>> i doing feel like the market has been crazy. i see the potential for some upside. >> mark is being very rational. >> investors are in a new regime the last 10 years. >> the fed is not fighting as big an inflation problem as we thought 10 days ago. >> we think things will slow down by the end of the year. >> this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. jonathan: stay in bed, the week begins tomorrow, live from new york city, good morning, good morning, for our audience worldwide, this is bloomberg surveillance on tv and radio. equity futures are just about positive on the s&p 500.

cpi data tomorrow morning, ppi after that and then earnings season begins. tom: its a terrible turn of the market today. what it is to me is setting up this arch battle be on the inflation report to the beginning of earnings season. we start strong today with jason trenner of strategas how are you in the market given this new information? jonathan: a seven handle wage growth in the united kingdom. this is their language they are using -- growth remains uncomfortably high. can you imagine going into your annual review and saying bank growth remains uncomfortably high? lisa: that's what the bank of england wants. they are saying ask for less and that's sort of this uncomfortable situation they're projecting. tom: it say keynesian madness

but its a throwback to the middle of the 20th century and the inflation of the 70's. i just dope by it, its bad math. jonathan: every man for himself. good luck to you. tom: 7% is a big number. jonathan: a big number for the bank of england who maybe hake seven -- you may hike again. lisa: that is the theme of the week especially with the rhetoric we heard out of fed officials yesterday not only in england but you're seeing it in the u.s., similar town that perhaps they have to go further to get inflation under control. the question in the u.s. of whether inflation is rolling over but in the u.k., its another story. that's the difficulty at a time when they are seeing some sort of hit to the economic growth. tom: just look at the bond market.

you've got to holistically look at the dynamics of the bond market and the spreads of the real yield. even on a boring tuesday, you got to parse that and say that yields have come in over the last three days. jonathan: lisa will make this less boring in a moment. briefly on the s&p 500, we are positive by zero .1% on the s&p 500. the two year yield is down for a third straight session, down by three basis points. the 10 year is down about four basis points. lisa: i'm thinking you can ask if you want more or less honesty. what we are watching is a number of important events including the nato summit which kicks off in lithuania this morning. we saw a president biden meeting with the lithuanian president and he will speak with stoltenberg shortly at 11:00 a.m.. then you have heard a gun of turkey meeting with biden and

i'm curious to hear what some of the arrangements are with f-16s and other types of provisions for turkey in order to ease some of the other discussions. through the week, the sun valley conference on the future of new media and entertainment. last year was all about twitter and this year, elon musk will not even be there. the twitter platform is in the center with the advent of thread meta shares up 300% just this year. later today, we are looking at amazon prime day which no one has talked about. to me, this used to be a false advertising holiday. this is drumming up confidence and enthusiasm for this and now what you are seeing is a whole host of competitors trying to get in on that and having sailed days and not relying on this much and you're seeing a slowdown in gains. tom: the pile of boxes at might

walk up gets bigger and bigger. the unit growth of amazon, item c any end in sight. jonathan: maybe 40% off of golf clubs on prime day. lisa: one of the best deals is rumba. that's the personal vacuum cleaner that goes by itself. jonathan: right. tom: someone told me once to buy amazon prime. jonathan: vacuums, cool. looking forward to that later. jason joins us now. wonderful to catch up with you. let's talk about the week ahead with inflation data tomorrow and bank earnings friday in which one do you want to see immediately? >> i think you would want to see lower inflation. there is a good chance you will get it.

this is the easiest comparison for cpi probably of the year because you peaked in july of last year. this is a good one, hopefully we get a good one because if we dope, the comparisons will get tougher from here. for banks, the expectations are relatively low already. i think there is a decent chance the banks will beat those lowered expectations. to me, the cpi number is a bigger move over the market this week. tom: you were doing quality before quality was in and the basic team has been you got to be in the market, you cannot go in and out, you have to participate but you've always got to participate with quality. where is the quality right now? >> as you know, things have worked out better than others. it worked well last year but has it work securely well this year.

i feel strongly about that now because i know the valuations of the overall market are particularly compelling3+ i think the risk reward is quite poor given her expectations for the economy and for earnings over the next year. depending on the numbers you are looking at, the market is trading at 20 times trailing. its somewhere between 19 and 20 on forward earnings depending on the earnings you are using. i think the earnings expectations for 2024 in my opinion are much too high, of about 12%. tom: how much cash do you have? is there a cash hoarding? >> we have a balanced portfolio. we have a model portfolio and we have 6% cash right now.

that's at the upper end of our range. i think it makes some sense given where the valuations are. lisa: we started the program talking about how it is a sleepy summer and people are taking a break. how are you resetting at a time of perhaps a pause with less dramatic volatility in terms of bond yields and stocks to shift your allocations? >> i think in the end, i think stock prices are largely about interest rates and earnings. i think people should take a step back. there has been some performance chasing at the end of the first quarter, particular as it relates to ai. i understand that and i would stand in front of that but by the same token, i would kind of take a step back and start taking a look at 2020 for earnings. when the earnings season starts

here, i would be paying close attention to what the guidance is going to be. the sell side has not really taken the numbers down. earnings expectations for 2024 down three or 4% year to date. but the market is up 15. now you have a situation where the 10 year treasury yields are piercing through 4% more or less that's just not consistent. its not consistent with those facts and it seems there will be some comeuppance if we continue on this path. lisa: over the past week or so, new paper came out by a fed economist that said a lot of the gains, about 40% of them and stocks over the past couple of decades has been a mechanical explanation based on what we've seen from rates and from companies able to take those low rates and put them into higher profits. as the fed researchers said, do

you think there will be a mechanically lower rate return for equities generally? is that how you are arranging some of your portfolios for the longer term? >> i did read the paper but i am sympathetic to the concept that its going to be difficult to reprise the quantitative easing and almost negative real rates for 12 years. as a result, the forward returns, one would have to think will need to be lower. i am of the view that quantitative easing for 12 years was anna norma's policy error that we will have to deal with for a long time. it means you're probably going to have higher interest rates and higher long-term inflation for a long time. that puts pressure on multiples. it also makes it harder for companies to buy back their own stock. it also makes it harder for

private equity firms to be as involved as they have been. there is a perfect storm in a way in which stock prices are largely a function of earnings in interest rates. but if you peg interest rates and you get real rates for 12 years, is not surprising you've had an enormous expansion in multiples and in the markets. tom: if people got lucky and late but quality and let's say its in tech and they own some of the seven stocks, should they sell them? >> i would be adding a lot from here. i tried to tell you what i'm doing myself, you should always ask strategist what they are doing with their own money because it cuts through the nonsense. i have been sold a lot but i also have an added a lot certainly from the start of this year. that's been my mistake in the market is up 15% but again, i'm

a long-term investor and a professional money manager with my own money. you obviously have to worry about staying employed. that is a whole other dynamic that comes into play. for those of a longer-term time horizon, i would be careful about chasing performance. i would also take a hard look at the valuations and what you are paying and what the risk reward looks like for the companies you are buying. believe it or not, there still 40% of the companies in the russell 2000 that have not had a profit in the last 12 months. that is sustainable when interest rates are negative in real terms. it is not sustainable when rates are going to be positive in real terms. we can debate whether they are positive in real terms now. item think so but we are getting there and we will get there that just changes everything. jonathan: we appreciate your

insight, thank you. the latest on the markets and here's the latest on nato. a group of ukraine key allies are closing in on agreement to launch negotiations with kyev on a collection of bilateral security commitments to bolster the country to defend itself. the u.s. and other participating nations would each work with ukraine on specific long-term security commitments through the provision of modern military equipment across air, land and sea, prioritizing air defense systems. tom: there is the ukraine specific, what will we do as allies. i think we will hear from mr. stoltenberg. i will take the polarity here of what's going on in the baltic sea with inland and nato with sweden on the cost of being in nato. i cannot believe i'm saying that

. its foreign to everything i was educated on. as we get down to the southern front and mr. erdogan's unique pressures with turkey. jonathan: that reporting this morning, we are waiting on some comments from the president of the united states a long time the nato secretary-general. let's get to amh on the ground in lithuania. annmarie: what we want to hear is from president biden and what he has to say regarding what happened overnight within the last 20 for hours. we have a completely different outlook on what we will be able to see coming out of this nato meeting. that is that turkey is paving the way for sweden to be the next member of nato. it was between these two nordic countries on a dual track but finland was able to make the ascension person now it looks like sweden will also be able to do that. it looks like this is potentially because of f-16s

that might be coming from the united states. this has been widely expected and there is a lot of reporting that there has been some pressure on bob menendez, the senator from new jersey and share of the senate foreign relations committee. that is one key topic here on the ground. i just spoke to the finland president and he was saying that's really what the rumors are about potentially for this quid pro quo. the white house will not call it that but let's call it what it is. the second topic is what happens with ukraine. ukraine wants to become a member of nato. president biden has already said there is note unanimous consensus on nato members regarding when ukraine could become a member. there is obviously a war on ukrainian territory. they would want to become a member right during the war -- right when the war ends and there is concern about a frozen conflict. what you are seeing here and what leaders will talk about is

what the path forward is in terms of dialogue with the nato alliance as well as some of the security commitments ukraine wants to see from the nato alliance. just like zelenskyy made this push for more support at the g7 in japan, he is going to be here as well at the nato summit tomorrow. jonathan: one outstanding issue is the provision of cluster munitions. what do you hear on the ground as to who is pushing back? annmarie: its difficul for the likes of france, germany and italy and some of these countries that had signed up to a treaty that would ban the use of cluster munitions. what we continuously hear from the white house is that russia is using these bombs and the fail rate on these bombs is much higher in russia than the u.s. says the ones they would send. jonathan: you can see the nato secretary alongside the president of the united states, let's take a listen.

>> that we stand by ukraine and also that we agree on the message for ukraine and membership for ukraine. a united message of the path forward for ukraine and membership for ukraine. another major message from this summit will be that we need to invest more in our defense. we need a new defense investment where we stay at 2% as a minimum. the european allies are stepping up this year. we have new number showing they have added 8.3% in real terms for purchase and this is a record high. that demonstrates that the

allies are delivering on their commitments. mr. president, its great to have you here at the nato summit. >> its good to be here and you continue to deliver. that's not a surprise that i been touting the fact that i think its important at this critical moment in that nato issue that you continue to lead nato. you are trusted. showing knows the situation better than you do. this is an historic moment, adding finland and sweden to nato is consequential. your leadership really matters. we agree on the language that weaker -- that you proposed relative to the future of ukraine being able to join nato. we are looking forward to

continue to be a united nato. you've heard me say many times, i still think president putin still thinks the same about nato. thank you for all you do. >> thank you. jonathan: the president of the united states alongside the nato secretary-general, some brief comments there. the president of the united states will attend the meeting of the north atlantic council so about 11:00 a.m. eastern time, you will see the president and a bilateral meeting with the turkish president. f-16s are the focus for many of you and that's the latest this morning. tom: some bargaining going on there. you have to believe we will give you f-16s, etc. there is a lot of nudge, nudge,

wink,wink going on. julie norman joins us now. i want to go back to them as said the condoleezza rice and robert gates road and robert gates wrote in the washington post six month ago. they talked about what has changed here is without question ukraine has proven that they are a determined partner and how they already now are part of nato even though they await admittance. >> that certainly will be the big question for nato this next two days. what is the next step for ukraine? we just heard in a statement from the president and from nato that there is a general support for ukraine membership. what that actually looks like and what its timeline looks like is still very much in debated within nato. as you referred to, there has been some indications ukraine is stepping up meetings with military requirements that are

expected but biden and others still have reservations about some of the pathways forward. the big question is how to move forward during a war? for joe biden and germany and the other actors, there's a sense of not pushing this timeline up while the conflict is ongoing. lisa: it feels like nato members are flirting with how much they can provide to ukraine without creating an escalation to the war or an inadvertent inclusion of nato members in the conflict with russia. where is that line? >> its something that has been debated throughout. we are never sure exactly what will be a redline for vladimir putin. the biden administration has been trying to ensure this conflict does not become world war iii and does not escalate further. nato obviously has the attitude that that end attack against one is an attack against all.

if ukraine is brought into nato while the wars going on, would that cause all the members to be involved? that's where the tensions stand. if you say we will do this after the war ends, that gives further incentive for vladimir putin to continue the war indefinitely. lisa: the war has been going on for about 18 months. a year ago at the nato meeting, people seems to be very united. there is a commitment to support ukraine. there is a very different tone at this native meeting -- at this nato meeting. how much is this polarizing some nato members that have had itn unusual degree of unanimity last year? >> nato will try to come out of the summit with an equal sense of cohesion, unity and we see that is a crucial message to send to vladimir putin if no one else. there is definitely differences but over all, most countries are very committed to supporting

ukraine. its what exactly that support looks like, differences in what kind of weapons are being sent and when, the question of membership. in general, the idea of supporting ukraine is one that most nato states are strongly behind tom: over the last number of months, we had the shock of finland joining nato, maybe sweden joining nato, maybe ukraine joining nato. this is the exact opposite of what mr. putin wanted. how will he respond? >> its one reason that i think there was some reluctance initially to consider this. the alliance has decided pretty much that in the long run, this method -- this may be the best way to deter putin. what that means for putin i think is anyone's guess. we saw after the 2008 nato meeting which suggested that georgia and ukraine might have a path to membership, you can cite that is when putin started

thinking in a more pugnacious way. others see the expansion is quite necessary so i think this debate will be ongoing. jonathan: thank you for your input this morning. absent in this conversation this morning and last week is how this war includes in ukraine. what is the path? tom: the real focal point for me is clearly the reports out of the british press. i think they are more on the scene. its the world war i equivalent where they are arguing about 20 kilometers of territory. lisa: people in quiet conversations are saying it just drags on and is just a war of a that goes on for a long time. that is unfortunate what nato members are kind of counting on because putin will not just give up. how do you support a nation while they are dealing with something that is world war i equivalent with a world that's moved onto different types of

war methodologies? jonathan: its gone on for longer than people anticipated 12 months ago. welcome to the program, our coverage on nato will continue. that summit is taking place in lithuania this morning. we will catch up this morning. david pages coming up shortly and we need to reset and look ahead to the data this week. cpi, ppi and the inflation stuff and onto earnings for banks on friday. many people are expecting some increase in lung lost reserves at some of these banks. they may be writing up some loans as well. will we get some insight into the cracks people are looking at? tom: right down to the super regionals and then regionals and all the debris off of svb, is not just one set of bank earnings this time around. lisa: i think if they show some kind of retracement or some sort of increased requirements from regulatory action, what does

that do in terms of setting the tone for the rest of earnings? jonathan: that will set the tone for the federal reserve. john williams is speaking to the financial times, i'd on have a recession in my forecast, i've pretty slow growth. the more these guys talk, the more revealing that splintering on the committee is becoming. tom: absolutely and we have six fed speakers today? lisa: i have been seen it as much as yesterday. tom: they are all recovering from the home run derby. jonathan: we are positive by 0.1%, from new york, this is bloomberg. st could not hear. i was hesitant to get the hearing aids because of my short hair. but nobody even sees them. our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years. when i finally could hear for the first time, i started crying.

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jonathan: equities are attached positive this morning. on the nasdaq, positive by 0.1%. on the s&p 500, snapping a three-day losing streak with the russell up by 0.2%. the two year yield is down for a third consecutive session by about two or three basis points. backing away from the highs of thursday's session. that's quite a swing in this bond market. the 10 year breaks below 4% again. tom: its coming back in the last

couple of days but to me, this is an ebbing before the key inflation point tomorrow. jonathan: lisa's favorite currency pair coming up, the euro against the dollar, reclaiming $1.10. this is for consecutive days of euro strength. lisa: and its on the heels of some persistent dollar we as. its been noticeable this week given the fact that it has come in tandem with lower front and yields over the past few sessions but people are increasing their expectations for rate hikes. the fed speakers could have a more hawkish tone but the market is not buying it over the longer term. they do not believe what the fed is saying consistently which is reading a little bit of an issue. jonathan: we were going to talk about fed speakers but i think

we have to move on toward what's developing in the u.k. its interesting to see sterling against the u.s. dollar, below $1.30. a stronger pair and on back of this wage growth data which is stubbornly persistent for the bank of england specifically because of your receiving those pay rises, i'm sure you. want to give them up even though the government would like you to. tom: we've got the perfect guests for this right now. david page joins us and we will dive into this. for the american audience, the foreignness of what's going on in the united kingdom. i want to go back to the university of york. i'm sure you stagger through foundations of economic history and some in there was a teen - keynesian sense that the labor should sacrifice their wage grains for the good of the

country? is that a unique british aspect? >> i think its something that is believed from the bank of england and the chancellor of england. it suggests we are getting a background where potentially the government is faced with the prospect of what it will set for pay. there is a belief it will ignore the recommendations of the public sector and advocate something a little lower. when they are advocating wage restraint, they are setting the backdrop for perhaps forcing that restraint on the public sector. what we are not seeing in the u.k.'s any signs of that restraint, just a slight softening and the monthly numbers that are still too high for the bank of england. tom: its 2023 and it feels like a conversation from 1974. its absolutely bizarre. lisa: or perhaps marie antoinette times, let them eat

cake. no one is really going to say -- were you there? tom: yeah, the streets were muddy. lisa: i wonder if this is unrealistic and meet in depth getting the bank of england having to raise rates more than they previously expected, raising into weakness. perhaps this is not what markets are expecting if the pound is gaining. how do you understand the market response to what seems to be a necessity to hike into more weakness? >> i think you are seeing the opposite of what we see from the u.s. affect which you touched on previously. when the fed is tightening now, markets are starting to trade higher in the short term. then we are more likely to see rate cuts but that's not the case for the u.k. is a aggressive move in the bank of england not just for the next meeting but into early next year and its that prolonged effect that's causing some concern.

for sterling, that's great. that's helping to push cable up to these one dollar 30 sent levels but the reality is probably different. the bank of england had just asked them about a year ago, they pushed back against market expectations which were lower than the rightly or the moment. now markets are once again testing that. when we hear the bank of england speak in early august, they will again be ready reticent to suggest they will fulfill market expectations and rate hikes at 6.5%. they also have to hike rates by 50 basis points like the last meeting because of concerns that inflation expectations are starting to pick up more. clearly, the bank is more work to do and that's with the labor market is suggesting but the concerns that inflation expectations could becoming unanchored and could lead to persistent inflation in the

u.k.'s something the markets are seeing. they might have to raise rates for a considerable period of time. lisa: everyone says the u.k. is unique in the situation of inflation is different than the united states where you are seeing disinflation come through in different sectors. how different is it at a time when wage growth is surprising to the upside in the u.s. as well? >> i would say not that different. the idiosyncrasies and some of things that have happened to labor supply and around immigration post-brexit and the concerns around activity given the difficulties that still is leading to a lot of inactivity. there are idiosyncratic supply-side issues but fundamentally, you got a labor market this still looks too tight even if there are some nascent signs of it moving in the right direction and that's waiting -- and that's creating wage growth. the legs will probably extend

relative to when the last timing cycle was and that's reflected in the difficult composition of mortgage rates so that complicates the issue. we have an economy that's been impacted by supply shocks and then has a superheated labor market, more because of supply shocks then demand but the bank of england dozen have the luxury to distinguish and that's causing a risk of persistent inflation. that's the story that jay powell has talked about the last 12 months. the timing is slightly different. jonathan: the mortgage market in the u.k. is so different relative to here in the united states. in the u.s., you have the beautiful option that when rates are low, you can lock them in for 30 years but they struggled to do that in the united kingdom and some of those mortgages will be up for re-mortgaging. when is the time horizon for when that starts to bite for people who have mortgages and for the u.k. economy? >> i

think it will show up by the end of the year and it will be a story going further forward and be throughout 2024 and into 2025 as well. at the same time, mortgage holders are becoming less important part of the economy, fewer homeowners and fewer first-time homeowners so that may mitigate some of the effect that there is also a big market in the u.s. its unclear how much these increases will feed through. private landlords are increasing rents so you might see increases that would have been expected before this. what it means for the bank is it is always been a different market. certainly compared to the u.s. but for the bank of england, its a different market than they saw before the gse in the early 2000s. this is some of the complications. they have to gauge how moorish more -- how much more the lags

are and how much more they need to tighten before they start to see the effect of what has already gone through. jonathan: apollo put out a piece last week on how reticent the u.s. economy was. ps wyatt's taking the fed dish he asked wise taking the fed so long to slow down the economy. you made the point about u.s. households. 30 year mortgages are less sensitive to fed hikes so how sensitive is the u.k. economy to what the bank of england is doing? >> more than the u.s. but less than it was in some of the features that you refer to like the household savings issue comes through here. we have seen different elements of fiscal stimulus. the pandemic created a fiscal stimulus that became the excess savings on both sides of the atlantic. more recently here as we see high energy prices, the u.k. government chose to provide

blanket fiscal stimulus to try and minimize some of the impact of the high inflation itself rather than target it. in some ways, the fiscal stimulus offsets the impact coming through from bank tightening. i think that level of buffer in the household sector and in the corporate sector is also applicable but not to the same degree but for the u.k. tom: we assume there is various and sundry disinflation's whether its america or whatever. what is the most efficacious disinflation? how do you have a good inflation? >> i think the supply-side improvements are benign inflation. we are seeing that coming through an energy. in the leg structure of how this feeds through. we jump see the petrol price increase but the way it passes

through utility prices. energy is the most benign of these issues with energy prices coming off benign inflation. we lost that coming through the easing of global supply chain prizes and that should be impacting local goods. we should see some improvement coming through over the course of this year. all of these are benign disinflation's. the less benign when you have to crimp gains in the labor market so that we do see pass-through service inflation because that's what underpins core inflation which is too high in the u.s. and to hike in the u.k. jonathan: david page, we appreciate it, thank you. going back and forth with guy johnson to some numbers we were both discussing over the last week or so. current interest rates with

savers earning 29 billion sterling more this year than november of 2021 before they started hiking interest rates. mortgage borrowers are paying more in debt interest. borrowers are paying 14 billion and you can do the math. this time mention of that analysis, an extra dimension. if you are a saver, you dumb have the height marginal propensity to spend in the same way -- you down to have the height marginal propensity to spend in the same way. i do think its as obvious in the u.k. tom: i agree, i did work this morning on a mortgage and if you had a 4% mortgage rate or 7.31%, with the same payment, you can buy 1/3 less. jonathan: go on street easy and pick an apartment in new york

city, any apartment and you can reenter with the mortgage rate would be and take it down from seven and work out what your monthly payment would be a couple of years ago. this market is radically different based on your monthly payment and what it would have been several years ago and what it is now. lisa: to tom's point, that means that housing prices have to come down in order to make people want to pay that. that's the theory but it does work because there are no homes available for sale because no one wants to get a 4% mortgage and suddenly people have tons of cash to spend is they are saving and it did work that way. tom: jonathan miller is scheduled to be with us and he's the expert. he has an understanding of the behavior going on in this dynamic. jonathan: its so. tom: odd barely describes it. this is totally different than what i remember last time when it was 8%. lisa: this is the reason why it

hard to understand disinflation. we do understand how quickly housing prices welcome down or rental come down for if they will. any marginal declines, does that set us up for other highs? that's the tension in the u.s. as they say to different story than what's going on elsewhere. tom: i think we are shaded by three zip codes. lisa: meaning? tom: nationwide, rents are coming down. lisa: used car jonathan: prices are coming down as well. jonathan: some reporting from axios there yesterday. just about positive on the s&p, this is bloomberg. ♪

>> these changes would increase capital requirements overall but i want to emphasize they would simply raise capital requirements for the largest, most complex banks. we intend to consider comments airily and any changes would be

implemented with appropriate phases. jonathan: the fed vice chair for supervision speaking of bank regulation. earnings season is kicking off friday with jp morgan, citibank and wells fargo. through next week, bank of america, morgan stanley and goldman sachs on july 19. tom: what are we looking for there? they are all enemies and i get that but we look at the dynamics of jp morgan and their troubles on the balance sheet but the basic tone i get is wall street, , its a struggle. to say the least. i wonder what we will hear. lisa: i am looking at the idea that suddenly michael barr wants to raise the capital arm is on big banks and said nothing about the supervision function of the federal reserve and how to bolster that and said nothing about the regional banks which were the problem in the previous

iteration. how do we get this to translate into a very delicate political dance? jp dimon has not been talking but you can imagine behind the scenes, he is probably saying this will not do anything. tom: what are we trying to accomplish here? we will get a brief on this. myra rodriguez joins us now. a real expert on basel three, dodd-frank and the rest. i am lost. we had basel three, dodd-frank and that had basically nothing to do with helping us with the svb disaster. how do we regulate or supervise improvement so there is not another svb? >> the critical thing to remember here is that there was some very important components both in basel three and

dodd-frank that were removed for banks the size of silicon valley bank on and first republic. under the trump administration, a law was passed, the economic growth regulatory relief consumer protection act. that stated in title iv that those banks that were under $250 billion were not systemically important. there were a lot of good provisions in dodd-frank in basel three that would have applied to those banks and that unfortunately was revoked. you correctly pointed out regulation and supervision. what really needs to happen here is that there needs to be more resources and more attention dedicated to what exactly is going on in the examination process at the federal reserve bank especially but also the occ. tom: the thing i done understand

is after what we all went through six months of no, five months of no, let's fix it. is there any thrust to bring back the original basel three and dodd-frank? >> basel three has long existed in the united states is part of the basel three banking supervision. u.s. always opines on these rules. there have been additional tightening recommendations over the basel committee and that's what people refer to as the endgame. the big banks are being allowed to use models to measure their credit risk. they have way too much flexibility to do that so there are some good things that barr is recommending. i'm concerned that we need to hear specifics about what will happen with improvement on the regional banks. those were the banks that again need to be designated as domestically systemically important as they were under

dodd-frank title i. that part was revoked under the trump administration. we also need to hear specifically about supervision. how will the bank examiners really be empowered to do their job? you read the documents that were released, the original documents that were released with the barr report and those are more interesting than the barr report subsequently because you see the comment from the examiners. they did their job but was there middle management intervention or senior management intervention? we have and heard that yet and there needs to be an independent investigation of what happened there. lisa: we know what the questions aren't people have been asking them for the past few months. what we heard from michael barth was not that yesterday. was this -- is this a fig leaf over the issues of banking supervision and whether they will increase regulatory capital for the smaller banks, a

political hot potato that no one wants to address, instead focusing on the hard questions that may yield some uncomfortable answers? >> unfortunate, this is a situation where you have to do both things at the same time. that of course can be quite challenging. basel three endgame, those revisions have been ongoing, those discussions have been -- happened way before silicon valley bank so that's what michael or focused on yesterday. of course we need resilient globally systemic important banks. however, the next step has to be focusing on the regional banks and it has to be focusing on supervision. how are you going to empower that whatever the bank examiners find, that that makes it all the way to the top and it banks are not liquid, that's the real issue here, svb, first signature, they were not liquid.

we have to remember that no matter how much dodd-frank or basel iii you have, that's not going to prevent bad behavior at some of these banks. look at wells fargo now, predatory lending practices against african-americans and latinos. you can strengthen capital all you want that bad behavior is not going to be addressed. you still have to deal with remuneration of the executives. you can have a situation where hit -- you have -- where you have an svb ceo part of the implosion of the bank and runs off to hawaii for a bonus. tom: the whole thing is as simple as this -- we also the crisis we lived. none of this helps protect us from the crisis. nothing. lisa: a lot of the new requirements came out after 2008 and some of them did and applied to the regional banks.

is it over? have we seen the end to the turmoil we saw in march? >> i dope think so, unfortunately because even though the fed has temporarily caused, we are still at very elevated interest rates which means high cost of borrowing for these regional banks. you still have inflationary pressures in the u.k. and continental europe so those banks of raise rates more recently. you do have those trouble spots ahead. you have rising default rates and -- in the credit card area and auto loans and commercial real estate and i think we will see some of that this coming friday with bank earnings. all the big banks including j.p. morgan, they all raised their -- their loan loss provisions last orders of the new there was these troubling times ahead. unfortunately, the regional banks will be the ones that will bear the brunt of rising default

especially in the commercial real estate area because their portfolios allocated to commercial real estate are larger than a jp morgan or bank of america and those banks are much more diversified. you mentioned earlier goldman sachs and morgan stanley. those essentially are still primarily investment banks, securities firms, so they do and if it from the business line diversity that jp morgan and bank of america have. they have asset management, the actual bank and cities so these rising to full rates will impact everybody but i think they will see the volatility in the market and that will hurt those banks that are less diversified than a jp morgan. unfortunately, that means goldman sachs come morgan stanley and the regional banks, they do have the asset management investment banking like the largest globally systemically important banks. jonathan: we will see how that

develops on friday. thank you so much for being with us. that's the latest with the banks. we've got to push ahead to bank earnings friday and economic data which kicks off tomorrow and we will provide you coverage of the nato summit in lithuania. we will catch up on that in a little bit. the president of ukraine out on twitter and last hour -- he dozen sound too happy. it seems there is no readiness either to invite ukraine to nato nor to make it a member of the alliance. uncertainty is weakness, he says. tom: its complex and the key is already gone, the surprise over the last 48 hours. jonathan: that's coming up in the next hour on bloomberg tv and radio. coming up next, jp morgan asset management, from new york, this

is bloomberg. ♪

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>> i jumped feel like the market has been crazy. i see the potential for some upside. >> the market is being very rational. >> investors have been investing in a new regime for the last 10 years. >> the fed is not fighting as big an inflation problem is we thought 90 days ago. >> we think things start to slow down by the end of the year. >> this is bloomberg surveillance. jonathan: welcome to 2023 where the narrative changes every week. from new york city this morning, good morning, good morning for our audience worldwide, this is

bloomberg surveillance on tv and radio. your equity market this tuesday morning is slightly posited by zero .1% on the s&p 500. a nato summit is underway in lithuania. tom: we thought it would be ok but all of a sudden, this is a big deal. there are important conversations and we heard from the president of the united states. its a stew right now. from turkey all the way up to sweden, there is a lot of movable arts in the next 12 hours. jonathan: as we anticipated this meeting, sweden's participation becoming a member of nato, getting the support of turkey. is it a scratch my back story and then you have a story of provisions that are controversial. on top of that, the pathway for

ukraine to become a member of nato. that is highly controversial. lisa: it highlights how the conversation has evolved 18 months after the inception of this war as it drags on. there is a question of how united nato members are and what the exide in his risk arjun crossing a potential redline we done understand -- tom: if ukraine joins nato, from my amateur read, that was the tipping point for mr. putin. what is he thinking here with fenlon, -- with finland, sweden, putin has to be borderline hysterical. jonathan: we talked about this in the last hour. a pathway to peace? no discussion whatsoever in the wars going on for longer than people thought it would. lisa: is there less pressure on ending it because we have and

seen the inflationary boost people expected? there has in been the economic hit. i was reading have stockpiles of natural gas in europe or at the highest levels in a long time so this seems to be a problem. does the lack of economic incentive reduce the pressure to draw an end to this in a way that seems very murky at a time so much complexity? tom: when my eyes glaze over, what captures my attention is when they talk about crimea. i wonder how zelinski will deal with crimea. people are talking about almost a cyprus annexation, splitting, separation. i dove no. -- i dove no. -- i dove no - i don't klnow. jonathan: yields are tracking a little bit lower over the last

couple of sessions. more recently in the bond market on the two-year, yields are lower over the last three sessions. with that, some dollar weakness with the euro reclaiming $1.10. lisa: we are seeing disinflation in car prices and some of the smaller businesses. is that a head fake? the nato summit is in focus today as president biden meets with erdogan of turkey. that's at 11:00 a.m. and we get a sense of the tit-for-tat for f-16s and signs were what unity there is around you rain. going through the week, we have the future of new media and all things streaming. last year we talked about twitter and elon musk and elon

musk will not be there this year at a time when everyone is focused on threads which seems to be gaining traction. tom: i'm going to delete its. to me, its a nuisance. jonathan: you are done with threads? tom: the linkage to instagram, ident want to see people getting drunk on the weekend and that's basically what i'm watching on instagram. lisa: i thought you liked bar chat. tom: i liked bar chat. bar chat gives me bar charts. with all this uproar, why do i need this? lisa: you might be in the minority if you look at the sign-ups. we are looking at amazon prime date which starts today and tomorrow. its interesting but they have the idea that they are getting less traction in these prime days. there increasing their sales less year-over-year with every

consecutive year since the 30% increase in 2020. tom: do you save money? jonathan: no, but its highly convenient. saturday night i re-watched gladiator, one of my favorite movies of all time. i thought i want to get meditations which is the markets are really his book so i ordered it saturday night and i ordered it sunday morning. who else provides that kind of service? lisa: i ordered a standalone tent of mesh for my younger sun and it came overnight. it was fantastic. jonathan: it was all about price before but now its about convenience. tom: i use it constantly. we use it for one or two items and the trucks are out on 3rd avenue piling up in three lanes. jonathan: five seen that. tom: the last mile is a big

deal. jonathan: phil campelli is with us and dozens want to talk about this. >> i love gladiator as well. lisa: we are re-creating it. jonathan: on friday, we get earnings. we want to talk about your bank specifically the what do you expect this earnings season from the banks and big tech and can the rally brought out? >> is going to look better than it did in march. i think there were so many head fakes and noise at the end of the first quarter that even the fed got faked out. they expected us to be in recession by now. many people were saying that by july and september, the fed could be easing. this is a year where the narrative changes every single week. we have dropped our recession probability from 40% in march two 25% now. we are pretty highly convicted that we are in the midst of a

soft landing. what does that look like? >> demeans the economy can continue to grow and avoid recession that's why we drop their probability and employment say strong and that's been the signal all along. people say we are going into a recession and the labor market has been very resilient. the third point is the easy has to get pushed out. i think that was one of the biggest mrs. this year was that there was so much easing priced into the back cap of the year that had to go along with prices -- you had to belong on a crisis if you believe in easing in the back half of this year. the inflation trajectory flattens out. you heard two more hikes and they will probably do one more than they're comfortable with because we are not near our target of 2% inflation. its an awesome time to be a multi-acid investor we are up 10% this year. everyone is talking about nvidia

but a balance fund up 10% is exciting as well and certainly more than the three-month people at 5%. tom: i love your research where you say to do this but the idea here is you have to be in the market. >> yes. tom: talk to people who are scared stiff. >> we've heard it all year, we've heard debt ceiling and regional bank crisis. it was a foregone conclusion there were be recession this year. i'm not saying get out of cash and go into equities. when you are making a bet on a balance diverse portfolio which has worked over so many years, you are not making a bet on stocks or bonds. you're making a bet on the relationship between those two as it passes which was absolutely inverted last year. last year was the first years and's 1974 that stocks and bonds were down in the same year.

when i came on the show and told you we have the best forecasted return for 60/40 had since 2010 and coming into this year, those are the folks i am after. they are sitting in the three-month people and its a hedge fund out there at five plus percent and they are saying i'm safe here. the balance fund is up 10% in their opportunities just went up. lisa: you talked about the soft landing possibility which hinges on disinflation. we've seen disinflation with used-car prices going down. you've seen disinflation some of the rental prices. we've seen disinflation even in small business. if you look out, that starts to change later in the year. is the disinflation we see a head fake or could that be a potential risk? >> that's the biggest risk to the forecast where the inflation trends higher for the end of the year. when the base effect of june

rolls off only get tomorrow's cpi number, the base case has to be for central bankers to talk extremely hawkish lee. they cannot afford to lend. that controls the housing market. if the housing market shows firmness toward the end of this year, that's a scenario where you could have equities going down and bonds going down but not to the same extent as last year. that's probably our business dish our biggest risk is that a trends higher instead of sticky inflation, accelerating inflation happens and that would be the biggest risk. we are not investing for that but that's probably more risk than the u.s. in recession by the end of the year. jonathan: what are you investing in? >> weed on have enough of a growth deterioration story that would speed up a disinflationary

back it to percent before the end of next year. that does it mean you cant invest in the market. if its flat, its ok and maybe you go -- drunk at the return in bonds that maybe you get that breadth story in the s&p 490 which is everyone else to keep the market going. tom: its like the dow 27. the headline inflation, 4% prior, plunging to 3.1%. i do think enough has been made about tomorrow. you get a headline inflation number and what if it comes in at 2.9%? jonathan: that would make set up. >> they know that last june's number was 1.2% and that's rolling off. if you get a high .1 or .2, that's not waving a victory flag. jonathan: i'm trying to make this exciting going into

tomorrow morning. lisa: you can tell he's an asset manager, excited for returns of a balanced fund when nvidia has delivered 188%. welcome to the program, equity futures are positive by zero point 15%. coming up at 7:30 a.m., fs investments on the inflation data. lisa: it was interesting how he said the biggest potential risk is not the u.s. full length recession but it needs chugging along. what happens of the disinflation we are seeing in certain areas reverts and restores an inflationary push that force the feds and? that maybe seems increasingly likely. jonathan: tk is off thread's and elon musk needs to get on it. bramo has a fake account and its

been verified and has a thousand followers. lisa: my goodness, seriously? i cant see any of that. this is the reason why twitter is losing a lot of traction. i have tons and tons of impersonators. jonathan: they used verification but its not verification. lisa: someone asked me to wink twice if i was the real me and i am winking so thank you. tom: is that why you were doing that? what are you doing?

>> we are just we know that adding finland and sweden to nato is controversial. we agree on the language that we proposed in you proposed relative to the future of ukraine being able to join nato. we are looking forward to it continued united nato. jonathan: the present of the united states speaking at the nato conference in the last hour. he's very proud of himself. you figured out how to

deactivate threads. you did that without deactivating instagram? tom: i do really understand it. lisa: i'm experimenting with threads. jonathan: you could be the bloomberg surveillance account on threads. tom: i could go back on. jonathan: i think i am done. i does need another app. tom: anne-marie hordern is up to 145,000 followers. let's get through this with futures up six. what else do you see on the data screen? jonathan: yields are coming in and the dollar is up. tom: this is the professional bloomberg surveillance check. fortunately, we have a lot to talk about our bloomberg washington correspondent. what's been the biggest surprise as you landed in lithuania?

that's the single thing that sticks out now? annmarie: what sticks out is the tension between ukraine and the nato alliance. what you have is joe biden being welcomed by stoltenberg to the meeting in lithuania. he said we agree with you and the wording you put forward in terms of at some point how they could see ukraine becoming a member of nato. then what you saw on twitter was a scolding from president zelenskyy saying he is on his way to the nato summit any cannot believe they are even discussing the language regarding ukraine. they say potentially how they will be hedged about being admitted potentially at some point. it looks like so and ski wants more than that. it looks like he wants specific timelines and dates and i just on see that happening at this summit in particular. jonathan: how unrealistic is that?

annmarie: the president was on cnn over the weekend and he said it unanimous. he said there needs to be more that has to be done within ukraine, nuts is the fact that there is a war in the country but also the fact when it comes to democratization. he says there needs to be done in ukraine before they could see this ascension into the nato alliance. there is a lot of countries that have mixed feelings and there is an open letter to the president from a number of foreign policy experts and former u.s. officials who want to see a quick path of ukraine to join nato. some of them say when it comes to article 5, 1 way they could potentially around that is that they would claim the territory that ukraine has right now would be the only territory that article five would have to respect and go defend. it would basically take away the likes of crimea and other areas

and territories of ukraine that russia has illegally annexed. jonathan: there was a series of complaints and a lot of them resonated with many people and many years later, its spot on. the contribution to military spending and some of these countries and some members of nato has an improved. as you look around the room now, is it still just the united states doing the heavy lifting? annmarie: i remember that nato meeting well because i was there. former president trump caused quite a fluster when he was demanding and wanted to break up the meeting until he got some serious commitments. by and large, it still remains that the u.s. is doing the bulk load when it comes to the military spending of this alliance. it is fair to say looking at the numbers that you have seen an uptick of some of these countries in terms of their military spending. the two key things you want to take away his they want to

percent to be the floor. that needs to be the minimum these countries need to be spending and they will emphasize this at the meeting but a lot of these countries at this nato summit will come out either collectively or single-handedly and talk about what they want to provide in terms of military ammunition and support to ukraine. there is the defense spending but there is also what military meant they have now that they will earmark and say this will go to our support for ukraine. lisa: many expected volodymyr zelenskyy to be the center of discussions at the nato summit this year. turkeys heard a gun has sucked the oxygen out of the room not only with -- turkeys erdogan has sucked the oxygen out of the room. they desired to be part of the european union.

what are we looking for today? annmarie: what you will hear is biden or erdogan come out and sadie f-16 saga that's been going on is over and they will likely get that delivery and shipment. everyone knows that this has been the discussions behind the scenes and there's been pressure from key senators like bob menendez, the chair of the senate foreign relations committee, to make sure they can rely -- greenlight the f-16s and erdogan last night greenlighted sweden's path. what you saw when he was trying to blame the european ascension of turkey was his way of trying to extract any sort of concession he could get as he has this power. he knew everyone around him really wanted to make sure they could claim victory at nato and it wasn't just finland that's

now in the group and they are celebrating that but that they finally were able to get sweden and they have an absolute hold on the baltic sea. this was important for the nato alliance and the president. you saw early gun coming off an election and he was using this of what he has at home and trying to extract as many concessions as he could. jonathan: looking forward to touching base with you in about an hour area some fantastic notes on wall street in the last couple of days so thank you if you are listening. we talk about this research -- the flawed logic in the current market narrative -- the market seems to think the fed returns to the 2% target and everything will be fine. there are some problems with this logic. the one problem he identifies as if inflation comes down faster than the fed expects come is

because the economy is slowing faster than the fed expect. for example, wholesale car prices decline more quickly than expected, is driven by sharper than expected drop off in demand for cars. tom: i totally agree and i would overlay it across nominal gdp. if you get inflation to come down with some kind of real gdp tepidness, you get a nominal gdp at 4%? maybe under and that affects the line to corporations and that's where you get into the earnings debates. jonathan: he goes on to say the fed and academics a takes 18 months before economic policy affects the economy is true when the fed raises rates and where the rates -- and when they cut rates. this is a pretty bearish view on the way the market position is going into the economic data. lisa: if the opposite of what we were talking about this far as

talking about a soft landing. we are still in pandemic economics according to tom keene , the great economist, and we have a lot of distortions not working the way we otherwise thought like the housing market. jonathan: you have never acknowledged each other. lisa: that was one way. jonathan: are you going to give bramo a complement now? tom: its a toxic brew. jonathan: he tried. ♪

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jonathan: stocks picking up on the s&p 500. the nasdaq as well. the s&p positive, 0.2%. by .25% on the nasdaq. gains on the s&p 500, continuing to read this from apollo. the fed highs will drag the economy down, that is why recession is more likely than soft landing. i'm not saying he has done this to counter the new york fed president. does counter him. he said to the ft, i don't have a recession in my forecast, i have slow growth. this going into the federal reserve meeting later this month

with a two year yield weekly. we are back down to 484 this morning. tom: let's pause and say why john williams matters. he has the san francisco tour of duty and is at the new york fed, which is a different fed. what is important is this odd phrase, a guess of normal, will it be the new normal? he says we are going to get back to pre-covid normal or are we going to set with a higher inflation and interest rate zero -- regime? jonathan: some slowing in jobs, overall work the number of hours in the u.s., -- lisa, that is not some thing we see currently

in this labor market. lisa: he talks about the likelihood of the autumn limit rate going to 4.5% by the next year. we are not seeing that. what more do they have to do to offset that? i will give you a sense of what the counterpoint to the argument is from the federal reserve based on individual companies. zillow, online home shopping, shares up more than 4%. they were raised from overweight to neutral by paper sandler. shares up almost 50%. the housing market is supposed to be falling out of bed because of mortgage rates at 7%. this is the conundrum for the federal reserve, looking at a market that has looked beyond rate hikes. i keep watching the homebuilders. jonathan: terrible website. tom: it is hard to use but i am addicted.

it is like voyeurism. lisa: me too. jonathan: right move in the u.k., superior website. if you can work it out. tom: you are looking for a pile of bricks in the middle of nowhere, the cotswolds or whatever. jonathan: you are thinking high-end property. right move puts all the properties in the same place. your kind and then properties you can actually afford. tom: the cotswolds are lovely. the sheep in the road. lisa: i can see you taking care of sheep. jonathan: -- in the studio. lisa: you could stick a couple of steaks on that. jpmorgan chase, shares of 1.3% as they are raised from a hold to a buy.

they report earnings friday, everyone is expecting armageddon -- or some negative earnings results because of the inverted yield curve. the biggest are the take alls. jp morgan. ne-yo, the chinese based electric vehicle maker, those shares up 2.4 percent as morgan stanley says the showed big improvement next month. we have seen this from rivian and tesla, it is building, even at a time when we are seeing signs of a buildup of electric vehicles. we are seeing a lack of demand for production. the bifurcation is interesting. jonathan: is that jonas at morgan stanley? lisa: i believe so. no, it is tim. jonathan: well the whole stream

on the auto industry is fantastic. when you go through the whole supply chain start to finish, how green are the? when do you start to break even? lisa: how much is it predicated on the idea of the parts will be recycled into future iterations when the technology is shifting? this is offered at a time when the governments are trying to push the vehicles. jonathan: that would be my -- can you imagine how much they will cost to fix? of got no idea how reliable these are. tom: i wonder if it is like railroads in america. jonathan: they will shove all

this money into this effort. tom: she was shaken. lara rhame. jonathan: let's get to the research. for percent saying this. -- 4% saying this. tom: a brilliant note, she comes from a foreign exchange background, chief u.s. economist at fs investments. she follows the data like an animal. i love how you are looking at real yields. i looked at the not the 10 year, the vanilla, but the inflation-adjusted real yield. i'm thunderstruck. our re--- are real yields now

where they have the effect on the american economy? lara: we were talking about audio, interest rates, these are the sectors that are affected. as the fed is transitioned to the end of that, the edging down of inflation highs this insidious effect via the real rates channel. that is what we are going to continue to feel in the housing market. it is going to be a weight on consumers. it is not catastrophic but it is a lot higher. hundreds of billions of dollars matter. tom: what do you think this will do to commercial real estate? and is not a big part of the gdp pie, but it is emotional. you are down in philadelphia, rooting for bryce and the rest. you are in philadelphia and you

don't have the manhattan stars in your eyes. what is commercial real estate going to do in philadelphia or phoenix? lara: those are different questions. we have seen geographically, regionally a huge dispersion amongst performance. we are so focused on finding the opportunity -- like the central business district. we are experiencing a lower rate that seems to be settling in lower than pre-covid. there are so many sectors, multifamily industrial, or even seeing hospitality doing well selectively. it is an area where you can dig in and find opportunity. it will find new equilibrium. we are seeing that in housing and commercial real estate. you want to be the bank, look

toward income. there are ways to invest in commercial real estate. it will be a an important sector for any portfolio to diversify into. lisa: this speaks to your theme that you don't think we are going back to the era of low rates and low inflation of pre-pandemic. how much is this is the -- this the real issue, the disinflation in auto, housing, other metrics? year-over-year, for six months, it makes it go higher. lara: housing is a primary example. cyclical headwinds with interest rates, but structural tailwinds given the under building and underinvestment in the sector for years. the forecast, a recession is in

my forecast. in the beginning of next year, it does not have to be severe. the fact that interest rates are now going to offer -- a trend of falling interest rates. it has caused people to change their behavior over generations. i think we are seeing it. look at the bloomberg bag. it is flat on the year. you cannot lock in a price again, you are left relying on income that is very low relative to where inflation is. jonathan: another person to catch up with soon -- u.s. consumers have spent and above

trend pace over the last couple of years. the dynamic is fading. excess how -- household savings likely to be depleted by year-end. in the last couple of days, more and more people are looking for wider spreads, based on where they are. they say our study for bankruptcy findings for small and private companies shows a default cycle is underway. put that together with projections on what people look for and i guess we will see. lisa: the counterpoint is the survey this morning that showed small business optimism exceeded expectations. yes, they are raising prices at the lowest level since 2021. but they expect to raise prices at the highest level since the member later through the remainder of the year.

to that point, other people are saying the same thing. consumer spending has to follow off if nothing else because of student loan repayments and extra cash. jonathan: that is in the fall. tom: it is evident in the travel plans of america. is there anybody not on airplanes? i would suggest that real yield is a tangible issue. i have no idea how the five-year real yield -- absolute moonshot. jonathan: lisa is done with flying. lisa: for about a week. jonathan: are you away again? great. enjoy the summer. from new york city this morning. welcome to the program. the equity market is positive, positive by 0.41%.

coming up in about 45 minutes from now, former fed economist, the labor market developing a suggestion on what the fed should do. tom: the day is looking pretty good. about two days ago she came out with a statement like we heard from j.p. morgan in the last hour. i don't know if this is a soft landing, this or that, the recession gloom is slipping away. jonathan: and has been pushed out. that is the big change, the crew, a three-month rolling forecast for a recession. every couple of months you are pushing out another three months . lisa: at what point do people capitulate and say there won't

be a recession? tom: i'm glad you bring it up. of all the calls of the last 18 months, the recession call has been silly us to. i give deutsche bank the greatest credit. we will have a slowdown, but it is way out. that is what he said a year ago. jonathan: jonathan: calling the forecast silly? tom: i think the gloom of the recession, if you look at what james does, it is hard to call a recession. jonathan: you brothers on the fx market. and then -- next.

jonathan: actual conversation. i'm happy for you. what sport do you want to do? tom: we should do sports with a little break.

lisa: the sport is gladiator that we are doing now. tom: i have not seen the movie. jonathan: what? lisa: we should have a surveillance viewing. jonathan: how have you avoided that? tom: i don't have the time. jonathan: i'm sorry -- i know the stuff you get up to on a weekend. tom: do i watch already or gladiator -- barbie or gladiator? jonathan: are you actually going to watch barbie? tom: no. jonathan: mission impossible comes out. tom: the trailer had some reason to it. jonathan: come with me. it will be great. futures on the s&p -- i just noticed a declined? lisa: no, it would be fun.

jonathan: three basis points low on the 10 year. yields have come in on the front end for a third straight session. a couple of basis points the two-year, a bit of dollar weakness. we have seen the euro-dollar reclaim 1.1, still close to 1.30, punchy wage growth data out of the u.k.. tom: the 7% number is a big number. i don't understand how that happens. but there it is. it speaks to the optimists view. we've heard this from oppenheimer, reaffirming a constructive summer. neil dutta saying this is the heart of the matter, inflation ebbing, flat wage gains to positive real wage gains. i usually get hate mail. thank you, stephen for writing in.

he says surveillance is timely. one of the reason we are timely and balanced as we talked to experts on their heritage. win thin with his unique view of the south pacific, levelheaded currency strategy at brown brothers harriman. i was getting a rationalization the other day. did the chinese yuan not depreciate or devalue -- i say baloney. i looked on the screen and see a depreciation. how does that change that pacific rim object -- rim?

win: it is a big deal. some of the calls about the exchange -- but by the markets, that exchange rate, the dollar you want is higher. -- dollar yuwan is higher. it is a bit of a no-brainer. the chinese outlook remains concerning. despite the announcements overnight that policymakers are looking for support for the property sector, i liken this to a band-aid on top of the gaping wound. there is no easy way out. there is more talk about china going down the way of japan in the last decade. that is something where to keep an eye on. but the outlook for china remains negative. that has application for global markets, emerging markets and commodities. tom: in your study of india,

overtook burma, around and up to japan, to you by the idea that the labor component of china will be moved to vietnam? win: that is interesting. there is a debate of whether china still qualifies as a developing country. that is a big debate with organizations. you get a few benefits from being classified as a developing economy. there is no doubt about it. it is the cost of being a fully developed country. there are still issues with market manipulation, etc. but for the most part china has been a big mobile driver of growth. it is fading. we are seeing more off shoring. vietnam, india, mexico.

it stands to benefit. i would not say it is deglobalization. but as china pulls more inward, multinational corporations look for alternatives for supply chain's and etc. the global economy cannot count on china being the global driver of growth right now. lisa: people are looking to the u.s. for a global driver. there's a reason everybody does is tap dancing. the cpi report, there is a feeling that the dollar is headed weaker even though we are getting hawkish rhetoric from fed officials. why do you disagree and see potential for a strengthening dollar at a time when people are seeing a divergence with the u.s. slowing the rate hikes and others continuing to do it more aggressively? win: it is a question i'm being

asked by clients. given how strong the u.s. on the mental, why is the daughter -- dollar not doing better? if you don't like the dollar, what do you like? germany is tipping in a recession. france and italy are reading ever recession. the u.k. is tightening. it will go into a deep recession. where the last man standing. we should be drawing more interesting assets. the market is starting to believe it is there. the second or third hike. i still look at this weakness as a gift. i think it should be higher. but i can't make the case for going much lower. rate cuts having priced out for next june or july. the pieces are there for a stronger dollar and yet we are not seeing it.

i don't know the trick will be, i still remain confident that the underlying story for the dollar is strong. eventually the market price will reflect that. lisa: what cross are you looking at, the euro-dollar or something else where we will see it come to the fore more? win: the biggest puzzle is in the dollar-yen. now we are down at 140. we go back to monetary policy divergence, bank of japan goes nowhere. the fed is hiking. that should be much higher. that is the biggest puzzle. it should be topping around 110, 111. i can't make a bullish case for anything going on in europe in terms of economies. those are the ones where i look at the most. jonathan: i can't make a bullish

case for what is happening in europe. it is better than people expected six months, nine months ago. lisa: that is where we are at. i have to give a bit of a correction. i was unaware tom cruise did his own stunts. he is 61 years old, he drove a motorcycle off a ramp like cliff in the austrian alps. he did this himself? it is a deathwatch. do you want to be doing that? jonathan: at 61, i would love to be able to do that. lisa: would you want to do that now? jonathan: no. but i would love to be able to do it at 61. something tom said earlier, i have made a career of this. stephen who you quoted earlier, stephen was telling annmarie that he enjoys her time --

timely and balance reporting on the issues. it was not for us. just to be clear. she is coming up with maria tadeo shortly. are you watching tennis? it is so special. kick yesterday from wimbledon. from new york, this is bloomberg.

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>> i don't think the fed is going to wait around. >> this is not a credit crunch recession. >> what is going to break the equity markets? >> i would not be surprised to see more tremors.

>> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and tom keene. tom: good morning, on television and radio, it is the slowest tuesday since time began. markets frozen. waiting for cpi wednesday. i am looking at the screen and struggling to get to 8:30 tomorrow morning. jonathan: there is a feeling against tomorrow, the economic data onto cpi, bpi. for many, the week might begin on friday. earnings season kicking off with the big bang, wells fargo. let's see if we get some insight into the u.s. economy in a few days. tom: all in all, it is this idea in the zeitgeist of recession analysis versus soft landing analysis. not that i know what a soft landing is. i don't recall but in the

textbooks. jonathan: recession delay not avoided. that is the take over at apollo. the lack of fed hikes will calm down. the light of john williams and the new york fed, the financial times. he says recession is way more likely. in the base case it is not a recession, it is slower growth. tom: dr. williams is qualified to talk about this and that of someone we will listen to. but partitioning the recession is about as useless as the fed -- >> who in this market is waiting for a group of guys at the npr to turn this over?

that was it. lisa: we start saying it is totally dead, don't come to work. then maybe come to work tomorrow, maybe wednesday. come on friday. then go on vacation until july 26 in the -- when the fomc delivers their rate hiking mastication's. there is interesting data coming out in the margins. the consumer credit data that came out yesterday from the federal reserve. to buy homes, you are seeing that coming down. but people are still using critic cards. small businesses are raising prices at the slowest pace going back to the heat of the pandemic but they are thinking of raising them more later. these are going to suggest this in the short term. but it reads a question in the long-term. tom: short-term, medium-term and

longer-term, i will get it up here. fomc go. it's get to the medium-term of november 20. these will be absolutely critical meetings given the inflation reports. jonathan: i am going to shored up for the fed decision. like sports commentators. tom: you can see this while powell is talking. i fell asleep last time. then we come back on and it sounds like we have hung on every word. jonathan: we both came in at the lowest for something like two years. can it mean whatever you wanted to mean? lisa: absolutely. it is information that shows why you can see it decline in auto prices. people are willing to borrow

these rates at a time when car prices are going up at the same rate. your underwater on auto loans. you are seeing that increasingly as companies drop prices on cars where people are owed to take the higher price. it is raising discomfort with these rates over the longer term. but to your point, it also means people have cash and they can spend it. jonathan: if that was the other number, people would say they got to, things are tough. lisa: although do people want to borrow at that rate to buy luxury cars? that is the real theme. tom: the car loans, home mortgages, car loans have ballooned. lisa: you are looking at the highest payments that people are making to own cars going back in the records. tom: i am looking at this creep away from low prices. jonathan: the futures slightly

positive. we saw the dollars kick in over the last few days. breaking 110 on the euro. tom: this is intelligent for northwestern mutual. brent schutte joins us. you look abroad at the developed nation equity is and you see -- you say that they are remarkable achieve. we are beginning to hear this in our analysis. what equities abroad are remarkably cheap? brent: many parts of the market. sometimes earnings are marked down 10 or 15%. i compare this to the u.s. equities, where everyone has wanted to be. and they have times earnings.

you mentioned short, mid and long term. i'm a pessimist. i think a recession is likely. narrative has changed and it puts a white blanket on equities in the near term. but i do think the parts of the market that are cheap will do well coming out of a short and shallow recession. i encourage people to position more toward that. and international equities. tom: are there tech growth performers in the mid-cap area? brent: yes, but how much you pay for that? it reminds me of 1999, 2 thousand, were that was the narrative. i know not every time in history rhymes.

lisa: it was almost silly to discuss recession, the gloom and deal. the data showed a strong economy. how do you parlay that into a shallow recession that could ameliorate some of the inflationary pressures enough to keep growth going on this see eric? do think that is the most likely outcome at a time when there is still this pressure? brent: it is highly linked to covid in the rearview mirror. but the big concern is -- unless people come back to labor market. if you look historically, the fed hikes rates aggressively as wages reach 4%. that is where the last economic

cycles have ended. i don't think the fed stops until they see the labor market crack. i look at the liquidity tourniquet on the u.s. economy and that means a recession is likely in the coming quarters. the good news is i believe unless the rate has changed from two point 5%, we are above five. there's plenty of room if inflation has gone to cut rates, to cushion the blow. the consumer still has ample savings and likely will after this. lisa: what keeps you up at night that could challenge that assumption, to something that looks more traditional in terms of recession? brent: the fed keeps hiking. i worry when the labor market comes up and shows its strength, they want to see a complete and gone. they probably already gone too far.

if they continue to go face on a belief that inflation is not completely back to percent, every sign points to that direction. if they go further and further until they get the labor market to crack, you could see something deeper. jonathan: you said suppose it strength. is there more to the labor market that meets the eye? brent: people look at the data and it is odd. he saw household employment for many months the flat. february 2 november last year, it was 200,000 total. this recession commentary, does anybody realize that most mastic income has been negative for two quarters? that is the opposite of gross product. -- gross domestic income and the opposite of gross domestic product. they won't stop until they see it weakening and hopefully they don't go too far and want it to weaken so substantially it

causes a recession. jonathan: how hard is it to -- right: i'm -- brent: for people who invested in bonds for years, the race on the bond index, they are not 5%. you have the opportunity to hedge your portfolio by investing in bonds which offer real value when inflation is going back to 2%. and it will hedge against equities, returned to the historical role of balancing the downside of equity markets. jonathan: thank you sir, appreciate it. from northwestern mutual. you've got another one. lisa: i have become less

bearish. i think there is this concern about inflation going back to the 2% level easily. that is the real distinction now. tom: it is a good thing. lisa: the fed itself, they said they are committed to 2%. do they have enough on that last mile? tom: i think he has an interesting perspective. the unappointed rate in milwaukee, wisconsin is 2.4%. it used to be five, 6%. jonathan: i got a message from his of scriber, now she tells us. welcome to the show. the s&p 500 positive by 0.2%. about 18 minutes from now, a former fed economist, we might

have heard about that rule. tom: a huge splash right now. she has earned this. it is court research from a phd at the fed who has gone on to bigger things. she is getting major love with the economics community about the granularity of a recession call and set of the aggregate foolishness. jonathan: let's get to that briefly. 3.5% unemployment. you heard brent, suppose the strength. he is not on board with the idea that this labor market is doing really well. tom: if you don't have a job, it is doing terrible. if you have a job, onward and forward. but the aggregate view away from the big cities, sub 3% employment is extraordinary. we have never seen that. jonathan: looking forward to the

housing market conversation with you guys. jonathan miller, the president and ceo of miller samuel, that taking place in about 30 minutes. it is so interesting in america, mortgage rates surging through 7% over the last 18 months. yet housing is recovering. lisa: a lot of people are buying with cash, a greater proportion with cash. are they not taking out loans because they are concerned about the rate, or because they don't have to? tom: how many people do i know who are buying houses with cash? jonathan: they are all your mates. futures positive, 0.2%

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1 >> the biden administration has been trying to ensure that this conflict does not become a world war iii and does not escalate. this ties into the membership though, and is attacked against one and all. the idea if it was brought into nato officially while the conflict is still raging, with that commit the u.s. and -- to be involved in a way that most are not ready. jonathan: controversial decisions being made at the nato summit. the codirector at the center on u.s. politics, weighing in on the nato summit. taking place in lithuania.

an important? -- tom: an important conversation. the socialist spanish minister uses a private jet -- jonathan: can you verify? she gets on a bike to ride it. tom: brilliant. jonathan: infuriating. maria would not. we think more of maria than that. tom: this is one of the three baltic states, it is extra ordinary. i did not expect this, i was way out front with annmarie hordern for the president of the u.s.. st. petersburg seems only. 240 miles from helsinki by ferry

to st. petersburg. i got finland nato, sweden nato. how alone is st. petersburg at the very end of the gulf of finland? maria: to make it clear, i would not do that. if you are a politician, you fly ryanair, you put the picture on twitter and you say i am a man of the people, a woman of the people. but beyond the spanish minister who was trouble for that picture by the way, that is the message that nato wants to send. this is an alliance that is stronger than it has ever been. now president erdogan dropped their veto. sweden expected to join the alliance. they say we are as powerful as we have ever been. tom: it seems like a combustible moment. in your reporting with the team and the president, are they worried about the putin

response? annmarie: they have been worried about escalating the war more. many critics say that biden administration drags their feet when it comes to fresh weapons and the latest list zelenskyy is asking for to ukraine. potentially, if putin feels like he has to double down -- if this becomes to a point where we could see putin maybe use a tactical nuclear weapon in ukraine. this is obvious concern not just for the biden administration but nato writ large, they have changed the nuclear posture. what the president wants to present, this is a win, not just for the alliance and the support

for ukraine, but the foreign policy. he will say what putin wanted to do was divide nato and what he is done by his invasion of ukraine was a the alliance and expanded. now you have finland and sweden going to be two new members of this group. lisa: and the fact that sweden will be incorporated into the union, finland is a member also the question around turkey. the willingness to allow sweden -- what questions remain to be established through the remaining 24 hours at this meeting echo -- meeting? annmarie: the real question will be involving ukraine. biden said he agreed with the language put forward for ukraine, regarding their invitation into nato.

but there was a strongly worded tweet from zelenskyy saying it is absurd, what he is hearing about the nato summit as he is in route to the summit, he said ukraine is being discussed without ukraine at the table and he thinks it is unprecedented and absurd that there is no specific timeline for ukraine to join the alliance or even for the invitation to join. how the world leaders talk about making sure they are 100% behind ukraine, want to strengthen the alliance, but not have a specific timeframe for ukraine, that is going to be one of the bigger potentially testy moments we will see on the ground. lisa: why is it that probably the most interesting person in this nato meeting is turkey's erdogan and his role in allowing sweden into the membership and his asks for the rest of the union? maria: well, it is involved in

the big talks. we know yesterday in sweden, had he not said that political signal, the turkish parliament would not rectify this and the swedish would be out, waiting in no man's land for weeks, months. that is key. what we know is that he wants the fighter jets from the united states, the m-16s. he believes this will also get the transfers. we know this is an economy that needs international support. it needs investment for international investors and that has to do with presenting -- presenting him not as just a powerful leader in turkey but willing to stay constructively on the international stage. jonathan: are you seeing a real change in leadership? maria: it is early to say. it goes back to is this a fundamental political change or is this about what do i get out of this?

if i help the swedish, what do i get? there is the question of money. we've seen the debate plan with the central bank, the economic measures they need. it is too early to say. but yesterday, president erdogan was the start -- the star of the show. you should have seen him walk around. he was the man of the hour. he says here i am, not only i won the election but i'm powerful. jonathan: catching up with emory and rates -- annmarie hordern and maria tadeo. some changes on the policy. lisa: the monetary policy that we understand is something turkey now understands as well. if you cut rates it might not work, if you raise rates, maybe it will be a way to curtail inflation and that is the new turkish experiment. none as much as people previously. that is part of the problem, it

is a difficult moment to be countering inflation. to your point, the orthodoxy has shifted for the moment. tom:-- jonathan: it feels that way. tom: it has flatlined. i'm doing in my head quickly, we should be up to 27 or 28 but we are not. they are holding their own see if that finance minister, usually acclaimed by the west, will have mr. erdogan listen. that is the heart of the matter. jonathan: kathy jones of charles schwab, and caffrey on housing, home improvement stocks. can forward to that conversation about what he sees in the housing sector. homebuilders on the s&p 500 doing well. why he thinks if you are people may move and more people might renovate.

tom: if we have the two rate increases, do we have an 8% 30 year mortgage or higher? jonathan: potentially. lisa: is the question will it matter, will anyone be paying a percent mortgage rates? tom: the dream goes away for millions. forget about the rich people buying all cash. the dream disappears. jonathan: i a great. --agree. futures positive, from new york, good morning. ♪

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five million people's lives, it's overwhelming. it's everything. tom: bloomberg surveillance, good morning. michael nowhere to be found. he is checked out. we are ready to go over the economic data if i can give it up on the terminal. small business data came in a little more constructive than was expected. lisa: i thought this was interesting report. it showed small businesses increasing prices at the slowest pace going back to 2021. it also showed they plan to increase the prices down the line at the highest pace going down to november. the push poll of the

disinflation versus re-inflation later on. tom: let's review the inflation data. claudia does not want to talk about it. 3.14% in from 4%. the operative university of michigan phrase, it is a giant arm us -- giant move. lisa: significant disinflation which is why no one seems bearish and everybody is pushing off dissension calls. even if we are not occurring -- recurring the pain that jay powell talked about it jackson hole. can we get true disinflation without job losses and smaller raises? tom: i like the cleveland series on inflation. there is core cpi year-over-year, 5.3. tomorrow, it will be here 5%. 4.9% is lower than 5%.

but it is a trend in the right direction. lisa: prices coming down, dropping the most since 2020. prices are not rising at the same level. you take a look at other things. even airline tickets are going down. i have not noticed that. tom: sir lewis hamilton, getting a lot of love off the formula one race. right behind them is claudia sah m, former fed economist and founder of sahm consulting. she has been invisible over the measure of inflation. we are thrilled to be joined by her. you mentioned california, it is as big as the german economy. all of a sudden, california's unemployment rate goes from 3.8% up to 4.5%. should we follow and be aware of california?

claudia: we should watch every labor market that we can. the fed policy is set for the national economy. so we can't expect the fed to get too excited about what is happening in california. there could be a lot of tech layoffs, disruptions in the bay area. so it could be unique to california or we could be headed to slower growth overall. tom: good month there was a massive redo. what do you see right now? i need to make some news this morning. claudia: the labor market is in a great place for people. because workers have had the upper hand, i look at the wage data which a lot of people were wringing their hands over yesterday, how do you think you are going to get workers back into labor market and deal with labor shortages if you don't pay them more? this is economics 101.

to see that we are still adding jobs is really good. but lots of people find a way to turn it into really bad. i will do that. lisa: i love where you said it is not hard to find an angry accra economists. everyone has made mistakes and everyone is trying to carve out a niche to explain what just happened. how do you understand the dissonance between expectations of where the economy was headed and what has actually happened? claudia: every macro economist has missed it. people get kind of not happy when they are making calls and their docketing a. they sometimes get even less happy when they look around and they see people that make big mistakes all of the news. i pointed out in the piece on bite nymex you are referencing

-- widened economics that you are referencing. -- it could do more damage than good. lisa: what are we misunderstanding to the point of making mistakes? we have only plenty. what we misunderstanding about pandemic economics as tom would call it, or where we are in the economy -- recovery and the distortions, people moving from california or the northeast or even people's propensity to switch jobs, shift locations, spend more than they would to capitalize on an experience they were denied in 2020? claudia: it is all in there. you need to be aware that every day could be leading us astray. are we doing the rebalancing or are we going down? we will know more in a few months. in terms of what went wrong, i expected that the economy, that

supply would come back online more quickly than it did. and we see this disinflation right now without unemployment rising. it is a huge puzzle to micro economists -- macroeconomists. if we did deep in the data, that is where we should stay in terms of grounding our analysis. tom: what i love when you come on is my brain gets going, doing research i have never done. out of the percent of gdp of america, there are like 23 states or so with under 1% of america's gdp, we know the names. texas and california make up 23% of american gdp. do people like you focus more on those big states, or do you aggregate everything together?

claudia: there has been a lot of work with the fed on regional effects. they have experts in the building who are not economists and yet they don't play an integral role. they could be the canary in the coal mine. we can get ahead of this a little if we get a recession. states like texas and florida, they have more than recovered their losses. you want to look at the states but that is not going to be the place you stop with the analysis. tom: what do you look at with the analysis as you try to measure a recession? claudia: i had no idea this was going to become such a thing. i developed a rule to start a fiscal policy and send out the checks. people want to use it as an indicator, but it is not a forecast tool. it is not tell us where we are going.

it tells us about where we are. if we are ignoring that we are in a recession, that is helpful to know. lisa: claudia sahm, famed for her sahm rule. the headline on cpi in the united states is supposed to drop from 3.1% year-over-year. from -- to 5% from 5.3%. one concern we have heard about from a lot of guest this morning is a head fake when it comes to disinflation and the pace. we have seen car prices and rent come down. we have seen peripheral areas that the economy shows signs of disinflation. is it enough and showing signs of consistency to bring us where the fed would like us to go? claudia: we're still in a place

of uncertainty. the fed leans on using unemployment versus inflation. it is more a rule of thumb. we are so far off. we're back to the days before the recession when unemployment was so low, inflation did not pick up about what is going on? we've carried the uncertainty about how those relationships work into the present. that is partly why we come out of this with some reasoning from a macro profession. lisa: i'm watching sectors, auto, prices going down for used cars. i'm looking at the mystery of why housing prices have not cracked at a time when mortgage rates are the highest going back since 2016 at the earliest, further, i think it was more than that. what sector are you looking at for a tea leaf in order for project where we are headed with inflation?

claudia: you listen to the news cycle and you will hear things. i had not planned on last week during state-dependent rules. so in terms of industry, you go after where the story is. you look at the tech. you see what does that look like and there are some places where he had a lot of trouble bringing local sin, state and local government. there one of the big additions. it looks like rebalancing. but you are going to pick up and follow any sector that is still higher inflation. tom: i was thinking about you as a fed president or fed governor. can you see claudia at the building around the table? lisa: i think she is close. tom: michelle will get her starbucks. the clarity of the dissent at the fed. we note there would be a visible

sign if you were there. what is the character of our non-descent descent at the fred? claudia: it is unfortunate that you have straight-line votes and then you get to see your economic projections that there is disagreement. i don't know why they are shy about saying there are a lot of moving pieces here. they are already somebody and some of these people have been opening for a pause. there have been some fed officials openly going forward. how do you get a pause out of that? you think you're going to do 25 basis points more twice? why now? everything was puzzling. tom: claudia, thank you. graduations on the impact she is having on our slowdown, stagnation, recession debate. amazing. lisa: we don't even know where we are and that is the takeaway we keep getting from pushing the

recession call. it is hard to figure out what kind of economic cycle this looks like. tom cole it she said the heart of the matter, she is not using rule as a forecasting tool. it is a statement of where we are right now. half the battle is nobody really knows where we are right now when you have travel as insane as it is, housing coming up here. then you got other people flat on their back. i'm getting a lot of heat from people. it is a struggle. lisa: what kind? tom: there are a lot of people struggling. -- up .2%. lisa: we have not talked by the pga tour officials headed to washington, d.c. to talk about the merger l iv, the saudi backed group. they plan to say there will be no influence whatsoever with the

saudi's in the u.s. golf tour. it will be interesting because it will be in front of the senate permit subcommittee on investigations at a time when there is real concern about how this is going to play out. tom: the heart of the matter is the sport itself. i looked at ratings of formula one versus nascar. nascar has a larger united states tv rating but the international ratings of formula one are super bowl ratings. huge. i look at golf, other than the masters, jonathan ferro is tuned into every hole. the pga, etc.. is anybody watching the stuff on the weekend? i think the answer is no. lisa: i'm not. my grandparents did though. tom: a few years ago.

lisa: how does this transfer that saudi arabian interest in sports more generally, golf, soccer or football. tom: u.s. women's open of 12%, but down 16% from 2016. that is the heart of this matter. people were struggling how to make this a sport after tiger woods. lisa: they will get a bailout to keep it going. we are shifting gears to the housing market and looking forward to this conversation. jonathan miller, president ceo of miller samuel. i'm curious to see how he perceives that strength percolating out as interest rates continue to rise.

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it's possible recovery can happen to any of us, too. >> we are likely to need more rate hikes over the course of the year. >> of funds rate will need to move up further from the current level. >> we are close but have a bit of work to do. tom: it will be interesting to

see, mary daly, loretta mester and michael barr talking on the various policies out there and the fed. all of them when they are not on the camera, lisa, are trying to figure out where their kids can write an apartment. that is the reality right now. lisa: or who is going to pay for said apartment if their kids can rent one. certainly none of them are buying. a key question around where that component of the cpi, a major one, falls into play when you've got interest rates highest going back decades. tom: we welcome all of you across this nation to a conversation with jonathan miller, president and ceo of miller samuel. all i can say is go to the miller samuel website and look what he has wrought. he owns the high ground on owning and renting dynamics in major cities in the nation. what is the trend right now that is not in the zeitgeist and all

of the miller samuel data, what is the number one thing people are not talking about? jonathan: i think that housing prices are going to rise more than we think they are. just in the last few months, things have rebounded pricewise and i don't think there is enough consideration given to how much listing inventory is falling off trend. new listings entering the market are declining because people are heavily weighted to the 3% 30 year fixed and it is going to take a while for that connection. tom: how long is eight while? is this a 2, 3 year work out? or eight or 10 echo -- 10? jonathan: may be more toward two

years than one. but i think it is a while. one thing we learn is that homeowners take one to two ears to capitulate to market conditions and also that people have shelter. they have personal needs. at some point, we see more people having to move into the market. the problem is that mortgage rates for those people are more than double what they were. but we are also seeing bidding wars expand because of the shortage of supplies. i think this is a couple of years out. lisa: to give a sense of what we are talking about, is this on average in the u.s. or intellect markets that are hot or hotter like new york in other areas? jonathan: i see it as a u.s.. i cover about 50 housing markets for a real estate worker. we are seeing the same pattern

everywhere, in southern california, texas, d.c., boston, new york city. they are probably more robust -- new york, because the housing boom was interrupted earlier by a change in fed policy because they relate. this is a national condition. lisa: tomorrow we get cpi, the headline inflation very of the u.s.. -- inflationary of the u.s. because of the fact that we did see a slowdown of the appreciation of home prices. do you think people are overstating how much skin plateau -- mutts -- how much rent can plateau, given the pricing in the housing spear?

jonathan: it is an overstatement. i don't see the two markets as a knee-jerk reaction where one changes the other. i think the rental market is mixed where we are seeing areas where rent is going down. new york metro, that is not happening. any kind of sudden move. i think we are going to be stuck in this position for a while. unless there is a meaningful economic event like a recession, which has been forecast in six months from now for the last two years, i am sort of stuck at the moment. time is what changes homeowners positions in terms of bringing property onto the market. lisa: how has the tenor of purchases of homes changed if people are not taking out a 30

year mortgage the same way but maybe they are getting a loan from the homebuilder to buy a home? maybe they are refinancing someone else's loan and putting their name on it to get the former rate? how does the nature of the financing shift to avoid paying the punitive rates currently instated at the headline level? jonathan: i marvel at the discussion about affordability, centered on the 30 year fixed. that is the benchmark. but i've been through many cycles and you have seen people work through and around that. just with the examples that you gave. homebuilders are doing a lot of offerings on financing, buying down rates. people are getting 51 -- five ones, seven ones, 10. to reduce the payment. there are a lot of things we did not have to do two years ago as

the rate was on the floor. that no longer exists. tom: i'm fascinated when you would say in the case of the governor of buffalo, new york city, or the mayors, the governors of florida. even the way you cover the fancy people in colorado with 8000 square feet. what would you say to public officials about the national outrage, that to be selfish our kids can't afford to live? jonathan: it seems like we had this conversation a decade ago. there is too much volatility in housing. one of the biggest problems is we just need to know more. the challenge is to make it middle-class. 40% of the middle class, we were wiped out of the ability to buy a house in this last year. it is rethinking affordability

and what it means. tom: i want to get the same, i think it is too important. all that media wants to look, as lisa mentioned, the luxury people are putting $6 million. all cash into 4000 square feet. when they can see connecticut, pennsylvania to the west. on the upper east side, past 3rd avenue, where people are just trying to do rent on second and 1st avenue, what is your prediction for the next 12 months? jonathan: i think rents are probably going to peek the end of the summer. they are not seeing a meaningful decline. maybe rents are not going to be rising they are not going to be falling.

tom: jonathan miller, thank you. that is from miller samuel ceo. the rents -- i look at these for like one bedroom. studios. and somebody is popping a certain amount of money, you just can't get it done. lisa: in new york it is different from a lot of places. he is talking about this being a robust market in york city in terms of it rebounding more. the divergence of these markets is interesting. he said housing crisis will increase more than people think. you are seeing rents come down in certain areas. this is one of the main inputs into headline inflation. to have this conundrum around housing prices and what people are willing to pay when people are also trying to game out of

recession call highlights the uncertainty and a lot of ability consistency. tom: what i learned today, claudia sahm, i was stunned at the concentration of percent of gdp in 5, 6, 7 states. we know from electoral votes, house of representatives and all of that but it is amazing. we will go rents are declining wherever, yet it is this tiny part of the economy. the big economies matter. they are like new york. lisa: it has been a year of splintering regions and sectors, is wintering economic cycle. tom: i don't think i can sleep. 8:30 tomorrow, cpi wednesday. cpi wednesday.

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>> a quiet summer morning for once. equities are positive for a second day, but 0.2%. the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading, this is bloomberg the open with jonathan ferro. jonathan: coming up, fed officials say higher rates are needed, china signals more economic support and an early breakthrough for nato. we begin with the big bond market debate. >>