and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> i think the inflation dynamics have shifted slightly in the u.s. >> we don't see any possibility for the fed to cut rates until next year. >> it is clear that the future is going to be different than the past. for sure, higher rates for longer. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: live in new york city, good morning good morning. this is bloomberg surveillance on tv and radio.

alongside tom keene and lisa abramowicz, i am jonathan ferro. the s&p 500 positive by 0.22%. tomorrow morning, retail sales, thursday from walmart. how many times have we done this from august? talking about china. china the headline once again. tom: it starts and ends in china with a set of news. what is interesting to me is it is not one story. you have to get briefed on this to get up to speed on three, 4, 5 stories. chinese equities in the tank, iron or somewhat in the tank. a lot of moving parts going on in china and that comes back to jackson hole. jonathan: one chinese developer, country garden holdings seeking to extend for the first time ever.

away from that we have a wealth manager missing payments. this is starting to mount in a bigger way. lisa: which begs the question of when this becomes financial contagion in china. why are we not seeing more trickle out affects? is that what we are seeing in germany or parts of europe? a lot of u.s. companies are rationing back expectations for growth in china. beyond that, where do you see the contagion? tom: i see it in the terminal. new yen weakness. the chinese yuan is right back to recent weakness as well. i see it in the 30 year bankrate mortgage. many different mortgage rates, 7.53%. you can around that up to 8% but i am not there yet. jonathan: you see stress in the bond market, in treasuries. 30 basis points higher in three weeks. lisa, i'm with you.

eight years ago, you get headlines like this from china. the last three weeks, life above 4%, can we sustain life above 4% on the 10 year? lisa: a great question, especially in light of weakness we feel coming from china and the surprising resilience of the u.s. consumer. it is an interesting dichotomy. chinese data pointing to all of this weakness and then we also see the consumer and what the u.s. consumer keeps doing which is spend spend spend. jonathan: look at what is happening with crude. every single morning, deflation, disinflation. crude is up more than 20% off of the june lows. tom: bring it back to my 201 k, what do you do if you are in stocks and you are listening to all of this talk about macro battle? i'm not sure. lisa: what a lot of people are doing is diversifying, they are

going into commodities. how long can you continue to go to some of these areas if china ends up being the major macro story? jonathan: for the first time we don't get a quiet summer. jackson hole about 10 days away. the future is going to be different to the past. tom: should i go hiking in jackson hole? jonathan: you should go hiking next week. lisa goes hiking. lisa went canoeing next -- last year at jackson hole. lisa: i've got big plans this year. jonathan: do you? tom: if you go hiking in wyoming, there are snakes right? lisa: snakes, elk. jonathan: you are more concerned about the snakes? tom: we are staying in like a motel 6. lisa: we are not saying in a motel 6. do you think the snake is going to get into your room? tom: when i walk into the room,

i checked under the bed to see if there are snakes. jonathan: let's get to the price action. equity futures only s&p 500 up by 0.2%. first back-to-back weekly loss on the nasdaq 100 of the year so far. the first back to back weekly losses for the year so far. as well as the s&p 500. the yields above 4% on a closing basis. above 4% on a closing basis for a ninth consecutive session. lisa, going back over time, it is rare to see that. lisa: especially when a lot of people are arguing we will go back to a low-inflation moment. you got goldman sachs calling for rate cuts in the second quarter. as far as today, it is light ahead of a week nominated by retail sales but i am focused on china.

bullard was one of the most nominal voices, he was a hawk. are they hawks left? what does a hawk on the fed right now mean at a time when they are looking for a soft landing? -- talking about the inflation reduction act and what this could do for the u.s. economy. i'm curious to see what she says about china. 10:00 p.m., china is releasing july economic data, including industrial production and jobless information. this comes at a time when broader markets have largely shrugged off china. can they continue to? at what point does the data supersede the calm of a soft landing in the u.s.? jonathan: we have to talk about china, talk about retail sales and talk about the developments in this bond market. let's kick it off with ben labeler -- been laidler. let's talk about this bond market.

life above 4% on a 10 year, can it be sustained and what does it mean for your equity market? ben: i think it can be sustained. 2% real yield. you go back about 15 years to see them be reasonably sustainable. 4% u.s. gdp now costs. i think this is pretty much the talk and i would be leaning against this. i think inflationary forces are still out there. we've had this headlines last week of this tone up in inflation but i have been leaning against this. i think long-duration assets are the place to be. tom: the wall street journal had a wonderful article looking at

five retirees, each of them with $5 million. the constant theme of these five different families was they bought attack, they owned tech, they stayed with tech. you say tech is not going to tank and that it has more in the tank. how do you look at tech and say they have legs to continue? ben: because of the earnings season we just saw. where did the growth come from? it came from all of these tech heavy sectors. these are secular growth sectors, which are seeing topline growth but you are beginning to see that come together. to the extent that u.s. equities get let out of this earnings trough, i think it is tech that is going to lead. that will take the ceiling off valuations you've had put on

over the last month or so. lisa: you've seen a 10 year yield above 4% for nine consecutive sessions. at one point -- at what point do you start to -- and that makes you reassess your whole call when it comes to the equity space? ben: obviously the fundamentals actually change. i don't think they have. a lot of this bond yields move is technical. changes we have seen of japan, i look at fundamental growth indicators and they have not changed that much. these numbers, the 4% and the 2% real yields, these are really top of the ranges. i would be very surprised if we could break through that. i'm happy to take a move sideways from here but i think the big incoming direction is down and that gives me

confidence along with the earnings intake. lisa: you say it seems really technical in nature and get it has been accompanied with seven straight weeks of gains on the crude level. we have seen a real rally into, oddities more broadly -- into commodities more broadly. how do you sort of pair this with the idea of china slowing? how do you look at the commodity space and say the yield move has been technical? ben: it hasn't completely been technical but there are two clear and present dangers for u.s. markets. oil is the second one. the 70% rise in gas prices is a double negative. it takes about $100 billion out of consumer spending. it will start pushing up inflation expectations. i think ultimately it is self-correcting. the higher oil prices go, the more people will worry about growth and interest rates and that will cool the demand side.

china is a big deal in oil markets, but it is only growing 16%. it is a much bigger deal in industrial metals. that is where you can see the weakness. we are right to worry a little bit about oil but i do think it is self-correcting. a lot of the rally you have seen has been tightness on the supply side. i think demand weakness will follow if brent stays above 85 for long. tom: you're a claim is late 2018, you had courage to look out 18 months. how do you look out 18 months from here? ben: looking to 2024, what is going to be happening? i think we will get digital earnings growth. i think the fed will cut interest rates and those are the only two ways to make money in markets. we are going to have a 15% swell

and earnings over the next 18 months. jonathan: you make it sound so easy, been laidler of etoro. great talk to you. -- great to talk to you. tom: i give the journal really great marks, they have made a commitment to talking to people of all different socioeconomic outlooks about retirement. some of it is not pretty. there is a huge part of america that is struggling. these five families are not struggling. one guy whose wife died three weeks after he retired. the one thing i saw was that at some point, they all decided to just buy name the tech stock and ignore it. jonathan: that wasn't my favorite story. my favorite was the scary math behind the treasury market. i can share some of the article with you right now. highlighting the cbo's forecast,

that maybe it is too optimistic. it envisions the net interest rate paid on the debt is near -- is barely 3%. lisa, some of this is quite worrying when you start to look at it. just how much the interest payments -- nondefense spending in the years to come, it is pretty amazing. lisa: peter read this and put up a note talking about this article and on the one hand he said it seems a bit extreme to us and yet the details aren't wrong. you read through it and it is concerning and he says he had to think about his longer-term bond yield call. at what point do people reassess how long they can shrug off fundamentals that they have been able to shrug off are so many years and say this time it is different with increasingly disparate markets? jonathan: it goes to the question i shared with ben laidler, can we sustain life above 4%?

who does it hurt first, the sovereign or the corporates? the sovereign which may experience a squeeze as well? lisa: they are somewhat interrelated but i would argue some people are saying it is the sovereign more than the corporate. going into a google bomb, you will public get your money back. the u.s. could be subject to all sorts of political shenanigans. you'll get your money back but you could get mucked up in some sort of government shutdown. jonathan: sebastian page from t. rowe price is coming up. good morning. ♪

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you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com >> i think this is all kind of nonsensical theater. i've made that clear to the rnc as well.

way back even before i entered this race, i thought the pledge was a bad idea. donald trump is now playing that game but that is what he does. i would not be the least bit surprised if sometime around sunday or monday of next week, that he signs the pledge and he shows up on the stage on wednesday. jonathan: the first debate is next wednesday, that was chris christie, republican president candidate on abc over the weekend. will the former president be on that stage in milwaukee? from new york city this morning, getting the week started with the equity markets shaping up as follows on the s&p 500. two weeks of losses on the s&p. concerns in china once again. missed payments, all of that kind of bad stuff. yields unchanged on the four, 15, 81 -- yields unchanged, 4.1 581. tom: i simply want to go back to things that are buttressed right up against resistance depending

a what the chart is an one of those is the 10 year real yield. we come back to an inflation around 1.78%, that is not to be ignored. jonathan: you want to talk about tension? did you read that magazine article that -- got into over the weekend? let me share the headline. is david solomon too big a jerk to run golden sock -- goldman sachs? when was the last time you saw anything like that? tom: that is the correct point. this broke on friday. this is a huge deal within new york and within american wall street. it is a combination of a new york times article, business insider writing about his alma mater and some students were upset and then the bombshell and the reporter for the new york magazine, not new york times is

really respected. i think it is the heart of the matter. this is not some journalist running around trying to make headlines. she is the real deal. lisa: you don't write an article like this unless a lot of people are unhappy with the leader of the company. that is the bottom line and i think what you have to wonder is at what point does the issue become a bigger problem? tom: jon and i are just tv and radio animals but you are the real deal from print. there wasn't all that much new in the new york magazine article but it was the language that was placed into sort of a funky magazine versus something serious like bloomberg news or new york times. the language was shocking. jonathan: it was scathing. let's do the sport analogy. if this was a u.s. sports team right now, we would talk about a manager that has lost a lot. tom: but we won't go there. jonathan: mike mayo of wells

fargo is quoted in this article and he basically says i've called for miniatures to leave in the past, for ceos to leave. he has not made this call that time around. this feel so personal within the bank. away from the performance of the quarterly numbers, this feels very personal within the bank. that was a lot of people's take away. tom: you wonder where this is going, into the weekend and the week. how do you stagger into september with this cloud? the cloud around morgan stanley is who is going to replace durbin? this is a whole other scale. what we are going to do now is migrate. bramo is our state fair expert. she was in iowa at 11:00 this morning, the milking demonstration. the milking parlor, north side of the cattle barn. they showed up this weekend to do the politics of iowa,

selected republicans. we go all state fair with the director of policy research at bt ig. are they kissing babies out there? what are they doing besides gazing at the cattle and kissing babies? what are the republicans doing? >> they are beginning what is going to be a long and ugly fight. a lot of this is quaint, it is great to see a person running for president flipping a hamburger. a lot of this is good old-school retail politics but underneath the surface, there is a lot of disdain and a lot of uncertainty over how the next few months are going to go. we have a debate next week for republicans and we don't even know if we are going to have the leader in the polls, the former president participating. i think it is plain and cute and sometimes nice but if you peel

the onion on your hotdog, you realize it is going to be ugly. tom: you have the fabric of the midwest with you. is the republican forever changed by former president trump? isaac: i will tell you this. i have a fun job. i get to talk to democrats and republicans. what i find interesting is that both democrats and republicans are largely unhappy with the candidate who is leading in the polls for them. donald trump is the presumptive nominee at this moment. he is leading in the polls by a wide margin. president biden is the presumptive nominee, largely unchallenged except for one challenge which has not shown any running room in the polls. what i've noticed is a frustration with the leading candidates, that perhaps can lead to a change in sentiment over time. it is hard to bridge that divide between what some party members

hope and the numbers on the ground. donald trump is going to get 30 plus percent of the republican party in a primary race and matter what he does. when you have this many win -- winner take all primary states, he is the nominee until someone proves to me that it will be someone else. lisa: i was writing a story -- reading a story over the weekend about the dynamic -- about the indictment affect. every indictment that comes out for president trump basically boost his popularity because it keeps him in the view of potential voters. how long does the indictment affect last? isaac: that is one that we are all watching. want to come from georgia and there are conversations suggesting the grand jury will hear from folks this week, with an indictment as early as the end of this week or next week. i've got to tell you, we've heard this phrase time and time again, teflon don. that has proven to be one of the

truest ways of thinking about this former president. his supporters simply don't care and at times it gives them more fuel. for the average voter at the margin, it is not going to change their opinion of him. if he is charged with rico violations in georgia, perhaps that gives him even more fuel to fight back against the dark state, the forces that are trying to stop him and hurt you. it gives him the talking point that he wants. i continue to view these indictments primarily as political fodder that i think will give him more fuel on the campaign trail. jonathan: keep us up to speed. new york is about falsifying business records. secret documents, florida. washington is january 6. what is georgia? isaac: georgia could be about their state-level rico statute.

that would allow the fulton county da to pursue charges relating to the former president supposedly pressuring state officials to falsify or overturn the election results at the state level. that was really interesting because it isn't a federal charge, it is a state charge. even if a republican is in the white house in january 2025, you could not sweep it under the rug. that one has some unique powers. georgia has been a little bit more willing to open up their courtrooms to cameras than new york or even the fed. that is also of interest. jonathan: thank you sir. isaac boltansky of btig. i'm sure i am not the only one losing track of this. tom: i think the nation, even the supporters are just benumbed by the whole thing. to be a polite, this is not normal and i yearn for the way the british do it. can we do this in six weeks?

jonathan: first debate, a week away. we keep asking, is the former president going to show up? lisa: we know the current president is going to show up to milwaukee tomorrow. there is a question, how long could people be numb and a larger question, are people equally numb on both sides of the aisle, to issues on both sides of the aisle? has it just become this is the new status quo? tom: i can't keep up. jonathan: maria has taken hold. from new york city, this is bloomberg. ♪

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jonathan: two weeks of losses in the s&p 500. good morning, getting your week started on bloomberg tv and bloomberg radio. equity futures positive by 0.2%. the nasdaq trying to balance. the first back-to-back weekly loss of the s&p 500. all eyes on the treasury market on the 10 year, life above 4%. can it be sustained? a move of 30 basis points higher over the previous three weeks. 4.15 on the 10 year.

let's finish in the foreign exchange market. the euro shaping up as follows, unchanged as well. that is a snoozer of a currency pair. you can guess where that is every single day. lisa: it was 1.10 for a couple weeks and now it is 1.09. jonathan: the ecp decision about a month away. china's banking regulator setting up a task force to examine a top private wealth management firm in beijing, that missed payments on multiple high-yield investments. they manage more than $100 billion of assets. missed payments, take your pick, there is a lot going on this morning in china. tom: 100 billion dollars,

whatever, but far more important is the what is the so what? the so what is a week you want but also pacific rim instability -- is a weak yuan, but also pacific rim instability. all of a sudden, these things in china matter. lisa: the currency potential transmission mechanism but also this transmission mechanism of at what point does this become a financial contagion issue hinging on the market march 8 -- hinging on the mortgage market? was property in china, when does this snowball given how much leverage they have and how many problems are percolating to the surface and the authorities don't have the power or the will to counteract it. jonathan: look at tesla cutting prices again. i know this is a separate ev

story but sales of tesla and china are not great recently. lisa: you see one u.s. based company after another talking about bringing down estimates for sales in china. why would tesla be any different? there isn't the same will to spend. you can see a lot of chinese consumers are saving, hoarding money and why? jonathan: let's turn to the next story. u.s. steel rejecting a takeover bid from rival cleveland cliffs, instead opting to begin a review of its strategic options, calling the offer quote, unreasonable. we will have a conversation between -- with the man behind the unreasonable offer, the ceo of cleveland cliffs later on. lisa: what do they have to propose instead? isn't scale really important? what do they have to do to get u.s. steel? jonathan: what happens with

antitrust issues? is this something they allow? lisa: evidently if it is not tech, they don't mind. at what point does a dominance of size at a time in the u.s. is trying to become an industrial behemoth matter more, and terms of industrial policy? jonathan: look out for that conversation later this morning. tom: those of us of an older persuasion are like ok, they have made 4% per year, the past two years and 3% per year the last 20 years. will somebody just put x out of its misery? why are we doing this. jonathan: it has not been lost, the ticket you just referenced. x would become available if cleveland cliffs. tom: i just fell into that. sometimes i get lucky and stumble into brilliance. x would go to elon. jonathan: if he wanted it. we will mention that later.

as for taking the high ground. mark zuckerberg looks like an adult. tom: somewhat say everyone looks like an adult. jonathan: you have gone there. tom: we will go to a serious story. this is heartbreaking. jonathan: the death toll from wildfires in hawaii approaching 100, making it the deadliest in the united states in more than 100 years. officials expecting the death toll to climb further. a search-and-rescue effort continues. tom: this was dry to begin with and i am really interested in the analysis on this heartbreak. about what the new dry is, what is the new dry in the mediterranean or spain? what is the new dry in western maui and how do we have to change how we live?

jonathan: now isn't the right time for point scoring. down the road, the inevitable conversation is going to happen. couldn't have been avoided and what was missed? lisa: should they have sound of the alarms sooner? -- should they have sounded the alarm sooner? all of these questions. the key concern is how do you rebuild considering this effort is going to cost incredible amounts of money and it is going to be a long time before they can invite tourists back? tom: i beat my amateur take on this. it is basically a manufactured tourism. there is a greg norman golf course at the top of lanai and it is very green and very watered. what is the one, manale bay? this is a bit away from maui as well.

it is pretty dry with green golf courses. what do you do with the natural terrain and climate change versus bringing in a lot of water? you are getting way down the road from the immediate tragedy. jonathan: that is the information i have. tom: we are migrating now to an important conversation of the day on foreign-exchange. elsa ling knows -- also look knows -- elsa lignos, head of global fx energy. you are the only one in europe working, what is your biggest mystery right now, forward in foreign-exchange? elsa: you touched on it earlier at the top of the hour. the uncertainty of what is going on in china, trying to understand the reality on the ground when there has been a move away from sharing information, the underlying gdp data, the breakdown of components just isn't there. on top of that, we don't have

the visibility onto these troubled developers. tom: does china bring in instability? i was talking about euro-yen. dollar-yen back up towards $ 1.50. can you see that stability given the events in china? elsa: it is the middle of august, a lot of investors we speak to have just shut up shop, particularly if they have had a good summer so far stop they are not seeing the opportunities out there. you have fx very much in the tight range. and even when we do attempt to get rate cuts as we did earlier in july, it just does not seem to follow through and i think people are struggling with that dynamic at the moment. lisa: if everyone is basically on the beach right now, does that mean when everyone comes back, you start to see more concern about the potential for contagion from china and all of

the potential and financial instability in certain sectors? elsa: i think we need to see a bit more information. the fact that you are seeing developers missing interest payments on their bonds has people concerned but more than anything, we've been in this situation and i could go back 10 years when people were panicking about the big china cliff and growth was going to collapse. markets are just naturally reluctant to believe that this time it could be happening for real. what i think we are missing in order to get bigger trends is a bit of global diversions. the moment -- at the moment, it feels like a lot of themes are affecting a lot of countries in similar fashion. whether it is the ecb or the fed, they all seem to be in similar positions. we need to break down and diverge. lisa: are we seeing that in the actual data? for example, the u.s. and europe, germany in particular. we are seeing that divergence, just not when it comes to a

currency that seems to have flatlined because everyone is on vacation. elsa: that is a great question. even more so than the currency, what i find perplexing is if you look ahead at expectations, there is still this widespread consensus that the euro area is going to outperform the u.s. and cyclically that does not add up. yes the fed has delivered more tightening but the u.s. also delivered more fiscal stimulus and the tightening delivered by the u.s. -- for the local realities on the ground. i do think eventually we will get the unexpected break lower in euro-dollar. i just think we may need to wait for the autumn for that to start taking hold. tom: there are a number of ways to look at the fiction known as the russian ruble, dollar ruble and also a basket of ruble. i'm going to go to the headline

drama of dollar as compared to russian ruble, through 100. i did a law of regression back 20 years. what do i make of the newly weakened ruble? what does it signal given the law -- given the lack of information that we have? elsa: it is very clear that business is a war of attrition that puts russia in a we can state vis-a-vis the rest of the world. it relies on foreign currency, hard currency in order to buy, whether it is military goods or so on. it relies on help from partners, high oil prices and we have seen oil trying to break higher but it is not following through. i think in terms of that war of attrition, it does put russia in a weaker spot. it is a highly controlled currency. tom: but it is unraveling.

how do they respond to it or does no one care? elsa: i don't think there is a response as such. it is a very different economy to even say the turkish lira, where turkey is an economy that is dependent on account -- dependent on commodity imports. there will always be some hard currency coming in, and so in that sense, the currency, the ruble is less of a signal for the underlying strength or state of the russian economy. jonathan: elsa lignos of rbc, thank you. -- throwing in the towel on the long euro call. goes for a range of reasons as to why he should be long for the euro but ultimately, things have been contained?

there is some concern of what is happening in china and what is developing in the developing market and looking into summer and winter. tom: there are a lot of different stories here. the bottom line here is you've got to get a belief, a set up a view out 18 months and it is difficult to do that right now. i think that job is very difficult. jonathan: lisa has brought this up a few times. seven months ago i'm sitting in london, just ridiculous conviction around the ecb hiking more than the federal reserve in 2023. going into september, what happens after september, a complete lack of conviction. that is the difference between now and then. lisa: which is also the difference with the economic picture which is much weaker. elsa lignos joining with jordan

rochester, seeing a weaker side of the eurodollar because there is not the same strength. they didn't have the same stimulus that the u.s. had and get they raise rates almost the same amount. if you look at what they are doing, it is more tightening even some of the transmission mechanisms. jonathan: china is much weaker than we thought it would be. europe is as well. tom: balance sheet is weaker. it is not about flows and income. not moments ago but in the last couple of hours, the yen prints up $1.45. jonathan: are you emotional? tom: very emotional. jonathan: from new york city, this is bloomberg. ♪ baby i hear one every night... every night. okay. i'll work on that. save 50% on the sleep number limited edition smart bed. plus, 36 month financing on select smart beds. shop now only at sleep number.

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they really want to see a trend in the headline figure. it is moving in that direction but we have a long way to go. jonathan: that was daniel morris of bnp paribas. as we start to think about jackson hole, the federal reserve. going into that, your equity mark on the s&p 500, the scores as follows. positive fire third of percent on the s&p. no real drama this side -- this morning, stateside. the u.s. 10 year, 4.15, an interesting level. about five basis points away. tom: are we beyond the banking crisis? that was a secondary debate this weekend. lisa: i like that you say that was the secondary debate because a lot of people including morgan stanley analysts were coming out and saying we can't really say it is over, especially with the moody's downgrade. estimate to think is this the

new thing is to just turn up the volume to use your language on certain issues and then people suddenly have to care about them again? jonathan: three issues, funding costs, capital, commercial risk. -- commercial real estate is going to linger. for the foreseeable future. lisa: this is the reason why you will have some of these names bleed lower. no one is talking about a crisis so can yield stay at this level and if that is the case, is this a soft landing? tom: are we at the price for you don't do a conventional yield analysis? if i have a mortgage rate at 7.53%, price adjusts, the amount you could spend on a house adjusts. lisa: that hasn't happened. tom: it hasn't happened. i wonder in commercial real estate when does this giveaway -- give way? jonathan: when the refinancing

starts, 2025, another year or so. but for residential, for people at home, sitting in houses, this market is frozen. they are not going to sell and people can't buy with rates at seven or -- 7% or 8%. you know how i feel about it. they called it mortgage envy at the end of the article. lisa: you were inspiration for the new york times article. tom: on their little french tables they have at 64th street. what i did this weekend was simple, i'm starting to learn the map of germany. you go north to bremen. i'm really ignorant on this. august 18, friday.

werner bremen plays baron kane. i'm wondering about -- and i said we have to book someone. so we did. jonathan: does our next guest know that you are talking about him? tom: his team got relegated and that is why carsten brzeski and is with us -- carsten brzeski is with us. limit cut to the chase before we get to serious -- let me cut to the chase before we get to the serious ing work. does he have his work cut out for him? carsten: no, but the bad thing is, he actually lost the very first match on saturday and that was the super cup. so it was not a good start for miami. tom: i'm going to tear up. amy is so good to bring this.

i can't go forward. i can't talk. lisa: i'm not going to talk about the bundesliga. i am curious what they were talking about with expected divergence and we been talking about that for a while. when will they play out? are we seeing market divergences with the economies of the u.s., of europe and of china? carsten: of course we do see them because everyone fears this soft landing, hard landing but it hasn't happened so far. with europe there is still a couple of people including the ecb, because here we have the problem of not only cyclical headwind but also structural transition. my best bet currently is that europe is in for a longer stagnation like my favorite soccer club. china, a third one is clearly

also in this very long soft patch. there is global diversions. i think the very first time for a long while that we are witnessing this big diversions. lisa: have we fully appreciated how much of the weakness we are seeing in china is bleeding over into european economics? carsten: not entirely. plus we have not fully factored in the fact that china no longer plays the same role for europe as it did in the past, especially for germany. china was almost in a symbiotic relationship with the german economy. there was a big need for german products. this time around, looking at the export data and the fact that china is able to produce the same products these days as germany or other european manufacturers. china is no longer playing the same role as it did in the past. at the same time, with this

weakening domestic economy in china, europe will not solve their exports. tom: what i was most focused on this weekend was foreign direct investment and the headlines are in. the dearth of foreign direct investment into china. what do you presume will be fbi between europe and america -- fdi between europe and america or europe and china? carsten: between the u.s. and europe, it is clearly turning to a net positive for the u.s. we have been seeing a trend of fdi's coming into europe and declining but at the same time there is the inflation reduction act in the u.s.. when you look at the u.s.-china and also europe-china, you will see a reduction in both u.s. and european fdi's going into china simply due to the geopolitical situation. tom: critically here, can you

get on board with the imf's five-year lethargy, the lack of global trade, just a dampening of the economy, out to 2028? can you get on board with that? carsten: i can definitely get on board with that because this is pretty much the reality. you don't call this the end of globalization but we should call this the end of globalization as we knew it. global trade is clearly slowing down. we will see more regional trade popping up, but with global trade slowing down, much more sluggish, it is obvious that the countries that benefited the most in the past from global trade -- and we have a couple europeans, i'm living in one of those -- they will be hit the hardest from this end of globalization as we knew it. jonathan: carsten, the german model, what is left of it? how do they change? carsten: there is not a lot left of it, other than i am currently

buying english planes to get to the bundesliga. i really think -- and not everyone has realized it yet in german politics -- this business model has come to an end, a business model that was highly dependent on export growth and also importing low-energy. with this new world, we will see a restructuring of the german business model. of course you have two narratives. one where you think ok, maybe german industry can still embrace new technologies, sustainability, renewables and kind of rise again after a couple of years. the other would be a global economy that is moving more towards services. to tell you the truth, the german economy is definitely not strong when it comes to services. jonathan: carsten, thank you on the next act for germany and

europe. carsten brzeski, global head of macro research at ing. outsource energy security to russia, outsourced economic security to china, it is almost a fail across the board. tom: what i observed from carsten brzeski, and i'm learning a lot about this. he said byron kane would not be relegated this year, which i think is an important piece of information. it is a headline. the other thing i say -- see. lisa was the -- you were the first when i heard that said what does this say about the 14x year heritage of angela merkel? you're the first one i've heard talk about that and that is going to be a source of serious academic analysis over the next decade. jonathan: ultimately, too many people got too cozy with the chancellor in germany and there is a lot of blowback and we are still feeling it today. sebastien page, of t. rowe price

up next. ♪

>> i think the inflation dynamics have shifted slightly in the u.s. >> we do not see any possibility for the fed to cut rates until next year. >> there are logs of monetary policy that will very slowly but surely slow down the economy. >> we need to stick to our work that tells us a recession is likely to unfold. >> this is bloomberg surveillance with tom farrow --

tom keene, jonathan ferro and lisa abramowicz. jonathan: this is bloomberg surveillance alongside tom keene and lisa abramowicz, i am jonathan ferro. we have talked a lot about this week dominated by retail results , all of that thursday. retail sales tomorrow morning. the federal reserve annual get-together is a week away. tom: we are standing there on the split rail fence and where they come down the line. they will all be there. you've got to see it to believe it, we will bring you full coverage with team coverage of the wave. powell is going to point out there was a 150 japanese yen,

moments ago 145. the weaker yen is a proxy. jonathan: why cc over at the boj, did you like that? yes. in china, real financial turbulence coming to the surface. just a little more over the weekend. lisa: there is an interesting tension, there is weakness in china that has contagion. with everyone is expecting to be the resilient u.s. consumer. retail shells -- sales expected to show spending, so which wins? this goes to the battle underpinning the yield space. can yields keep rising with the overhang of potential contagion from china and weakness overseas? tom: price analysis, at some point you look at a yield analysis, the price comes down enough where it is like i am losing money. how close are we to that i am losing money?

you can quantify anyway you want. jonathan: a lot of people have lost money. tom: a three year bond bear market, is that what we are talking about? jonathan: i do not know, but we should highlight some moves from the last few weeks. crude is worth highlighting, the others in the bond market. yields up by 30 basis points in three weeks. lisa, you ask five different people what is behind the bond market move into they will give you five different reasons. lisa: some people dismissing it as a technical blip that does not make a lot of sense, than other people saying no, this is the key risk for the federal reserve. they stay on hold, they are complacent with some sort of soft landing. inflation starts to accelerate, we have heard that from a host of people. at what point do we see the data to edify that kind of idea? probably what it is too late for the fed to respond. jonathan: equity futures about

positive by a quarter of 1% on the s&p 500, the move above 4% on a 10 year yield. 10 year yield for 15. lisa: today is quiet ahead of a big week for retail sales in particular. james bullard is leaving his role as the st. louis fed president and becoming the dean of purdue university's business school. he has been such a loud and sometimes contrarian voice and has been hawkish of late, who are the hawks remaining? 5:00 p.m., janet yellen is deployed to vegas to talk about the inflation reduction act which is a big drumbeat this week from the biden administration. he heads to milwaukee tomorrow. 10:00 p.m., china is releasing a slew of economic data. retail sales, jobless data. how much do we see the ongoing weakening and how does it play out through the markets?

when does it start to have a more contagion effect? tom: that is the first thing i looked at this morning, they are moving. there is no other way to put it. one of the great things this weekend was the detroit tigers were at fenway, 35,000 people stand up and applaud for 10 minutes. bullard -- the only reason you go to see bullard's to go to the cardinals with him. is he going to be there tonight? are they going to stand up for 10 minutes for bullard? i love busting his chops about it. don't say that, people think we actually have box seats. jonathan: sebastien page joins us now, you can be one of the

five this morning. what is behind the bond market move? sebastien: higher inflation expectations. we are all seeing inflation coming down, but when i look at my one year breakevens this morning on my bloomberg, ic 1.56%. to me, that is too low. if i think of the risk to inflation, it is not to the downside, it is to the upside. jonathan, you nailed the reason. it is commodities, oil prices being up 20%. you need energy to produce goods and services. sometimes, we underestimate the impact on even core inflation of higher energy prices. i am not saying inflation is coming back to levels we have seen a year ago, a year and a year-and-a-half ago. the risk as to the upside, that is what the bond market is starting to smell.

tom: for radio, this is a bloomberg total return chart. this is the all in chart. the bottom line here as we are about ready to break down a new price weakness off the carnage of two or three years ago. i do not know what to say about price down. if we get the bond market to break down to lower prices, what does that do to equities? sebastien: it is always a risk to equities, because you are revaluing. year-to-date equities have rallied on the price earnings ratio on the valuation and that is sensitive to rates. earnings are soft, down 7% year-over-year. it is a risk to equities. this is not the time to panic about duration. if anything, now you have a better entry point. fixed income portfolios, we have

added duration this year. it is a "hedge" against a real growth shock. the most anticipated recession in history is becoming the most elated, but there is pressure building in the system. we are not panicking about duration right now. we have duration and we are paring it with credit. i call this the magic barbell, getting 9% total yield out of high yield. i like my fixed income factors to be diversified, and nine you get paid for the protection of treasuries. it will not protect you for an inflation stock, but inflation pressures. you to step back and look at what is the greater risk right now? lisa: hold on a second, let me make sure i understand. you are seeing the risk with

inflation is an upside surprise, you can we accelerate. you are leaning into duration because it is not inflation shock, just a grind higher. what is the difference? sebastien: we are using duration as a hedge to a growth shock. to me, the risk to inflation is 3, 6 months, it starts peaking back up. at the end of the day if you take a 62 month horizon, you want some hedges in your portfolio. where do you get the hedges? you get them a little cheaper than you have in the past. it is nuanced. just diversifying the different risk factors. lisa: one thing you talked about was commodities pressure to fuel real inflation. this comes as we look at china and the potential threats, risks to growth. if there is a reversal in oil prices and that comes with a lot of weakness, how do you rearrange in a timer you prefer

high yield over equity? some barbell approach to being more conservative kind of asset allocator? sebastien: look at the spread for high yield. it is not particularly attract. if you adjusted for forecasted default risks, it is not bad. i really care about the total yield. the comparison with the earnings yield is advantageous, 80th, 90th percentile in favor of high-yield bonds. i am getting 9% at of high-yield bonds globally and the earnings yield is down to 5% on stocks. that spread is really advantageous. we are not forecasting a really hard landing wave of defaults, even if things slow down in china, which they are. we always invested in stocks, we are close to neutral right now. if we are going to add to the portfolio, might as well do it

with high-yield. tom: i cannot say enough about this, really sophisticated effort. do i want to be diversified or do i want to be more acutely focused? sebastien: i think diversification remains critically important when you are going through a regime shift, which is what we are going through. you've talked about this on the show, gravity is back in financial markets. we have a ton of cash in the sidelines. you do not want to go all the way to cash and miss the upside of stocks in the long run. i do not think you want to go all the way to stocks right now. there are other opportunities. think about valuations, the tech sector is trading at a price earnings ratio of 30. let us say you missed the rally, do you want to chase the momentum or wait to buy the dip? you have a third option, which

speaks to diversification, get in parts of the market that have not participated, quality small caps price ratio of 13. that is hard recession level. we mention high-yield bonds yields at 9%, so the energy sector trading at 12. there are ways to get in the market where you are not just chasing the momentum. i call this the third option. you chase the momentum, wait for the dip, or take a diversified approach to your question and get in parts of the market that have not participated. higher yield into high-yield bond space. there opportunities to get in and diversified. jonathan: always enjoy your insight, sebastien page. welcome to this program and good morning, equity market we are positive by 0.2%.

the two biggest stories in financial markets right now, the commodity market and bond market. sebastien page connecting both. 10 year at 415, 30 basis point move on the 10 year yield. a big rally in crude, off the lows from the middle of june. lisa: this is been a sleeper issue. i saw the price of gasoline, you have to start to realize we have reset back to places where people started to push back and get concerned. we are not talking about it because of resilience, but at what point does that start to hamper consumer discretionary buying power? does it cause prices to go up? i am thinking of airline tickets, people are talking about prices coming down. can they continue to go down if you see prices where they are? tom: airline experts are seeing jet fuel into this if we break out into $90 brent crude. what i would suggest, move up in

gasoline, a gallon of gas, it will affect the dialogue of jerome powell. that has got to. it doesn't matter in washington, a gallon of gas matters. jonathan: will he be on the same page as sebastien page? seems unlikely. there is a feeling they embrace it a little bit. lisa: i am expecting to hear something more dovish, the idea of we need to see where we are, we are sufficiently restrict the , all these types of comments. jonathan: i think inflation is bottoming. that would change the conversation. from new york city, this is bloomberg. ♪ ust want to lie motionless in a chair! ♪ booking.com, booking.yeah ♪ ♪

>> if the iowa state fair -- i have no right to overturn the election. there is almost no idea more

un-american than the idea anyone person could choose which votes to account for president of the united states. the american people know, as i heard from dozens of people at the iowa state fair, the american people know the presidency belongs to them and them alone. no one person has ever had the authority or ever should under our system. jonathan: that was mike pence on nbc, maintaining that president trump asked him to help overturn the 2020 presidential election. quite a week ahead for you on the economic society, retail sales tomorrow morning, plenty of earnings. thursday, you will hear from walmart. this morning, equities are doing ok. a grind higher on the s&p 500 after a couple weeks of losses. yields have been higher the last month or so, just about unchanged this morning. tom: the bond market, we've been

talking yield and price. lisa knows this chart, this aggregates and all the bills and bonds and between the notes that are out there. it is simple. on price, back to 2001, we had this horrific bond bear market, then we had some stasis. the maximum stress if we rollover and revisit the price lows on bonds. i do not think that is in the market right now. lisa: there's a distinction between people looking at the 401(k)s, statements into saying my bonds are losing a lot of value versus we just heard from sebastien page, yields are high, they look good, it is a great entry point. that divergence is unclear in terms of lows. tom: bloomberg speaking with bill gross on friday about some of the history of the great moderation. speaking of moderate, economic

policy research director who was on fire last week, had to drag her back here this morning to? but where we are. is the debt debate the same old same old you have heard for years, or is there something new about the worry of our debt and deficit? >> i had a really interesting conversation with some senior counsel on the hill late last week that i would share with you all. the conversation around the debt and government that down -- shut down in federal spending said been with us since the republicans came into control of the house, that is great. you want to see the conversation. but the tension that we see between a small faction of house republicans and the moderate or middle ground of the house caucus and senate is so far apart the dialogue on the hill now is not about reducing federal spending as a way to get

over the impasse we will face of the end of september. it is about? who can we impeach? can we get money for the border? it is a dialogue that is really important for your exact question, because it is not about the debt or deficit spending. it is about whatever they get from a political perspective. tom: if there are two leaves out there, like something at a state fair or something like the vote in ohio last week we talked about, is there a point where the middle ground of the two parties put the extremes in their place and we move forward to some kind of true political discourse? henrietta: i do not think we will see that until we get into general election and of donald trump is at the top of the ticket on the republican side, the opportunity for democrats to express the extremism of the

right when it comes to abortion and the inability to move beyond that means at least for the next six to eight months, we are going to be in this hyper-partisan chaos. the issue of abortion is so telling. it moves not just democratic voters to get out, but the pendulum swing that we see from republican voters just for example in arizona is a four percentage point swing of the voter base. from 2016 when they elected trump to 2020 when they elected biden and the 2020 two midterms, that is abortion. it has moved the needle so substantially that in tight margin states like arizona, pennsylvania, georgia and nevada , the margin is so razor thin but the pendulum swing you are suggesting as they turn from partisan politics toward the moderate center is the tell. that is where you see the shift

from public and voters, independent voters, 70% of whom believe abortion should be legalized. this is a voter issue that has tremendous impact in red states and blue, ohio would be a perfect example. jonathan: first debate nine days away, let us set the stage. who is on it? henrietta: i do not know trump will be on it. based on how he is treating the indictments, he wants to be center stage. looks a little bit like you should be there. if i was on his campaign, i would recommend not to go. his next closest competitor is the one to be, ron desantis. he is 15% in the polls, which makes them far and away the front runner. everyone else is locked in the low single digits. stay home if you can avoid the spotlight, let ron desantis take the last couple of hits. the potential for the gavin newsom ron desantis debate

november 8 could be canceled if this cannot be pulled off is something that is important to watch. it really opens the door for another candidate that may be is not in the race right now to jump in. lisa: when you talk about trump being the conventional candidate, he is not. he probably is not listening to conventional advice at a time where he stopped by the iowa state fair and broke with convention pretty directly. he was not supposed to be there. he did this to lambaste his opponent, ron desantis. people applauded him and booed ron desantis. how long can this work? were people do not need donald trump to flip burgers and hold babies and go around and shake hands? he can swoop in for an hour, give a speech and fly off and everyone says we like he is unconventional. henrietta: it is a tv show and he is an expert at it.

the booing gets more stories than the actual candidates, mike pence, chris christie or ron desantis. the playbook works. keep doing it. jonathan: does wrapping m&m work -- eminem work? henrietta: no. i do not get a lot of credence. jonathan: doing pretty well and some of the polls, ramaswamy did a fantastic tradition of that if you missed it. lisa: at one point -- what point with this be the playbook? more press is better, do we stay with that kind of narrative? if that is the case, who could go up against the expert in reality television? lisa: i -- tom: i asked this question last week.

is the voting about the economy stupid, or is it simply one big culture war debate? i do not know the answer. my evidence is day-to-day culture wars cells cable tv time. jonathan: the polls number one issue, the economy. the cultural stuff, how has that worked out for the governor of florida who ran hard into the issue does not gain traction? we have seen him lean into economics. tom: sunak and labour, do they have a culture war debate? jonathan: it is a western phenomenon. lisa said is more press great for whatever candidate that might be? i would say not all press is great, some scathing articles going into the weekend on the goldman sachs ceo, eight: 15 eastern, about 45 minutes from now, we will catch up with mike

mayo wells fargo, that conversation is around the corner on a guy that is holding onto goldman sachs in the face of critical articles into the weekend. tom: i will always back mike mayo, he has been fired for security analysis independence. he is someone who speaks his mind, fact-based. not just another conversation, this is the right guy at the right time in the future of the firm. jonathan: your equity market right now positive by 0.2% as we kick off a brand-new trading week with equities pushing higher stateside, good morning. ♪ 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!

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jonathan: looking to bounce back this morning, good morning to you. equity futures positive by 0.2%, nasdaq up by 0.3. on the month so far in the last couple weeks of august, nasdaq 100 down close to 5%. on track for the worst month of the year so far on the nasdaq, a bit of weakness creeping in. into the bond market, yields higher by 30 basis points over the last three weeks. we have not had a weekly decline in yields for more than a month for the 10 year.

the post failure high is about 420, we are about five basis points away from that on the 10 year. multiyear highs, let us call it the cycle hi, we were through 430 3, 434, something like that back in october. those levels off the back of a big move in the commodity market. foreign exchange next month, 14th of september, ecb decision just around the corner. then what? do they hike? for the federal reserve, do they hike? lisa: what is the consequence if everyone is gamed out at a time where the ecb is struggling with greater degrees of weakness while still persisting core inflation, especially in light of higher natural gas prices. ? jonathan: natural grass -- gas, crude, picking up.

surveillance this morning, china showing more signs of stress for the property market. the developer is asking to stretch out a bond payment due september 2 over the next three years. yet to comment on bloomberg reporting, but an indication across a range of businesses about reworking the debt and the focus is around one part of the economy, the property market. lisa: which has a lot of tentacles, we found that with private wealth manager who is not able to make payments on all of the products, that was the other news that came to light. how much do we see this played out? the task force, is it sufficient? official say we can think about it, we will look at it. can they come with some sort of stimulus package, or are they done at a time where they do not want to reinflate the bubble? tom: a single sentence here,

this is from the vast compendium of wikipedia, after his resignation, yang kept the role of special advisor to the cayman islands company. this is not just a chinese story like alibaba and the rest, this is a westernization of their finance and are there rules using institutions in the cayman islands among other things. that is why scrutiny needs to be in place. jonathan: we do not know how far the tentacles stretch out or what they touch. we seem to be talking about it every single day at the moment. another story, goldman sachs expecting the fed to cut rates in q2 next year. the cuts and our forecast are driven by the desire to normalize the funds rate from a restricted level. once inflation is closer to target, we are penciling and 25 basis points of cuts per quarter, but we are uncertain

about the pace. bank of america has pushed the rate hike call from september to november and sees the cuts starting. tom: he is careful with his language, penciling is the key phrase. penciling in, out, there is a lot of of this and that. i would suggest every market economist and strategist is as data-dependent as any given governor or president. jonathan: john williams of the new york fed pencil to something into the new york times, his point was very intuitive. inflation is going to come down, nominal rates stay steady, real rates increase. to make sure real rates are consistent and do not become more restrictive, they have to reduce interest rates and perhaps that sequence takes place next year. can you make a call nine months out from now? i cannot.

lisa: i care less about when they start cutting rates, i was more interested in what was said about where the fence flood rate would stabilize. 3% to 3.25 percent, that is what he sees a stabilization for the new rate. are they starting to game out with the new neutral is at a time when there is more momentum and strength in the economy than people expected? jonathan: talking about the same thing at b of a. tom: politically, i do not think they can do a run rate to three. i cannot frame out and american central bank at three or above. jonathan: those conversations a week away. the billionaire battle between elon musk's and mark zuckerberg might not be happening. zuckerberg took two threads over the weekend -- he has taken the high ground. if you dues not get serious

about a real date, i will move on. i will focus on competing with people who take the sport seriously. last week, musk posted a fight was happening, but he might require surgery for an issue with his shoulder. he talked about it taking place in italy. lisa: gladiator. he is being the adult in the room, mark zuckerberg. the fact we are talking about this seriously is so absurd. we cannot tell if it is fact or fiction, you get the sense that elon musk has been trolling mark zuckerberg and he is sick of it. tom: i wish they would try it out. i like mr. zuckerberg's on this. but people like that, you get ok, we're going to the coliseum or whatever in room, this extravaganza. we are going to fund the high school educations of 10,000 room kids or something. make it applied to charity, that

would change the dialogue. right now, clinic, this is really important. the answer was federated, is all of the heritage of the firm owned money market claim, reserve fund was the first out there. it is federated who in 1969 said you could own a portfolio of government securities. 1976, you can own a money market fund and make more yield and that gets us to next year. deborah cunningham, honored to have you on today as well. is it a new era for money market funds? >> i do think, to some degree, we are out of the zero rate environment we have been in for 12 of the last 14 years. in that sense, it is a new era. i do not think we get to the

point where we are in double digits, anything like that, nor do i feel like we go back to anything that is zero or single, zero rate or 1% type of environment. i agree, to some sense, with the 3%, reported 25% terminal fed funds target range. that gives you a two plus percent inflationary rate, plus you have 100 basis points for risk. you get to something then gives you a normalized rate and for those taking out loans and paying rates on their cash. tom: federated owns the high ground on this, not so much what money market funds will do. do you assume over the coming quarters the rest of the banking finance establishment catches up to where they should fit in number of basis points below

some high-yielding money market fund that only jonathan ferro is brave enough to go into? deborah: those are not many market funds if they are all the high-yielding and you need bravery to go into a. there are new products out there from banks that are what i will call brokered cds, for lack of a better term. that necessarily are not providing the same type of diversification and quality you get any a money market fund. these are highly regulated types of vehicles. as the bank's true cds are not catching up to those interest rates in the market today, they have to maintain net interest margin from an institution standpoint. they are coming up with other products. tom: i cannot convey enough the snarkiness. a total class act, tearing to

shreds brokered cds, which are vacantly -- basically a marketing campaign. lisa: you do not need to have a marketing campaign if you have 3.5 percent terminal fed's fund rate. how much does cash become a greater staple in people's portfolio if it is income producing, whether it is corporations or asset allocators at a time where there is a lot of uncertainty? how much of this is not cash on the sidelines, it is just cash and it will stay cash? deborah: where we were prior to 2007, then the great financial crisis changed, the interest rate environment changed. i think we get back to where we were. it does become a larger allocation, it does become a larger asset class. to the tune of not 5% to 7%, but may be 15% to 20%. as such, there is a lot of for industry growth with securities

in the market as well as demand for the product. jonathan: deborah cunningham, how may times have you said it so far this year, gravity is back. tom: i stole it. within the equation of derivatives of which dr. tollett is an expert on and someone like bruno is as well, the gravity is there. you can bring it over to equities and sharpe ratio, we have a risk-free rate. gravity is back. jonathan: cash's back, all that good stuff. if you believe the rate cutting cycle begins next year, is it time to start looking? lisa: do you start to see the rally in the backend and reassert itself? deborah cunningham said 15% to 20% of your portfolio could be in cash, this is a time when you see money market assets climbed a record highs of $5.5 trillion.

if you have gravity, where is it coming out of? completely deflated. tom: we are hardwired on an income statement analysis in the old world, looking at a balance sheet dynamic. if you have money market funds go from 5.2% with 3% run rate, you get to 6%, 7% money market fund. nobody is framing that right now. that means on a balance sheet basis, yield up, price down. that is how it works. does that fold into disinflation? tom: no one is framing it out. [laughter] no one is framing it out, it unfolds into the inflation debate. jonathan: if you are just tuning in, welcome. s&p 500, positive by 0.15%.

shortly, barclays at about 8:30 eastern, we will have that conversation in about 45 minutes. do not miss this, in about 30 minutes, to catch up at goldman sachs, mike mayo. someone is having a difficult time over at goldman sachs. the ceo, david solomon. tom: let's move beyond the conventional security analysis, a lot of it has been whispered and alluded to. in the interviews we have done, we had to talk about his new style, which is very much in all of the different articles over the last three or four days. mayo is looking to performance. what is keeping mr. solomon at pieces there have been pretty good stock performance away from the consumer bank disaster. it will be interested to see how they for pro security analysis. jonathan: we mentioned this last

week, we have had those interactions and interviews we broadcast on bloomberg, always a decent guy to deal with when we had those interactions. there is something about this that feels very personal within the institution, that is backed up by the commentary we saw in another article in new yorker magazine -- new york magazin e. lisa: people say they do not like dealing with him, when he walks into the office they get scared. at what point does it become an issue? jonathan: mike mayo 30 minutes away, keith lerner is just around the corner. for new york, this is bloomberg.

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>> the china stimulus narrative is one the markets have loved and embraced and we are getting

a reality check on that. all of the news of stimulus has pushed inflation expectations higher end of that has become a big problem for the fed, who has not yet claimed victory on inflation. jonathan: that was the co-chief investment strategist, goldman sachs looking for a rate cut may be as early as next year. let us see about that, will we get stimulus from the likes of china? pushing back all your against this, saying this this morning. we stay unexcited by china exposure despite periodic bounces. that has been the pushback from j.p. morgan, the investment bank. they had a difficult year, i would say they've been pretty decent when it comes to calling china and what has and hasn't developed over the stimulus front the last couple of months. tom: it is what has not occurred, do you have beijing like stimulus?

within the formulas, does it distribute out to the cities? what is different now is xi and the dictatorship, the method of politics here. within the new xi politics, can you distribute stimulus? that is unproven. jonathan: tesla making the call to cut prices, let us look at the stock. cutting prices once again in china, model x by roughly $1900 on two versions of it, stop down by 2.5%. sales in china, deliveries for the month of july something like 30 plus percent. price cut all over again. lisa: it raises a question of this is a china issue or a tesla competitive issue, they are trying to gain traction against local ev manufacturers, or is a broader story? we see it not just with tesla, but other industrial companies

that are downgrading the sales pick your for china because they do not see the demand. tom: what is the future of it? it is more about china. the way i take this -- these are the conversations, just as a beginning question, is there a knock on effect from tesla china to say the ford f1 50 ev super crew? $98,000, can you take a price cut in china and bring it to a price cut of a $98,000 pickup in america? >> what we are seeing really since late last year is a case of an industry that has been extremely production swinging to actually having the ability to make as many cards as it wants to again and may be making more than it has demand for. that is why we are seeing price

pressure across the board and across markets. you are seeing ford bring down the f-150 lightning pricing in the u.s., tesla bringing down prices globally. what we are seeing with the model y is it is sort of a complicated story of a rare ev salivating -- rare ev selling at extremely high volumes. they were only going to be able to sustain it for so long. if you want to sell on the volumes tesla was getting investors use to, the price point -- there is only so much demand. tom: you are in the united kingdom, is there price elasticity>? ? is there responsiveness if they cut the price, do we respond? craig: one of the key sort of things everybody is waiting on here is tesla updating their lineup a bit. they have two horses to the

lineup, model why and model three. a lot of expectations of refreshers of those products in the coming months. if they are able to spruce up the lineup a bit, will that help them sustain pricing and put an end to this month after month gradual come down in pricing across major markets? we saw a little bit of a pause the last couple months, sort of beneath the surface they were still doing some tweaks, whether it was messing with inventory models or what have you. they are steadily bringing pricing down as a result of the fact they brought on so much capacity so fast. we are seeing a lot of the industry do that, try to increase volume. as they do that, they have to adjust prices down. jonathan: tesla and the broader ev market, china. can you tell me specifically

what is happening in china on the demand side? craig: it is both a story of actually strong demand and real competitive pressures. you have an extremely crowded market, you have issues with the fact byd and a lot of other chinese manufacturers have become competitive in a dramatic way and squeezed out some of the international players. whether it is tesla, ford, general motors, volkswagen, a lot of international companies are struggling in china in a way they have not in the past. one other thing to keep in mind, we mentioned decline in shipments for tesla and china last month. some of that had to do with the fact they were doing factory up rates globally and that may have to do with changing over plants to make updated models. that might end up being a blip. they tend to bring production down at the beginning of the

month, at least for local deliveries, and back end the quarter. we may see incremental improvement this month and next month for tesla and china. lisa: this china pushing out u.s. auto manufacturers even more than they were say a year ago, saying they have electric vehicle manufacturers and planks -- placing emphasis on that. craig: i think it is interesting. in the past, it was always talked about as something that was maybe a little bit conspiratorial. there was a model for a long time of you had to set up local joint ventures with local players and help the domestic industry learn and evolve. that was beneficial both to local companies and international carmakers that made china the biggest market in the world.

for companies like mercedes, general motors, volkswagen. we are now seeing a real challenge of being able to sustain that presence in china, particularly as we switch from combustion engines to ev. we have seen the chinese able to drive the price down in a dramatic way and innovate in impressive ways. you see companies bring out fresh models month after month, whereas tesla has emphasized just a couple of horses. model three, model y, more than 90% of their volume of just those two models and they have not updated in years. jonathan: we can squeeze in some controversy. when you think we will stop pretending all of this stuff is good for the environment? craig: that will be a tough one to sum up in 60 seconds. it is absolutely something the industry is talking about specifically as it comes to

policymakers and ira in the country is trying to match ira. they will play the card of how clean are the ev's being made in china? tom: the kid from michigan state goes over to london, he is from east lansing, michigan. he looks mayfair, doesn't he? jonathan: that is a better way to cover detroit. [laughter] more controversy. craig trudell of bloomberg. i know we keep coming back to this, people have done phenomenal work on how the marketing around automobiles has been highly manipulative to put themselves at one with the environment. we use ev and green in the same sentence all the time, how many tons do the cars way? -- weigh? lisa: they are trucks coming in,

the mining for the materials that go into it require a lot of an environmental footprint. it is unclear, are they going to be recycling it like they say or onto a new technology? tom: i read an article this week, the weight of the automobiles. everyone wants a big ford f-150, that is not as green as the little itty-bitty thing driving around. jonathan: mike mayo 20 minutes away from wells fargo. this is bloomberg. ♪ >> welcome to a special western and southern update -- open update. all eyes on novak djokovic in cincinnati as he turns to the court for the first time since wimbledon. he will be looking for his 39th masters crown and to extend his

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months of softer inflation readings. looks like a soft landing.

i do not think that is where we are headed. >> power expectation is the economy will begin to slow. >> we would be mindful of taking too much risk in this environment. >> this is bloomberg surveillance with tom, jonathan ferro, and lisa abramowitz. tom: deep into august, we are on radio and television. a lot going on in markets. august complex. jonathan: retail this week. that is the headline. this economy has been surprising, the consumer or resilient then thought. retail sales tomorrow morning first test for this month then onto retail earnings later this week, walmart per se, target wednesday. out much can this -- how much

can this consumer stand higher interest rates? tom: not only retail stores. walmart is most fascinating. joe from the advisory group on the nuances of big-box. but i am just interested in the nuances globally of the consumer. i cannot judge where the chinese consumer is right now. jonathan: i think we can. confidence hammered. property market not recovering. problem after problem leveling to the surface. we are not seeing that beyond china at the moment bleeding into international markets. we have said repeatedly that warmings that mornings like this where you see a bond market railing, commodities selling, you are seeing the opposite. yields higher over the last three weeks. two issues right now that a lot of people have focused on this week. tom: august, back to school.

growing up in america, you read steinbeck, written in 1961. at gunpoint, you had to be "the winter of our discontent," some twice during the school year. plurality of issues across equities, bonds, currencies i do not know about q2 2024, too many discontent lisa: this week we are focused on retail sales, the u.s. consumer, and in divergence from the macro story locally -- globally. there is a tension with people in the u.s. continuing to spend the divergence of the u.s. economy from china and weakness elsewhere. oil prices lower today but not a significant selloff after the seven week rally. tom: i would suggest in america, in the u.k., you have got a

society feeling their inner recession. john murdoch last week about here is the prosperity in london and here is everybody else. you can bring that to substantial parts of america. jonathan: everyone has been phenomenal at work on this. economists focused on principle change, high prices starting to stabilize, identifying inflation. consumers are not seeing that. they just see high prices that is the difference between consumers and economists. economists look at a price that will change. consumers just say this is expensive. tom: 15.61 on the vix. and a weaker yen printing out 1.45. it gathers my attention. jonathan: equities just about

positive by 0.1% on the s&p 500. the yield just a bit higher on the front end by a basis point. on the 10 year, up a basis, 4.16, closer and closer to the high 4.20. tom: chief market strategist troost advisory is not only fundamental analysis but he was something at schwab years ago on their technical site. technically, are we in the second leg of a bull market? keith: stellar group this morning. i think have to give the weight of the evidence that the trend is still intact but our view is we will consolidate. jonathan mentioned earlier while this market has done so well.

that's why this market is done so well -- surprises to the upside. but what you see recently is doing earnings season is of going up on positive earnings, stocks went down. you had a good last week and markets did not do much on that. we are in this consolidation is owned with high expectations. tom: you and i learned these charts from louise yumana. she would talk about distribution. isn't distribution healthy? keith: all of it is healthy. what we saw even after july is we have seen sentiment higher and expectations reset higher. in the last few weeks, we have seen the market pullback modestly. i think that is ultimately a positive sign. i do not think the individual investor ever got to you or you.

you look at the ica data, for this year, we have seen equity flows flat, 100 billion going into fixed income. it is normally two steps forward, one step back. the minimum, we have a baby step back and some choppy action. lisa: if we see a terminal fed funds rate, 3% to 3.5%, what does that due to cash allocations come into being more conservative on a permanent basis? is that some thing you're hearing from your clients and recommending, the 50% to 20% in cash or cash instrument? keith: i do think have has a place nemo folio. 5% is more attractive. if you go back to the mid-1990's, the stock market stilled and well. the good news for investors is you do not have to take all the rest by just being in the equity

market. you can look at the bond market, money markets. you have the better else for folio with assets. some investors were taking too much equity risk. no alternatives. this is a positive for investors. lisa: when people look at equities, some say they're looking more commodities, events. areas that have not gotten so much love this year. are you in the camp of buying energy stocks despite concerns in china? keith: we more recently upgraded energy. we see more of sign there. if you look at the last three years, they had a big year. this year, it is only up to percent. reduction cuts on oil, oil prices rebounding, still cheap, generating cash flow, more rotation there. the challenge for the overall market is it is only about 4.5% for the overall index level.

we are likely to see money coming out of tech and into energy and financials. we continue to like the average stock, a bit less top-heavy. tom: what happens to the equity world in bond prices breakdown? even if it is ever so slightly, we write support on price, on bonds, lower price, higher yields. what does that do to the stock market? keith: as you look at about 4% for the market, put a cap on it. if you think about the s&p forward multiple, we read 19.6%, pullback to just below 19%. if you continue to go up above 4.25, that puts a cap on expansion. another way of looking at this is the equity risk premium. that is at the lows level in a decade. that constrains the upside the

more we see yields move higher. and markets do well. we need them to stop moving up. keith: how closely are you watching china is to hear about mr. bond payments, possible extension at the major property developer or financial services? how long can the u.s. economy remain divorced from what is going on over there? keith: from an asset allocation perspective, we have been negative on china, zero allocation in our global folios since last year. the main thing is you cap about the stimulus and you have this big rally of hope. you have given all of that back one of the things we pay attention to is earning trends. how are they looking relative to the u.s.? they are making new lows every week and have been for the past year. it is a negative for emerging markets, about a third of the index.

and to your question, a big part of the inflationary story was china. that will have some impact on the u.s., keeping inflation higher for longer. jonathan: the data has been difficult. good to catch up. we talked about some of the scathing pieces in the press on goldman sachs and his leadership from david solomon. more scathing pieces over the weekend. one from new york magazine, the likes of mike mayer cited at wells fargo. " i have called for ceos to be fair before. if it is warranted, i will speak up but i am not seeing it from outside metrics." mike male will join us in about five and its. tom: i will leave mike and the financial analysis was william cowan and money and power. i give that to every kid who says i want to work at goldman.

there is a cultural object to his book. it is completely removed from what we saw in a set of articles this weekend. lisa: jerome cassidy was asking is goldman sachs's performance that bad? or do people just not like david solomon? that does not have so much to do with the performance of the company. jonathan: it feels deeply personal. we can talk to mike mayo in about five minutes. equity futures right now on the s&p 500 just about positive but rolling over, positive by 0.1%. week ahead -- retail sales tomorrow morning. walmart, target. and some fed in the mix on wednesday it was we are at some kind of inflection point fed

policy. tom: you show up at jackson hole, is jerome powell central figure of the world? and the bank of montreal, a detailed note on the persistency of interventions, what he needs for the bank of japan, the ministry of finance, fed? we are at 1.45. he was just saying it is not only the parler games. that every time you intervene, you lose firepower. that is a closet analysis. you lose a bit of umph. jonathan: they are thinking they can do something about rates. tom: absolutely. lisa: what i find interesting is

how much of a move the bond space is directly tied to the bank of japan? this is something talking about. even a whiff of moving away from yield curve control has loosened a bit of the anger from below bond yields. jonathan: there were two anchors around the neck of the global bond rk, the mood market and the boj slowly coming back out. if you ask five different people what is behind this move, five different reasons. young first confusion, commodities markets, treasury supply, data, resilience the u.s. economy. lisa: and then people say it is just wrong. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com >> can it be sustained?

-- failure high in the bond market. in this cycle -- interesting

we're going back there, yields climbing, commodities rallying. this is two pieces of a focal point for this market. tom: i just noticed moments ago a pop-up in the 10 year real yield. we may print at b1.80%. that would be of note to bond participants and the economics rocket. -- rapid. jonathan: this from new york magazine is shared by pretty much everyone. the leap paragraph is bruising, the headline is something i have heard before. david solomon running goldman sachs. tom: lisa and i talk friday about to handle this. we will handle it the way we have four years. he will talk to experts.

he will report on this, along with our new york finance team. we welcome all of global wall street. in 1999, mike mayo got fired from a major bank. it was a testament of that independent securities analysis. the culmination of that was the forestall award, under one at the cfa. mine and antonio in 2013 mike mayo the symbolism of -- i cannot tell you the symbolism in mike mayo 2013 of fired for being independent. this is the guy to speak to. jonathan: wonderful to catch up with you. let's talk about this story and the criticism around the goldman sachs leader. the get the sense this is strategic or personal? mike: thanks for having me on

and bringing up the csa. i go back and think how should i approach the situation about the ceo of goldman sachs and the differentiation between the external metrics, which are good, and potential internal metrics, which might not be so good? the issue is i have not seeing these metrics. i do not have internal metrics. the company has said they do not have any unusual turnover in the partner rents. i would say it comes down to winning cures all. goldman has had recent performance issues. they have missed expectations two of the last recorders. when that happens, other issues moved to before -- the ore. one is consumer expansion. that was a debacle. in the cultural change.

david solomon running goldman more like a public company after 25 -- and the third would be his character and some attacks by the press on that character. lisa: i would like to go what has to happen in order for the character issues to not be center stage anymore. as he lost of the room to such a degree that they need a blowout performance in growth in an area that has yet to be identified? mike: going back to the basis on how i should perform my job, it is the job of a ceo to uphold the reputation of the firm, but when we talk about that, we are talking about him being the number one advisory for the last 20 years, goldman growing capital markets over the last three or so years. we are talking about the

reputation of the firm to your multinational companies, to governments, to bring important investors. where it matters the most, they are upholding their reputation. but could there ba.1 there is enough of people that the tail wakes the dog? i suppose it is possible but not going to happen right now. lisa: turnover and partner ranks is not that unusual, you say. but we are hearing about lloyd being brought back to the firm and owing after david solomon, having some strong words for him. what do you make of that? using that there are a lot are people talking to -- do you think that there are a lot of that are people talking to members of the media? mike: i do not have the numbers to back this up, but i think it is like traders earning $6

million a year got a last year and $4 million. they had a blow year in 2021. leslie herod was a bad year for goldman. -- last year was a bad year for goldman. people were paid down. they were partly subsidizing consumer banking. they are upset. they go to the ceo. you have to have strong opinions to change a culture like david solomon is doing while trying to generate profit. a lot of people are upset about what they are getting paid. tom: you are an expert on board analysis. we have mr. montag over at bank of america. he returns. you have someone like david who ran the ship and into thousand seven under prices.

how do you look at legal text right now -- at the goldman sacs board right now? mike: i have been a critic of bank boards, probably representing corporate boards more generally. they are soft, do not hold management accountable. they do not listen to shareholder concerns. and i look at goldman sachs more than anything else, like any bank board, i think there push for change is probably not that much. that is the reality of corporate america. i wrote my book about it. i still see it. some other banks today, i am happy to talk about her i think there is more need for change than it goldman sachs. i to address your lloyd blankfein,. lloyd blankfein started the consumer seven years ago. he amplified.

it took all of the room. david solomon down on the consumer that was lloyd originally lloyd probably does not like to be tainted with these $3 billion of losses. his hands are not completely clean and the slow situations. jonathan: a pointed question -- how would this stop respond that headline drop that he was out? mike: i do not think the stock would go up. might go down. remember having the ceo fired? i think the stock went up that day. that was a good moment. we have seen that other places, where the ceo goes. but if david solomon were fired today, i think the stock would go down.

you are running the company based on media reports. when i talk to investors, investors are not saying come and get rid of david solomon. they are asking the questions you are asking -- does media impact performance? i would say, no. having said that, david solomon has to earn his job every day. i could come back in a month -- two months or six months. if you does not get the job done, i will be on the other side. jonathan: it is a question we have asked all morning -- is it strategic or deeply personal? conversations like that make it feel more and more like it is deeply personal within the bank. premarket unchanged on the s&p 500. from new york, good morning. ♪

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

monday in august. i have barely discussed this. but this week there is a fair amount of economic data, starting with nothing that really matters. for the first temperature this morning, we discussed retail sales tomorrow. kind of this, china that woman sex, retail sales -- lisa: retail sales coming tomorrow at a time where the u.s. consumer seems against

macro concerns, because the consumer keeps spending. we will get the latest we on that with the expectation for a re-acceleration of retail spending. tom: fed minutes, i believe it is the 16th, wednesday. do i care? lisa: just to see if there is a shift in town in terms of not being that aggressive or letting some soft landing percolate out. tom: we will dive into the american economy. u.s. economist barclays joins us. features of rolled over a bit. yields nicely higher, three basis points on the 10 year yield. i have got the yen weakening. there is a movable feast in pacific rim currency. look at sterling, 1.26. one of the movable parts in

mistry is the american consumer. this u.s. economist at barclays, what is a state of the american consumer? what will we look for in retail sales data? >> thanks for having me. he u.s. consumer remains resilient. from the last time i was here, we have not seen much in hard or soft data to suggest things could be slowing. as of retail sales this week, we think it will be a strong print, .4% increase on the month. this could possibly be an event like boost, which seems to be the case for the july meeting, but even outside of that, we think there is still a fair amount of momentum in consumer spending. we also tend to look at where excess savings are headed. that will savings still tends to be fairly decent.

going viral of this -- tom: dilantin gdp 4.12%. you are saying this that there is an asterisk because of amazon prime? pooja: no, but to the extent that it is still a 4% handle, we think it could be a strong third quarter. lisa: what happens with student loan repayments? what happens to the savings pool? what happens to the fact that oil prices and gasoline prices are going up? none of this really matters. but this is what people are asking. when do we start to see that actually take a bite out of consumer spending? pooja: good question. what we really need in order for some of the materialize is to see monetary policy that is more restrictive. i think that is what we have been seeing. we still think that there is one more hike that is likely.

when the fomc looks at the data, i think -- the economic outlook is positive. anything, they upgraded their assessment and economic conditions in july. lisa: are you pushing back against people who say we are overly restrictive right now? that the fed funds rate is not restrictive at a time with this much growth? pooja: fairpoint. we have been looking at it this way -- so late in the taking cycle, blairsville think such a resilient economy. 5.25 to 5.5, the fed funds rate has not been at this level since mid-2007. we are still in an economy showing signs of slowing. that leads us to question has monetary policy struggled to gain traction? if so, what is happening? we talked to pines on friday.

there have been estimates from the new york fed about the natural rate of interest. some of these model estimates seem to suggest that this natural rate of interest could have -- is possibly higher now. lisa: how high? pooja: about 50 basis points for the long-term rate but they also have estimates for the short-term. that is about where policy is right now. it leads us to question what if policy really is not as restrictive as one would generally think? really, the fomc is aware of these estimates. that would be on their radar when they make future policy decisions. tom: that london school of economics, you have to look at the phillips curve. you tripped over the beverage curve i am sure in the way to

the lunchroom. does that theory work? are you flying blind? or can you and determine have a theory? pooja: i think these frameworks are still useful. to the extent that we still have a phillips curve, yes, it is not dead, is a lot of people make it out to be. but we are looking at the data, at the beverage curve to see where we are moving. looks like we have shifted lower. that is a move in the right direction, but the broader point is maybe there is more room for policy to become restrictive. we should not celebrate so early about disinflation. that is something we learned on friday as well after the hot ppi data. there is more room for problems. tom: and jackson hole, hope there is a paper on this. ricky is the only one who knows what the papers are and he will not tell me.

but do you a brigade into a summed american economy analysis? do you this aggregate into two or even four or five americans? pooja: based on the data, we have to work with the aggregate picture. even something like the savings rate, we do not have a clear picture of what is happening at different income levels. we are looking at the aggregate america to get a good sense of where the economy is headed. lisa: we are speaking ahead of the retail sales data tomorrow and in light of what we are seeing internationally. one big theme today is when will some of these problems in china start to make a dent in u.s. economic growth? are they so divorced from one another that it does not ultimately matter this time? pooja: good question. a lot of that is sentiment. what is happening in china.

we take particular interest in terms of the inflation, that spillover from china into the u.s. that disinflation narrative supports what we are seeing u.s., especially on the good side. but we have got to see if that is enough to dent the resilience in the u.s. economic activity so far. lisa: there is a question around oil prices, picking up because of supply contraction out of saudia -- saudi arabia but also the idea that you would see some boost in china. at what point are high oil prices inflationary versus deflationary, given how much it takes out of the paychecks of u.s. consumers? pooja: we are already expecting to see the impact of a higher oil prices in the august cpi report. and a lot of people have pointed that out. to the extent that this can

continue to seep into other components, what we need to look at the increases in oil prices and whether they will sustain. that is something we will be watching closely to see how that plays out for the inflation narrative in the u.s. tom: i wonder about something -- the ability to bring foreign exchange into this. on a monday morning, before retail sales, i have a renewed, stronger dollar. and a week or one. -- yuan. happy dollar-yen slipping away. suddenly 1.4538. sterling well under 1.27. can you link in and make some form of dollar conviction? or is it just a mess? pooja: a lot of this is a

reflection of the resilience and strength in the u.s. economy. some of the move is that, but we will have to watch how the data play out. look at what is happening in the u.s. vis-a-vis the rest of the world to get a sense of where the fundamentals are headed. tom: jerome powell, is a central banker to the world? pooja: i think the whole world is going to be watching him clearly to see what he has to say. it is great for them to outline help they are thinking about policy at this stage. a lot of people seem convinced they can engineer a soft landing. we will look for clues to see how they are looking at the economy. tom: thank you. we've got to go back to markets on the move. equities peel away bit.

we have the vic's up, 15 point 92. we've got sterling off a cliff, 1.27. these are little moves, but in the doldrums of august, they are tangible. where does it stop? lisa: at what point do they intervene? i am watching the front end of the yield curve. in light of the selloff has been at the back end, but today we are seeing it at the front end, a bit more. but at what point does the that have to consider getting more restrictive? if there rate hikes have not had the impact. you are pointing to earlier today, 7.35%? tom: on the 30 year mortgage. lisa: when does that affect home prices more? tom: i would look into the oddities of urban idiocy versus what i am saying out west, which is just tangible redlines.

it is a generalization west of the mississippi. lisa: that has been an argument for disinflation, that rent declines will feed into that, but in other areas, it is reigniting. is this just people who have turned out von the yield and are able to avoid really understanding what this actually means for their bottom lines? or is this just an economy with way more power than people thought? tom: we have markets on the move. sterling at 1.2 660. john will have a lot of this in the next 20 minutes. but we are at that important level. but read down .2%. lisa: i think that is the point. people are looking for news. quiet august. we are hearing everybody is on

vacation and there is a lot of range bound reading until then. you have not taken a lot. tom: and taking huge amounts of vacation and him actually trying to get to china at the end of the year. not sure we can pull it off. lisa: they are opening up some of the roots. did you see that? tom: you mentioned last week that fears are down domestically, even down internationally. lisa: this is ultimately the round -- the question around some of the oil prices that are going up, disinflation, health long can it last if you see oil prices going up? i would like to see plane tickets go down. tom: brent crude is down 1.4%. $85.63. west texas at $81.90.

i am looking on a monday. august is the doldrums of the summer. i am looking at where we are and simply foreign-exchange markets. you go out to a market. all my radar is on dollar-yen. i cannot thousand in tokyo with the are dealing with now on the second intervention perhaps. lisa: less impact each time. people trying to understand china. this to me is underpinning a lot of the uncertainty. t eventful monday --tom: eventful monday. coming up, drew matus of metlife should this is bloomberg surveillance. axes can erode returns quickly, so you need a tax-optimized portfolio. at creative planning, our money managers and specialists work together to make sure your portfolio and wealth are managed in a tax-efficient manner.

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u.s. open.

-- up or introductory, 10 year yields almost 4.20. that is a shocking moment, considering we are taking what happened over the past four months. tom: i agree you have to take this back to benchmark yields. tenure u.s. yield is there, some german yields as well. the bottom line goes back to july 6, euro weakness. i agree all you can hold onto here is benchmark analysis.

to me, is the 30 year mortgage a benchmark statistic? there it is, 7.35%. lisa: when dave would've been incredible. people seem struggling in the single stock names. it has been an interesting morning of divergence. u.s. steel rejecting an offer from cleveland close and standing out. basically rejecting an offer from cleveland cliffs. cliffs sent that united states steel calls the offer and reasonable. still later confirmed the response, said it was going to -- trying to find strategic ways to manage its assets but those shares are up almost 30% at a time when the u.s. would want to emphasize some industrial production. tom: there is historical baggage here. it will not go to semi conductor factories in ohio.

but it is such a legacy of the nation, such a collective memory that distorts rational analysis. lisa: it comes at a time when the u.s. is looking to rival china. the combination of these two would create the second-biggest steel company worldwide. tesla, since those shares are lower after they cut prices in china, is this a china story? a tesla story? an ev story? nicola following 18%. they had some fire batteries that had an issue. there was an electric malfunctioning in the batteries. those shares are lower because of recalls. tom: right now, we step into a

discussion of the markets with drew matus, chief market strategist at metlife. we had a huge response when he was on last time. are we are made disinflation and in selected economies outright deflation? drew: in the u.s., we are in goods prices deflation. the question now is about service inflation over the next couple of months. how long it will not hold up overall inflation in the u.s.? tom: the answer is we have to this into our market belief. how do you, going back to ethan harris, you only work for people named harris, i look at the economics of drew matus and a state i can guess what prices are going to do that how do full debt into a market analysis? drew: for me, i am focused on

imbalances in the inflation. what kind of imbalances exist? what does that mean for the economy and growth going forward? for medium term, i am kind to figure out when the recession occurs and what will cause it. frankly, the longer the imbalances process, the worst the recession will be and the more you have to worry about it. things like you are talking about earlier with regard to housing -- housing should be repricing. the fact that it is not is not a sign of health. it is a sign of dysfunction. i think that that could come back to bite us in terms of we begin to generate some momentum in the economy and all of a sudden people need to move for work or when they have retired, they want to switch houses there are no trade downs happening anymore. if you hit retirement age and want to switch to a smaller house, there is no.

-- no point. you will end up with the same payment in a smaller house. that pinned of dysfunction creates prop kind of dysfunction create albums for the economy that will reverberate the next couple of orders. lisa: how do higher oil prices fall into your thesis and wrapping disinflation? drew: that creates another distortion. should we at a time when it seems like growth's getting to a more sustainable trajectory, should oil prices be behaving the way they are? there is weakness overseas in markets that typically import oil. once again, something that does not quite fit a narrative about a soft landing and all is right with the world. it is something important to watch for going forward. lisa: how much are you watching china? this morning, we have been

focused on what happened in china with respect to their developer and a private wealth manager not being able to necessarily make payments on some of the products it had tied to real estate and other types of investment. how much of an effect with some of that weakness have on the u.s. economy? or have these two economies diverged enough for it not to make the material difference? drew: i do not think they have diverged that far in the same way if you had material weakness in the u.s., it would translate to china. or to the u.s. there may be more of a delay in getting here and there might be different routes that it takes but the end of the day you end up at the same place which is in order for the u.s. and global economies to be doing well, all the books have got to be moving in the same direction right now, they are not.

you have more weakness in parts of the world, strengthen the u.s. once again, something that does not seem sustainable in the long run. that has caught my attention. it is worth focusing on as we move forward and figure out where we are going to be. tom: and the general counsel of metlife. i have to ask not so much the nitty-gritty of metropolitan life and commercial real estate and all the huge investment that you have there and the mathematics it, but how does drew matus synthesize how crv fits into your risk profile? is it overplayed? should everyone calm down? work is it a tangible fear? drew: i will duck that one. we have a great euros state team, great research team. i would refer to them on that.

sure you could reach out. tom: you're in with us. nobody is watching. thumb up or thumbs down? drew: every asset process you could possibly look at will always have good and bad places to be. having the kind of research we have available at metlife allows us better insight into that area. tom: that was great. it is like possible at a press conference, reading off a card. thank you for that nonanswer on commercial. lisa: most controversial thought the day. actually probably not, the idea that commercial real estate is coming back. you talk about this idea that it is losing luster. tom: i was stopped on the street . this happens to us. i was stopped by a major hundred

real estate months ago. he said there is a class a partition with class b and class c real estate. metlife only owns the problem background -- the creme de la creme. but beyond that, i am trying to read about office buildings not being a good place to be but what about apartments? there are other places to go. lisa: i did not understand self storage in the massive amounts across the country. tom: i have never to this day had one. i am big on throwing stuff out. but we are a nation of pack rats. self storage was the way to go. that bill has got 500 square feet. lisa: what is egot? tom: winter coat, green shuri -- green treats.

thank you for that -- for that conversation with michael mayo. this is bloomberg. ♪ wow, you get to watch all your favorite stuff.

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jonathan: where live from new york city this morning. good morning good morning. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is a bloomberg the open with jonathan ferro. ♪ jonathan: live from new york. coming up goldman has the first rate cut in 2024. worries build on china's real estate market.