he work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> it is hard to see where this recession is going to come from. >> we're going to be in this 3% to 5% inflation and varmint for the next three to five years. >> is appropriate for the fed to take a pause and see. >> i am inflation is going to get to 2% without any help from the fed. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning, good morning. this is "bloomberg surveillance" on tv and radio.

your equity market slightly negative on the s&p 500 for the second or third time this week, waking up and looking at china. to the data and commentary around that economy right now. new loans extended on chinese banks ranging to the lowest since 2009, there are concerns about what is developing in the world's second-largest economy. tom: you look at the income statement dynamics and the balance sheet statement dynamics. i agree. i believe i mentioned this the day before. the flows on the balance sheet in and out are what matter. this is fbi from us to them off a cliff from them to us. maybe not a cliff, but it is down. jonathan: the data dropped in the last hour. the response clear from many on the south side. stop gin weighing in. we will see. we have not seen it.

lisa: what kind of stimulus when they are concerned about debt load in local governments? if they want to move away from leverage and create a more sustainable economy, how do they stimulate the economy where you look at these local government debt piles that one goldman sachs estimate has a $13 trillion outstanding. tom: this is important. i mentioned this earlier, i got heat for it. federalism in china is different than here. it is not like a federal government with capital. it is always devolved to the cities. the critics will say it borders on an organized structure, whenever. if shanghai gets a focal point, my knowledge base is, there has got to be more than just shanghai involved. jonathan: to get to the president's comments at a fundraiser yesterday evening. with this to say, china's economy is "ticking time bomb" and referring to leaders in the

communist party as "bad folks." i thought at the time, the administration was sure -- was trying to shore up ties with the chinese government. that is not going to help the cause. tom: i will put out an article in the foreign affairs magazine from eight months ago that goes to what the president is alluding to. we need to be delicate. there are things we can and cannot say. there is this because of how did mr. xi become mr. xi? how did the leadership in china become who they are? jonathan: you are censoring this, is that what you are saying? tom: they are in my ear saying, tom, shut up. lisa: joe biden did not shut himself up. does this fly with the economic policy they are trying to do? you are trying to tow this line between trying to prepare live relationships and communication

to avoid some error. then, bad folks, ticking time bomb. it is not going to go over well. jonathan: can i share this line with you that the president shared with potential donors yesterday? china is in a position where the number of people who are of retirement age is larger than the number of people of working age. if you are in the business of correcting politicians, you would be busy. we had to write in the story this morning, a statement that was not only incorrect but off by hundreds of millions of people. you wonder, politicians start talking about the economy, where do they get these ideas from? you cannot reconcile with reality. tom: this is the heart of the matter. they are playing to the domestic audience of the united states of america. the china people we talked to, they are looking at far more than just three cities on the pacific rim. i had an offspring once. i said, where are we going?

he mentioned some city i could not pronounce. jonathan: are you losing count of children? tom: i am talking to cash flow. i am talking, are we going to some city i cannot pronounce? he said, it is one of their 14 pittsburgh's. that is china. 14 pittsburgh's. jonathan: let's turn to price action this morning. equity market s&p 500 negative by 0.1%. heading for a second week of losses on the s&p, the longest weekly longest -- longest weekly streak since may. yesterday, yields up and away. even after that cpi print, it was about san francisco fed president pushing back a touch. that issue at the longer and, the 30 year auction softer compared to the 10 year and three year. lisa: selling at the highest yield going back to 2011. the latest read on inflation,

3:00 a.m., u.s. ppi input prices for a lot of companies. it has fallen off a cliff, going to zero until now and is expected to take upward particularly with the increase in oil prices and commodity prices. mohamed el-erian was great on this yesterday. 10:00 a.m., university of michigan sentiment survey. how much does this rollover as a result of higher oil prices? 12:00, world agricultural supply and demand estimates come out. an hour later, rate counts from the acre hughes rate count data. i want to understand whether we are reaching an inflection point upward with wheat. how much does that become a persistent story in the backdrop huling a little more inflation of the very bad kind? jonathan: dan morris joins us now, chief market strategist.

is it too early for this fed to declare victory? >> oh, my. yes, definitely. we do not see any possibility for the fed to be cutting rates until next year. that is under a fairly benign scenario for the outlook on inflation. there one -- they are going to want to see a trend in the headline figure for inflation. tom: there is a global view, a u.s. view that people are comfortable with right now. we are not believing the good news of disinflation. what do we have wrong in our interpretation of disinflation is in place? daniel: i think what is notable with the cpi data we got yesterday, which was about as good as you could hope for -- it was around expectations, but i did look at the core figure. when we have monthly core core inflation above 2% for three months in a row, that is encouraging.

the market should have reacted more positively. it is notable that with stocks with nasdaq, you did not see any bounce. what is driving tech stocks has been the x rotations for policy rates and inflation. for us, it is good news has been priced in, growth is going to slow whether or not we get to a recession and i think that is what we need to price into u.s. equities. tom: where to invest now? take the oh -- take the econo babble from august and. daniel: we are optimistic on u.s. rates both nominal and tips. if you look at the level we were at a week or so ago when we got above 4%, over 2% on real yields, we thought that was attractive. those sectors, it is starting to come down. we think there is more potential there. we have got to price in more

inflation or more growth. you are at levels that are historically like -- historically high. we think the outlook is on a risk reward basis most attractive. lisa: i wonder what your take is on the price action past couple of weeks. we could be poised for the first back to back losses on the s&p going back to may. you can see the biggest potential back to back losses on the nasdaq of the year. is this a recent moment or is this basically the one drawback the people are going to get that everyone is going to swoop in and by? daniel: i think that would be a bit too optimistic. i think a lot of it is how the markets or where x rotations were at the beginning of the year. now that the market swung to be more optimistic about the outlook into a soft landing narrative when you have had 40% gains in the nasdaq, it is hard to see that continuing from

here. we are expecting subpar performance or u.s. equities, for tech stocks and are looking for potential out of asia and china. lisa: are you selling aggressively on margins when you look at where the gains are in anticipation of what you expect to be a tumultuous end of the year? daniel: we have already going underweight on the u.s. -- i do not think expectations are to increase the underweight. i think we are happy with that right now. the overweight we have in china to materialize and given the data we have had recently and may not come immediately, we are still optimistic that will materialize by the end of the year. jonathan: pricing power in america and labor power. where do you see that pricing power sector to sector in the united states right now? who is going to be able to get margins to hold up and expand in the next year or so? daniel: that margin expansion

you can see in earnings growth or consensus estimates for earnings growth. we are not confident that is going to come through. we think the risk is that doesn't happen, you do not see many sectors able to push again those price increases on the consumers. you see the contraction in margins and those assessments start to come down. i think it is the set -- it is the opposite scenario is more likely to happen. jonathan: good to catch up. i bring that up after the mess we saw yesterday. gm coming off the back of its worst day of the year so far, the stock hammered this morning just about positive in the premarket but one to watch. let's go through a few. 46 percent wage increase, the restoration of traditional pensions, cost-of-living increases, shorter working week and a retiree benefits. one analyst said these names right now in the penalty box until this is resolved. tom: that famous bloomberg

surveillance phrase, there is absolutely no alternative. we heard that at the renaissance center in detroit. we were there for the upset of the auto industries steve ratner's cars are was there on that given day. there was a labor shift there from my childhood and 170,000 teamsters, down to something that was lower wage. the unions want a jump condition back to what they remember from their fathers and mothers. it is as simple as that. jonathan: these brands now need to compete with tesla. tesla was up yesterday as they were getting hammered. we are all familiar with the why. lisa: the story is, basically they have been cutting back expanding and have been not tied to unions. they have pushed back more aggressively. elon musk has come under fire from that, including from the president of the united states. we have general motors and ford talking about $80 billion of cost for each of them if the uaw

comes through with asks. we heard this yesterday from people who came on the show. victoria vern and as said, i am not going to go for a company that could come under pressure from the unions. jonathan: out of -- how did these brands compete? tom: they compete. it is like disney world, where this strategic gauze, does it work? i am seeing in the zeitgeist eeev is 7% of the auto public. ford and gm and the rest of them including the european bankers have to figure out, how do you do the labor construct to make profit with your holders demand given the seismic technological shift that is a complete mystery? lisa: how do you get workers on board because they are not happy with the electric vehicle policies? tom: the income is cratered. lisa: have we reached a point where labor still has power because of the declining working

age population? does that because a ranking in margins that we have not seen yet that people are not going to account for? is this a name by name story or broader? tom: i did not live it, you did not live it. john, you lived it. the midlands of england was autonation. it is appeared. why did it disappear? jonathan: the coventry was the detroit of the united states. you can book -- you can blame a lot of things. a lot of people would say collaboration. we can also talk about ev's not been great. did you see the new cadillac escalade? give me a break. electric, green, good for the environ it. lisa: yet the size of a building. [laughter] jonathan: from new york, this is bloomberg. ♪

>> we are at a watershed moment in our economy. i am not just talking about the

flight -- fight against inflation. >> inflation will gradually make its way down. it is not a data point that says victory is ours. there is still more work to do. that is committed to resolutely bringing inflation back down to its 2% target. >> the federal reserve has a dual mandate from congress pretty first is to foster stable prices. inflation has been too high. and bring it back down to our target of 2%. jonathan: fred presidents agree on one thing, there is more work to do. whether you believe the means more interest rate increases are holding them there for a longer period of time. we will see if the fed officials take effort views on that. equity market s&p 500 index, this rally faded going into the close on the back of the inflation data. equities up. it started to fade as mary daly started to speak. a soft tissue on the 30 year

maturity out of the treasury. three year went well. 10 year went ok. 30 year not so good. yields up this morning, down a touch on a tenure. 4.0 9% on a 10 year. the euro at the moment, 1.09. in europe, i am looking at china. the data from china this morning, not painting a picture of an economy that is riproaring on right -- on fire right now. tom: i am going to get to euro-yen. the global head of g10 at standard charter with all sorts of economics on the american economy and the distant ration witness yesterday. jonathan: steve, wonderful to catch up with you. in foreign-exchange, why is the euro not weaker given what is happening in china? >> high thick the market once to

sell -- i think the market once to sell dollars. the market is pretty long dollars. i think most investors think the inflation is disinflation is in the bag. i think they are waiting for the economic data to slow down, so that the fed hikes go out of the picture. the prospect of cuts come in. one more thing -- this does not happen all the time. this is a relatively rare situation. right now, the u.s. is a high-yield or and market sentiments is risk off. we have to see some action on the yield side for the -- the

market want to do to resume. tom: you go to six month annualized, yesterday there was an interesting idea of where to look for the rate of change of disinflation out there. the key question for listeners and viewers is, when we move, does it take forever to shift to a disinflationary central bank, or will it be to use the economic phrase, suddenly? steven: suddenly in the sense of the lord, first slowly, then very quickly. i think the fed is not about to give order until it gets clear the u.s. economy is slowing again and they feel comfortable writing the phillips curve. if they see sign the inflation -- the economy is weakening, then rate cuts will quickly calm into the picture, not slashing them down to zero but 25 year,

25 there. right now, they do not see the upside as mary daly said to declare victory. even if they are right, it is not going to help them. if they are wrong, it would be catastrophic. lisa: last week, everybody was talking but political and fiscal risk. all of a sudden, that would matter for currency traders. is it? steven: i think she was right to downgrade -- the u.s. is different from 2011. 2011, we came out of the fiscal debt crisis with a strong fiscal deal that limited spending. this deal in may enshrines most of the spending we had during the covid period. it is not just owing to go away. the combination of the absence of a mechanism to arrive at a fiscal outcome, plus the settings that are looking in a wrong direction -- the u.s. is not going to go bankrupt, it is

always going to pay its coupons, but whether pair it with a weaker dollar or higher inflation is the question. lisa: some people are to beating the recent rise in yields to this idea of political risk and fiscal uncertainty or fiscal largesse when it comes to the debt. other people say it is a story about the bank of japan, money flows, not necessarily coming in the same way from that economy based on yield curve control. maybe being tweaked, maybe being abandoned. do you agree with that? steven: i agree with the first, not the second. there is nothing meaningful in the bank -- nothing meaningful the bank of japan has done in terms of limiting close they are putting into the market. basically, all they have done is yield go up a little bit to market rates. if you look at the way the long end has been trading, given there is no real shift in expectations with what the fed is doing, this is risk premium and risk premium concentrated

way out the curve, which tells you it is not specific, immediate -- next week, retail sales will be a problem. something that says we are worried about the distant future, now we are pricing it in. tom: i want to shift over to a traders are looking at this weekend, which is, take out the dollar, euro-yen is extraordinary. what are the ramifications for japan for the pacific rim if we see euro-yen breakout to a weaker yen? we are at the precipice of the weekend. steven: i think the yen spills over. it will have an impact on korean won, an impact on china and a few other currencies. i think there is a bit of puzzlement as to what good a weaker yen is doing japan.

i think it sets the tone. the market would like to sell dollars against the asian currencies. we think towards the end of the year, that is what is going to happen. the risk environment will improve, but it is hard to do as long as the yen against the dollar, yen against the -- are pushing against these levels. i do not think the markets are getting to sharp at this stage. i think it is more they are waiting to see some signed there is stabilization and maybe a move back. plus, an improvement to the risk environment. then, the dollars selling would resume. i do not think it is going to happen over this weekend. i think it will take time. jonathan: two triple confirm, do you think the fed is done here? steven: oh, yeah. there is a risk to cut faster in the marketplace once the data starts sliding. you say, what is the point of labor market that is weekend if inflation is coming down?

you do not caught -- cut very far, but you might throw in the token cut in q1. to show your heart is in the right place. jonathan: will it change from 12 months ago? steven: yeah, but you know, they have come off their hawkish tone. nobody's talking about that second hike, they just -- i think what they are doing is to be sure they are not sounding too dovish prematurely. i think everybody says, it is a failure to commit not because the data is justified. one last thing very quickly. they went from 65, 70, now they are north of 80. during that process, wouldn't you are inflation expectations came down to 1.5 -- that means core expectations have collapsed just like we saw yesterday in

the numbers. that is likely to continue in coming months. they are a very good spot with respect to inflation in the next six to 12 months. jonathan: we will continue this conversation. to show their hearts in the right place, they are going to cut in q1. that is quite a statement from steve this morning. lisa: especially when he says, what is the point? the point a lot of people feel is longer-term, there is still inflationary pressures that have yet to show up. tom: the history is simple. they get overwhelmed by the data and act fast. jonathan: there is a conversation on the other site about inflation re-accelerating. we will see. abigail walt of aberdeen next. good morning. ♪

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jonathan: let's get you to the weekend. i have said that twice in the last hour. your equity market on the s&p 500 index negative zero point 1%. we are down on the session a little bit. poised for the longest losing streak of the year on the nasdaq. russell slightly firmer. in the bond market, nothing --

yields up and away. the curve is steeper. 10 year this morning comes in about a basis point. 4.09 on a 10 year. on a tenure, we are rising for a fourth consecutive week. yields higher. in the fx market, dollars stronger or a fourth consecutive week. this morning, a touch weaker against the euro. lisa: it is the push pull of european economy facing off with china and the weakness they are. it is the u.s. possibly at the end of a rate hiking cycle and these dynamics are push pull a holding pattern they cannot seem to break up. jonathan: president joe biden blasting china's economic problems as a "ticking time bomb" and referred to communist leaders as bad folks. the administration is seeking to improve overall ties with

beijing. it comes before data that spells out a dire picture of the economy in china. state a you get for chinese bank offering loans to the economy, the worst we have seen going back to 2009. lisa: they have a problem that has raised questions on whether this gives the u.s. or leverage. the u.s. -- is it trying to have a better relationship with china? if so, what was president biden thinking saying it is a ticking time bomb and they are bad folks? tom: he is playing to the u.s. audience. lisa: at a certain point, the bang for the buck, what are you going to go for if he has some sort of restraint with investment? some people would argue it has not been strong. other people say it has been significant. why can't you just .2 that? tom: the economist publishing in the last 12 hours has a brilliant short essay on the supply chain, the manufacturing process. that used to be china to

america. now, it is china to vietnam to america. or, china to mexico to america. there is a debate on the accuracy of these statements. jonathan: on policy, the policy coming out of china or the united states for china, much narrower than people thought it was going to be 12 months ago. it has narrowed down. on the rhetoric, it is the donors. this is how you raise money in the democratic party. it is the position republicans have to have, as well. you will see lots of this going into the presidential campaign next year. keep an eye on the actual policy. is it going to be as hard as the words you hear out of the administration? lisa: a lot of people say no. a lot of people on the democratic side say, actually, it is significant. you have got both. tom: we want you to be smarter into the fall. this was my essay of the year

last year on china, on beijing. it is in foreign affairs magazine. without question, the most courageous essay of the year. she was thrown out of the communist party. this is a brutal essay which directly goes to the city's relationship with beijing, the weakness of xi jinping. jonathan: as you put on x? tom: i put it on. you are posting and reposting. jonathan: let me update you on a serious story. hawaiian governors saying the wildfires are the largest natural disaster his estate has ever faced. 55 people confirmed dead. 1000 remain unaccounted for. in the small seaside town that has been reduced to ash and rebel. the ladies is 80% contained according to fire fighters.

that is the only piece of good news. this is about contained. the pictures are shocking. tom: it has got to be about the new dryer world? you see it in mediterranean, in spain. why is this any different? it is a different maui. lisa: the implications, this was vacation center. there are estimates out there right now this is going to take $10 billion of damage and economic consequences to one of the main hubs of vacationers. this raises a longer-term question about hawaii, but on a larger scale, other places devastated by wildfires. jonathan: massive rebuild effort has to be had there once they get that contain. harry kane is set to say goodbye to harlem after two decades. set to leave for germany later today to join bayern munich. reportedly worth $110 million. tom: you tell me, you are an

expert. how does this team go on? i do not wallow -- no what the american equivalent would be. jonathan: forget harry kane. forget the players involved in this with the exception of daniel leavy. to do this going into opening weekend and the premier league on the people is absolutely -- on the eve of is shocking. to lose your best player with no time left in the transfer window and in a new season, to replace him. think about rebuilding the team. this is a man who just scores holes. you have witnessed the drops back. in the buildup play as they make tom: it. my amateur take is, this guy is a striker. the magic i saw that you do not see on tv is how he would help the middle of the field play forward. jonathan: let's think tom,

patriots. -- tom brady, patriots. imagine this happening before the start of the new season, your quarterback is -- that is ridiculous. tom: what is important here is we need team coverage. we are going to be in london the next coming weeks. i think a remote is in order. lisa: a remote to london or germany? [laughter] by the way, we do not know if harry keene is going to go over to bayern. it is like, maybe there is negotiations. jonathan: there was an old story he was on his way to the airport and had to turn around because there was not clearance. it looks like based on reports, this is close to happening. we will see. tom: we are going to move

forward with the advent of premier league football. jon ferro driving our coverage on premier league. is f1 until september 1? jon ferro for that. jonathan: one to watch. tom: man city plays burnley this weekend. in the last -- last eight matches -- here is a partial score. man city 26, burnley one. we had to get a token man city fan to start the season. for you to bring in abigail watt at aberdeen is brilliant. she, more than anyone we know, she believes the light lou of man city. jonathan: there is a difference between a main road, manchester city fan and a nt hat manchester city fan. the main city fan is -- and nt hat manchester city fan

is the fan that supports the team that is winning because they got a ton of money and the best players. abigail is a main road man city fan, research economist at aberdeen. i wanted to start in the u.k. the data out of gdp pretty decent relative to expectations. imf world bank meetings in the spring were talking down the u.k. hard. can you tell us how the economy is performing in the aggregate market? >> the u.k. growth numbers came out stronger than expected. we saw it .2 q on q increase in activity in the second quarter. the detail of that, one of the key things we saw is a returned to work after the holiday we have seen in may. industrial production side was pretty strong in the june growth data. that said, services were listed

stronger than expected. you are continuing to see consumers being more resilient than we would expect in the u.k. tom: there is a lot of talk about this year. a great fear i think overtime is the concentration of prosperity in london versus the rest of the united kingdom. as you look at finance and investment for aberdeen, is that an advantage or a hindrance, not only in the united kingdom but other countries? abigail: i think you have to think carefully about your investor base. it does help having that concentration in certain areas, it is useful as a firm. i guess operationally and finding clients, i think economically the prosperity of the whole country matters and is important for the longevity and sustainability of growth in a

number of economies. it depends on whether you are thinking from a macro perspective or micro perspective on that issue. lisa: broadly, people are talking about the soft landing on a global basis, albeit much more in the u.s. then the u.k. growth coming in stronger admit inflation. when you take a look at forward drivers of inflation and i think increasingly about oil as demand ages record highs, food as the prices keep ticking up, are you in the camp we could see a reseller creation -- re-acceleration that people are shrugging off and not counting on? abigail: we are looking closely in the u.s. in particular, very focused on core services inflation and core services ex shelter. this is where the fed has been missing their attention to. it is was -- it was one of the things i noted yesterday, inflation data. aggregate topline numbers came in line with expectations. we saw core services, recreation

services and education services coming out much stronger than june in terms of the month on month rent. there is pockets within that services sector with which there is concern about. the other element is around headline pressures, thinking about energy prices and food prices. on the energy price side, you are seeing this summer boom in commodities and oil prices. that is likely related to increased travel. we are less of the view that can be maintained. we are expect -- our expectation is that the economy will slow. you will see demand slipping off again. the other thing we have seen this week is more news around natural gas prices. natural gas reserves have been built up in the european area in particular, given some effects the russian invasion of ukraine last year. we did see strikes in australia

and the effects of that through natural gas markets. you saw that happen quite. we have seen -- it does show there are risks to the upside still on inflation. jonathan: with that in mind, let's finish on this. where do you have more confidence we are seeing big rates, the fed, the bank the ecb, where? abigail: i think the fed, likely. i think the inflation dynamics have shifted slightly in the u.s. relative to what we are seeing in the euro area and the u.k. and in particular in the wage dynamic, we have seen progress on softening wage pressures in the u.s. relative to the u.k. and the euro area. i would say if i was trying to say where i would think he could rates are likely to happen, the fed is most likely to be of those central banks. jonathan: thank you, come back

soon. thank you very much. tk, big rates in the thank -- in the bank potentially. they have more work to do. tom: to contemplate into q3 and q4 is the idea of deflation. there is interesting dynamics here. somebody yesterday had the keyword, residual. i worry about the deflation overlay and the certitude of where we are at. lisa: i am not worried about airplane ticket deflation. jonathan: you are fully embracing that. lisa: i am fully embracing airplane ticket deflation. [laughter] you do not believe it. that is what everyone was thinking. ♪

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>> we saw a rebound in home values after they came down. that could create a rebound

effect along with higher energy prices and more supply chain problems, which is why the fed is hesitant to declare victory. i think they are done on rate hikes. i think the higher for longer narrative is what they are leading into during -- jonathan: the conversation at the moment is divided. i would say the consensus believes this might be the end of the federal reserve. the debate on when they start cutting early next year. there are people who believe inflation has the real risk, the potential of reaccelerating. the group over at city, for anna clark, andrew hallman horse, raising the same question. price action on the s&p 500, future slightly negative. ppi coming up at 8:30 eastern time following cpi. your attention very much on what

is developing in china. or rather, what is not developing and what we have not seen is the long scale stimulus people were hoping for has not happened yet. the new loan data out of china really week. socgen first out of the gate. saying, this added to the chances of easing of the central bank. tom: the allocation of debt, the visibility of debt whether within the company's of state owned enterprises or the cities. wrigley, it is greek to me. i can barely keep up. what this amounts to is domestic demand and the price change around that. if you have a slower china, do prices slog down? jonathan: does this become a problem for u.s. markets? when do we wake up and have one of those mornings when you see treasuries bid hard, equities down, commodity struggling because there is concern about that economy? remember when evergrande got

into trouble. there was concern and nothing happened in financial markets state side. we had the same approach to another developer in china. lisa: country garden holdings which was bigger than evergrande is trading as a penny stock now on the hong kong exchange. it has been downgraded to triple c. it has not made a payment on its interest. bondholders are paying back, particularly interest payments, the coupon payments to the people who hold their debt. this raises a question. no one cares in the u.s. why is that, given the fact this is a bigger developer? have we divorced the u.s. economy that much from china? jonathan: i think we are on the same page. there is comfort to some degree of what is developing over there. not my view, based on what i am seeing in the price action every single morning. i would say, less positive directions week after week. tom: i am looking for china to

open up. i got a huge response yesterday, $39,000, two people business class saying hi -- shanghai. jonathan: do you know how many people said the same thing to me? tons. after you said it, they went and checked. lisa: i checked, too. i was shocked you were right. [laughter] tom: we are living in a real time. we are going to migrate to the airline business. we all have -- john has his flights he looks at. italian islands i cannot pronounce. i have two flights, a flight to paris i look at as a benchmark to europe. i look conventionally -- new york to lax. i look at google, they've got the red and green and yellow stripey thing of value.

1700 business class right now, $2000 is pretty attractive. we are getting over the green side that is almost a legit price of a lower price of new york to lax. lisa: legit price means deflation, which is what we saw in yesterday's cpi print. everybody said, we are not buying it because it is not what we are seeing. george ferguson covers the airline industry for bloomberg. how long can true deflation last in airplane tickets? >> it is going to hurt profitability. if airlines could change, they would. it is part of the competitive dynamic. everybody has returned to the marketplace. i feel like it is the consumer starting to run out of gas. i think we have said that for a while. they are running out of gas, some are. which is taking demand down and business has not really returned.

not in full force. we are seeing 60% of the pandemic. lisa: if you look at the cpi, it is based on domestic affairs. when you look at where people are going, it is international. that has been fueling profitability. those prices, if tom keene's engaged to shanghai are any indication, are not going down. at what point are we seeing a destroyed -- a distorted metric in deflation as average prices continue to increase dramatically? george: i would disagree with you. i agree that domestic is more correlated then the international markets. what i will say is, there is a small correlation. we are finding correlations higher after the pandemic, which

is a long way of saying, there is more consumer in that number right now. that consumer cpi is mirroring airline yields more. i guess -- if i drop back and think logically about this, there is a lot of demand for international this year, especially europe. china is its own issue. if we drop back and think about logically, we see a big step back in europe, what we did domestically in latin america as we came out of the pandemic. we do not think this can persist in the next year. we think the bounce back is this year. in europe, there is a lot less tickets to sell in that probably hangs in there for most of the year. tom: you are an expert on the planes and engines and all of that. i saw a wonderful, big jet video yesterday of an air canada 747 which had been repurposed as a

cargo jet. is a lot of that going on/ the efficiency of the george ferguson world? is everybody repurposed sing airplanes for the new ferguson aviation era? george: i do not know if it is the ferguson aviation era, but i would say a lot of airplanes were repurposed into cargo during the pandemic because cargo was so hot. airfreight rates have come off dramatically since then. i think you are going to see less of that. earnings, q2 earnings -- q2 logistics earnings down 90%. they are getting back to normal, getting back to pre-pandemic levels. that pandemic surge in airfreight over -- jonathan: do you pay for a subscription, tk?

tom: the guy that does it is a son of a pilot. his enthusiasm about it is what we knew as kids. triple seven. jonathan: [laughter] how much is his son? tom: vandal is in charge of that. it is great. the guy is flying around the world. he was in anchorage a couple of weeks ago. he goes all around the world. jonathan: i thought he was british. tom: he is british. he watches the planes take off and they come in and they will be way off in the distance. he will go, triple seven. lisa: did you know about big jet tv until that day we were on air? just saying that. jonathan: pretty sure i introduced you to big jet tv. thank you, george ferguson of bloomberg intelligence.

this show is off the rails this week. what is this? after labor day weekend, we become more responsible? tom: we have to run off the rails. jonathan: tk, you have taken off more time this year than i have. you are becoming more euro. tom: i am more sensitive. i grow more euro by the day. jonathan: i feel like you are coming to their side. tom: i feel like i have always been embarrassed by the american work ethic, which we are as guilty of as anyone. you go on vacation and work while you are on vacation. i literally studied for the cfa exams on vacation. lisa: i grew up with academics. the summers were free-form. jonathan: three months off. lisa: pretty much, traveling. tom: maria tadeo does it so much better than we do. jonathan: where is maria?

tom: she is on vacation. jonathan: of course she is. emily of blackrock management coming up next. ♪ wake up, achievers. you're making the most of every hour of your life. except the hours that you're sleeping. so why do we leave so much untapped potential on the table? this is a next level bed, for a next level you. my circadian rhythm is kicking your circadian rhythms butt! it's not a competition.

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>> be in this 3% of 5% inflation environment for five years. >> i think there is more disinflation in the pipeline. >> it is appropriate for the fed to take a pause. >> i am convinced inflation will get down to 2% on its own without help from the fed. >> this is bloomberg

surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: let's get you to the weekend. this is bloomberg surveillance on tv and radio alongside tom keene and lisa abramowicz, i'm jonathan ferro. plenty of feedback when i shed -- when i said the show was off the rails, this lit up, "only this week?" tom: i am medicated. jonathan: is that what this is about? your equity market is 0.1% on the s&p 500. we are talking about china. some of the recent data is pretty difficult. the question we have, what can they do about it. tom: the theme is a look at beijing. it is a huge country.

evolving tension out to the cities and that will be the story point over the weekend reading. i would dovetail it with currency dynamics. what we see with euro-yen and steven englander. can i note the real yield is back up near that 1.80%. jonathan: disinflation stateside. fueling the conversation, the team of bloomberg leading with this line. chinese banks sustaining the smallest loans since 2009. lisa: is this an issue of banks not willing to lend or people not asking for loans? if you have an economy that is in stasis or atrophying because of age differentials and consumers not spending, what do you do? the larger question, does it matter to the u.s. economy. tom: absolutely.

the media focuses on banks, what is jamie dimon doing. as you state, the loan demand is critical from the public. the other way i would look at this is disinflation towards deflation mathematics is not studied because it does not exist. the british have a third rail in understanding this before world war ii. their depression was totally different than ours. it was a true deflationary moment. they are academics totally gets the mathematics where americans were like growth, growth, it will all get fixed. we will fix it, we need more growth. like what we heard from the president overnight. jonathan: a lot of people know what they are talking about in china. there is a shock to confidence. coming out of the shut down we all thought china booming. that was the consensus view for

2023. china boom, u.s. consensus, the fed cuts rates. that story is on its head for the year so far. tom: does mohamed el-erian suggest we need to worry about inflation? they would push back against it and say the system will solve it. jonathan: let's turn to the price action. in the equity market almost totally unchanged on the s&p 500. talked lots about the bond market through the week. had some issuance from the treasury this week. a ton of issuance. 10-year was all right, 30 year was a struggle. yields up, treasuries down. this morning yields down by a single basis point. lisa: today we get the u.s. ppi report at 8:30. do we see the same kind of disinflation that could give everyone this warm and fuzzy feeling of a soft landing, or do

we start to see it go up and concerns about commodity prices starting to reverse and inflect upward. 10:00 the university of michigan sentiment survey. interesting to see how to track the increase we see in oil prices and there is a direct inverse correlation between oil prices and sentiment. at 12:00 we need to keep and i on what is going on in the agricultural base given the increase we have seen in week prices and this inflection up in food prices. corn, soybeans, cotton, wheat. i am really interested in commodities. lisa: to meet the u.s. is record supply, to what -- but demand is at a record we have oil poised for its seventh straight weekly gain. what does that do to this narrative of the disinflation of the good space if you get that bleed through affect?

jonathan: we could be pushing 13 million barrels a day in oil production in the united states by the end of the year. the forecast is quite a number. tom: try not to predict the oil market, it is a good way to lose your jobs. look at jeff currie at goldman sachs. lisa: he was not pushed out forgetting the oil market wrong. carry-on. tom: we wish jeff currie the best of luck. brent crude $90 a barrel. jonathan: you cannot allow rumors like that. tom: who said it was a rumor? jonathan: you are in the penalty box. jeff currie departing goldman sachs and not because he got the crude forecast wrong. emily rowland joins us now. we will keep him in line. let's talk about china. do we want stimulus out of china right now if you have a seat at

the federal reserve? emily: i don't know if it is working. you look at some of this loan growth data and it is not showing up. i think the china stimulus narrative is one the markets love and embrace and we are getting a reality check on that as it relates to commodity prices, all of this news has pushed inflation expectations higher and that is become a big problem for the fed that is not claimed a victory on inflation. we are watching that really closely. a lot of mixed messages. speaking of mixed messages i understand trying to get to the weekend. if you watch the macro and you watch the fundamentals the market did not make a ton of sense. of course we have the treasury auction you talk about pushing yields higher. at the same time the economic data was pretty disappointing. you had softer inflation, you had initial claims picking up, you had dovish comments from the

fed. european equities trading on another planet right now. tom: within your note you talk about whipsaw and i think it is important. one big group whipsaw. with that said and the group whipsaw we are in, how do you position out one year or two year in my depleted 201 k? emily: it is top. the macro signals are going from red to green and back to red. when you look at the macro messages right now it is more of a yellow. you want to maybe take your foot off the gas a little bit and look both ways and proceed with caution. we are starting to see this big shift in sentiment. it did pull from fear to greed and you are starting to see more cyclical parts of the market outperforming. we would be mindful of taking too much risk in this market.

we still like higher quality stocks and think bonds can do heavy lifting in a portfolio but the leading economic indicators have been negative for 12 straight months. the yield curve has been inverted for 13 months. we need to stick to our premise that tells us a recession is likely to unfold due to the lack of fed tightening. it is becoming difficult to stay patient. lisa: i want to pick up on what you said about european equities trading in on the planet. mean they have not sold more aggressively in the wake of china weakness? emily: look at the strength versus domestic equities as of late. europe has been more tied to china stimulus. you've seen a big momentum trade and some short covering has resulted in gains in that market and you are seeing major companies in europe disappointing on the earnings front. markets seem to be very much

enamored with europe. they are enamored with this china story. it does not match up with the macro economic. look at the economic surprise index. it is surging in the united states and -100 and europe and those markets are outperforming to us. we want to emphasize domestic equities because of the relative economic strength. lisa: u.s. tech underperformed this week. how much is that going to be a challenge to her thesis if it continues? emily: we have definitely seen a pullback and valuations were stretched and we were expecting to see a bit of profit-taking there. we still wonder if tech is the biggest issue that market should be focused on. it is hard not to like quality in this type of market and tech is were poster child. over three to five years we have seen the u.s. technology sector

has produced the best earnings. of course we want to diversify from some of that. look at the way sectors are starting to perk up. health care is one of our favorites. it is trading at a meaningful discount to the s&p 500. it has the quality metrics we love and it is more defensive. i think the baton could be passed in the back half of the year in order to create that balance away from the tech sector. jonathan: are you on the strong dollar train as well? emily: we have been. we look at where is the strongest economic growth and which central bankers will tighten the most. because of the relative strength in the u.s. we think that is the u.s. federal reserve and the u.s. economy is doing the best. we think if a recession unfolds there should be a bid for u.s. dollars. i do not know that the dollar

goes gangbusters like it in the first few quarters of 2022 but i would say any weaker dollar trade. jonathan: european on another planet. that is the headline from emily rowland whether you intended that are not. have a good weekend. euro stoxx 50 up something like 15%. not far off from what the s&p 500 has delivered. tom: of all of the different opinions we have the one constant theme has been surprised over europe. i would still suggest we underplay the war reporting we see day by day in ukraine. it should be more in the discussion then it is. jonathan: the equity market on the s&p negative 0.05%. coming up in about 48 minutes, ann miletti way in on whether we

can get the broadening out and tech away from the cyclicals. a bit of news. harry kate has permission to fly to germany and undergo a one million plus transfer between tottenham and buyer. a brexit thing. i think that was daniel leavy getting on the phone. tom: explained to the americans who do not understand why lionel messi is in miami. explain where byron fits in. jonathan: can you reframe that? tom: it is all greek to most of us. we are worried about if the reds have enough to get a wildcard slot in the national league. lisa: us dumb americans do not know anything. can you explain. [laughter] tell us exactly what we should be paying attention to. tom: who is byron.

jonathan: heavyweight european football club based out of madrid. they are competing for the top titles in european competitions every single year. tom: when he plays a friendly championship in england, that will be a big deal. jonathan: if he plays a champions league game in england, that would be a huge deal, particularly if he got to go home and play tottenham. you need to qualify for these competitions first. tom: i am learning every day. vishy tirupattur of morgan stanley joining us in about 20 minutes. from new york city, equities negative. good morning. ♪

>> the goal of the executive order is to make sure we are limiting the ability of financial flow and the know-how to give countries of concern to get around the things we are trying to prevent them from getting access to like the most advanced semi conductors. jonathan: that country of concern is china. that was u.s. deputy treasury secretary following the executive order from the president on outbound investment into china. the president also had something to say about china at a fundraiser in the last 24 hours. he referred to communist party leaders as "bad folks" and went on to say this economy in china is a ticking time bomb, and that speaks to the data we have had out of china. whether you would go that far is up to you. the data on the loan side of things, chinese banks extending the smallest amounts of monthly loans since 2009. this going together with deflationary data, it does not look too good. lisa: it raises a question of

what china will do about it. president biden hinted at that as well. they will not take it sitting down. how will they try to generate growth? the headline of a ticking time bomb and bad folks is perhaps different than some of the conciliatory moves by members of his cabinet as well as -- jonathan: does bad folks sound like an insult to you? lisa: i would not want to be called bad folks. it is trying to gather a certain tone ahead of the campaign. jonathan: what with that tone be? lisa: we are not in it for china. you would never call someone bad folks. jonathan: no one calls anyone bad folks. lisa: if you come around again you are bad folks. tom: bad folks. [laughter]

jonathan: you have to speak. it is radio. tom: good morning on bloomberg radio. jonathan: you get a microphone and you engage it. i have worked with you a long time. if you're just tuning in or we still keep you here, tk does this thing. in radio if you miss your q and there is a moment of silence and you pick up not talking, you own it. to the audience you missed your cue. what tom does when he misses his cue is he waits for someone else to own it for him. lisa: [laughter] tom: jeanette loeb will have some patient for us. there are does kinds of people in tv, people who have done radio and have not done radio. to john's point, silence everything in this business. when they are doing that and i'm sitting here looking at the red sox, they have no chance against

the mariners, you use the silence for show business and you extend it. lisa: and then give it to someone else. jonathan: let someone else own it. tom: like that. let's break the silence with jeanette lowe. it was at the jefferson hotel with the acclaimed jefferson statue and she figured out if you make a law in washington everyone piles on and enhances the law. your research note is brilliant about now we are making policy about china. the president is making policy. will we see congress in various forms pylon and make our policy with china more limiting and restrictive? jeanette: absolutely. we finally got the executive order that biden has been heralding for a few months. we knew this was coming.

it was more limited in scope than we thought and you can see members of congress putting messaging out before the executive order hit and after it. we see the administration is saying we will focus on targeted products and services within aim semiconductors but the treasury will issue those rules and it will take time to be implemented. congress is saying gas -- senator schumer has been wanting to do legislation on china for some time. you have members on the u.s. china committee. you have members at head of the foreign affairs committee saying we do not think the executive order goes far enough, it should include other areas. this is still the beginning stages. we anticipate we will see more coming out of congress. even if we have this executive

order we have been waiting for there is still more to come and they will refine it as they said in the executive order. looking at the notifications and investments we have in china and figuring out where they need to do more restrictions in the future. lisa: some people were saying the restrictions were curtailed from their original form and much less restrictive than previous thought and the reason why president biden top so harshly about china was to distract or send the message that he was harder than his policies were. you agree with that type of sentiment? jeannette: i think the administration is trying to thread a couple of lines. one is the u.s. is -- biden is going into campaign mode and you will have the speeches and these talks. this was not a speech, this was a private fundraiser. they want to show that the u.s. economy is doing quite well and make the contract -- the

contrast with china. there is the push that biden is not tough enough on china but there is the idea that we are trying to move in stages. i think to some extent he would like to do more and faster and that is the reason behind some of his comments but he is also trying to draw this line between the u.s. doing better and china not doing so well but we also need to do this for national security reasons. tom: i look at china and what is assumed to be the response out of washington. what will it mean for american business? is this a political exercise or can you bring it over to the total dearth of fbi we see towards china -- of fdi we see towards china? jeannette: this is one concrete step we are taking but at the same time the administration is sending a message to businesses that china is more of a risk than in the past and there is

more of an effort companies need to undertake if they need to do business in china. the u.s. also wants to highlight some of the issues we have seen with companies investing in china over the years. there is definitely -- you are already seeing -- yes we have had the chips act passed, but some of that funding has made it come out. we are seeing investment move to the u.s. ahead of that. i think this executive order is still putting forth that environment for businesses where they have to reassess whether they want to be in china, take those risks into account come and consider moving supply chains or their business out of china overall because more changes are coming. jonathan: wonderful to get you on the show. jeanette lowe of strategas. these comments from the president came at a fundraiser to donors in park city, utah. this is what it is about to raise money.

democrats and republicans, this seems to be a box you have to tick. you have to say things like the president said. tom: playing to a domestic audience and beijing knows he is playing to a domestic audience but they will use it for their own needs internationally and domestically. what is unique, and i thought jeannette was brilliant on the bipartisan nature of this. if congress piles on it makes it more restrictive, who will push back? will say let's think about this before we act. jonathan: i am so pleased you made the first point. so much of this is for public consumption. publicly china said they were disappointed by the outbound investment order. privately they are a lot happier that it is narrower than it could have been. even for them you made this point it is for public consumption. we are disappointed. at the same time, how much has changed? lisa: if you look at the data,

and this to me stands out. everyone would agree the rhetoric has to be hard line and underneath there is a reality of eating a bit of working together to keep both economies on the rails. there has been a divergence between these economies which goes down to the fundamental question of why we not seeing more of a read through and the u.s. economic data with respect to what is going on. tom: catherine mann is brilliant on this. stay with us. jonathan: is catherine mann going to come on the phone? tom: we will get her on the phone but her work on china-u.s. is brilliant. jonathan: vishy tirupattur coming up shortly. your equity market basically unchanged. from new york, this is bloomberg. ♪

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jonathan: let's get you to the weekend. tom: where is my tang? lisa: that is like a sign that is up. jonathan: every time he says this i will have a drink of tang. jonathan: the london desk might say this -- might play a drinking game before they leave. tom: is there anyone in the city of august -- in the city of london in august? jonathan: did you see that meme of cap the u.s. economy?

this guy calls another guy and says inflation is great, gdp is brilliant, speaking down to the european market participant, and they just get an out of office supply we are out of office until september 20. [laughter] love that. tom: the heart of the matter, france has the same productivity. i believe it is 19% less. that is the math. jonathan: the latest out of china. china's economy showing further signs of weakening. loans from chinese banks plunging to the lowest level since 2009. adding to a slew of recent negative data out of the world's second-largest economy. tom: there'll be lots to read about this. it is important to be informed about the nuances. i will go back to the heart of the matter which is people look at america-china. baloney. look at malaysia.

look at mexico. look at south america. this is a more complex discussion than the simplicity the politicians speak of. jonathan: president biden calling them bad folks but it has been bent data all week. lisa: i keep going back to what peter tchir said. he said he will see chinese companies try to compete more directly with u.s. companies in latin america and africa. there will be new alliances that are drawn more severely that will have to come to the fore. jonathan: quote of the week. can we start doing that? quote of the week came from the president united states about the inflation reduction act. republicans could have written this for him. he says he regrets the name of the inflation reduction act, saying it has less to do with reducing inflation than providing alternatives where we generate economic growth. he said a little bit more than that, but wasn't that the complaint of the other side of the aisle in washington before

this got past? lisa: everyone was saying it was called the inflation reduction act to get it passed because how can you vote against the inflation reduction act? who will fight against inflation? now people are -- he is saying the quiet parts out loud in the issue is he is fueling growth. lisa: he wants to own the growth because inflation is coming down. tom: the president could go on wall street week with larry summers. that would be interesting. jonathan: that would be a great conversation. tom: the balance between inflation and growth. jonathan: i'm not sure the president wants actual questions. tom: i am in the jeff currie timeout chair as it is. jonathan: yesterday the biggest

one-day loss of the year so far for general motors on concerns demands by union leaders could send labor costs soaring. labor power in the last couple of weeks. back on the agenda, even as we talk about disinflation day after day. lisa: it has been building. this idea that suddenly the new playbook will be looking around which companies are most susceptible to organized labor and pressures to increase cost. it was $80 billion in extra costs for each of them if some of the demands were brought to the fore. i want to say even for companies who do not have that kind of union pressure, what does it do for the wages they need to offer if you can get that kind of wage growth, if you can get 170,000 dollars to be a truck driver at ups? what does that do to fedex, what does that do to others? jonathan: tesla? you think it could have an impact. lisa: tesla is its own animal.

there is a question around the broader impact. jonathan: are they hiring? they are pushing up wages for union workers. are they going to be hiring truck drivers anytime soon? lisa: are they in a vacuum when they're paying people more but not affecting the labor market because they have no choice? i do not know the answer to that but there was a story how fedex is getting increasing pressure and other workers in that same industry are starting to raise a lot of pressure. even if they are not hiring and affecting the labor market directly indirectly there is an impact. jonathan: what a massive conversation. lisa: in fairness, it is a living wage with some of the increases in places depending on where you live. it is more than that in some places. it is trying to harken back to the 1950's. tom: why will you harken back to

the 1950's? lisa: i will look at you. when one person could go to work and support of family. jonathan: dapo's, it is freezing -- davos, it is freezing out. the ceo of a health company said 1/5 of my people cannot afford to get to work every morning. jonathan: what was his bonus that year? tom: his bonus was huge and he got a lot of pushback. we will go back and we will be more ecumenical. are we ready to go? we have an important guest on a friday morning. vichy drop a tour joins us -- vichy trumpeter joins us -- quoted in cranes on sl and what is out there, which you nail in your research note.

we have had a massive refinancing. will be the ramifications of refinancing in this new environment for fixed income? vishy: i think talking about commercial real estate is definitely a financing challenge. i think it is important. in terms of type of properties, in office properties there is clearly a secular change in terms of flexibility that has reduced the demand for office space. there is significant headwind for that property type. when you look at the other property types, whether it is multi family, multifamily housing, industrial real estate, the challenges are not exactly the same. i think the bigger issue is from

a lender perspective, the biggest exposure to the commercial real estate is in the smaller regional banks that also happened to be the weakest link in the lending chain. that is a real challenge, not commercial real estate. tom: if there is fear, and the pendulum is swinging, which type of fixed income instrument is of uncommon value right now? vishy: there are a number of places we will point to. a lot of the senior tranches of secure products that have fallen out of favor because of the bank demand for these products has fallen off, and that has clearly kept those spreads wider so --

we continue to think the higher quality fixed income value, including treasuries, high-quality investment grade continue for reasonable returns in our area. lisa: what you make of what emily rowland was talking about earlier where she was saying some of the price action in bonds does not make a lot of sense considering we got disappointing data. we do have disinflation. people are gaming out higher inflation for longer and a fed that backs off too soon. vishy: it is a head scratcher. yesterday's data we had inflation surprising modestly to the downside in line with what we think is going to be a lower inflation print for the next few months. the expectations of the budget deficit numbers, the monthly

numbers were a bit of an upside surprise. we think how much that number played out in the market -- the narrative that has taken hold in the market, which we disagree with is the term premium will be higher for longer and we disagree with that notion. lisa: if that is the case, have you been buying 30 year treasuries en masse? are you saying this is one of the best buying opportunities we have seen? vishy: we are suggesting investors go along duration. we think the five-year is the sweet spot. we have not made the call on the 30 year. all of these selloffs we are seeing in the market we think of them is a chance to go along treasuries. we think we will see a more dovish tone coming from the policymakers over the course of the year in the market narrative

will shift in favor of being long-duration. jonathan: interesting. starting to hear that more from fed officials. i am thinking of john williams of the new york fed and the new york times. love to catch up with you. sometimes you have to stay on top of ridiculous stories and i think you're all familiar with the prospect of a fight between elon musk of tesla and mark zuckerberg of meta. mark zuckerberg said he had offered to have this cage fight on august 26. no sign of a date being agreed. elon musk saying the fight will be managed by our foundations, not ufc. livestream will be on this platform and meta. everything in camera frame will be ancient rome, nothing modern at all. i have spoken to the prime minister of italy and the minister of culture and they've

agreed to an epic location. i would love to hear what the prime minister meloni has to say about this. out of that go? still don't know. tom: lisa is totally on the story. jonathan: is this to raise -- tom: is this to raise money? lisa: elon musk originally challenged mark zuckerberg to a cage fight in response to the creation of threads. mark zuckerberg said bring it on, he has been training, he looks jacked. elon musk is not. they are talking about possibly doing this. i think elon musk is the chief executive troll of the world. at what point is he being serious? ancient rome? tom: we need scarlet fu on this. she is tuned into all of this. i would say to scarlett, what is

the why of this? how did we get here? jonathan: i hope we can raise the money for charity. lisa: who are you. that is not the point. the point is elon musk was mad at mark zuckerberg. somehow mark zuckerberg starts looking good. he was the most unpopular figure in corporate america. suddenly maybe not. jonathan: the s&p 500 -.1%. coming up in about 45 minutes, andrew hallman horst of citigroup looking for the potential of inflation re-accelerating and looking for the risks of rate hikes next year. is he in the neil dutta camp? tom: i would say for global wall street this is the friday interview. we need to really listen about the sticky inflation or lift in inflation.

that is an outlier call this friday. jonathan: conversation on retail coming up, a lot happening in that space. joe found been looking ahead to retail earnings. we will catch up with joe. tom: joe is readjusting on big-box and dana tell seat was definitive on the coach transaction. jonathan: what did dana say? tom: she said they underpaid nicely versus the gross overpayment from years ago. the stupidity of buying james to and for saatchi. -- jonathan: equities negative on the s&p. from new york, good morning. ♪ so why do we leave so much untapped potential on the table? this is a next level bed, for a next level you.

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>> i don't think the fed has done enough and i think the fed

is enamored with this soft landing view. i do think there is a risk the fed is patting itself on the back by the end of the year only to watch inflation potentially turn backup sometime next year. we are definitely -- jonathan: we are definitely borrowing that. wishcasting. he thinks there is real potential for the economy to re-accelerate and take inflation with it, questioning whether the fed's work is really done. let's turn to the price action. on the s&p 500 equity futures down .1%. the ark of earnings season, the banks go first, then tech. not a big fan of the bank earnings story. i like to turn to retail towards the back end. retail target on wednesday, day after on thursday it will get numbers out of walmart. retail takes over the earnings

season for next week. tom: they are different. i totally take your point. it is like ups, fedex, or whatever. to me they are each different. the financial media lumps them in, they are all big-box. the answer is they are not. jonathan: different approaches to merchandise and apparel and food and grocery. tom: joe feldman joins us, senior research analyst working with dana tulsi. they have been on fire. i want to get to the big-box. at target i have a women's zip up denim jacket blue denim for $35. that is what you are looking at. your colleague in crime is looking at the medusa 95 dua lipa denim jacket at for saatchi

for 1500 -- at versache for $1500. will there be everything left in the middle between versachi and target? joe: the middle is squeezed right now. the middle is trading down and the upper end is staying where they are. the aspirational company is trading down. it is still positions target in walmart. dana likes the deal in the sense you can bring these companies together. i note there are more of those middle aspirational brands. you can operate them more efficiently and you can allocate resources to the different brands and make it more profitable and make them a stronger venture to put forward.

we like that lineup and the strategy. the capri side has been languishing for a little bit. i think if you put it together you could make a go of it. in the near term, the consumer is still under a lot of pressure. discretionary has big -- has been slow. big-ticket discretionary sales have been slow. that is where we are heading into this earnings season. jonathan: wal-mart year to date outperforming target. underperformance from target. there is a word i don't like around the retail names. it is shrink. one of they call it what it is? theft. how much will would be talking about that next week? joe: we will hear a lot about shrink. target has laid it out and said they are expecting about $500 million. walmart has a big number as well. they have not quantified it yet.

and home depot and best buy and the list, it has been a big problem for anybody. theft has kicked in high. the shrink, there is always been damages or returns you cannot sell. things that walk out of the store with an employee. but this organized crime and retail is a big problem for the big-box retailers. dana recently was in beverly hills and witnessed it firsthand , someone just grabbing out of a high end store right in front of her. it is frustrating to see and it is scary for the average consumer to see that happening. jonathan: -- lisa: it is something we have seen with respect to drugstores in city centers. i am wondering how much this pushes the emphasis on the online presences of some of these companies. i think of walmart, which is putting up competition for the likes of amazon with what they can offer in e-commerce.

joe: the e-commerce side of walmart and target or any of the big-box have improved significantly. they are very robust. we see walmart going toe to toe with amazon on the retail side. on the retail side and physical presence to leverage the physical with the digital is real advantage especially relative to amazon. amazon wantss to get more physical and open grocery stores. we will see that accelerate. there is this conflict that will be around for a while. you can get great value at both of these retailers. adding target, adding posco and you are absolutely right -- add in target, add in costco and you're absolutely right. we have seen people return to the stores a bit more but that

is definitely a strong area of opportunity for retail. lisa: walmart is a confusing read on the u.s. consumer. if it does well, that is a good thing. on the other hand people who are going from whole foods or whole paycheck as tom calls it to walmart and looking for a bargain. his walmart's gain everybody else's pain? is it a counter indicator of consumer strength? joe: that is a great point. it is an indicator of the health of the consumer. the consumer is still spending. walmart has done a good job over the past few years and making their business model stickier. they are retaining those customers. they have seen trade into the business but they are seeing those people stay. that is not great for the rest of retail. it shows walmart is gaining market share.

some of their latest formats, especially the ones in new jersey across the river, they are phenomenal stores and they very much target-like. it has that slightly more upscale feel and goes after the core american consumer. we are concerned about how things will shape up, especially for the middle income consumer. jonathan: talked about the prospect of trade down to walmart. what about holding onto talent? we have seen softening in the labor market. you're talking about the economy deteriorating. they have the issue on the talent side? they have a ups problem? joe: i don't think so. walmart and target have done a good job of trying to pay their people better, to raise wages, starting wages, and raise the average wage for everybody.

they have added more benefits to their consumer in addition to their employees and they have done a much better job of that. we have not heard as much of the grinding we used to here a few years ago, especially around walmart or target. employees felt underpaid. jonathan: i am jumping in because we can only have 60 seconds left. i cannot imagine how difficult it would be to work at some of those stores in certain locations, at target and cvs when you see people clear off the shelves and you are told you cannot intervene. what is happening to those locations? are they just been shut down? joe: unfortunately some have been. you saw walmart shut down a couple stores in chicago. others have shut down stores in san francisco and other parts of the country. retailers tell us there is isolated pockets. it is not everywhere. it is a concern for employees

and scary for the shopper and very frustrating. we keep hearing stories of employees that occasionally step in when they are told not to and yet it is so frustrating that they step in and try to stop it. some of lost their jobs for doing so. it puts them at risk in the company at risk and puts everybody at risk. it is best to let the people go. very frustrating. jonathan: shocking images. joe feldman. going into earnings next week, target and walmart wednesday and thursday. tom: i totally take your point on shrink being homogenized theft. in new york it is a huge issue. you go into the store, little plastic windows. turnaround, go out, order it online. that is my response.

i think it is a changed landscape. jonathan: live from new york city, good morning. ♪

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>> the economy has been pretty impervious to the feds's increase in rates. >> sooner or later, the economy

will stumble. >> we are seeing deterioration in the broad fundamentals. >> it feels like the economy is doing more than they would become to vote with. >> i think the economy is growing above trend. i don't think the fed has done enough. announcer: this is "bloomberg surveillance" with tom keene, lisa abramowicz and jonathan ferro. tom: good morning. it is friday, friday is what it is. it is a friday in the summer. we are recalibrating forward to august, into september, on our way to jackson hole. the big change this week is inflation. it's out there, somewhere. does -- jonathan: does it validate a pivot? we are not quite there, yet. you have people like tom talking about re-acceleration. others as well, we will catch up with that later this hour. others, who believe that we are there, we are done. it is time to go on a victory

lap. this fed, perhaps nervous about doing so. given the risk they might be wrong. we have been asking the question, what is the biggest risk right now? waiting too long to reduce? tom: they always wait too long. that is the history. i thought jason furman was brilliant yesterday. we don't give our opinion out, ever. jonathan: no, no. tom: but the debate here this morning is do you look at a one-year view or a longer-term view? or, do you take a more short-term is some six-month yield. jonathan: it has come down. steve thinks they are done. steve was talking about cutting interest rates for the first quarter of next year. i would say if you are a fed official and you have to take that prudent approach as a policymaker, do you want to declare victory when you have

one more cpi print, one more payrolls print before september 20? perhaps too early. we did get a clips of it. john williams in the new york times, i think that is somewhat revealing. even though it is intuitive to suggest that when inflation comes down, real rates increase and we may need to do something about that to adjust. just entertaining the conversation about rate cuts in any way, shape or form is a step away from what we have been doing with the fed. tom: the math of the nominal rate, less inflation over deflation. there is a whole debate there to the residual. that was what john williams was looking at. i didn't get to joe philbin on this. but amazon is going to grow -- blow up their grocery business. a lot of people listening in our saying you can have your bowtie won't inflation debate. it doesn't matter. i'm getting killed at the grocery store. that is the emotion out there. lisa: which raises this issue around commodity prices.

we have seen some oil prices climb up and gasoline prices climb up. when does that affect sentiment? if people are feeling like prices are just too high, when do they start pushing back? do companies still have the same pricing power? this to me is the question at a time when prices are so much higher on a relative basis, they can't keep creeping higher at this kind of pace. have we seen that? not in every area. you still see hotel prices, have you tried to book a hotel recently? tom: insane. worse than airlines. the hotel thing is more serious, actually. it is absolutely insane, worldwide, getting a hotel is a battle. lisa: pushing this forward, if you do have wage increases, down the line, how much does that

bleed into other things? the hotel thing is a perfect example because of how hard it was to hire people after the pandemic. tom: is it -- this is the fed's cycle into september after jackson hole. jonathan: we have the jackson hole split. we should hear from chairman powell with an update. elon musk and this fight potentially between him and mark zuckerberg, the fight will be managed by their fine dacians -- foundations, live-streamed on meta-, and x, formally known as twitter. they have agreed on an epic location. everything done we'll pay respect to the past and present in -- will pay respect to the past and present in italy. preach, you on. when is it going to happen?

he responded to how is the mri on twitter. i spent three hours in an mri machine on monday. the bottom line is my c5/c6 fusion is solid. not an issue. real athletes stuff. however, there is a problem with my right shoulder rubbing against my ribs. which requires minor surgery. what is he talking about? lisa: [laughter] i think he is trolling us. tom: you and i are going to step aside and this screams bloomberg, francine lacqua and jonathan ferro from the coliseum. jonathan: i imagine joe rogan would love to commentate on it too. tom: i could see you and

francine lacqua doing a blow-by-blow at the coliseum in rome and it would be great. jonathan: one guy is shredded, one guy is not. one guy knows jiu-jitsu and the other guy, not so much. the guy who knows jiu-jitsu is probably going to win. that guy is zuck, isn't it? tom: if they can buy a college education for every kid in rome while they do this, that is a cool thing. we are doing a data check right now. i will look at -- i will call the vix center tendency. jonathan: we are down on the week, we are down about 0.1%. 4.1% on the 10 year maturity this morning. tom: we will dive into a look at growth and value.

we will do this with and milady -- anne moletti. your value stock at the top of the pile happens to be google. is tech valued or growthy right now? >> it depends on the name you are looking at and the growth rate of some of these companies and the cash flow they are producing. those are the things that our investment teams are focused on. you could find value in a tech name, whether they are large-cap or small-cap, depending on the way you look at it. i think we have seen this throughout. you picked a big name. one i see even more often is our managers steering away from some of the most popular names, the

names that have been really -- going to the names that have been ignored by the rest of the market. lisa: some people would say this is the longest losing streak for nasdaq. others would say this is a sign the rally is broadening out. which is it from your vantage point? is this the beginning of a selloff that is more protracted or the beginning of a broadening out that can be more sustainable? ann: it's the million-dollar question and i think what we need to do is remain humble. we don't have the crystal ball. we don't know. but what we are paying attention to very much is what we are hearing, not necessarily hearing. let me make that clear. but what we are seeing from companies and the actions they are taking. and what that suggests to us is there is a lot of fog in the future. and that, you know, that it is clear that the future is going to be different than the past.

i.e., for sure, higher rates for longer. that affects business models. we are starting to see management teams adjust to that, which is a good thing. that being said, we think some companies are going to be set up better for the future than others. lisa: how do you view the whole gm and ford selloff from yesterday and the question around unions pushing for greater benefits, bigger wage increases, what we saw over at ups. -- ups? how much is that trend influencing how you analyze each company? ann: you're hitting on some important things because you are going back to the fundamentals of companies, which we are focused on. it is things like labor cost, things like potential deglobalization. things like that that can impact company margins. and, you know, we know what margins have done over the last decade. steadily, they have gone up.

there is real question whether or not they can continue to go up. we think that is probably not possible. but can they stay where they are at? i think that is the challenge and you are hitting on some of those key points. and that is why we are very much focused on fundamentals and specific stocks. tom: what i see is real math here, folks. this is r squared. the idea of a correlation of a given portfolio to an index. the fact is a lot of institutional portfolios are running management very close to the index r squared. where are you on that? does an active manager need to get more active and disparate from the index or should we all go out and buy the all spring index fund? ann: it's a great question. when you look at it and ask any asset manager, you will see a

weighted shift board a higher number -- toward a higher number than we would like. but you have to get active in this environment. if you look at the higher weighted names in the index, not only have they exploded in terms of waiting and the index, but they have exploded in terms of valuation. i was talking to one of our growth managers earlier this week and we were talking about the russell 1000. he gave me some stats and let me just read them really quick so i don't get them wrong. the pe of the benchmark at the beginning of the year, looking forward, started around 21 times. it's gone to 26 times during the same period. or about 25%. if you look at the rest of the benchmark, there has been contraction in the rest of the benchmark if you took away the large seven names. -- largest seven names.

it's things like that that make us go ok, regardless of the macro environment, there are names that are clearly not being treated as equals. and so, you need to get more active. you need to look for other people aren't looking and steer away from some of those large bets that you are getting wen yu plane index. jonathan: ann miletti. if you're just joining us, the s&p 500, negative by .01%. -- .1%. andrew hallman horst is looking for another hike potentially in november. sees all the ingredients for reacceleration and inflation later on this year. park yourself of any hopes and dreams, andrew will upset them in about 20 and it's time. tom: kate dunbar and nicole

kagan, the idea of a stasis that jim talks about. is this the new 10% level that we are at right now? they talk about this maxim -- maxim extrapolation. what bridgewater is saying is maybe we are here. jonathan: she thinks inflation has bottomed and things will get harder. your equity market on the s&p 500, slightly softer on the s&p. we are negative by 0.1%. 4.1% on the 10 year. the weekend, hours away. ♪

oh, oh, oh...i'll be the judge of that. oh, that's nice... oh!! searchable, verified reviews. that's better than the ham, and i've never said that. booking.com booking.yeah ♪ >> -- has been wanting to do legislation on china for quite

some time. he has said he wants to codify these restrictions. you have numbers on the u.s.-china committee. you have members that are the head of the foreign affairs committee already saying they don't think the executive order goes far enough and should include other areas. this is still the beginning stages. we still anticipate we will see more coming out of congress. jonathan: that was jeanette love on the outbound investment border from the president earlier this week. containing investment in certain parts of the chinese economy to some extent. if you are just tuning in, we are 15 minutes away from ppi data in america. cpi speaking to the dish inflation trend. let's see if that shows up in ppi. the data drops 8:30 eastern time. the market sets up as follows. we are down by 0.1 percent on the s&p 500. the bond market is steady, driven by a softer 30 year

option yesterday afternoon. san francisco fed president, speaking to yahoo! finance, suggesting it was more work to be done. the bond market staple now in the fx market, the daughter a little -- dollar a little weak, the euro a little strong. we are south of 110. tom: 158.93, beneath the radar this week. into the china-asia opening, sunday, that will be interesting. a 160 print there would be newsmaking. jonathan: china is on the radar. if you missed that and are catching up, chinese banks extended the smallest amount of monthly come back to 2009 in the month of july. sparking a bigger conversation going into the weekend about the prospect of maybe some central bank easing. lisa's point, does it make a difference in the economy right now? tom: i think it is a jumble. i don't have any wisdom on that.

i will say it was front and center. u.s.-china, china-u.s.. but also, the complexities of other nations as well. we have an expert on this, the banker from arkansas, the republican french hill joins us. you in arkansas live this, you are absolutely front and center on agriculture. tysons, the iconic chicken maker and also pork. and the simplicity that is in the political dialogue versus the complexities of chicken from america to china, chicken from brazil to china, and the stew of it all, not to use a pun here, what is your best policy with china, given the complex realities of a multinational export-import reality? french: tom, jonathan, great to be with you. this is a super complex issue.

we are not confronted with a cold war situation like we had in the 1950's to the 1990's with the soviet union, where we were not in integrated economy there. the case is exactly the opposite with china. japan, for south korea, for taiwan, for the united states and for the e.u. first of all, i think your comet has to be thought of in a multilateral way. all of these developed economies have supply chain and market revenue opportunity in china. this de-risking that we are seeing, led by the private sector, i think is one of the most important components of why you see concern in china. and i hope that's the case. in my view, economic deterrence to beijing is one of the most important things that we can do on a multilateral basis, to keep them from being provocative. vis-a-vis taiwan or the south china sea. i think that is a key point.

tom: we are thrilled to have you on as you are the only republican who will not be debating at the end of the month. it is good to see at least one republican won't be on stage. but french, can all of washington, democrat and republican, the bipartisan china view, can we have an adult multilateral and complex discussion? or are we going to end up with silly simplicities that we hear and listen to now? french: such a good point. that's why i think mike gallagher, who chairs the china select committee on behalf of speaker mccarthy has a good worldview. he comes from a military background. he understands these global capital market and trade markets that are multilateral and not solely with the united states. that is why i was glad to see the g7 countries think about a reverse cynthia's type approach. this is the essence of where joe biden is going with his executive order, yesterday.

i agree that it is more complicated. i don't think it goes far enough because everything in china is a dual use technology. that's how they operate. it makes it very hard for us to monitor and think about how to limit capital flows or technology flows into china. lisa: that's the china story. there is a big to story that was highlighted last week by fitch that a lot of people are discussing, and specially -- especially in light of the auctions, which were ok to pour as the week went on. one thing that was said is we are taking seriously the risk of a government shutdown this fall. do you think a government shutdown should be on the table in order to reduce the deficit? french: lisa, here is my view. the house is behind the curve, here. we need to pass the other 11 appropriations bills we did not get to in july. we passed one. we need to pass all 12.

that gives us the maximum negotiation capability on behalf of the house of representatives with the senate and with the biden administration, to get the kind of spending deal that we anticipated from the debt ceiling negotiations. we want to hold the line on that. the best way we can do this is to get word on the appropriations bill. those conversations are going on every day. if we can't get all that done before september 30, i think a short-term continuing resolution in order to get that work done is important. we don't need to go into a government shutdown when we have done the hard work through the debt ceiling negotiation and we've done the hard work in our committees. both in the house and senate, on the appropriations process. lisa: is there enough unity within the republican congress members and senators to get an agreement that everyone can get on board with? it was splintered in order to get anything through. is that one of the big obstacles for you? french: i think it is. we are talking with our members

every day as we have done all year, as we have accomplished a broad set of solid policy accomplishments this year. some of which have even gone to president biden's desk. we have to do that on each of these appropriations bills. you have concern about each one from different members of the republican conference. and i think that's good. i think it is constructive. we can handle some of that with amendments on the floor. what we need to get these bills moved forward. that maximizes our negotiating clout and i would say to my republican colleagues, if you go to a continuing resolution and don't do your work, what you are doing is institutionalizing nancy pelosi and joe biden's spending levels of last year and their policy positions. which is not something that house republicans are in support of. tom: we have to cut to the chase on what matters here. you and i have talked about this before. but if you look at razorback football and you look at the schedule of western carolina, kent state, byu, lsu, finally a

real game, lsu, and texas a and m later on, what in gods name is happening to college football and what are you going to do in congress to tell these people to get their act together? french: this is all about the money. they love coming to arkansas and they will make a lot of money and the razorbacks will hopefully have three victories in a row. but college sports is now absolutely all about the money. that is why jonathan needs to come out here and watch some good sec football and stop talking about "european football." jonathan: it's a dream of mine. i want to make it happen. i want to watch college football in the south. tom: for someone like congressman hill to tell us it's all about the money, that is the most shocking thing i've heard this year. jonathan: this year, it's going to happen. congressman french hill of arkansas. the atmosphere is awesome.

absolutely fantastic. the closest thing in the country to european football. tom: as big a foreigner as i was when i walked in to see harry kane life the tots, i walked in and you sit there as an east coast kid and ralphie comes onto the field and the buffalo goes on the field. a real buffalo. i got my screwdrivers or whatever they were serving me. i was like you've got to be kidding me. this is religion. for french show, it's religion. jonathan: alabama, the most basic thing. lisa: even i've heard of them. jonathan: ppi, coming up next.

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>> inflation, ppi data around the corner. we are seconds away from that. going into the equity market, the scores like this on the s&p 500. negative by 0.1%. yield coming down a little bit. on the 10 year yield, four point 861%. yields higher off a softer than expected 30 year auction. following decent demand for the three year and 10 year. we are looking at the month over month stuff, just to look at the trend. you don't want to do this?

tom: i'm loving it. it's great. jonathan: mike mckee, it was his birthday yesterday. he took the day off. here is the data. 0.3 percent. slight upside surprise, month on month, the ppi headline. the expectation, 0.2%. energy has also come in at 0.3%. a slight upside surprise. slight revision. overall, a little bit of an upside on ppi data. cpi yesterday came out in line -- bank in line. equities a little softer, down by zero point 2% on the s&p 500. the yield reflecting a touch higher. by not even a basis point. we have been down a couple of basis points. lisa, let's call it for 11. lisa: this pushes against people who say a soft landing is in the books.

andrew is the best guest to talk about this. given the fact you are seeing some of the input prices. the fact it is not just food and energy. it's when you strip that out. the revisions indicate that perhaps on a rolling basis, this will average its out. food and energy was revised downward 1/10 of a percent. maybe this will be a wash in the end. jonathan: the price action looks like this, equities down a quarter of 1% on the s&p 500. yields a little higher. the 10 year, back up a couple of basis points. dollar is stronger, the euro almost unchanged on the day at 109.88. kathy and john and jay levitt coming up. mike mckee is back. tom: i remember m1, m2 and m3. there was a .20 or 30 years ago

where the world stopped for ppi -- there was a point when 20 or 30 years ago, where the world stopped for ppi. i thought you did great there. jonathan: thank you. tom: it was a toxic brew of inflation. jonathan: not my first rodeo. i'll see you guys next week. would you like to do the open today? tom: no, i did it once. lisa: [laughter] tom: it was a disaster. jonathan: i'm on my way out the door, tom. tom: do they have ppi in the animal kingdom? lisa: he's literally going to walk off the set. tom: jonathan ferro, thank you so much. on set right now is our interview of the day. for those of you who are concerned about the persistency of inflation, andrew, the chief u.s. economist has been shockingly prescient about elevated inflation about america -- in america and worldwide as

well. i want to go back to yesterday's free-for-all on one-year, six-month, three-month and one month annualized. are we getting way too granular, andrew? are we so desperate that we are looking at every single tea leaf? andrew: i think you have to do both, tom. i would say for jon, ppi is one of the hardest releases to read. you have a lot of different core measures and we look at all of those things. we look at those things for cpi also. the super core. we are looking at various measures of underlying inflation. one-month trends, three-month trends. you have to look at the details. but then you have to look back, step back and look at where is the trajectory broadly in the economy. looking at the details, there is some upside risk we are seeing if we look at inflation in august.

we have gasoline prices that are up. airfares are down 20% since march. that is not the expense i have had. we think we will see it coming up. then you step back and say where are we going as an economy? it's an economy that is generating 2% plus growth. it's an economy with a tight labor market. wage growth's running around 5% by various different measures. that is not an economy that will bring inflation back down to 2%. we are getting a couple of months of softer readings. that will look like a soft landing but i don't think that is where we are headed. lisa: we were speaking with a person from morgan stanley and he said the bonds market was a head scratcher. since we got softer than expected economic data, you got confirmation in the data that we are getting right now of disinflation. do you agree or do you think this makes perfect sense that the more the fed gets complacent, the more concerned

people are about longer-term inflation? andrew: i think there is a way to make sense of the price action this week. which is partly that this soft landing idea, narrative and the softer inflation data that has come in was really well priced into the markets. speaking to investors ahead of the cpi release yesterday, it was hard to find anyone that thought this wasn't going to be a very soft print. i think that was already in the price. so then, what investors are looking at is some of those details, some of those trends in the labor market. the longer-term trends and exactly like you are saying, lisa. if the fed is going to be finishing up rate hikes and everyone thinks they are done or they are going to do another 25 basis points in november and be done, then we are looking at where does inflation go from here? and does the fed need to keep policy increase rates higher for longer? that will increasingly play out in the market that may be just the neutral policy rate, where

policymakers need to leave fed funds in the longer-term is going to be higher. lisa: how much do oil and commodity prices feature into this? there is an asterisk next to the disinflation everybody was selling running yesterday and it has to do with oil prices heading toward their seventh weekly gain. looking at food prices, which are starting to inflect higher, how much do these affect the larger input prices like the factory gauge ones that we just got? andrew: i think the fed got helped out with lower inflation with gasoline prices coming down and energy prices coming down. food prices that stopped rising as quickly. we were saying at that time that fed officials should be careful in terms of the downshift of inflation. fed policy does not control oil prices or food prices. now, they may start experiencing the opposite scenario where you

actually get some of these commodity prices moving higher. most notably energy prices. that is something that fed officials and economists need to look through to the core measures. i mentioned airfares before, we are getting higher jet fuel prices. that will boost airfares. the august inflation reading, we could get a month on month increase on the headline, something like 0.4, zero point 5, 0 point 6% month on month. that could change the narrative. tom: a simple question, are we beyond the pandemic? are we back to conventional macroeconomic analysis? andrew: so, i think we can use conventional macroeconomic analysis. and i think that is one way that we've been forecasting inflation and thinking about inflation staying higher for longer. the idea that tight labor markets do drive inflation over the medium term. so i think that framework of analysis has been a useful one

throughout the pandemic. and then this post-pandemic period. the idea that the economy is going to normalize back to where we were in 2012 42013, i just really don't understand that analysis -- 2012 or 2013, i just really don't understand the analysis. i'm not sure why there is this belief we would go back. tom: this is the heart of the question. i will get a little wonky year. -- wonkier. the school of thought out there, andrew is that we return to a quiet and r-star. there is a new hire r-star set or people looking at an even higher r-star. how do you position r-star out three and five years? andrew: i think we have to think

about the possibility that r-star is migrating higher. if you take the model which to your point is full of complexities and you are doing this update where you look at the economy and figure out where r-star is, you can say what that model is doing is if growth comes in higher than we expect and if inflation comes in higher than we expect, then it must be the case that the neutral real interest rate is higher than we thought it was. well, where does growth come in? stronger than we expected? where does inflation come in? higher than we expected. that model should start catching up to what we have seen in the data that looks like r-star is rising. i think we will hear about this at jackson wall -- jackson hole. the father of the williams model, i don't think he thinks r-star has moved up yet. he has made comments to that

effect. powell might completely break away from what williams is talking about. i think we will hear some discussion about the possibility that r-star is higher. lisa: how long can the fed hold ground beef levels? 5.2 5% or 5.5% before it causes relation -- recession? andrew: i think there are lags of monetary policy that will very slowly but surely slow down the economy. we see that and the senior loan officer survey, where you see banks that are tightening lending standards. you think about many people right now have a mortgage at 3%, 3.5%. mortgage rates for a three year fixed-rate mortgage is 7%. over time, people will start slowly settling into the higher mortgages. but those effects that slow the economy work with a very long lag. you won't be incentivized to sell your house and pick up a

new house at a higher mortgage rate. that will only happen if you have a life event, you change your job or your family size increases. that slows the economy. it could be quite a long period of hire for longer. tom: thank you so much. andrew appearing on our lack of disinflation. it is very well understood that steve cohan and the 2023 mets used the bayesian approach. that is how that worked. death on a bayesian approach in statistics. lisa: we call that rebuilding, tom. tom: down 3/10 of a percent. lisa: we got a lot of feedback from andrew. i gather he has cotton quite a

bit of put back. a lot of people are believing this disinflation narrative and he is pushing back. he is saying stop it, there will be a reacceleration. look at airfares. if you have higher jet fuel costs, what does that do to the price of airfares? is it going to continue to disinflation or deflate outright? tom: david rosenberg has been talking some optimism on disinflation. he has been in that camp for some time. he talked about it out of toronto this morning. i will go to where claudia psalm is. she is important in this discussion. she is set back by her iconic analysis of how you measure recession. she is begging for some humility here. i want to emphasis -- emphasize this. even andrew on a wing of inflation has an immense

humility on how he could possibly be wrong. lisa: this is probably my favorite story of the week, zoom called all of their employees back to the office and said you can't work from home anymore. jonathan: it's -- tom: it's amazing how many different narratives and that being about what are we going to do after the pandemic about how we work and where we work? lisa: all of these transitions, it is how we are struggling to come up with the right model. you think it is bayesian? tom: they got used to this in the pandemic and they are like this is fun, let's keep it going. negative seven for the dow. futures, -16. the dow is bayesian. we do that for jon ferro. this is bloomberg. good morning. ♪

♪ lisa: we are about 15 minutes

away from getting the ppi report. a bit of a confusing report considering it does not exactly confirm the disinflation narrative. however, pretty much status quo we are seeing in markets with a little bit of softening initially on the heels of that. s&p down about 3/10 of a percent. the biggest back-to-back weekly loss potentially on the s&p, going back to march. the first back-to-back weekly loss, going back to may. is it a pause, is it something more substantial? it is something on the heels of the grind upward in yields. yields at 4.1%. tom: i'm glad you bring this up. it is a for standard deviation plus a two standard deviation to negative two standard deviation off of july 28. the answer is ok, is pull the correct phrase? -- pullback the correct phrase? it's not a correction, that's

for certain. i guess there is a little angst out there. lisa: we have been addicted to up, up, up, up, up. when it does not happen, it is notable in a year that has been in one direction. a couple of names we are watching but i think are important to game out in terms of what the signal is going forward. ford shares, gm shares on the week, lower by about 6%, give or take. ford down by about 5.7%. general motors down about 6.6%. how much our investment managers looking around after unions are looking for some sort of negotiations, where they could potentially gain power, where that could eat into margins the same kind of way we saw on ups? this is one of the key stories as people look forward to where do those wages come out of that soberly people -- so many people are asking? tom: it will affect some of the public sector. there is a new debate, back

15-16 years, does labor have a new power? i think that is a huge part of the discussion into next year. also, it will be about the state of business. i get upset about this. cfos and ceos come on bloomberg, they talk to us and mr. westen and go we are great, we are minting money. you are back there is labor, going hello? i think that is by far and away the greatest emotion. lisa: that has been basically the story. a lot of uaw and others said if you are getting these bonuses, you have to share some of that. at this point, do we see that backtrack the past decade, two decades where basically profits came out of the -- at the expense of revenue-sharing. i was looking at tesla in particular because they are down less than the others and apart because they have less union ownership. i have also been looking at big tech and how much they have been selling off. tom: i think dana did a great

job, i was happy with our coverage on yesterday -- on that. 22 times with nine times, now you can see how it is a value proposition versus perhaps a foolishness of years gone by. we will have to see that over the weekend. they are acclaimed as founders of french derivative mathematics. he came out of banc of america, working with deloitte as well. he is a first order excellence in derivatives, dynamics of the equity market. we get a brief this morning. what do the tales look like right now? do you have a clarity at socgen about the constructive risks on the right side or the agony to libyan risks on the left side of the tail? >> in october of last year, we

didn't have the extreme tales. now, things have changed. things have changed dramatically. now, what we have is if anyone is looking for a more balanced volatility, i would not get carried away with thinking -- when you start combining different elements on the auction market. if anyone is looking for upside, one can still be looking for the u.s. it is a better place. things have changed over the last year. tom: decades ago, with paul will months leadership, he put out --

with paul's leadership, he put out a magazine that was a bible. we read it cover to cover, every six weeks whenever it came out. one of the great hallmark of what paul said is find out where the bet is. where is the bet right now in the summer of 2023? where is the extensive money being placed that sometimes can be wrong? >> most of the money that we have seen is still in nasdaq and ai. that is where all the excitement has been throughout this year. if i look at s&p, and split it between micro signals and macro signals, it is clear the micro signals are positive. and the current fed cycle is actually helping s&p 500

companies. they are making interest income, rather than interest expense at this point. it is creating extra micro signal based owning's. owning striven signals and that drives a lot of the equity. -- owning's driven signals that drives a lot of the equality. i would say the u.s. has the best industrial policy as of now. lisa: you raised your s&p 500 target to 4300. which is still below what we have right now. which means a downdraft by years end. i'm wondering if you would see anything or what you could see to raise that target further. >> we think s&p goes to 47 or 50

before we see the negative element in terms of the neighbor costs and the union costs and the credit costs. we are expecting the small companies refinancing will happen within a few years. it started this year and gets extended next year. i think we are bullish on the micro front. but we are not bullish on the macro front. i think that is the right call. there has been a big -- between micro versus macro. tom: we will leave it there. he is sitting right in the

middle with the balanced portfolio. bloomberg reports for the benefit of bramhall. amazon cracks down on employees who stay away from the office. amazon expects u.s. workers three days a week. from zoom to blackrock are demanding -- workers are demanding brano. -- bramo. lisa: they sent out reprimands to people saying you have not been in the office for three days a week for the past three weeks. tom: shirking their duties. lisa: it shows the tension. there were picket lines for people who did not want to go act to the office. amazon coming up with a more strategic way of cracking down. you heard google say they are going to evaluate workers aced on their in office attendance.

there is a real push, get back to the office and workers are like no way. tom: do you think it is generational? is it like bitcoin where people of a certain ill are like no and the younger kids say bitcoin is legit? lisa: you know, i think it is a lot more complicated than that. i think you have people who want to learn and who are coming into professions. i don't necessarily think that. i do think that there is the feeling that if you create a lifestyle that you think you can work from home -- tom: you should try it next week. lisa: are you trying to send me home? tom: she was in her paris flats. jonathan and i are slogging away . thank you for your attendance this week on radio and television.

at 2:00 p.m., stamp collector william gross will make an appearance. bill gross on mexican carrie. stay with us. this is bloomberg. ♪ my cpa told me i wouldn't qualify for the erc tax refund, so i called innovation refunds. their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies.

jonathan: donald the session, down on the week. live from new york city, good morning. the countdown to the open starts right now. announcer: 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 insisting there is more work to do. the