services data later this week. jobless claims, jobs, payroll on friday. cpi next week, tom. think earnings more broadly kick off the next week or so. tom: the theme that i have with bramo greifeld save the day. we had to talk crypto. jonathan: we don't want to talk about crypto. tom: barmo -- bramo is gung ho

for the earnings season. freedom of the banks i just don't know. jonathan: i can't believe we are in july already. negative by 0.5%. a touch softer, not a big deal. 386.64 on a -- 3.8664. a big yield over the last couple of weeks. down a couple of basis points but sunny repriced higher if you think about where the two-year has been we can work it out of bloomberg for you very quickly. going to the svb fiasco we dropped as low as 275 over the last 12 months that's the 52-week low, tom. the following svb we dropped to about 350 at the lowest. we've added 100 basis points plus into the two-year. tom: the two-year is

extraordinary. i'm going to bounce it off 105 basis. rounded up 111 basis points. 1.11 percentage points different with the two-year and a 10 year i don't know how normal business gets done. jonathan: it makes a difference. tom: yeah. jonathan: i'm not going to do x, y, z because of that area tom: i think in business investment it makes a difference. not with the two-year will do, but with the tenure will do. i don't hear much about the two-year will it come plunging down. jonathan: tom said 3% in the last hour. but that's it. different kind of cycle. tom: we will recalibrate and we can do this on value, a be up phrase with and milady -- this is the entire strong excellence in wisdom out of the last number

of decades in her wisconsin. thank you so much. the first six month of the year, how do you recalibrate here the value proposition? >> well, tom, it's an interesting time because no one expected what happens in the first half. i would say look at all spring. we are looking forward in thinking about where investors should be. and if we're sober about the future knowing there's a lot of signals that signal a possible recession. that being said, we also knew that on the equities side, what's important is the time you spend in the market and not trying to time the market. history suggests that if you stay in the market through cycles you're going to do great. that's what we're telling our investors sober trying to be tactic. around what we invest in.

really think about stock selection. tom: there's also research that says mid-caps michael after cycle or a place to be. mid-caps, not large caps. are there apple computers within mid-caps? >> as you know, tom, apple, nvidia, all of those docs started off as mid-cap companies. we try to find the innovators, the winners, the next big cycle players. there is a lot of those in the mid-caps space. that's why it's interesting especially with the risk reward where it's at today where you have the really large cap names. again, it's just a couple of him of really large cap names that have accelerated and are trading at hyman. so, the risk reward may be less

then you can buy some of the mid-cap names much lower multiples still great opportunities out there. jonathan: and the big moves elsewhere. we discussed over the last several weeks. the cruise operators, the homebuilders on the s&p 500 what are you talking about some of those moves they are monster moves here today in just like six months homebuilders that by 40%. what is that about? >> a lot about -- a lot of it has been demand. we talk about this all the time, travel demand has come back lee strong rated housing demand is still out there despite that we all see with interest rates. there is a shortage of housing and housing supply as well is strong it's not too shocking to see that demand in those housing -- homebuilders are still doing pretty well even in this economy

but i think there is the balancing act that we have to play. those names have seen really good returns is that the place you want to be over the next excellence? does are the things that we are looking more closely at. >> were trying to look at how the races at the performance. tech, rates are at 5%. this is happening with rates at 5% and mortgage rates much higher. as we know that's because ultimately people on 30 mortgages have got 30 year mortgages not 5, 6 7%. that's a story for another time i'm trying to work out what is the relevance of the 5% interest rate given the performance we see across the equity market. >> i do think it's relevant and that's why i would call myself more of a sober bull at this week. there is risk in the market. it's clear there's a lot of risk in the market.

i'm paying attention to a lot of the economic data not all of it suggests things are great out there. i live in the midwest and my friends, my family are all dealing with inflationary pressures every single day. it's pretty sobering out there. i also had lived through, you know a couple of decades of equity markets for you see signals and signs to nine months in advance where the market rallies, tries to bring investors and all of a sudden you see the real pain gets created. we are cautious but i think it's about stock selection at this point. tom: on a sector basis unthinking energy consumers, whatever, where is the value opportunity that is not a value trap? >> it's a great question. you were talking about energy early on this morning. that's an area that hasn't

gotten a lot of love so far this year. obviously we go into recession that's going to be still a tough area of the play, but the supply has really been cut back. there is more talk of supplies being cut back. that could be more interesting as a longer-term play. health care, again hasn't gotten its fair share of love. it hasn't recovered well the pandemic and there's some really good values within health care. i would say real estate is a tough area to talk about. we are not living the office real estate space and some of the retail space. there's a lot of other good real estate space in the sector. it's hard to limit just to a few industries because as he looked down cap and as you look in those areas there's been a lot that has been ignored and we

just saw that right now in june were small-cap finally got a little love, value got a little love. i think growth and you were treated pretty equally in the month of june and small-cap alley saw some broadening out but not every name saw the appreciation it probably deserved area jonathan: thank you. if you are tuning into the program, welcome to the program. equities a little softer. we are -0.6%. as we go into a conversation with ed hyman, talking about the lack of disinflation he anticipates in our jury. tom: the surprise here is the disinflation in place and people talk about the distance inflation as well. moments ago from tom reese of

the london desk this is jp morgan modeling out and and anchored 7% by the bot which i can't get my head around. the word hear from tom reese is the idea of it becomes an acre that there is a risk it loses a little bit of control. jonathan: you go after six, you go up to seven. this might not be biting in a major way but slowly start to get remortgaging and i talked about some of the data 1.4 million do to this year in the u.k.. when you start to see the more and more that's the illustration of the lack in policy services to speak. tom: i get that maybe it's lots of caveats. how blind are we right now that's something i want to talk to ed hyman about jonathan: let's go back to where we were last year. tom: eight minutes, freezing

cold. jonathan: pain. where's the pain? i thought major market pain, major economic and and all everyone has done is push back the call. fished it further out. tom: i think the fancy people have done well. jonathan: i agree. we've been talking about recession, bear markets, and here we are. talking about anything but. ed hyman coming up shortly. from new york, we are down 0.6%. that's what you get from the morgan stanley client experience. you get listening more than talking, and a personalized plan built on insights and innovative technology. you get grit, vision, and the creativity to guide you through a changing world. ♪

76% of 23andme health customers surveyed reported taking healthier actions. to guide you through a changing world. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme. advancing flight for future generations. ♪ welcome to a new era of flight.

>> what you don't want people to do is speak and chase in the rally. we do think the risk of recession has risen. i think the fed will continue to hike rates. i wouldn't chase the rally too much. i would stick to your allocation rather than moving things around trade. jonathan: how many people miss the rally for 2020 in the first half the first couple days of july. s&p up 15%. futures this morning slightly negative. we are down .5%. payrolls on friday, cpi next week. a ton of data in between. tom: still modeling 2% growth.

even ed hyman got the recession call. it's out there. jonathan: we are just pushing it further out. some people might say that technically it's a negative growth. we can have another debate another time about that. tom: did you look at ed hyman's research he sent over to us? jonathan: it's too expensive for me. he charges so much money i can't read it now rated tom: true, folks. it didn't work out. there was a paragraph on page 42 that said i must have 24/7 the research of sanford earnestine and edward hyman at isi. that was literally written into it because that's how much in the old days and frankly the present days you have to have every leader in the world, folks, once wants to get this research.

jonathan: explained that story. tom: he sits at a table that's got 42 floors on fifth avenue, excuse me and he sits there at a little table and they give him the nut and he takes out a black pen and mark set up like this. jonathan: how much did he get? tom: he is over the cheap seats. joining us now for a substantial time this morning chairman of evercore isi ed heim enjoys us. john has like six serious questions. i'm calling the october bottom many other people were out there aren't as optimistic. absolutely nailed the bottom. you basically gave him his job. you were at cj lawrence a million years ago. i rate your research. you went out the door to set up

your own shop and he replaced you is that true? >> i had a deal with my boss that i wouldn't leave until we got a replacement. so jim came in and said he said ed, you can leave. tom: the optimism that hyman has come up with is the gloom getting ron here? >> so i think were going to have a recession. i follow it closely and i read this piece over the weekend where he doesn't have a recession. and i been through this more times than anybody on your show. it works. it was really inverted and if that doesn't do it you have a contraction in the money's of i, the most since the 1930's. then you have a significant

increase in rates plus qt. mike tyson can get you with any one of those. much less scout three shots. i just have to add her when it inverts they can take 18 months for the economy to go into recession. just before he goes into recession, it looks great. it's a very humbling business. i have not been forecasting a recession for the past year. i fought the to do on like crazy. i had to third quarter down which seems to aggressive. i'm pretty flexible but i'm sure it's coming. jonathan: does this have a wheat field to it? >> not really. jonathan: that's what i meant. >> pressure on that. it's playing out pretty much like that but you don't have the housing bubble.

you don't have something that would cause a severe recession like we had in 2008, 2009. jonathan: we had a guest who suggested inflation expectations are bottoming. for the cycle, they are inflation is going to be sticky and recession will address it. >> i'm on the others, big time. i just looks before i came over here at gasoline prices which have a big influence on inflation expectations. they were influenced by gasoline prices. the futures have gasoline prices going down another $.10 in the next six weeks. gasoline prices before they were 15 years ago so inflation is coming down around the world. they just reported the ppi for the year is not deflation and then last week, spain cpi i try

to connect the dots as best they can and it looks to me as inflation is really going down. with the positive backdrop i mentioned it's going to keep going down. >> let's build on that. most people anticipating the fed goes again this month. maybe goes again after that. where are you on the team now? >> one more and done. that's what i would follow. at this point the one more is baked in the cake i think anything from now is a mistake they are just creating a deeper recession for a more likelihood of a recession. but five and a quarter with the bond yield at 380. or pretty much done and inflation is slowing.

the fed hiked rates in march of 2022 and at that point inflation had already gone crazy and they were still doing the transitory. jonathan: that was not in qe. >> by the time they cut rates, inflation will be so far down it will make them look a little wrong. tom: you been considered for fed president certainly as a fed governor as well. what does fed get wrong? was it too much communication were we advantaged with the silence of greenspan? >> i think it's very difficult to have 300 phd's make a forecast. not buttering you up, tom, but i'd rather have you make the forecast fan 300 phd's. tom: mike walked in one day and

said tom i don't need any are cast. >> i think it's just part of the stickiness of the decision-making. tom: it's by committee. >> it's by committee. and i also tend to try to go where the puck is going to put it in your terms. tom: ok. >> the evidence that things are slowing on inflation, it's pretty awesome. tom: how is julius emmanuel's doing? his weekly note is the most valuable thing that comes over the transom and what i want to say is this guy captured the equity market. he didn't tell you to buy nvidia but is he doing ok? >> he's doing great. we have an office, i learned from mike bloomberg so i have a desk and i have richard ross and i have joey emmanuelle and we

are not within shouting distance but talking distance. tom: is he talking about the second rent at the bull market? second leg of the bull market -- >> he's just cautious. jonathan: they separate tom and i in the office, did you know that? we are not allowed to sit next to each other but we can throw things at each other. tom: we've got interns that help us they go between us. jonathan: opening belt in about 30 minutes from now. this is bloomberg.

tom: "bloomberg surveillance", jonathan ferro, lisa abramowicz and tom keene thank you for the huge response here lots of interesting topics. even new things invented in the last 72 hours. i make a joke boy does this feel like it. we are compressing everything into wednesday, thursday, today. michael mccain is going to be medicated after he speaks to us because tomorrow is an impossible amount of data. mike, it's amazing how we get this data dump on this wednesday, thursday, friday. mike: we are going to compress the week as he said. it's going to be a lot of data

that matters to people. it's all about employment this week and something the fed is really focused on. most interesting number of the week besides the jobs report is tomorrow's jolts number. we will see if job openings go down and the quick rate goes down. that will be interesting. we also have claims tomorrow and adp. you're going to be busy, i'm going to take a lot of your airtime, put it that way. tom: we have the 10:00 data today. in lightness on total vehicle sales sometime along today. how is the audio industry work into the mckee calculus? >> autos go into gdp on the sales basis not the retail sales numbers. because they are counting one goes out of the factory and they also count the orders from

rental car companies and things like that as business investments. so they are not quite in the auto department that it does matter a lot because it's an awful lot of spending on autos. we did see a slight decline last month we will see if it picked up this month as people want to go out and get convertibles to write around in the sun rated -- tom: before i do that what is the dynamic from payrolls. alan settlers this week rapidly go under 100,000 i find that almost unimaginable. is that possible? mike: i would say it's unlikely it would happen that fast. that companies would altogether decided the same time to stop hiring but it is certainly possible. i think it gradually heaters out at least that's the fed scenario but to get to the numbers

they've been talking about in terms of an ointment were going to need a rapid move down from the second half of the year or were still going to see unemployment will below percent. tom: michael mckee back with us in a few minutes. then to the friday jobs report. i continue with the gentleman from evercore sis. i want to talk about the hallmark of your work and that is the granularity of studying data. does the granularity of free traits, this, that, any data study does it still work in a modern high-tech age to mark >> it works even better. tom: why? >> there is so much generated by computer. i really think my success in studying the economy and forecasting comes from being more granular.

the fed seems to look at one data point that comes up like the super court i flicked it may be 20 at that point and like what michael was talking about there's a lot of data points and they are generally pretty darn strong employment rated we are estimating to 20. i don't see that sub 100 number, a really low number in the data we get so far like unemployment claims where we serve employment agencies once a week. tom: i look at the data and need a hallmark your across the decades. the way we bring aqua data. do you still aggregate or are you partitioning out for different quintiles or to america's can you aggregate still? >> yes but you have to take into account the different pieces.

right now the manufacturing sector is pretty weak. maybe in recession. and many parts of the economy are doing quite well, services like from the holiday july 4 and you also have homebuilding is actually coming back. it's been very strong. and has accelerated in the last couple of months. tom: right. i don't know if you studied solo there after 57 productivity that explained the evercore isi view, america's productivity given the new technology. are you up to mr. not? >> i'm an optimist but it's not in the numbers. one of the phrases is that activity is everywhere except the numbers. what you do has an arm's productivity. but we are not getting it period

right now in the numbers. employment is good, but the economy is still slowing, i think. tom: what are you think about the frenzy, they come out every friday. you publish for the weekend and that but we've always worried back in the thick of 87 or august of 1998 the worry, the angst is always there but there seems to be a different character that has gloom now. how do you respond? >> the forecast for recession was virtually unanimous a few months ago. now there are many people going to a non-recession forecast. i am the most bearish i've ever been on the economy. because of the yield curve, the contraction in money, and qt at the same time. they are hiking rates at low hit to the economy. it's going to cause a recession but it doesn't happen overnight. tom: can you own stocks given

the statement you just made that you are the most gloomy you have ever been? >> so, i mentioned i think three times now the 2006, 2007 going into 2008. the s&p went up 20%. and peaked like two months before the great recession hit. boy is it tough. so right now, i think the economy is doing well and the stock market is going up. technicals are good. so i think we'll keep going up until it looks like were about to hit the recession and that's not today. tom: i've got two minutes left your the only one who hasn't moved to florida. you are part of the new york city fabric. explain how you view the future

of this great city. >> it's very dull so many people are moving to florida. but this city is so vibrant just being here with you which i know you love the city. and all institutions. tom: never bet against new york. that's why i got this job. >> anyway as long as mike bloomberg is here, i think we are here. tom: what is the ed hyman strategy? >> they are going to hike one more and then they are done. i think toward the end of this year but maybe early next year. i can look down the street, i can't see down the corner but i get to the corner and have a much better idea. tom: ed hyman, thank you so much. he is with evercore isi and truly iconic on the streets. i'm going to read some market

economics of ed hyman michael mckee rejoins us with the prefrontal labor economy. adp claims tomorrow, do i care? mike: claims, you care about because of the big surprise last week where we dropped so many and went back to her previous level. as ed was just saying when you're looking to see some weakening of the labor market, you are looking at jobless claims. we are not seeing it at this point. the adp numbers are always traded on but they don't matter all that much today. they are not a data point that's going to forecast the jobs numbers. so, yeah, we will get some action on that but we could in theory see more action on jobless claims if they went one way or another to a significant consent. tom: ed hyman has a killer chart. it that from evercore isi or mike mckee but mike on wages do

you look at wages wages or inflation-adjusted wages? where is the best value? >> you're going to want to look at the hourly earnings which are not adjusted because of course nominal spending, nominal wages are the way you're going to be able to compare those but it is average hourly earnings that the fed is looking at to see we are starting to see some sort of progress on the idea of companies having to pay for labor. if that comes down some more they will feel better. we have seen inflation fall below wages and earnings particularly for the eci. that is good for the american public for people who are getting paychecks. but it doesn't mean that we are seeing a decline in the inflationary pressures. what we are not seeing as ed was

just saying his productivity. right now, that something that has to come down or productivity has to go up. tom: what about the technology overlay? i say this with the immense respect for mike's encyclopedic knowledge of the data and what it represents. paul romer the noble on technology does our present clumsy math of productivity capture what technology is doing to this nation? >> there's a lot of debate about that, tom. productivity is hard to measure especially with technology in the way we use it. but the one thing you have to note is for the last decade or so most of the technological improvements that we've seen have been in the leisure category your phone, the fact that you can carry around all the streaming tv in your pocket kind of thing. what we are waiting for is something that really affects

the work place. maybe that's going to come with artificial intelligence, and that does seem to be moving forward quickly. we don't know exactly how it will be adopted or how quickly but if it is anything like the 1990's we could see a nice front of productivity. tom: looking at the data right here right now and we will come back with michael mckee an important discussion fermenting over the weekend. the last number of minutes with the vix up to 14 .48 the s&p percent move .5. we say good morning on radio and television and i want to look forward to friday at the jobs report will company the headlines data but for more which is loaded with data. michael mckee with a look at our economic data. over the weekend and discussed

to my book of the summer is this raging debate of r-star. we are not doing one key difference equations are that but i want you to frame the two camps. john williams just reaffirmed we go back to where we were some form of lower run rate for the economy codified by the babel of r-star. others disagree and they are out in a new which is elevated. who are those two camps? >> first let's define it. it's that neutral level of interest rates which means they don't stimulate or holdback inflation. what you're looking for except in hindsight. john williams that the fed along with the late tom lombok came up with a formula to try to

estimate where it is. during the pandemic they suspended that because they couldn't get enough accurate numbers. now they brought it back and what they say is under the new formula the way they accounted for the pandemic it means that this number the neutral rate goes back in a relatively short period of time. tom: ok. >> it means less inflation. tom: we're going to see but we will continue this discussion with mckee on the way to jetson hall. this is bloomberg, stay with us, good morning.

>> it should bottom at 3% and start drifting towards 4%. i'm assuming no major downturn, no kind of crisis that comes along if the inflation rate bottoms at three in starts drifting higher the fed is going to find this unacceptable.

the two rate hikes we have priced in for the rest of the year will happen if not three. tom: jim beyonca with respect to ed hyman. i'm going to codify this because it's going to be the conversation into this week and into all of july. jim bianco are talking about yes we get disinflation as ed hyman just codified. but the basic idea is and then it stops. and bianco's is bold to say is it will rise up again. that is a discussion and we welcome all of you as we stagger into q3 of 2023. here's where we wait the reason we have helane becker on she can get me tickets to paris, nobody else can. joins us on the tragedy which is

domestic air travel. what i learned over the weekend to instances, one with jon ferro who got on it airplane and not home international travel is pretty good and domestic travel is an absolute train wreck. you drive out of denver and you and i remember the terrific airport with the wind going sideways and you were lucky you could land. this is history and you're going across the fields of denver east and there are the teepees in the distance which was the huge success of denver den built a stunning 27 years ago. why can't we build new airports in america? >> that's a great question, tom. the number one issue is space. we don't have enough space. if you think about newark airport you have one highway and to the left you have the new jersey turnpike. there is no place to put a third parallel runway that would

alleviate some of the problem. people don't want big airports in their backyard. the recent denver was able to build this is because they bought so much of the land out there that you can have, i think there's for parallel runways and i think they can go up to six or eight. most of the rest of the country is built around cities and you just don't have that. >> scott kirby of united i believe he called from teterboro scott kirby of united made clear they will do less flights out of ewr the companies you follow is that the future which is just going to have fewer flights. >> absolutely. we have been seeing that for a couple of years now. it's going to be more seats per to purchase a bigger aircraft and it's going to be fewer departures per day. you remember, you and i talked about this secretary of

transportation asked the four big airlines serving the new york area delta, american, united to cut summary capacity by 10% because air traffic control is understaffed. you add to an understaffed air traffic control system then you add to that winter or summer thunderstorms and you have all the aircrafts how to land especially the ones coming from overseas. nothing is taking off so you get this issue with aircrafts that can't find gates. the next thing you know people are trapped. tom: one final question on this insanity. actual adult securities analysis not so much who do you blame but years ago warrant the thunderstorms as well? i don't know why they are now a new thing. >> exactly. the biggest issue is when thunderstorms rolled through the

area they are unpredictable. you don't know where the cells are you cannot have because of all the metal if there's lightning in the area you cannot have your people on the ramp loading and unloading bags they have to come in. you can't refuel so that's to your point that hasn't changed but what has changed is the entire system is just overtaxed. it goes back to years. it goes back decades. the system has been underinvested in it includes airports, government and it includes airlines. tom: let's talk securities analysis. topeka united airlines i did a log regression of united airlines back to 2008 where they cratered in the great contraction. great they can go up 100% off that log extrapolation out based

pre-pandemic do you envision these airlines going up 50, 80, 100% in the near term? >> off the 2008 basis? yeah, there's no reason why they shouldn't. it doubles from here even. i mean it's not going to be as robust as it would have without the pandemic because with the exception of delta and alaska air everyone else issued equity. if they thought they could unlike united the best idea for 2023 if they thought they could earn $13 a share, at the peak at a multiple would be 130 but now you have to adjust for the increase in shares outstanding. so it becomes 120 and the stock is at 55, 54. there's no reason why it can't go up from here especially given the fact they were in the middle. if going to have these issues these are not issues that are going to be solved speedily.

we only train five or 600 air traffic control a year that is a five or six your problem right there. yeah, it's kind of problematic. tom: this is important because i treasured my conversation with robert crandall and all he did in the history of aviation, great. the bottom line is how they found a new maturity of persistent cash flow or are the group of planes, are they stare sharks where they boom, the best. is it a new regime? >> no. i just, i don't know the answer to that specifically. i would never have forecasted the pandemic. in fact i famously said that in one of my reports that you can't shut down the world and it turned out we did. and you could. it's just turning it back on is

not that easy. that's a big problem. we stopped figuring out how to make this work. the fix is a multiyear fix. but in the interim there will always be shocks to the system that will cause the earnings to decline, will cause losses, will cause airlines to go bankrupt again. but i think in the main because of all these infrastructure issues, the lack of oem deliveries that are good friend and my colleague at td calamine talked about all the time the atc system that we talked about all those issues together. plus he had 10,000 at this point pilots retiring in this decade. it's hard to replace them. so by the time you're done with all of this, yeah, it's really problematic. because the air truffle is going to get more expensive. tom: real quick here you get to

breathe the same air he is the giant for all of us. with an airline transportation security and analysis. is he optimistic on the future of boeing whether out of seattle or chicago or i think they are moving to washington this week. is he still plus plus on ba? >> i think so. it's one of his top picks. tom: thank you so much. helene baker there thank you for your anecdotal comments over the weekend domestic travel and a couple worried messages about bramo. i'm not sure what airport she's in but as they set up the airports and there's no place to lay down because they don't want people laying down, she's got a fold out were she puts it across the railings of a chair so at least the chair she can sleep a she's had her fair share of the domestic travel as well.

i didn't think it was going to be a boring day. monday was extraordinary i was surprised by that. but if it is the where we going to be medical come friday? i don't have a clue. i also don't know were going to be july 17 after we get three days of bank earnings as well. there's a huge mystery to what we are covering here at bloomberg news and we will continue to bring that, bloomberg news not only that but bloomberg opinion as well. bill dudley last week of a fed to 4.5% yields. futures at -25. dow futures -200. the vix elevated. brent crude $76 a barrel. this is bloomberg, good morning.

76% of 23andme health customers surveyed reported taking healthier actions. because they know health isn't just a future state. health happens now. start your dna-powered health journey today with personalized insights from 23andme. was also the first time your profits left you speechless. at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com

jonathan: live from new york city, good. equity futures about -.1%. -- -.5%. the countdown to the open starts now. announcer: everything you need to get set for the start of u.s. trading, this is bloombergtv open with jonathan ferro. jonathan: live from new york, coming up, a look into five minutes for a guide on hiking. all signs of weakness in china's economy as yellen heads to beijing with tensions simmering. we begin with a big issue. welcome to the second have. -- >>