>> the dip in rip has not happened. >> it's an interesting time because when expected, what happened in the first half. >> what's important is what is dragging the market and how much more >> the indices higher and don't drive the rest of the market with it. >> i would not cheese the market too much, i would stick to your plans. announcer: this is "bloomberg surveillance". jonathan: live from new york city, good morning for our audience worldwide, this is bloomberg surveillance on tv and radio alongside tom keene jonathan ferro. here i can we -- equity market is about -.4%. a little later this morning, jobless claims and we get data from adp, job openings, all that stuff. we kickoff this morning

distracted by new app by mark zuckerberg and instagram. tom: john is like can you open? on instagram. [laughter] jonathan: what you make of this? tom: it's a huge deal. i'm guessing i could be wrong, i defer to alex webb on this but i think it's a huge deal. it's about the fabric of a nation, about our social network and we will have to see where it ends up. to get back on track, this is an important thursday. we have the right guess to lead off. giving this wisdom. into jobs and all this economic data, we have a new rate structure this morning. jonathan: it's amazing, isn't it? it's not just the treasury market getting close to 5% on a two-year, it is the united kingdom, the gilt market. do remember the end of september when filled yields were around 470, 2 year 545 and we talk about potentially bankrate over the bank of england going through six and maybe into 65 at

some point in the next nine months. . tom: i get the drum of 6%. this is really important if you're in the stock market. we're just going to focus on the tea leaves. we go into the thursday compressed economic data, claims and the rest of it, and jobs tomorrow with a 10 year real yield which is almost on the edge of a reset to a higher inflation adjusted yield. the 30 year mortgage jump condition over the last six to seven to eight days in italy from a 7.05 out to 7.21% this morning. jonathan: who's paying it? i saw stats around apartments in new york city, some of the new stats, the amount of people paying in cash. if you got cash, great. tom: it's not america. jonathan: it's not the rest of the country -- the country but a lot have locked in that low interest rates for long time pushing out 30 years. how much of this structured do

you describe the starting to bite? tom: i think it is starting to buy geographically and always in the real estate business, particularly retail and individual and you look to the west, i would be interesting to see with the dynamics are to the west. i believe this statistic is negative 6% year-to-year rent in california, arizona, that. the front of what is to come. jonathan: our next guest is coming up in minutes. elon musk snapping back on this. it is deftly preferable to be attacked by strangers on twitter than indulge in the false happiness of hide the pain on instagram. [laughter] tom: does zuckerberg has 10 homes or does musk have 11 homes? it is surreal. we are going to be unbiased on this, john and i are going to kill ourselves not to give an opinion on this, but i'm sorry they are launching this thing

after one year upper. jonathan: creditor's elon musk and his platform, i think you are taking this pretty seriously. tom: i believe morgan stanley was involved in the transaction. they've gotta be waking up going ellen zentner, are you on threads? jonathan: do you have a cup house? tom: now. jonathan: that lasted -- no. jonathan: that lasted five minutes. tom: what was the other one, my something? jonathan: myspace. tom: yeah. jonathan: you think twitter might go the same way of myspace? tom: i don't have an opinion. i signed up for threads and the dogs are in. it's great. jonathan: so you won't do markets? tom: the handlers will. i don't do it. jonathan: we catch up on this a little later. equities are now -0.4% and

snapping at three winning streak on s&p just yesterday, bond yields higher again, for percent on 10 year, up to 397 and looking at the fx market, euro showing strength, 10860 five, weakness yesterday on the side of things. tom: mexican peso printings 17, never did i think i would see this. about mexico, the mexican peso goes to 17.0. jonathan: what is happening over ther? tom: all of latin america is doing well. jonathan: the head of u.s. microstrategy at m u g joins us now. some of us read the minutes. how significant is the division emerging on the fomc? >> i don't think it is significant yet. the commentary after the minutes we got, i think they will hike

most likely unless something derails until then. i think there are important pieces worth mentioning. they are starting to focus on although inflation is highly attentive, that is the main focus and continues to be but they start to focus on some of the growth factors like gdi is emerging from gdp i and i never expected to see that in fed minutes and the u.s. data is maybe over counting jobs. i think the fed is starting to think about how robust is this recovery at this stage. tom: thrilled to have you on, just the right guess that the right time. on a focus on the inflation yield. our listeners, it is not a common statistic, a 1.73 alluding up to 1.58. where is your pre-pandemic normal on the real 10 year yield? george: on the real 10 year yield, we are getting back to levels we are seeing preach efc. tom: i agree. so what is the level here where the tension, where it begins to

fall apart? george: in any other time period, because we have been operating with huge lags in terms of liquidity buffer has been allowing markets to ignore the real rate but if it continues to move higher like it has been, i think that financial markets take notice soon. jonathan: are you expecting a hike then? just to start? george: yes. given the language as well as what is pressed into the market, it would take a lot to derail the hike. jonathan: are you expecting another after that? a lot of people think maybe they will go july and perhaps they are done and another one in our future. george: the one that follows, i think it will be about financial conditions. we are starting to see more tightening and there are channels that are important that tom is highlighting. if we continue to see the rate structure move higher, let's not forget since last year, the tenure in general has treated well under the fed funds market. if we get a normalization or

catch up, even a brief catch up like anti-seasonal rise in rates which people call a bear steep, which we had a little bit of that yesterday and this morning, i think that matters. that is were tightening will take place. we have had rates under and that has helped the housing market. if we see a rise in five and tenure rates, it would be a game changer -- 10 year rates, it would be a game changer. jonathan: the federal reserve communicated a couple more hikes. you seem to be on board. they are also communicating simultaneously a mild recession potentially in the second half. what should a 10 year be doing with what the federal reserve is projecting? george: it depends on what recession we get. we have about 15% to 20% risk of stagflation which has never really been in the cards for u.s. economic forecasting but stagflation is out there at some point and if the fed cannot get inflation under control, you see similar situations with the boe.

maybe raise rates of 10% and takes longer to get inflation down and all you will do is crush the economy. a comes down stagflation and recession nuance. tom: how does the yield curve diss invert -- disinvert. what are the threads of information that allow us to disinvert to say -30 and -40? george: traditionally it has been the fed cuts rates. if they cut 200 basis points, the two-year would move faster than the 10 for sure. bear steepeners are like unicorns, hard-to-find, very rare. when they happen, they are short-lived but very painful. a rise in long-term rates, we have not seen that happen on a consistent basis. it would have to come from the front-end. tom: this is critical with mufg and the japanese affiliation. you have first knowledge of this , domain knowledge of this. if long-term yields are lower,

is that pricing up yield down by foreign buyers of faith at a credit u.s. paper? george: at this structure, looking at the public flows to see was going on, this has been domestic driven, has been for quite some time. we've seen less foreign influence for years. in the last number of months, i think most of this will have to be taken down by domestic investors. foreign investors play critical world but i think, given where funding costs are and everything else going on, and more importantly, now the u.s. treasury as competition from other markets, other sovereign markets are yielding hires well. so we don't know the boj would do with its own policy and i might make jgb's more attractive at home. the curve maintaining its steepness is something i think will be critical, even when the fed starts cutting rates. tom: what is your strategy as a

bond portfolio? take a full faith and credit portfolio, what is a duration strategy? do barbell, single-point, go to cash? george: i think you have a bias of the latter but mislead it. at some point, if the fed raises rates, we have an attractive front end. your risk reward is not -- is how much downside you get if rates go down 50 versus 200. you have to look for plays that are more mortgage rates and mortgage bonds specifically as raise rise up will be more attractive. jonathan: this has been fun anything with the bond -- anything with boring with the bond market. i'll try to get my words out. 4.98 was the high of the session. just short of where we got in

march. tom: while you were gone, we has -- head west texas intermediate with a 66 print and we came back smartly. brent round about $77, it's not a tangible move but a little bit to the system, which is a change from four-week seal when you left. jonathan: two more hikes? what's next after that? it's interesting the federal reserve is saying a few more hikes. tom: when the facts change, jerome powell change. you have yield going here in the mortgage rate like somebody at heim invention the other day, what a great conversation with him, gloomy as he has ever been on a recession and said it is still about a gallon of gas. you get gas to go 80 to 90 on brent crude, what does that due to a gallon of gas? the political pressures change.

forget about the macrolevel. jonathan: i talk about politics and the u.k. right now, looking at this rate move, it's incredible. real pressure. tom: i bust jon's chops but his work during brexit was brilliant. is it a given that labor takes over? jonathan: no. tom: when did they have an election? we have the first tuesday of november and we know it is coming. jonathan: we know when it has to come by and don't know when it will be. we have a decent idea when it will take. tom: mr. sunak controls the decision? jonathan: he will have the decision to make. just based on the polls, the labour party gets in and you have to wonder how things get better from here. can they get worse at the moment? just in terms of restructure we can talk about with the economy. the economy has surprised to the upside, just to be clear on that, it has surprised to the

upside. when people feel the distinction between economic data and how people feel, that will bid tough discussion for number of months. tom: take us out, i'm busy on threads. jonathan: you're busy on threads? it's good to be back. tom: i'm taking six hours off in august. jonathan: equity futures, slightly negative. i might join you. good morning. this is bloomberg. ♪ 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.

>> the idea of slowing down pace of rate increases and continuing to slow the pace make sense. we need to take some time to assess and collect more information and be able to act, knowing we communicated to our projections that we don't think we are done based on what we know. jonathan: john williams, the new york fed president, he touch a be following the fed minutes indicating one more hike welcome in july. and a truce may be, agreement struck on the committee. the divided committee, to skip the june meeting and wait for more data. the problem at the momoa data is we only have one more payrolls report tomorrow and one more cpi report, next week. then it is july. tom: i thought about this the

last weekend with this is really about as we were altar accommodative and some form of neutral and i think even for example bill dudley or andrew hallman horst would agree with ed hyman, we are there to the tension point, we are each -- where each decision has significant weight. this july meeting, whatever they decide, it is no small matter. jonathan: hike in july and hike in september. it was curious to me in the minutes they were people basically dissenting but did not dissent. what do you make of that? i don't understand. the federal reserve, unlike the bank of england, won't come out and say i disagree with the decision and i thought we should've hiked at this meeting. what is that about? why do they have to show some united front in public all the time? tom: this is a legacy and i will go to the gentleman from washington university in st. louis. his name is lawrence meyer, he wrote a beautiful monograph in modest.

years ago about how greenspan controlled the eccles building. there is one chapter in their which begins the heritage of our different from the bank of england and frankly from the ecb. it was greenspan saying we are all in the same page and i've got the voice and you guys can show up and give me wisdom but my good friend alan greenspan said i'm the one in charge. the legacy of that is there. lawrence meyer brilliantly described it from 25 years ago. jonathan: an agreement from the doves and hawks to say project more to come and may be agreed to hike in the next meeting which is a few weeks away. if you're just tuning in, welcome to the program. cindy -- the equities are as follows, a touch softer by .4% on the s&p 500. secretary ellen touching down in beijing today. the conversations in china. tom: we need to find someone qualified and the qualities are that chair yellen's cholla --

chair yellen is chair yellen and secretary ellen is secretary ellen. michael hersen of eurasia group now head of china research. in the zeitgeist on yellen's trip, what is the thing most off of the mark? what we need to know that is not being reported right now? michael: that's a good question. i think what is most off the mark is maybe there's a sense which i think is accurate that there are not really going to be any deliverables from this visit. i think that is fair to say. but this is one of the occasions where just establishing the lines of communication is not sexy but in this case it really is important. we've got a new economic team in china, a relationship that is badly frayed, and we have the two largest economies in the world and the chinese economy

that i think is coming under significant pressure. i really think this is both a trip that is not going to produce much directly but [indiscernible] tom: what's important to me is british phrase overcome by events. how important is beijing and their leader overcome by events where they have to radically change their tone with america? michael: i don't think that they are there yet. i don't think they feel truly acute pressure such to change the relationship with the u.s.. i think there is quite a high bar to get there. but i do think that there are risks of accidents in the relationship. the balloon episode clearly showed that. there are also risks of accidents on economic side. whether that is something happens -- that happens domestically in the chinese financial system or u.s.

financial system where that happens between the two sides when we have these pressures for decoupling or de-risking or whatever you want to call it. we have had reminders this week about pressures, speaking here of the chinese moves to impose export controls on some metals used. ham potential u.s. restrictions on chinese companies using cloud computing. there's a lot of risk for accident and that is why i think those channels are important. they will not be resolved on this trip, they are probably not going to be resolved at all. the ability for yellen to make contact with this team so that if they need to make a follow-up call they know who is on the others of the line to establish the dialogue, i think that is important. jonathan: language is important. we hear decoupling and de-risking a lot. what is the key distinction between the two for you? michael: honestly neither of them are good. i think decoupling was clearly not the right framework because these two economies are not

going to be separated from each other. de-risking i think it's a little better but also does not capture. de-risking sounds passive, sounds innocuous. what we really talking about is i think a dynamic and this is academic speak but i think it is correct here, weaponized interdependence. these are two governments that are really using supply chains, sanctions, different tools, to try to achieve an edge and try to influence each other's behavior. so de-risking is to innocuous to describe what is going on. jonathan: it seems to me they want to identify specific parts of the economy in china that they want to stop the u.s. business doing business with. do you think that is possible? to do that with a country like china? michael: i think it will be very difficult. i think the areas that are now

defined by national security concerns in both countries are becoming much broader. national security is an issue that is moving into areas like biotech, that normally would not associate with a national security issue so i think it will be quite difficult and i think the other challenge is that -- this is why decoupling doesn't make sense as a concept -- decoupling is a macro term. you can look at u.s./china trade continues to rise saying decoupling is not happening but the story here and some economic risks happens at the supply chain level. it's chokepoints, it is what happens of china does not allow certain rare earths to be exported? it is the impact usm a constructor -- semiconductor restrictions are having. it is not at the macrolevel we need to worry, it is at the intricate, complicated supply chains that frankly policymakers don't understand. jonathan: that's something we

have to all work harder to understand. michael, thank you very much. i think any easier question to ask, what is a national security concern with regards to these two nations are now? tom: i agree. i think it is linked to what i would look at is underreported that pacific expansion of the u.s. military. i remember trump clinton, clinton trump, the massive bipartisan agreement to walk away from some form of transpacific trade agreement and it seems like that might as well be 40 years ago. now we are to the point where we are figuring out where to put the next base to look for submarines. jonathan: you think anyone wants to introduce the concept again? i don't see that happening in the politics at the moment. tom: based on what i read and particularly from greg valieva who has been great on it, i don't see that coming up. i think the g7 meeting in italy,

the number of quarters, is really crucial. jonathan: 12 months from now. i think it is so important. that we attend the g7. together. tom: the security is so strong. jonathan: it is massive in fact. i think that might be the most significant g7 in the history of g7 summits. tom: since churchill and fdr off of the coast of newfoundland. [laughter] jonathan: and we will be having a conversation about why we should be there in 2024 to a trend that -- attend that. ♪

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jonathan: live from new york, welcome to the program. plenty of economic data through the next several hours and into tomorrow. payrolls are on corner, jobless claims, adp report, job openings shortly as well. your equity market a bit softer, negative on the s&p 500, down by .4%. snapped a three-day winning streak yesterday, taking more weight off of the recent rally over the last few months. here, double-digit gains on the s&p, phenomenal stuff relative to beating down expectations. tom: i got four to five places to go looking at the bloomberg launchpad and i will go to the two year yield where we have 5% print. we are not there yet but we're getting there. the other data i see is the 22 followers i have. jonathan: i can see you are

distracted. have you threaded yet? tom: i have not threaded yet. i'm following up on people with the british graham p -- grand prix this weekend. have you ever been? jonathan: i have never been in we should go. maybe we could fly. tom: is it different than the others like austria where it is wider but not stupid wide? jonathan: have you seen what has been happening with wimbledon? tennis? tom: everybody there is on threads. jonathan: they have been threating as well. tom: i want to get to the bond market briefly. the two, yield up by couple basis points. when is lisa abramowicz back? for 97 on the two-year, 498 earlier, close to 5%. higher the year, either that higher the cycle, not many miles away, away from the banking delays and we put that yield back on top again.

tom: real yield coming through in the tenure inflation-adjusted yield matters. psalms with decades of experience, our next guest. i want to cut to the chase, how do you identify a second leg of a bull market or you hope and pray? i'm looking at a summer and not a discontent but a summer of building walls of worry. that sounds good to me for equities to go higher. >> not only good, i think it is necessary because what we had going for the market in october was the trifecta of an oversold market technically improving under the surface even though the index has taken out the prior june low. you had really washed out sentiment. fast-forward to the recent period, they have gotten arguably frothy on the senate measures and behavioral side of measures. you look at things like equity

etf and flows, 80% were in equities out of all etf flows in the last month. sentiment has gotten stretched and you rightly point out that it is not just about nominal yields but real yields which are up. disinflation has not re-accelerated and given rich valuations and multiple expansion, which is nothing to do with earnings this year, it is all multiple expansion, i think there rise in nominal and real yields is starting to take a bite out of rich valuations. tom: how do you participate in equities if the margin you sell shares, do you make a dramatic move to the triple leverage cash front? and what you do if you are in it, your modestly or frankly really successful in equities the last 12 months, what is the action plan? >> i think there are three action plans, two of them are back to traditional disciplines but maybe with fine-tuning. diversification, this is one having international

diversification is to your benefit and our bias has been on the developed international side then em side rebalancing, but a nuance there is maybe considering portfolio rebalancing but calendar based rebalancing. like traditional funds, some individuals do it once per year or couple times per year and let your portfolio tell you when it is time to make an adjustment adding low, trimming highs i like to say and as you know we have been factored focus with a quality wrapper around factors, a strong free cash flow, healthy balance sheet, so funding companies that do not need to go to the banking system more credit markets, positive earnings revisions, positive earnings surprise, so we think focusing on the quality-based factors that span on the growth factor side of things and value factor side of things is the way to approach what you are doing inside your equity allocation.

jonathan: wonderful to hear from you. . the conversation we've had the last couple months, the a lot of people going into cash that have felt trapped and missed out on big gains. could you give us insights on how conversations have begun with clients who have been in cash and may be putting too much money into cash? >> i think it depends on the client. what we find is a lot of our investors that are yield oriented investors even with the bit of a mess on the performance subside are perfectly comfortable locking in the 5% after years and years and years of having to go way out the west -- the risk spectrum. i don't need to remind you, you talk about it a lot, the concentration aspect. if you are an index investor and you are out of the indexes, you did not get the cap weighted benefit but if you are an individual stock picker, given until recently, how much equal weight has underperformed cap weight, you would have had to

been in the mega cap eight names because that is where the vast majority of performance has been , whereas the other stocks, 492 stocks, at the end of may into the beginning of june, it was record percent of stocks, outperforming the overall s&p index over the prior three month period of time so depends on who the investor is but you needed to be in the cap weighted index to match that return unless you just were in the mega cap. jonathan: you mentioned international briefly, could you build on that on how maybe people should take international exposure, particularly those that have not done it before. >> from the perspective of schwab, our asset allocation models in terms of what percentages they apply depends on whether you are on the conservative end of the spectrum or more aggressive end of the spectrum. we do not pick individual

countries on a regular basis but emphasis within developed markets has been more japan than europe. because we approach it more at the developed markets versus em, there is any number of ways to take a somewhat passive approach to get the exposure with how you have to pick individual countries. tom: where's the value that is not a value trap? i want to talk about energy but tell me i'm wrong. there's another sector that is an opportunity rather than trap. >> energy, i'm glad you mention because it is generically confirmed -- generically consider value but because of massive earnings growth, not this year but even in the year prior, s&p does rebalancing in december versus russell's which happened last week. what happened with s&p's peer growth index, december 18, the

day before rebalancing, peer growth was 37% tech and had all eight of the mega cap eight. december 19, s&p peer growth was 13% tech and energy was the largest weight within p or growth. and only one of the mega cap eight was still in peer growth. so energy was a growth area last year, in terms of the fundamentals of earnings growth. we generically think of it as value but last year it was the only sector that was up. it was mostly in the value indexes until the end of the year and then moved into pure growth. i think you want to focus less on monolithic sector calls or even style like growth value calls but don't put blinders on it to sectors. there is a way to look for value screen -- value, screen for value, and applied to growth sectors because there is value within those sectors and often growth within the sectors we generically think of as value sectors. you've gotta be more open and

think about growth and value as characteristics more so than index labels. tom: help me with everyone in passive land. it has been a great ride for passive i would say over 10 years, and they becoming out of 2009. just at schwab in general, do i want a less r squared not passive approach or do i want to stay on a passive, whether it is spx or something else? >> we are not or folks, we are and. we think there is a home for both. it is also a function of who you are as an investor, are you purely just looking to match some particular index. we think -- last year active did better than -- active had i think the best year since 2005 in terms of percentage of active managers outperforming their benchmark, equal weighted well. last year, correlations are coming down. i would not be surprised if

equal rate starts to emerge relative to cap wait and that is to the benefit of active. that does not mean active will leapfrog past, it just means active may, like last year, having more leveled playing field on which to compete relative to passive. it is the individuals choice for a variety of reasons. tom: it's fascinating where we are and i want to harken back, you are too young to remember this but there was a big lift in 75 to 76. zeppelin was out and i think it was on the west coast. and all of a sudden there was a secondly to a bull market which at the time i remember this clearly no one saw coming. are we there now? >> i think too soon to tell. you are right to point out 75 but that was the beginning of a cyclical bull market, it was an ongoing secular bear market that did not end until the early 80's. interestingly, 1975 and 1983

where the two years where the performance of the nasdaq in the first half was stronger than what we saw. this was the third best first half. you are at the beginning of cyclical bull market in 1975. that meant he still had upside but unfortunately that had a significant amount of downside. 83 is a different story because you were in the beginning of the secular bull market. in both cases, the first half strength gave way to second-half weakness. it was more what happened to be on that i was defined by the secular nature of the environment that we are in. i don't think we are in a secular bear market. i think what we had with the covid bear market as well as the bear market last year, assuming it is over, i think we are cyclical bear markets in an ongoing secular pull but we are in some sort of tricky state

where it is hard to figure out what the next 10 years looks like. jonathan: clinic as always, thank you. you very much for joining us on the equity market. the surprise of the year. the performance we have seen in stocks relative to the start of 2023. tom: you have to go to stocks but other places as well. that is why it's july, it was like the italian island but humidity. there's a lot going on here in these two days of economic data coming up in less than two hours. i will go to the tenure real yield, 1.7344. big figure i'd is, i've never heard that phrase. big figureitis, 4% that, 5% this and i will take it to foreign exchange, 16.99 on dollar max is

a big figure. that is a shock to people. stephen engle who has a look at that as to go what happened? jonathan: it's amazing what you fit in there. nhtsa bound my vacation, a little bit on cake jukes. tom: arsenal top september 23. he's got like six season tickets. jonathan: he's got sue season tickets. would you like to attend the game? we've been to the emirates together. tom: my good friends at the tots and say, you know -- >> i believe we watched the north london w together. tom: did we? i was at the linz borough having a cigar. everyone that works at the lanes bro cigar bar supports arsenal. jonathan: i have not missed to at all. let's talk about the market reaction to fed minutes.

to sell the longer end of the curve and equities, tents are getting closer to 4% and big figureitis may take it hit. we are close to that, the tenure, 398. citi coming up later on this morning, catching up at 8:15 eastern. from new york, this is bloomberg. ♪ 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.

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>> did you see storm -- storm clouds on the horizon and we think the risk of recession has risen. i think the fed will continue to hike rates and i would not chase the rally too much. stick to your asset-allocation rather than moving things around. jonathan: the spider-man meme, have you seen that where there's

two spider-man doing that to each other? you've never seen that meme? the two spider-man that point? tom: i've never seen two spider-man movies. jonathan: this is just a, we can put it on the screen. you must know this mean. tom: no. [laughter] jonathan: i don't? -- you don't tom: tom: know that i don't know that -- jonathan: you don't know that? tom: i don't know that. these two guys are really rich, they buy seven medical educations in america. jonathan: i think some of them are doing that anyway. i'm sure they are. tom: i think it is all sort of step up and do something substantial. pick the city. jonathan: you are saying threads is not it? tom: it's fascinating. i look forward to this conversation. how are you doing with threads? are you verified yet? jonathan: i did not. i had the ferrotv handle on

instagram. i have that on threads. i could not pull any followers because i did not have any, i have four on threads. it's going really well. tom: bramo and the tribe following you? jonathan: thank you to those for followers, i will never forget you. tom: let's talk about this buildup. john and i normally ignore this stuff but the day seems different. alex webb is with us and he looks at this 24/7. is this day different, alex webb? >> it does feel like they've really gain traction very quickly in the most recent numbers we know in excess of 10 million users, i was the 10,000,300 something thousand users so there are a lot of people adapting it. that is faster than any app we've seen launched that i can recall. they talked about chatgpt having

a record laundry and that was one million users in a week. the challenge is, as a total percentage of meta-user base, in the order of 2 billion, it's a percent of that. is he going to be damaging to twitter? potentially. does it help meta-? at this stage, not yet. tom: instagram is different from twitter. will threads be different or will they copy what mr. dorsey and then mr. must have done? >> pretty much looks like it is a clone of twitter. there are some differences, you don't have the stage have the ability to have in your fee the accounts you follow, feeding other stuff in there much in the way that others do and instagram does. it does not yet have a desktop version. i suspect that might be a big deal given the turbo users, the people that generate a

disproportionate amount of the content often do so from desktop platforms such as tweetdeck. that does not mean these functions won't come. there is a suspicion that facebook or meta-accelerated the introduction of this to capitalize on the problems we've seen in twitter in the past week, capping the number of tweets to restrict the load on servers? -- service. jonathan: twitter had many ceos over the last decade or so. it has never been a phenomenal business. i'm wondering what medic can do with its version of twitter that various people have not been able to do with the actual platform. >> ads. twitter has not had an effective advertising machine. that is meta-'s core competence -- meta's core competency. they have close fillet ships with brands, brands see platforms as a safer space to be in twitter.

twitter, you never sacrifice that much of your personal data to it. you don't have to to be able to use it so a lot of it was contextual, you can infer from the accounts you followed what things you're interested in. meta-has far better data on you already given in order to have a threads account you have to import it from an instagram account so they can do better targeted advertising even with some of the controls by gdpr and similar legislation like california for instance. they can pump existing as into structure into threads. they have the potential for more upside than currently seen in twitter. jonathan: we are having this conversation in the united states and you are having in london. it is not a conversation you can really have on the continent within eu area did what is happening with that and why was that an important decision to make? >> there's a new set of legislation in europe which essentially restricts the ability for companies to port data between different services.

it is something that regulators in this part of the world do not like when you leverage strength -- i should say in that part of the world a leverage strength in one business to generate strength in others, the things google and others have been fined for in years. this is what the businesses, you take your instagram user base and porting them to the new app. therefore, in order to see whether they can find a way to make it work, it seems they are not offering at this stage threads in the european union in order to reduce any legal vulnerability that might emerge. jonathan: do you think that will change? >> i suspect they will find some sort of work. it seems at some stage threads should be able -- you should be able to sign up without an instagram account. you can see why they have not done that to begin with, partly because you have a free formed social networking graph where i open the app and i'm already engaging with people i know from

other platforms without a huge amount of legwork. that would seem to be the obvious fix to it. an accelerated timeline. you can see they would maybe do that. tom: without doing fancy differential equations or power functions, blah blah blah, how do you get to critical mass and where does alex webb think threads -- where you guess the timeline is to where they get to so-called critical mass? >> i think they need to be as biggest twitter which is 300 million users. that is when i think it starts to become meaningful for meta-. they have 2 billion users across their various paps. i think her instagram as well, half-billion, those are valuable users because they are often in the super attractive 18 to 35 demographic. i do not know how they will get to that point.

10 million is a great number out the gate and i suspect they will not add 10 million per day for the next 30 days. that would be a huge ask for twitter 15 years to get to that point. nonetheless, it is an impressive start. the reaction in the share price i think is a good gauge for how people are seeing it. at the moment in the premarket, it is up 1.5% so it is not gangbusters numbers on that basis but positivity. jonathan: you do wonder how twitter would be trading this morning if it was a public company after that. that unveiling last night. would you expect there to be a change in approach to the way this company has been managed, twitter specifically with elon musk given what we have seen develop in the last 24 hours? >> we long ask ourselves what elon will do and goodness only knows. in any typical company you would expect there to be a reaction, you retrench perhaps, return to fundamentals with twitter but elon does not necessarily operate companies in the way

other people do. the new ceo seems her job is to forge stronger relationships with appetizers. -- advertisers. she able to say appetizer -- advertisers one thistle were able to do this? two or three people know the answer which are elon musk and others. alex webb, thank you. meta-unveiling its twitter app killer overnights. tom: i remember when pinterest came out and everybody was gaga on pinterest. some people said sign up and tell us what you think. tom: it never got to critical mass of me and quickly with a lot of other people. it was like very good for wedding planning or diverse planning. -- or divorce planning.

but is that critical mass like the big ones? i absolutely -- you asked the right question, what would be mr. musk's response to what we have been witnessing. jonathan: it has been a haphazard approach to the platform, treating it like a startup from many perspectives. it will be interesting to see how seriously he takes this and i wonder where twitter would be trading if it was a public company. i imagine it would be down in the premarket. based on what we have seen. tom: i don't know, fascinating. alex is very fascinating. when i get to 100 followers on threads, i'm not there yet. jonathan: that could be this morning. 19 threads followers, number one fan. appreciate the love, to 19, this is big-time stuff. john hancock up next. ♪

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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 has been more sort of -- >> it is interesting. >> what is important as what is driving up the market and how much more it can go. >> the giant stocks get bigger and push the indices higher. >> i would not chase the rally too much. >> this is bloomberg surveillance. jonathan: good morning. this is bloomberg surveillance on tv and radio, alongside tom keene i am jonathan ferro.

going into payrolls on friday, jobless claims later this morning. some services data as well. let us see if that is captured by the index in the united states. before we get to all of that, need to talk about the bond market in front of us right now. yields higher by two or three basis points this morning. tom: we are on the watch, economic data could shift. look at the data as one measure of the labor linkage into the spirit of the economy. 1.73 percent, that is a jump condition. against new highs in the 10 year , there is a lot of value versus the nominal yield, inflation-adjusted yield. look at the level. jonathan: let us talk about levels in the u.k., 540 on the two-year. a real conversation.

there is a real conversation in london about the prospect of going through six on bankrate at the bank of england. tom: i was going through my photos, i am trying to get verified on threads and had to go get proof of who i am. the basic idea is iran across the photos from august, 10 months ago as well. this is a different jackson hole, how do you rationalize society, part of england flat on its back and part of it is like it does not exist. jonathan: we have reflected on what happened in the jackson hole symposium were chairman powell talked about the need for pain. you certainly do not see it at the level with unemployment expected to drop again tomorrow.

approaching 4.5 on percent -- four per 5% employment by the end of the year that shun employment by the end of the year. -- four point 5% unemployment by the end of the year. tom: it leads to almost -- which walls of worry do you want to climb? there are developing fast. jonathan: you can take a look at the various surprise indexes, u.s. or u.k.. that is data coming in relative to expectations. it is the most positive it has been stateside since 2021. we often give a shout out to for macro, let us give him another one. the homebuilders here today are up by more than 40%. never mind the recession debate, there is a conversation happening about the prospect of

things improving in certain parts of the economy. tom: this is really important, if you look at a labor economics textbook, chapter two you realize you are lucky to get a quality see. one of the things optimism comes from is you have wage growth and inflation comes down, so inflation-adjusted wage improves. it yields a very big on that being an understated idea, going from 2% economic growth to wherever we are right now. jonathan: negative zero point 4% on the s&p, just a touch softer. onto payrolls tomorrow. if you're interested in the median estimate, those numbers are coming through. 225 is the estimate at the moment for tomorrow morning. you will get an appetizer, we

call it the appetizer for payrolls later. that is expected to come in at 225, the previous number 278. tom: average hourly earnings, i am going to focus on the wall of bloomberg data. you mention u.k. rates, can we talk about german two-year? i think it is flat on its back from 0%, negative interest rates january of last year. they pop up and now they are ready to break through the new highs, that is germany flat on their back. jonathan: let us get to emily roland, wonderful to hear from you. you have some people on wall street forecasting recession, other people saying things are set to improve. where are you? emily: this is a tricky late

cycle environment where things often look great right before they are not. you had ed heineman yesterday talking about this, how the late cycle environment as lasting a long time. that typically only lasts about six months, we are month 10, 11. we went to 18 months there. you are seeing a lot of chopped in the economic data and yields, you want to participate in the market because risk assets can see the big swings higher. you were talking about the european grand prix earlier and it got me thinking about how you want to participate in this market. it is sort of like drafting in car racing. you do not want to be out front taking on too much risk, you want to participate by owning things like higher quality assets and leaning into bonds.

tom: i get all of that. i want to know, do i want to be in the market or not, given the way my head is spinning with the data? are you participating in equities? emily: you want to be there right now. you can see the massive swings higher in risk assets. you almost see investors celebrating this idea economic data has come a lot better than expected in many cases, you want to think about this pivot party that is going on right now as investors celebrate the idea the fed is getting to the end of its tightening cycle. we have a hold and cuts in 2024, so the pivot party can be powerful. you want to go to it, but you might want to think about sipping on a light beer instead of reaching for the tequila. you might have regrets the next

day. jonathan: if you ever reached for the light beer instead of tequila. tom: you do not know what coo rs 32 beer is. david had a keg of in his room at colorado college years ago, it was some midwest evangelical thing, i do not know. this is all before light beer. you were getting shot in vietnam, but you were too young to have a bud, so you had a coors 32 beer, think of it like a coors light with a glass of water. jonathan: it is worse? tom: yes. he had a keg of it in his room, that is how he got through physics. jonathan: how do you think but sales did over the july 4 holiday? tom: i think in terms of

marketing and advertising, the debacle at bud light really needs to be studied by every institution. jonathan: look what you started, emily. let us move on. talk about sectors you like and sectors you want to avoid. emily: we continue to lead into quality, companies with a great balance she and a limited need to tap the capital markets in order to grow. that leads us to the technology sector and u.s., which has an abundance and technology stocks compared to the rest of the world. we are starting to see market leadership broaden, we are worried about valuation risk. we want to look at parts of the market that can protect portfolios from that. mid-cap value in particular one of the only areas trading at a discount to its own history, that it's another area we are

looking at in portfolios to diversify. leading into bonds, you are getting 5% on high quality bonds. that is another place we think there is a great mix between risk and return. jonathan: if i remember correctly, you did not jump on the international bandwagon at the start of the year, why was that? emily: there is an idea there is going to be this immaculate economic cycle where potentially the u.s. goes into a recession but the rest of the world avoids one and that has never been the case. we continue to believe we are going to see a global economic recession. look at the pmi's on the manufacturing side, germany is at 42 and european equities are at all-time highs. the macro economic factors does not match with a asset performance. when you think about owning european equities, it is cyclical.

they tend to do better early in an economic cycle and we think we are in a late cycle environment. we do have some of in portfolios , overweight and emerging-market equities. the better time for europe is going to be in the future. jonathan: wonderful to hear from you as always. tom: she covered it all. i had no clue. jonathan: very excited about wimbledon. tom: she was talking about grass and the f1, and nascar there is a big draft because they are big cars. f1 cars are so low -- they do not have the same -- he gets a little bit of a 10th of a second. jonathan: then you pop out and press the button. tom: seriously, help me here.

jonathan: i am not a big fan. tom: get rid of it, i am the same way. to your conversation with christian horner, i think it has been underplayed. it is unreal. jonathan: to come in just before the last slap and put a pitstop, to get a single point -- tom: we are not going to commercial, this is too important. sky tv has great coverage, they ignore him because he is so far upfront. no one in american sports would do that. jonathan: that has come off the back of the netflix series that they look at the races from the back of the grid. i am not interested. welcome to the program, equities this morning down about 0.4%. coming up in about 48 minutes at

about 8:00 a.m. eastern, we will catch up with dominic konstam. tom: this guy is fabulous, he owned the high ground at credit suisse years ago. ira jersey and others put out a definitive linkage of the economic system into what fixed income said, i am fascinated with what the update is here. so much of where we are now is where he said we were and he invented this phrase, super restrictive. jonathan: are we sufficiently restrictive? if i told at the start of the year were interest rates would be in july of this year on a two-year at 497, if i told you where that would be, would that help you make your equity call? tom: germany is flat on its back. i do not -- jonathan: you can make the rates call and even if you have all

that information precisely in hand, sometimes you still get the equity call wrong. tom: the choice is so small, there are so few companies to get it going. jonathan: the treasury secretary touching down in beijing. jeannette lowe next. ♪

>> just establishing the lines of communication is not sexy, but it is important. we have it or economic team in china, we have a relationship that is badly frayed and we have the two largest economies in the world and a chinese economy coming under some significant pressure. this is a trip that is not going to produce much directly. jonathan: valuable conversation this morning with the head of china research, the treasury secretary touches down in beijing to meet with her counterparts in the chinese government, the second hole prior -- second high-profile trip in the last couple of months. tom: you make an appearance, you go through the motions and it is

a good and beautiful thing. 7.23, this is a devaluation of the chinese currency. you can rationalize it however you want. as she comes back to the united states, if china struggles and you see it break down further, i do not think it is the same as it was six months ago. jonathan: we used to talk about deliberate manipulation of the currency to weaken it, devaluation is loaded. is this depreciation or something else? tom: the difference between devaluation and depreciation, you are dead on. maybe it is not as fixed and devaluing as it was before. nevertheless, could be depreciation off of a struggling economy. leland miller made it clear, he said this is baloney, china is doing better than we think. jonathan: we are about one hour

20 minutes into this. take a vacation. tom: you have more followers than i do. jonathan: check. 28. [laughter] tom: that is pathetic. tom, can we hope you over a cup of coffee? 25. excuse me, 75. jonathan: we are not playing anymore. the market looks like this, futures negative zero point 4% on the s&p. you know deep down i am unhappy about that. tom: sam put me over the top. jonathan: getting closer to around figures of 5%, 4% on the curve, two-year versus 10-year.

let us call it -100 basis points. tom: the next two days really matter, one hour 15 minutes away from a slew of economic data. there is policy in washington, as well. jeannette lowe, thank you for joining us. i want to move forward, secretary ellen comes home, the site diced is clearly not much is going to be done. then what? in august, september, january of next year, how do we amend our relationship with beijing? jeannette: it is a great question. i think yellen is going to china to try to reset relationships, which is everyone's understanding. she is trying to tone down the rhetoric we've seen the past couple of months, we had issues with planes coming close to each other, ships coming close to

each other in the south china sea. she is trying to tone down the rhetoric and make it less about decoupling and more about de-risking between the u.s. and china. part of that is to keep the negotiation points open. there are new teams in china, she is trying to build up new relationships and start to have more conversations, military to military conversations. but i think the biggest thing is this trajectory is not going to change. the u.s. and china are on trajectory to have the u.s. continue to d risk in key sectors and we will push allies to do the same. next week the house will come back from recess, they will be debating the national defense authorization act and they already have amendments they are talking about putting on outbound investment controls. tom: while you are talking, we are showing videos of everybody's smiling, grinning. let me take the side of the

conservatives and some democrats , liberals and conservatives in congress, i'm going to pick on marco rubio as someone who does not trust this. the chinese are doing the smile meet and greet thing, what do they want from us? jeannette: they would like us to stop the tech restrictions we continue to put into place on semiconductors, because that is definitely putting a bit of a hamper on their development of key technologies they believe is important for them to have a greater dominance within the world. i think the fact that they announced having critical minerals, export controls on those on monday, people are calling it a bargaining chip and it is a way for them to say we have ways to retaliate against you if you are going to do these things to us. some may be a way to try to get some concessions, but i do not see many concessions coming down

the road. the u.s. is continuing to move down this path, but we continue to add pieces every couple of months. we started this last october with export controls, we will continue to do so. the president is expected to put out outbound investment to review u.s. investments into china, potentially this month, potentially at some point this year. the u.s. trying to block chinese companies from using u.s. cloud services so they do not get around the semiconductor issue. that is another thing on the table. i think we will continue to add pieces, but the u.s. and china need to talk. jonathan: we are hiding behind a phrase, national security. what is not a national security issue with regards to the relationship between these two nations? jeannette: i think now the u.s. is particularly starting to take

a much bigger view of this. we are looking at things like farmland much more closely then what is in missiles and what we need for certain ammunition or things like that. the definition is getting broader, it is interesting that china used the national security line when they announced export controls on monday. now everyone will be able to use it as their argument going forward, it definitely makes things more difficult. we are moving into a new environment that is much more about deglobalization than globalization. it is going to be a lot more difficult to parse the free trade we have normally seen amongst countries if this is the new dynamic that we see. jonathan: do you see europe on the fence? jeannette: we have seen europe move more and more toward the u.s. direction. i think the fact the u.s. got japan and the netherlands to agree to export controls on semiconductor equipment was

quite important. i think you are seeing europe -- while it wants to move more cautiously, it is more in the camp of seeing the risk with china. similar to what they saw with russia and the war in ukraine and having too much reliance on russia, that is becoming more and more clear. how do they go about doing it when they have so many members they have to deal with consensus? jonathan: an important trip for secretary ellen, we have got to leave it there. janet yellen touching down in beijing to kick off a series of meetings with her counterparts. tom: i wonder if she is opening up a threats account while she is in beijing. it is serious, to take the side of the china critics, what does the diplomacy signal? shake hands, smile. you are just doing it, you are showing face and you are there. but what is going to get accomplished?

i am trying to follow people on threads, i'm trying to follow annmarie hordern. jonathan: you are distracted. tom: it is clumsy. jonathan: she is big on instagram. tom: are you on instagram? jonathan: not really. i have the handle, but i've never posted anything. tom: i had to sign up to do it, it is stressful. tom: i have never been a fan. anyway. ♪

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jonathan: are you going to do any work this morning? tom: i am trying to figure a trade with mark mccormick. jonathan: work that out. welcome to the program, a little soft on the equity side of things. down by zero point 4% on the nasdaq, small caps underperformance over the last 24 hours and again this morning. tom: i am looking at economic data, i think we've undersold it. one hour from now, we begin 25 hours of absolute crushed insanity before the fed meeting in july. there's a whole bunch of things to follow. jonathan: 45 minutes from now,

the early report, the appetizer for the big one tomorrow. tom: terrible, recession level. jonathan: jobless claims one hour from now, looking for a tick higher. then, job openings. looking for that potentially to break 10 million, we will see. a little later at the same time, ism services, a read on the services sector for the united states. manufacturing is not doing great things, let us see if it corresponds with services later this morning. tom: we have a lot else going, let us tilt to foreign-exchange and do a review. maybe -- the bloomberg dollar index, 12:31, the bloomberg financial conditions indexes more accommodating, that is not

what powell months -- wants. jonathan: just short of 109, right one await 94, positive by zero. that is covid 0.4% on the euro against the dollar. mark mccormick calls for another pause. for u.s., disinflation is the main driver. out of consensus call, u.s. disinflation is strong enough for the fed to skip july, effectively ending the cycle, would reinforce lower macro volatility, tone late cycle growth dynamics and boost carry. tom: we are thrilled to have mark mccormick with us. i have eight ways to go here, but the only way to go is for you to define what kerry is for mere mortals.

your good competitor at deutsche bank, the entire essay this morning was on carry and asian carry. that is greek to our audience, define a carry trade. mark: it is the way of looking at the dispersion, the gap between interest rate differentials, higher yielding in latin america and eastern europe versus low yielding currencies, basically asia and parts of europe. you are funding out of lower yielding currencies into higher-yielding currencies. the most important component is volatility. we look at interest rate differentials and adjust based on volatility, then the carry model looks for the appropriate basket to treat it based on the dynamics. tom: it is a field day, what does a signal that there is such an imbalance in global effects? mark: the hiking cycle started in emerging markets, they needed to get the credibility.

kind of the first one in, first one out concept. everyone feels confident that central banks are going to cut in the second half of the year. i think the main thing here is that in these parts of the world, we are seeing the greatest dispersion and interest rate differentials. the places you are funding are parts of the world where there is disinflation. if you look at where people are easing policy, it is in china and asia. you are funding out of a currency like china and buying a currency like india, brazil or mexico. higher quality. particularly with india, equities have done white -- quite well in the second quarter. jonathan: we read out the quote about fed policy, can you tell me if that is an expectation? mark: we thought they should have hiked in june. what we think if there is a data

dependence narrative, that the data was strong enough and robust enough for them to have hiked in june, which is part of the context of the minutes. there was enough to say we could have went. our view is the inflation forecast is strong enough on the downside in disinflationary terms that they do not need to hike again. i understand after the minutes it seems increasingly unlikely and they will go in july, but we still have payrolls and another inflation report. we are pushing for the inflation forecast to underscore the fact that disinflation is happening. we are seeing it globally in all these countries, it is just not moving as fast as policymakers would like. the u.s. economy is slowing significantly more than others in the second half of the year, so they do not need to keep moving. jonathan: set the bar for us,

payrolls on friday, tomorrow. cpi next week, core cpi. where does the data need to be for your call to deliver? mark: this is the one thing that is interesting. we are not opposed to stronger growth. when you have stronger growth, you have disinflation. we are slightly above consensus on growth tomorrow, we are looking for 250, 260. we're looking for a .2 month over month print on inflation. jonathan: core cpi or headline? mark: core. that allows us to move into the disinflation category. inflation surprises globally, particularly in the u.s. -- if you look at emerging markets, inflation is surprisingly on the died side -- downside, relative to expectations. i think this is one of the values you do in fx.

if you look at inflation expectations over time relative to consensus, we seen about 60% of the countries we track with disinflationary forces over the last three months. if we get good growth numbers, the fed does not have to be worried if inflation numbers are coming in softer than expected, which is what we are anticipating. tom: someone said can you talk to mark mccormick about peso? forget about trump, clinton and all of that. i to get back to 1995, i did and extrapolation of the weakness in mexican peso forever. we have advanced strong mexican peso, almost three standard deviations, like we've never seen since 1995. how does that change life in mexico, how does that change life for america? mark: the mexican economy is

linked specifically to the u.s. economy. one of my favorite indicators is ism new orders component. it is good at capturing the manufacturing base that mexico has coming into the u.s.. i do not think the strength of the courtesy -- currency is a detriment. it is intermediary of pulling things together then shipping things back off into the u.s.. the currency does not have a dramatic impact. we have seen over the last 10, 15 years that those models of international trade were if you get a stronger currency than see slowdown in the economy, they have not worked. there is usually two to three years worth of legs. they are not working. the most important thing happening in mexico is it has been linked to the relative strength of the u.s. economy, but is also the best performing carry currency across the world. brazil, peru, mexico are three

of the highest yielding lowball currencies. i do not believe in the week peso story, i think the flows are changing. i heard your prior guest talking about the geopolitics between the u.s. and china. the re-tweaking of global supply chains is bullish for the mexican peso. jonathan: you mentioned a new orders component, it has been sub 50 since the end of last summer. why the call for mexican peso? mark: you can look at data surprises, data strength, pmi's, ism. if you look at the strength of u.s. data, it is in the hundredth percentile. u.s. data surprises are in the 50th percentile, it is coming in better than expected. the strength of u.s. data is still insulating mexican economy. no one is looking for been

eco-to cut until the second half of the year and that falls into our expectations of the fed cutting in december. a resilient u.s. economy from a data perspective helped the mexican economy be generally resilient. we push back expectations they will cut. even if they do cut, you are looking at double-digit interest rates. what you need to break the carry trade apart is the global recession, which we are not calling for the next six months. chinese growth is -- we are sub 6%, probably 5.5 to 5.8. it is peak pessimism. if you think about how this was linked to the dollar -- there's a lot of focus on the u.s. strengthening the economy in may. the bigger driver of the dollar is the complete capitulation of china data surprises which went negative in about four weeks.

the market has gotten so pessimistic on china, on europe, our models show the relative to what we are expecting, there is value in some of the asian currencies. what we like doing is easing financial conditions, it is good for korea. the indios and craddick story in india is good. asia in itself is a relative value play on a relatively less strong -- jonathan: i have 45 seconds left, you through europe in that bucket. where does that leave the euro? mark: it has become somewhat boring in this context. it is in the 107 to 110 range. there is a push and pull. the growth story has gotten really week. at the same time, terms of trade as a general boost. we have decent momentum. what we see a natural language

processing models, ecb is more hawkish than the fed. we are expecting less from the fed, so the rate differential stories supportive of euro being 107 to 110. the call for the u.s. to slide into a recession, good u.s. data to move the opposite direction reinforces the euro should break 110. jonathan: do you use the language models in-house? mark: we are all playing with them. jonathan: from new york city this morning, welcome to the program. equities right now negative about 0.5%. in about 30 minutes, we continue this conversation with andrew hallman horse -- andrew hollenho rst. then the latest with your new addiction, threads. tom: i still call it facebook, it is the perfect time to talk to ives.

we always end up talking about apple with him. today is a meta day. jonathan: ultimately leadership at tesla, he will have tons to say about that. tom: the underlying mathematics is fascinating. where do you get the emotional mass that tips it? jonathan: twitter feels messy, tesla is having a great year. tom: i have never gone and i still do not get it. bramhall -- bramo was good about this. jonathan: how many times have we heard that phrase this morning? tom: like a kelly clarkson thing, since you been gone.

i cannot sleep at night, i need therapy. it is expensive. i am vulnerable. jonathan: you are going to be ok, i will hold your hand and we will walk out of work together later. is that you singing? great song. we should play music on this show. when we did on radio, just on radio and not tv -- tom: we programmed it. john insisted we play clash. jonathan: i wanted to play oasis. ♪

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>> since the bull market has mostly been in technology stocks, do you see a pickup in other sectors that either catches up to technology, or do technology stocks keep running? the problem is once the headline names that are so big and the indices start running, it is difficult for the rest of the stocks because they get bigger and bigger.

you have a math problem where the giant stocks get bigger and pushed indices higher. jonathan: big tech keeps getting bigger, meta up by more than 100%. nvidia, tesla, microsoft, apple. double digits across the board. s&p 500 16% higher, nasdaq something like 40. futures negative by 0.5 percent, yields higher by three basis points. the conversation outside of the cross asset analysis of financial markets, very much the spat between elon musk and mark zuckerberg and it gets real overnight with the unveiling of what they are calling threads at instagram, a direct challenge to twitter. tom: for me, this is a nonevent, but it is so important we have to get right to it. dan ives has earned the

credibility. eight months ago, he was the dumbest guy, how dare you think we are going up? we have had a dan ives market from the third week of october 2022. what did you see in october 2022 the rest of us did not see? dan: fundamentals that we are going to be a lot more stable, a lot of the skeptics thought -- what we are seeing specifically in cloud into enterprise and even when it comes to consumer, names like apple, we felt like the bark was worse than the bite. starting in the fall is when we started with ai research. in my opinion, it was going to be the biggest transformational trend we have seen in tech. that combo is where we are today. tom: we got the indices this morning, threads at critical mass. dan: it will be difficult to get critical mass. the name of the game for

zuckerberg is further expanding instagram in terms of the cross sale opportunity, eventually advertising. they are trying to strike while the iron is hot. getting to scale will be difficult, but musk has an open opportunity. there's a lot of frustration building and i believe this is a drum roll to what will be the cage match this fall. jonathan: define critical mass, what is that? what is the number? dan: you have to start to get to 30 million, 40 million users. tom: they will have that by the end of the week. dan: you need to engage. it is not just about the users. sign-ups in the first seven hours, 10 million, 20 million. you get to 40 million or 50 million than scale to 100 million, but engagement on the platform is key.

jonathan: instagram has a preloaded base. there is no friction at all. it is that easy to execute. why do you have doubts? dan: if you look anything that has tried to challenge twitter in terms of any of the other platforms, it has been difficult. for zuckerberg, you have one billion plus users you can tap into. i think scaling other standalone apps -- the question is, how much resources are they going to put into this? is this a moonshot type project or something they want to scale? they went from position of massive weakness, going back to eight or nine months ago to now flexing the muscles for zuckerberg. tom: you are not on here yet. dan: i am not. i was waiting for you.

now that you are on, i will go on. jonathan: mark zuckerberg says i think this should be a public conversations app with one billion plus people, twitter had the opportunity but has not nailed it. a lot of people had the opportunity to do and they failed, what did they get wrong? why is mark zuckerberg the man that might be able to do it? dan: it is modernization. if you look at what zuckerberg has been able to do, monetizing has been key. ultimately, that has been the issue for twitter. they are trying to get it from verification, subscription, every which way. that is the challenge for them in this arms race that is going on in this space. tom: we all agree it has been a multiple expansion. how does an apple fan boy like you adapt to the multiple expansion of the various stocks

last year? dan: especially when i look at a name like apple where you go into a mini super cycle, i think multiple expansion is about the increased opportunity to monetize and install. that is why what is happening in cupertino, i think it has been what is on the others of the mountain. that is the key. tom: are we running terminal value out of it is five years, seven years? are we buying it because we think it is a nine year terminal value by? dan: that is my view. you are the professor. but that is why we believe 3 trillion -- this train does not stop. tom: you do not see this on radio, but he addresses conservative for us.

the shoes are outrageous. jonathan: do they dress down at the stock exchange? tom: it is a cultural thing. he might as well wear a tuxedo. dan: i need to address a little down, then later i am going to go on threads. tom: we are coming into earnings season, will they do it again? dan: i think this starts the road to 4 trillion, in my opinion. i think will be another trophy case not just quarter, but what we are seeing going into iphone 15 into september, which is why i believe this is just the start of the next cycle. tom: he knows the data. how many people have an iphone that is 400 years old where they will bite for the new toy?

dan: those who have not upgraded their iphone and four plus years, that is ultimately why apple continues to sort of own it. jonathan: i am holding off the upgrade at the moment. i do not see anything in the new iphone that i particularly want. is it quicker? tom: do not buy it. you buy it just for the battery life. the camera is better, you buy it for the battery. jonathan: that is why upgrade, because they kill the battery. dan: ultimately what i believe here -- it is not just about technology on the camera side or chip. i think this is the start of what is going to be the ai ecosystem being built out in cupertino. jonathan: what are you talking about with apple and ai, what is it?

dan: ultimately 12, 18 months from now, you will have a separate app store for apple that is ai apps only within the ecosystem. i believe for developers and the some of the parts, that could add 40 to $50 per share for apple. that is the next leg of the school -- stool. i believe it is a matter of when, not if. as much as the haters continue to yell fire in a crowded theater saying innovation is done -- that is why he is the ceo tactician like he is. great to see you. tom: i just followed noris on threads. he did not follow me back. should i follow girls think i'm funny? jonathan: i do not know what

that account is, so i cannot make that decision. he is an interesting guy. dominic konstam is joining us shortly. futures low, -0.5%. ♪

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>> we think the risk of recession has risen and i think the fed will continue hiking rates. >> if the inflation rate starts drifting higher, the fed will find it unacceptable. >> the high-end they go with the fed funds rate, the more likely they are to reach 2% inflation.

>> they will hike one more and then they are done. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. tom: good morning everyone. an important thursday for economic data. we welcome all of. it begins for 25 hours. jonathan: and tasty runway to july 26 which is the next federal funds meeting. payrolls are tomorrow, cpi is next week we have an adp report in 50 minutes, jobless claims in 25 minutes. tom: this hour, much wash -- must watch and listen for global wall street. it comes from ultra accommodative to accommodative. as dominic talked about, we are at a restricted level and they want to go even more restrictive.

jonathan: you have andrew hollenhorst to joins us in 15 minutes and says another hike at this meeting and another at september meeting, and then maybe they are done. we have had this conversation two or three times this year. if that is about to go on pause but we have some people talking about september hikes. tom: we have her jonathan ferro talking about yields at the bloomberg terminal and london in the city and you said the can economy perseveres. jonathan: if you look at the surprise indexes in the u.k. and u.s., positive surprise to economic data reintroducing the conversation about higher interest rates and inflation not coming down fast enough in places like the kate you have to go back to early march. you start to hear about banks we do not often talk about like svb . people start discussing the banking crisis. we have fro bank failures

playing out before our eyes and people say that is done, we will have a credit crunch, and this is the beginning of a process. that is what the conversation was at the beginning of march. here we are several months later with a two-year yield short of 5%. tom: a 30 year bankrate mortgage goes right out, pops up like a 7.05% of 27.1%. you get to the data quickly or get to the data -- two dominic konstam. the summary is what ed hyman said of evercore isi. he has never been this negative on the economy. that is a huge statement. jonathan: s&p -0.5%. a touch softer. yields higher, up by three basis points. the 10 year short of three -- so short of 4%. the two-year yield this just short of 3.5%.

tom: while you were gone, i was in tokyo, a guy came up to me and said thank you for telling people about our world us literature. we say this now with the death of credit suisse. all of this effort was led by neil sauce who helped jumpstart everything i do here. under him was a guy named dominic konstam. he and i let a world-class team, synthesizing all this mumbo-jumbo together. we are joined by him now. i will cut to the chase. you invented super restrictive. does jerome powell want to become super, super restrictive? dominic: i think he is already really super restrictive. i think the only reason why they would be willing to unwind this would be either if you get a faster fall of inflation where you see the labor markets

beginning to loosen materially. at which a combination of both we think will happen. i think the panic, if you like, going back in march and into april and may when the curve was steepening and people were focusing on the banking crises has subsided thanks to what the policymakers did. but there is still a scar on the economy. tom: in our opening, jonathan you mentioned the idea of march. we forget the bank trauma. while you were gone, we had stress tests and you think we would move beyond the trauma. i am not so sure. jonathan: that is our renewed drinking game. "when you were gone." you said the scars are there. they will start to come through. this indicates you believe a process to begin back in march. can you shine a light on that? what do you see that is taking

place at the moment and will come to the surface? dominic: we know credit conditions have tightened a lot on the surface. this leads to a lag in terms of lending growth on the surface. ending growth does not look good for larger banks so this is one issue already in place. the other issue is the net interest margin story. you will start getting earnings. you can model the limbs straightforward and they will deteriorate. the curve is very inverted. new compression, that i would argue, is very much in place. it takes a few quarters to see through but we are talking about a swing of a few hundred billion dollars. in terms of what to be taking out bank earnings. as from a top-down macro view. and of course the issue of how this is distributed across the banks. some banks will be in a much better place than other banks to

deal with this. once a have to fight for deposits will come back into focus. policymakers have done a lot to ring fence the crisis acting -- to a banking systematic problem. this will all feed through into weaker lending growth. this collides with what we think will be messing up the labor market because people are -- there is too much labor hoarding going on and not get enough labor shedding going on. this transition will take place in the fall. we have had a round in markets and the fundamentals behind the outlooks of the economy are still very much concerning. we have another soft landing, fantastic, but a hard landing is on the radar. jonathan: we need you to build on this more, tom. you mentioned how these issues may be distributed across the banking system. how this will be distributed

across banks, small to large, will have issues on the economy. how do you think this will show up in the economy? is it's all sections -- is it small sections that start to have issues where across all sectors? dominic: it will be the combination of the banks that perhaps have not had the benefit of earning rates at the fedex have not had excess reserves. on their income side, it has been more difficult and they have had to fight for deposits. this will probably be the same thing we saw before. in terms of the economic impact, you can look at sectors where there has clearly been over employment of technology. i think that is where you will see the stress. tom: years ago, the most famous

chart you generated was how everyone was consistently wrong about predicting higher rates. there was little risk on the credit suisse model of wrong, wrong, wrong over time. i am not saying that you were wrong but that the entire street was wrong. what is the chart now that indicates how wrong we are? what is the chart that we are just getting wrong? dominic: i guess, the way in which the fed expectations -- you have to look at the fed hair charts where the markets always consistently overestimated what the fed would be doing. the market has tended to overestimate the commitment of the commitment of the fed to maintain rates at a elevated level and keep pushing through. if you go back a year, we are pricing in cuts this year. and obviously, the market is not there now. tom: that is why we are

dovetailing you with andrew hollenhorst of citi. if we get an andrew hollenhorst markets of two rate increases, how does our world change? dominic: every time they hike rates, i think the market is not convinced they have to do more. it is more like they hike rates but that is the last one. this is just a function of the super restrictive. there is no way you can look at the markets in this context and say this is not very restrictive in terms of where row rates are. it is a question of what your view of inflation is. if the fed does not do anything, they become even more restrictive. even if the fed does get rates up to 5.5% or 6%, and keeps them there, unless you think inflation is also going back up again, then that policy will become more restrictive. they will have to rewind the

rate hikes quickly otherwise they will collapse the economy. when we look at inflation, i think the inflation picture in the u.s. is looking good. the core services site has gone down and the goods and services side is bad because of used cars. but the real purchases of used cars has been going down the past couple months because the prices going up. this is a supply-side issue and is not what the central bank to be focused on. they should be focused on demand-side inflation because they cannot help the supply-side. that is why we get into concern around the restrictive pulsing and you get a tell risk of a harder landing. if it goes wrong, it will go wrong pretty quickly and that is why the fed may have to reverse course quickly. jonathan: amazing. dominic konstam of mizuho. can i ask one thing of the audience? if you have 10 or 15 minutes, go

yesterday and listen to tom's conversation and then relisten to dominic konstam. tom: john entire up for a game today. we are just missing the legacy of the past 24 hours. talking about distance inflation where you are sticky, you come down, and you either stop or as jim talks about, rates actually go up and nobody is fondling this in. jonathan: it is amazing. total opposites. welcome to the program. the s&p 500, equities now negative. session lows are -0.62%. coming up, andrew hollenhorst with a slew of economic data that begins with an evp report. the adp report, the expectation,

and the median estimate in our survey is 225,000. the previous number was 278,000. tom: michael mckee talks about the joseph survey and is looking underneath the headline data. he taught me this. the media is focused on three or four numbers and you can go to this and say, did you see the unemployment rate? but there are a lot of dynamics here. i am fascinated. you mentioned neil dutta earlier . how does this since of that size -- how does this synthesize down to everyone being wrong? that is where i want to be in 24 hours. jonathan: a lot of people are wrong. the economic data comes out in two minutes, the adp report. then onto jobless claims in 17 minutes. then after that, job openings and the jolts report.

michael mckee will give input on that. then out to in the u.s. economy. manufacturing is saying an recession worldwide. most of this is some 50 on the manufacturing side. services is still robust. going back to yesterday, how these two things converge. is it manufacturing up to services or services down any fracturing? contributing. ♪

>> i am the most bearish i have ever been on the economy without being in a recession because of the yield curve contraction and qt at the same time, hiking rates at -- below the economy. it will cause a recession but

not happen overnight. jonathan: ed hyman of evercore was fantastic yesterday. you can find the full conversation on bloomberg.com anti-terminal. remember this phrase, "nobody cares about the adp report, but then it comes out and is a big one. michael: it is a big one. 497,000 jobs created according to adp during june. that is well in advance of the forecast for 225,000. adp for months and months has been coming in lower than the nonfarm payrolls number from the bureau of labor statistics. if we have a higher number from els -- from bls, you can only imagine what the numbers will set two. most of the hiring was in leisure and hospitality. although the seasonably adjust

these numbers, i am not sure if they have it right. because 232,000 jobs in leisure and hospitality. open all the beaches and amusement parks open up. that would increase the numbers but that is a very large number. you get a 497,000 with a loss of 42 thousand jobs in manufacturing according to adp. this is quite a number. it will be interesting to think about this tomorrow morning. jonathan: let's push through the bond market. yields up on the two year by seven basis points. we reclaimed 5% of the front end of the curve. about to get there at 3.99. yields higher by seven basis points. yields higher on the 2-year yield. around 4% briefly on the --

10-year yield. the euro-dollar is back down to around 10.62 -- 1.0862. if you are tuning in, a big upside surprise. 497,000 on the adp report. the survey was 225,000. that is the appetizer. tom: let's look forward to michael mckee's busy morning claims at 830 a.m.. i will say as john is also, settling at 10:00 a.m. before we get jobs tomorrow. i want to point out the 10-year yield explodes up to 1.75%. jon: i think that is amazing. i think you look at this in what is not happening with services. michael: this is for the general

pattern. the ism for services and limit numbers were negative, below 50 last month. do we get this again or does it start to go up? in theory, if you get these numbers at services, those numbers should go higher. we will see if this is an outlier or not. one other important point is adp has started publishing a pay survey. they have been doing this for some months now. according to the pay and sites -- pay insights, the overall pay for employees increased 6.4%. this is down from 6.6%. it may job changes slow for the 12th straight month, 11.2% raise . this is the lowest since october 2021. we are get to job creation without significant wealth gains .

or they are slowing. if the fed were to look at it, they probably would like that. interestingly enough, the fed has its own private index of employment and use adp data. it is not the same antics but they do use it. tom: on in nine minutes, michael mckee with claims. andrew hollenhorst has led citigroup and is the chief u.s. economist on one and to rate hikes. i am interested in september 20. my head is spinning over restrictive. are we close to restrictive in our complex mathematics of this economy? andrew: i don't know that you need to go into complex mathematics. he can into that is important but if you step back and look at labor market data, we surprise month after month to the upside and continue to see jobs coming

in strong. i think mike gave a lot of important caveats around unemployment. all of this is right. but take a step back, look at jobs numbers. hundreds of thousands of additional jobs relative to expectations that have been created. this is a symbol that maybe we are not at appropriately restrictive rates. jonathan: is that a lagging indicator? andrew: that is the big issue. the fed is making policy now, looking at data that will depend on their lag. he issue and credit tightening is something that will still work its way -- the bank issue and credit tightening is something that will still work its way through the economy. if you look at the housing sector, we bottomed in housing and have come off that bottom and did not lose construction jobs. that is great for construction workers and the economy, but if the fed is looking to loosen the labor markets, that is not good

data. jonathan: can you help me with that? i will keep digging into this with other guests later on bloomberg tv and radio. when you look at the surprise indicators, that index is the same it has been since 2021. is this because things are better than expected or are things actually improving? andrew: it is better than expected and this is theory versus data. the theory would tell you interest rates, real interest rates are higher. the tail and for the fiscal stimulus should be coming off. all these things should be slowing the economy. we should see some signs but job growth is down. it was running a million about and in slowing but it is a lot faster than anyone would have expected at this point. tom: our issue here is ed hyman 's at a very, very weak economy and yet we have the service

sector doing this and that. does citigroup look at this as a weak economy? andrew: i think this cycle is so different than some indicators of weakness. they are not working the way they have historically. one example jonathan was talking about before is manufacturing. manufacturing, ism, so the contraction is usually a good indicator. housing is usually a good indicator of recession. tom: in the continuum, as dominic constant mentioned from mazzulla, is the pandemic --dominic konstam from mizuho, is the pandemic part of this? and rico it is a common statement that central banks should focus on the demand and not the supply-side. you have to focus on where is the demand relative to these playset?

fish the supply-side? a lot of these are structural and will be with us for some time. tom: -- jonathan: i am looking forward to bookmarking the address from chairman powell and jackson hold month with the address from last year, to comparing where unemployment is now. we are looking for this to come to 3.6%, where is basically where it was when they talked about causing pain. tom: this is not in the textbooks as andrew eludes to. post-pandemic, it is supply and demand and we are making this up as we go. they are wildly exposed. jonathan: it is almost a laughable number. it is ridiculous when you see a number like this come out. tom: is there one color you can give us before claims? answer: -- mike: i don't think

there is other than to say the initial reaction from most economists is kind of an outlier. it is hard to explain small business is added one million different jobs. jonathan: michael mckee coming up in five minutes to break down jobless claims. andrew hollenhorst responding to that. the two-year yield 3.5% -- 3.9%. the should you sell the low volatility? amy lu silverman of the opening bell.

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tom: if you thought it would be a quiet start to july, are wrong. we are seeing history in the right market right now. the two-year yield is of a solid nine basis points after a bang-up adp report. the data will come in six seconds but we have a new and sobering reality. michael mckee really matters for the next 25 hours. a trade balance or incomes on -- in on plan. how do claims dovetail into the adp report? michael: they come in higher than anticipated at 248,000 which is higher than the initial report of 239,000 last week and

higher than the anticipated 245,000. this is a tough time of year to get claims right because you have some things going on. we had the juneteenth holiday in the last report is now revised down to 236,000. and you have auto industry shutdowns every summer. i would not put too much on the actual number. but the level change is a little stronger but still nowhere near telling you we had a big layoff tom: and on. -- layoff going on. claims are down from one733 -- from 1733 so the people getting benefits has fallen back. that is two out of the four today. we get jolts numbers and

services coming up. then watch the 200 25 survey for payroll tomorrow. this may change. before the jobs report. if we get all the strength, people may start to build this into their anticipated numbers. tom: futures deteriorating, -33 on the s&p futures. the two-year yield has a life of its own, up 13 basis points. 5.07%. we have the honor of continuing hearing it from citigroup, a 7.2% six month cd. andrew hollenhorst is with us. i want to go to wet matters with this in the textbook which is not the yield. up nine basis points at 4.02. but inflation is a yield in a fit of 1.7%. given the andrew hollenhorst

rate structure, bill dudley rate structure, and mohamed el-erian rate structure, there is a comfortable real yield we can live with? andrew: tenure inflation-adjusted yields will control the level of activity in the economy. historically, the level of real yields need to get up above 1%, maybe even above 2% to slow the economy. that is the first thing to keep in mind on the real yield story. the second is, what is the inflation number you arson tracting -- number you are subtracting? 4% of the treasury yields will ba.2 hundred basis point real yield. if you are subtracting 4% inflation, we are at zero yield. tom: what you have from answer is three statistics. the nominal yield, take away the inflation rights which is movable, and gets you to a real

yield. one of the things we are hearing in the show from smart people is the stickiness of our disinflation. what is right call on disinflation? we get to 3% where we will reverse or safe for a long time -- or stay for a long time? andrew: we have positive dynamic the next few weeks where you should see car prices going down and shelter prices should be slowing. they think we will slow into the end of the year and get down to something like 4%, underlying core pce pace, may be the high threes. the issue is further into 2024. if house prices continue to rise and the labor market stays tight, it is hard to tell a story where inflation is disinflating further and you have risks it is increasing. the risks are becoming more

material. tom: there is july 26 and jackson hole. does this change what you will perceive? michael: not so far. a lot will depend on tomorrow if we get half a million jobs created, they will raise rates. they probably will raise rates in some timber and jerome powell will explain it. if it comes in more like the 225,000 that is anticipated, then it could change in september. when you start to model what happens over the next six months , the end of 2023, do they go two or just go one and hold? are they every other month? how should people anticipate what the fed will do? answer: i do not think there is a strong presumption toward every other month. they want to moderate the pace but are not telling us if this is every other meeting. they want to keep a

data-dependent approach. i think they will look into the labor market data and the inflation market data. core inflation at the next couple prints will be a little softer so this should be somewhat encouraging for officials. on the other hand, this research and activities story and 2% growth is continuing longer than expected. some growth stays longer than expected which may end up being pivotal. i agree that if we see anything approaching what we saw in the adp reading, that is probably a strong signal that they will go ahead in september. michael: tom loves to talk about our star but part of the calculation going forward, you mentioned the 2% growth that goes longer than expected, so do you think the interest rates are higher and will stay higher longer than expected? or do you think we will go back to 2% and rates can fall as well? answer: you could maybe say i am

in the lowball john williams camp which suggests you can have a very slow moving update. we really do not observe it. what we to observe is, where is inflation and where is growth? i am kind of slowly starting to adjust higher where the r-star might be. i don't think we have come a long way. we have to see the data. if you look at the fed, the long run our star in their dot plot came down significantly. we are starting to see the dots move higher which is appropriate given the data we are seeing. michael --," if you are just running us, it is 24 hours of chaos. michael mckee will bring the unemployment data tomorrow. in the market on the move, the equity spaces down 32 points on the s&p futures. the vix is at 15.28.

i am nine basis points higher on the 10 year yields. the two-year yield is a 5.08%. andrew hollenhorst, i just brought up the citigroup mortgage rates which is something like a public 7.07%. what do these yield moves due to housing and to me, we are on the edge of a jump condition and the cost of money to affect real estate. andrew: higher mortgage rates will affect the economy. but that peaked back in september or october last year when 10-year yield's pete. we are getting back to those levels so you can see the same kind of mortgage rates. the issue you had is reduced demand for housing that also reduced subfile of housing in the sense that if you have an existing home, you do not want to put the on the market or lose

the 3% mortgage rate. we are seeing housing with an interesting development where we are getting new activity and demand is lower but like we were talking about before, supply is also lower. as the market suggests, we are seeing new price pressure. tom: if businesses live in the nominal space or topline space, i am sorry. it is a jump condition. 14 basis points in the two-year yield, 5.09%. how does the business appetite change with the shock of thursday morning. andrew: we will definitely see this feeding through to broader credit conditions. we will get another look soon. you see landing conditions broadly the are tightening and this will take time for the banking system and credit sector. tom: we have a viewer question. i never get the viewer questions.

michael: you get all the questions. it is something i should have thought of to ask you. you guys are at 174 tomorrow and this is below the consensus. do you change based on any of this data? how will you put this together? andrew: i do not think we will change this. the reason we are lower on tomorrow's number is because this data is so difficult to seasonally adjust. the seasonal adjustment teams to defer between adp and nfp. i think we probably will be weaker on nfp than adp and treating this to seasonal adjustment issues. tom: you are going back to the office today. do you guys rip it up or have to wait to see at 8:30 tomorrow? andrew: everyday is like we are starting over. we take the days as we get it. tom: i will suggest this

describes the central bank of the u.s. right now they are wildly ex post as a never defined in my mind right now. andrew: i think that is right. tom: they were all struggling to come up with theory. andrew: there is a sense in which the data has a verged so much from the theory and everyone has become more empirical to the data. tom: thank you for joining us. can we see you around 8:30 if we a bang-up number? pick up the phone? andrew hollenhorst with us from citigroup. michael, hollenhorst makes clear he has never seen this. have you? michael: not like this. it is a completely different kind of economy and the interesting question is, how much will this last? do we go back to old working again? our friend mohamed el-erian. do we have a new norm or to be go back to the old-new normal

where the old normal? we do not know at this point. tom: are you doing threats? michael: i did sign up. tom: isabella at bloomberg news said she just signed up. michael: i think everyone will try it out. we have to see. tom: this is exciting. forget about sleeping to light in the heat out there, particularly in new york's 80. we are seeing a two-year yield at 5.10%. the basis points are down 0.8%. this is michael -- tom keene. michael mckee is with us. i want to go to 101. we said we need to lean forward and pay attention to jewels. why is that important. michael: because the fed hung the idea of a tight labor markets on the idea there are so many job openings that people

will have to pay up and that will be inflationary to try to get workers. they have been watching these numbers and economists have a lot of questions about jolts. the survey data is very low and this may be repeats job announcements that have already been filled. the folks will run their own job surveys. their numbers are much much lower in terms of overall jobs. they are about where we are. does this give jerome powell a reason to continue his claims that the labor market is really tight or what do we get out of it? since they are watching, everyone else is. tom: to the phd's at the fed pay attention to the adp report? michael: my guess is they pay attention and look at the data. but they have an index they say is based on adp data. i would be very interested. if you are listening, send me

that number. i would be very interested to see how it the first from the number we got. tom: the 10 year real yield, 1.80%. that is a wow statistic have all the reason you need to stay with us through the coming days. the conversation as we go to the job three wart. we will do that tomorrow. this is bloomberg on radio and television. ♪ 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.

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>> it is an interesting time because no one expected what happened in the first half. i wouldn't call myself more of a silver bowl. there is risk in the market. i am paying attention to the bond market. i am paying attention to a lots of the economic data. not all suggest things are great out there.

tom: and leddy is paying attention --ann milleti is paying attention to the land of ira jersey and so is gina adams. ira jersey with his 201 k is probably paying attention to the land of gina martin adams. he mentioned dominic konstam earlier and ira jersey is a young whippersnapper and worked for him years ago at credit suisse. we have your real bond and real equity perspective if area let me define the tumult for you right now. this goes to the clip guard calculus. i am going to you because ira is weak at math. the basic idea of the twos-tens spread has moved a hundred basis points and 10 euro yield is a rocketship to the two-year yield up 16 basis points. these are wild moves in the bond

market. when you get llama and bonds, what does it due to the equity market? gina: it depends on the offsetting because earners are the primary drivers. but when you have significant moves in the bond markets, you usually see it play off. specifically assets in the equity market which are concentrated much more distant into term. the interesting aspect of 2023 as we are not seeing this necessarily happened this year because of the earnings landscape which is significantly offsetting a lot of volatility that exists in the bond market. also, because 2023 is so polar opposite in difference in terms of margins from what we experienced in 2022. even though the bond market is experiencing a lot of movement, the equity market has other factors to tied to like ai driven earnings, compressed

inflation spreads helping to stabilize margins and the like. as long as you have good job growth, any concerns about the equity markets are diminished. tom: years ago, ira, dominic konstam would lean over his desk and say which number on the atms -- the btmm screen, the great bloomberg money market screen matters? which one matters at this moment? ira: all matter at some moment but what is going on in the repo market matters quite a lot. these moves are much larger than you might think just given the data that we have received. liquidity is certainly something on the minds of a lot of people in the bond market. it is a holiday shortened week. we have a big data number tomorrow.

not a lot people want to take risks and probably want to get out of risks before tomorrow's jobs report. on top of that, we had a week europe because they are talking about more rate hikes in the u.k., maybe going up to 7%. may the calling in london is flagging this is one of the reasons the cell started quite dramatically -- the sale started quite dramatically. tom: a fancy talk as we glide past smoothness which indicates stability. if i take the two-year yield back three years, ira jersey, can we now stay with this breakout a jump condition? ira: we have certainly jumped in a short period of time and we keep doing this as the price for the fed will reserve -- will return. we have almost fully priced for the basis points you saw in the dot plot.

there is data to go before we get to the september and november meetings in order to see if the federal reserve will ultimately make the second hike. but when you get data like this morning's adp report, you almost have to think it is a done deal the fed will move again in july. tom: gina, 5.09% on the two-year yield, at norman's 15 basis point move. what does this mean for dimon and monahan and what they say about the dynamics of the financial statements of big banks? gina: the banks within the referral sector are not one of the preferred statements along with general credit distress in certain segments of the economy. when we run water financial models, -- broader financial models, we see they filtered toward the top, leaving banks

behind. as well as potential for default and ongoing risks emanating out of tom: the regional banks. tom:tom: you talk like this and i think of the son who has been a huge performer. good morning, meredith whitney, who nailed that call a few years ago. am i going to see 33% or 35% annual charge card rates? gina: it is not within my purview to finance. i think we are seeing the cost of borrowing go higher and higher very quickly. at the same time, we are seeing the amount consumers are able to get on deposits to rise rapidly. it depends on the degree to which the job market slows down, suppressing wage growth and forcing consumers to go borrow. it is worth noting that borrowing over all is still at a very low level relative to income debt service and relative

to income over a 40 year low. there is a capacity to borrow but it will cost more to borrow money going forward, given where interest rates are. it is important to note that is not the only decision tumors will be forced to make. the job market remains very strong. wage growth remains steady area as it -- remain very steady. as inflation numbers come down, that can offset the pace of debt. tom: we are all living very quickly. that is what i am seeing right now. divine -- defined very, very quickly in your world and what will this do to mere mortals watching? ira: very quickly, it was almost instantaneous. the market is kind of confused. and a little fickle. we have seen some of the data on inflation continuing to trend lower. but then you get data like we

had this morning in an adp report and people are worried we might see a reseller ration or a flattening out of the level of price growth in the economy, to continue to maybe stay at 4%. in an environment like that, the markets are continually reassessing where is the federal reserve's terminal rate. while most of us thought it was 5% plus or minus 25 basis points, now we have to reassess because we have gotten to 5%. the next question is, can we go to 6%? that the market will ask itself. tom: can we go to 6% now? ira: i don't think so but i did not think we could go to 5.5% and now i have to reassess that. tom: dan ives was in this morning and nailed the tech rally of summoning stocks. gets lucky once every decade. he talked about ecosystem.

there has been a lot of zeitgeist in the last three days about how older people in america have loaded the boat in the equity space. do you agree? that everyone owns stocks and our ecosystem is stocks ever higher? gina: if you look at broader statistics, less than 50% of u.s. households actually own stocks. net households have not added to their equity positions in more than 20 years as investors were burned i the tech bubble. you have to go back more than 20 years to the peak in equities holdings as a share of overall household holdings. certainly, investors that were able to ride the wave of the equity markets and the storm of 2000 and 2008 have benefited from this but they have been riding it, and do not have an attitude of positions.

i would take a little issue with this idea investors are over allocated to the equity market it. they certainly are holding and this has benefited them as equities continue to perform significantly better than many anticipated. tom: ira, you taught me the 30 year yield function. i am looking at the year to date on the 30 year bond. we did not get to 4%. what is my mortgage rate in two weeks? ira: a little higher, that is for sure. tom: thank you. ira jersey a bloomberg intelligence. and gina martin adams. we are going to start slow. this is nuts. tomorrow, i will have more threads followers. ♪

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jonathan: live from new york city was morning. good morning. countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading, this is bloomberg the open with jonathan ferro. ♪ jonathan: live from new york the latest jobs data coming in hot. we begin with a big issue. payrolls up next. >> we look for another big print on friday. >> we will see a strong jobs report.