>> welcome to "bloomberg markets ." i am sure nelly messick. you are looking at an s&p that is going sideways. we have flipped green on the screen. futures rising higher on the day at an 80 handle and a dollar that is softer. taking a look at the bigger story of the day which is yield. global yield and treasuries across the current.

the two year yield at 4.97 on the day, essentially flat. the long end of the curve is where you see the real movement. these are the highest levels since 2011. the 10 year yield at 4.30, up about five basis points. the highest level since 2007. we will talk more about the bond market with liz mccormick. if you take a look at what is happening in the yield story, explain the movement at the long end of the curve. liz: that has been the important thing among others this week because it just seems like the long end cannot get any good news to bring the rates down because you have the trifecta that the fed is the base for everything. inflation could be sticky. you have what we heard earlier this month, the deficit is so

bad. in the minutes yesterday besides sounding generally hawkish, the minutes reiterated what powell said during his press conference. quantitative tightening, the rolling off of bonds from the balance sheet could keep happening even if they start cutting. that is another pressure on the long end of the treasury market. things keep piling on. people bought a risk premium to lock their money up with the treasury for 10 years, 30 years. sonali: who is getting caught off guard in this scenario? liz: without naming names, some of the big asset managers came into this year and. last year was brutal, the fed is close to done. i hate to keep seeing the year of the bond but you should go out the long end and we just

mention the long end is getting beat up lately. if you look at the in page of our indices, the u.s. treasury index was down for the year and the u.s. ag is about there, the global ag. all of these things are at the best flat. some of the asset managers will tell you, liz, chill out, we are in for the long haul and they are probably right but at the moment they might not be feeling so great. sonali: thank you for your time. another sector was raising rates is the housing market. pushing affordability to the lowest level in nearly four decades. bess freedman joins me to discuss. if you look at this movement in mortgages, what is the ultimate impact you are seeing with buying trends that most people do not see? bess: the rates going up so much

have created potential buyers sitting out and opting to rent. potential sellers are deciding not to sell because they do not want to refinance at the higher rates. you are seeing the trifecta -- rates that are up, inventory that is constrained in a lot of the country and prices are still elevated. that trifecta is creating a sluggish -- sluggish housing market. sonali: there is a new plan to roll out as many as 20,000 housing units and rezoning midtown from office buildings to a more residential place. how might this impact the market? bess: it would be a great thing. the mayor's office has submitted a plan for rezoning. we have a migrant crisis so we could definitely use more housing in the city. sonali: how are you thinking about pricing not just in new york city but the hamptons?

you look at this trend of people believed to pay extraordinary prices with the luxury market. bess: discretionary is different from the everyday fire because they have a lot of money at the fingertips. they do not care so much about race because a lot of times they are cash. cash is king. and the luxury market, the hamptons, palm beach, there is no inventory, prices are high and there is not a lot to buy. his people have a lot of money they are willing to pay more but the everyday buyer is sitting it out. sonali: the scarcity value, is that making more people jump into the market knowing they will not get a place if they do not? bess: right now it is mixed messages. we heard recession, recession, recession but the fed is saying economists are saying there will not be a recession. it is a flawed assumption to think that because inflation has

come down, rates will come down. i think rates will stay where they are and possibly tick up a little bit so we have to get used to this 6%, 7% for the 30 year. sonali: how much higher can rates possibly go? the luxury market is so different from what you see across the country. at what point does this start to dent buyer appetite? bess: there was a report that the rental market in new york city has had a high because, in my opinion, a lot of would-be buyers have decided they want to rent. i had friends who want to buy who reached out to me and said they will renew their lease for another year. there are a lot of mixed messages. is the fed -- will there be another increase? i think there is a lot of -- there has been a meaningful change in the economy. we avoided inflation.

but for housing, we are still in day sluggish market. sonali: you see an inventory issue, what would it take for people to start listing homes again? bess: a good rate. if they have to .5% or 3% and now they are paying 7%, they have to decide if they want to move to another place. why would sellers want to give that up? i would not want to. it is a low cost every month and then you would be doubling your expense. we are in a holding pattern right now with housing. sonali: how do you consider what the top really is for selling prices? if you are looking to sell your house, at what point do you do it? bess: i hate to say this over and over again but the market is there to serve you. you have to decide what your circumstances are. do you want to go downtown? do you have a new job? are you working from home?

what is your situation? and then you determine what you need to do or want to do. you do not look at the market and decide you want to sell. you decide for yourself what works. sonali: you wrote that selling your home now is not a bad idea. bess: you can take advantage of what is going on. there are real buyers out there and they are willing to pay if they can find the right home. you can take advantage of less inventory on the market in august and maybe get a deal done. people typically do not list in august because it is the summer and people are away but real buyers are out there and you can take advantage. sonali: how do you look at the new york city to florida dynamic? there was so much exuberance when you saw the exodus out of new york city but you have a lot of people coming back. bess: we did see a lot of people move. we stop people move to florida during the pandemic, connecticut, too. we have seen people return.

we hate when people leave new york city. it is not a good thing. the return has been slow and steady. taxes have been a -- big reason companies applet their headquarters in florida. in albany, we have to think about that because we want to keep rich people here. it helps our city. sonali: where are the markets you are most focused on? bess: we have offices in florida, new jersey, connecticut and new york. those are a lot of discretionary buyers. we also do rentals, studios and one-bedroom's and the market has been slow. sonali: what about new jersey? where does new jersey fall in all of this movement? bess: that is a place where there is tight inventory. look at montclair, hoboken. agents will tell you there is an open house and.

. there are 20 people people are bidding and things get done right away. new york city, we have good inventory. jersey, you do not. connecticut is challenged and florida, as well. sonali: that is bess freedman. thank you so much. bess: thank you so much. sonali: coming up, we will talk private credit with raj dhanda. that is next on bloomberg. ♪

sonali: this is "bloomberg markets" and i am sonali basak. private credit managers have turned to wealthy individuals as a fresh -- almost $65 billion from a retail investor contributing anywhere from $2500 to $1 million for investment. raj dhanda, thank you for

joining us. i know you have had a lot of roles when it comes to wealth. we have been talking about the market rebounding, what is the pitch to private investors when they can just be investing in the s&p? raj: great question. thank you for having me. there has never been a better time to reflect on your investment portfolio. we have had an unprecedented move in investment rates and characteristics from the alternative market is important to dampening volatility and helping advisors keep their clients invested in the market. we think this is as great a time as ever to reflect on a 5% allocation to alternatives and take that to 50%. sonali: that seems like a lot of your money tied up in a certain investment. raj: you have to zoom out because the liquidity discussion

is important. today, a lot of individuals overpay for liquidity. the liquidity in public markets is there to provide opportunities to get in and out of the markets. most individuals barely have 5% or 10% in alternatives. with 90% in liquid assets, they are giving up 300 or 400 basis points in excess return. there is an opportunity to have a portfolio that can whether higher interest rates and inflation and not overpay for liquidity. sonali: let's talk about some of those areas. you're talking about beating inflation and capitalizing on high interest rates, private credit, that is the story of the year. how much interest are you actually getting? are they willing to foot the bill when it comes to adding more to these investments? raj: for 25 years, private credit has been a backbone in

areas of growth. it is something we have been with for a long time. we have the scale, flexibility and incumbency to be a real leader in the market. for investors, the critical role is durable income, it offers today almost a double digit yield and a defense of position which most clients are looking for. they feel there is uncertainty and they want certainty in the capital structure. they are growing as more managers like aries can deliver the types of solutions they're looking for. sonali: you think about concerns. as much as people are excited about 8% to 12%, people are also worried about defaults. there is a note out by apollo that discussed the rising amount of downgrades relative to upgrades in the market. you have to wonder what that

looks like in the private market more the data is a lot less public. raj: sure. one of the parts about aries is we stay away from the more cyclical sectors. for the 2000, 3000 companies we lend ot, we are not seeing a lot of stress. as rates stay higher for longer, there will be some stress in the markets. to date, we have seen companies we lend to putting together good returns. sonali: how long the race need to stay high for you to see more meaningful movement? raj: if it is a few years, there will be more stress in the system. people are talking about rates being cut next year. for that. sonali: real estate has been a popular area. until this year, performance has

been booming. the performance has still been elevated but it has dropped a bit. windows that start to turn around. raj: commercial real estate we think of as a core asset class or wealthy individuals. i rarely meet someone who has built wealth over time without a connection to real estate. in new york city, it is hard to miss the challenges in the office sector but we see opportunities as well. commercial real estate debt is an attractive opportunity where you get equity-like returns. our areas of high conviction have been distribution warehouses on the coast or apartments and some of the high-growth, low tax sunbelt areas. in those areas, we see strong cash flow. this move in interest rates is relatively unprecedented, it will take some time for cap

rates to adjust for a 500 basis point move. sonali: especially because you have private markets looking to capitalize. how does aries view that opportunity? we are willing to dip in and we are asking retail investors to get along for the ride? raj: we spent a lot of time on education to help this journey from five to 50. private markets have a lot of different opportunities. we are talking about private credit today. secondaries, we see information -- interest in. where the public markets around the screen everyday and provide some sort of feel for the sentiment of the investor, there is really a tremendous breadth of opportunity. sonali: we were joking the other day about working from anywhere in ares. you live in denver and you are

working here today. [laughter] where are you working from? for someone who is the epitome of not being in new york city, how many people are doing this? raj: at ares, we have offices around the country. new york is home to many of us. denver is an office. i am heading to massachusetts to be with my family later today. sonali: thank you for joining us. that is raj dhanda, the global head of wealth at ares management. this is bloomberg. ♪

sonali: this is "bloomberg markets" and i am sonali basak. investors and bankers are avoiding saying esg in meetings with clients. they are still integrating what esg stands for in their work. it comes at a financial cost to ignoring esg esg on wall street making headlines from the ups frank to hawaii and electric being sued for its alleged role. here to discuss this is eric roston. what are you seeing in terms of how this kind of frustration or even hate with esg turning into conversations with investors and bankers with clients after so

much popularity a year ago? eric: there is a great bubbling up. we have a number of systemic problems and the stress created between investors and companies, between employers and employees is creating the display of these systemic problems. you see it with the ups strike, which was resolved but it will cost the company more than anticipated. there are losses involved. fedex is seeing it, too. it is very easy to talk about the specifics -- sorry, the generalities of inequality and climate change, but when it hits the street, it is difficult to deal with. sonali: maybe double down on the financial cause, especially with the "s" part in esg, social.

how is this floating across corporate america? eric: the most obvious cases are the ones that hit us every day, whether it is that package delivery services under labor pressure or hollywood, with the writer's strike. it is more than a decade ago that the occupy wall street demonstrations first brought to public attention the extreme difficulty that many people are having with what they perceive of, and largely is, great growth in inequality. even though that has been in the air, it is coming to a head in ways we have not seen in decades. sonali: what has been the reaction from wall street for the "e" part of the equation? this is the forefront of the esg

movement. has it been getting as much pushback as the social parts have been? eric: i don't think so. once a term like "esg" enters the political sphere, it is riding current political climates. i think the social has slid more comfortably if it is the right word, and it is almost certainly the wrong word, into american politics. companies know that climate change is here an causing damage daily, it seems like. i do not think there is any disputing the 30 days in phoenix over 110 degrees or the flooding in vermont. it is in everyone's face. the u.s. has legislation to articulate and fund approaches

to solving the problem. i think you are right. there is a real stark divide between the "e" and the "s." sonali: coming up next, we will pivot to earnings with david trainer. this is bloomberg. ♪

>> there is no digital whether chips because everyone speaks about the digitalization of our world. there is no green deal with their chips so yes, it's a bit like the new oil for the world. given some of these geopolitical tensions, especially between the u.s. and china, it's become a necessity i believe to be more resilient against these political tensions.

while finding it out the hard way for the past two years during the pandemic because we've all seen how key industries in europe and the u.s., especially in the industrial, medical and automotive sectors have suffered from a shortage of semiconductors. ♪ jon: welcome to bloomberg markets. sonali: let's take a look at the s&p 500 because you are back in red territory. we were green for a second but back to red. the nasdaq 100 is about 0.2% down on the day. this is the third day of pressure in both indices and the nasdaq is about 6% lower than the summer high we saw in mid-july. it's a yield story and you're looking at the two year yield come about one basis point higher but the 30 year yield,

the longer end of the curve is where you see six basis points on the 30 year yield. a lot of ramifications for this higher for longer narrative that is now being constructed. jon: it feels like in an environment where everyone is taking a cautious approach, there has to be some standout stories to have stocks on the move. cisco is one of those, the best performer of the dow, up about 4% at their message with court really just quarterly results is that there was demand for their business. cbs is under pressure -- cvs is going in the other direction. they are moving away from their care market and we will track that developing story and the industry has been taking notice. if you have a business that gets the index notice, that can help out as well. for example, a stock like chesapeake energy is up 5% that it will be added to the s&p

mid-cap and a key aerospace part of the business is being sold and that deal is sizable, $10 million trans action it's up 3% on a somewhat cautious day overall for these markets. sonali: we will track more about the markets, pretty soft on the date and we will talk to the new construct ceo. if you look at the days of softness we've seen in the market, the s&p flirting between red and green today, is this just a summer low or is this a harbinger of us? >> i think it's a harbinger of a tougher september in the market is finally digesting the fact that we are stuck with higher for longer and that's going to slow the economy down and slow consumption. it will have the effect that the fed has been trying to have for a long time. there is a lag between when interest rates are raised and the effect on the economy and we are just catching up to that in terms of what's happening in the real economy, spending as well as investor sentiment.

jon: i want to get your perspective -- we were talking about -- with david rosenberg who normally takes a bearish view but listen to what he told us earlier today with a skeptical outlook. >> the recession has been delayed and not derailed in normally takes two years after the first rate hike by the fed and the start of the recession. they started hiking in march of 2022 so we probably have a bit more of a lifeline. this recession staring us in the face to benning in your time perspective. we are not getting out of this recession. jon: he made those comments in part because you had that narrative recently that jay powell's own fed economist were pushing away from the idea of a recession. bank of america had been pushing away from the idea of a recession to what your economic outlook from here? >> i have to agree with david rosenberg.

he is saying exactly what i was a. it's inevitable and it's coming. i think this goldilocks idea that there would be this soft landing or perfect sort of scenario of slowing but not recession and everything will be super good, that's just not possible. there's been an norma's amount of overinvestment -- there's been an abnormal amount of overinvestment. and make people less discerning and not make investments based on real fundamentals. people don't really understand what fundamentals are most of the time and some people don't even care. when's the last time you heard someone talk about reading footnotes? it's not as interesting as crypto or nft or ai. we've been such a narrative driven market that people forget what it means to be discerning and do their homework and recognize that capital allocation decisions are difficult. they take rigor and the economy will suffer for i think a while

as it works through all of themal investment. jon: one of the points that people who are more bullish would highlight, we were talking about the sysco guidance today and bloomberg intelligence putting together the overall guidance picture for this quarter and determining for the first time in about six quarters, you saw the guidance topping expectations. take that piece of the pie along with these better than expected results in the quarter itself, for you to see guidance that is relatively up beat, does that perhaps justify some continued interest in the equity market from here? >> i'm not trying to say we are headed to the end of the world. i think we just have to be more discerning. there are plenty of gray, cheap stocks out there with great fundamentals and cheap valuations and plenty of opportunities. the point is to be discerning about where you allocate capital

and about market expectations. the guidance game is just like every other wall street game, they keep lowering expectations ahead of the earnings and all of a sudden, when it's at its peak, you have to recognize that you have already be beaten down numbers. that's part of the game this been going on for decades. wall street analyst no that if there by recommendations beat the number, the stock goes up so they have extra low numbers so that there is a better chance for the company to beat. the same is true of guidance. i think you have to take these numbers with a grain of salt and do your own homework in terms of understanding was really driving the numbers. a lot of times, what we see from the companies or even wall street estimates, those numbers are omitting a lot of important information that can reveal very different operating and profitable results than what investors think. sonali: i want to pull up some research from the san francisco fed. if you look at excess savings

that they look at across the country, they are telling you that aggregate savings are likely to only support household spending until the fourth quarter of 2023. what kind of cliff does that create for consumer spending, propping up these companies we are reviewing today? >> this is straight out of wood david rosenberg said. there is a lag between when the fed raises rates and we see the impact on the economy. i think we will probably see the impact of excess savings going away for sure. that will be in the not-too-distant future not to mention all of the additional liquidity that the government has been pouring in with respect to differing payments on rent and deferring the limits of unemployment. all these things are the stragglers from the covid emergency fund, they are just

now really being pulled out. i think we will see the impact of those being taken away toward the end of the year that's going to change the dynamic as well. this is not mean, we are not talking at the end of the world but it means the meme stock phenomenon and the overpriced stocks, there could be a lot of pain for people who haven't done their diligence and make sure that when they choose a technical strategy, it's supported by fundamentals, not just the fomo. sonali: coming up next, we will talk about walmart raising its profit forecast again but striking a cautious tone on the consumer outlook. more on that next. this is bloomberg. ♪ today's the day you graduate from southern new hampshire university.

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jon: this is bloomberg markets. time for our stock of the hour. we are watching walmart today. walmart is flexing his retail muscle and its gross advance in the quarter but you have to keep in mind, the stock is done relatively well this year which means a fairly high bar for investors. sonali: there is another man with a higher bar, an analyst at evercore isi and has an outperform rating on walmart with a price target of $175 per share. when you look at the troubles you see at walmart today, the market is not loving this outlook on the u.s. consumer. what is the biggest downside risk to walmart when you think about what they have said about how weak the consumer could get heading into the next part of this year into next year? >> today, the stock is down because the expectations were high. we thought walmart was doing

well and they would end up beating and raising for the full year and they did that but clearly, people were position for a nice beat into today's print. fundamentally for walmart, we think the key here is that they have growing traffic again. we upgraded in march and our top five portfolio. we think the traffic turn is real and has sustainable legs and will help them gain share and grow margin again which they haven't done successfully for many years. jon: a lot of people understand that the way this business works and the scale helps to keep prices low but getting people into stores thanks to the grocery business and maybe finding some good deals, we are getting more guidance and we saw it in the quarter today, it was the e-commerce part of the building -- the business, the loyalty side where they have invested in. should we be paying more attention to walmart's e-commerce battle with amazon

and their ability to fight back on that front? >> absolutely, what walmart has been doing the last five or 10 years is a lot of back in the investments. they have come together at a time when people went back to regular stores and then post-covid and now with strain on the consumer, are looking for value and walmart is the natural home for that. with the investment they've made in multi channel, they are winning new customers and more higher income customers and i think the key of getting that e-commerce early on to work together is opening it up to a new customer base that they -- that never really appreciate walmart because they've a store nearby them. sonali: bring this together for us. we've had a target surprise and walmart is doing just fine despite some weaknesses in the consumer ahead. what happens next? will the consumer hold up better as planned or should investors

be concerned there are vulnerabilities to these big-box retailers? >> we think retail sales, having having spent three years above trend, growing close to 30% the last few years, the fact that they will accelerate to around 3% growth this year is just back to normal. right around 3.5% for the past 20 years. . it's not about coming back to something normal but do we have to go below that normal as inflation hopefully ebbs and if we do, how long will we be there? we don't think we have to have a deep retail recession. we think we can normalize in the back half of 2023 will be the trough of retail sales growing around 2.5%. hopefully next year, we will get a modest three acceleration but the leading desk for the lead indicator we look at his job. if you can keep growing jobs, we are probably facing the toughest pressure on retail in the next

few months. jon: in terms of what walmart can gain in terms of market share in an uncertain time and we watched many recessionary times that they can keep that core consumer base. are you suggesting that with the e-commerce arm that they are already in a position to grab some retail share during this uncertainty? >> yes, what you saw in the first quarter in the second quarter print is you so walmart at seven and 06.3 and maybe it's a celibate u.s. retail sales growth decelerated more in the second quarter from the first quarter. that to me is showing that with this growing e-commerce prowess, walmart is able to reach more customers, have a bigger share of their wallet and whether we will be in a tray down economy or recovery economy of winning new customers is always a good thing and if you can wow them on

convenience and assortment which is what they are doing, then you can keep those customers and it may pain you to save some money when things are tough but when things come back, they will stick with you because of the great assortment you have an convenience. sonali: walmart 156 today. your target is 170 so what gets it there? >> the single biggest is traffic growth which is growing share versus their competitors and retail like amazon and target. as you get the traffic growth, the margins we think trough last year and the inflection and margin with growing traffic is why we think the street is still too low for this year and it still below seven dollars next year. we think they will make more than seven next year. jon: great to have you with us and thank you for the breakdown. time for a quick break and when we come back, can griffin in

florida is going straight to the governor's office and we will dive deeper into that developing story next area this is bloomberg. ♪ with your hearing, if you start having a little trouble, you're concerned that it's going to cost you money. to this day i only paid what i had to pay for the device... when i go back everything is covered. there's so much you're missing by not having hearing aids. we'll find you a hearing aid that fits your lifestyle and budget at one of our over fifteen hundred locations. call miracle ear at 1-800-miracle and schedule your free, no obligation hearing evaluation today.

it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved

five million people's lives, it's overwhelming. it's everything. jon: this is bloomberg markets. let's dig deeper into our bloomberg big take today, an exclusive expert -- excerpt from the forthcoming book, inside the crypto wild rise and staggering fault in which there is a crypto powered human trafficking ring in cambodia so let's discuss. what a fascinating journey you take us on. it's not just with the crypto confusion but also in the world of human trafficking. did you imagine when you did went down this road that this is what you would find? >> no, this had to be the craziest story i've seen in my career. it actually started with one of

those wrong number text messages that we all get. it said this is vicki, what's up? which is obviously not my name. i decided to play along. it turned out that these texts are, hans for crypto scams to try to convince you to trade with them and people really send huge chunks of money and it's all gets stolen. the really crazy part is the people on the other cited the phone and sending these messages . sonali: you cover crypto and we get a lot of these messages. i never tried to look at what was on the others. who is on the others and where are they coming from and how did they not get in trouble for stealing this much money? >> turns out the messages are mainly sent by people in south

east asia who are themselves victims of human trafficking. there are whole office building full of people were threatened with beatings, electric shock or even death, chinese gangsters are often running these places. these crypto slaves work around the clock sending these spam text messages to you. it's truly awful. i went to cambodia to check out some of these human trafficking crypto scam compounds. sonali: that is truly terrifying. we wish we could get into it more but we will make people read your book. the book is available september 12 wherever you buy your books. another exclusive looks at ken griffin lobbying in florida the tickly when it comes to anti-china crackdowns on foreigners. bloomberg's miami bureau chief

is here to explain. we take a look at the incident itself, what does ken griffin have to do by fighting ron desantis on these issues? >> thank you for having me. basically, to ken griffin, ron desantis'ban on chinese and other areas of concern of owning property in florida, he sought as an ideological fraud. to ken griffin, lawful owners should be able to own real estate whenever they want and even if you had a working visa or a green card, you wouldn't be able to actually own property in south florida. the other side of it is since adele has relocated to miami last year. they are bringing in hundreds of workers from miami. along with that kind of restriction would obviously impact some of the workers at says adele. the -- -- at says adele --

citadel. jon: there are some very personal aspects like the fact that one of his trusted deputies it is a u.s. citizen who was born in beijing. in terms of having an impact in a political related fight, is this all can griffin or part of a wider group effort? >> it's not necessarily just can griffin but he is obviously the most emblematic in opposition to this law but we are seeing a position from groups that have tried getting over the courts and -- and sing a position from other focus groups. there has been widespread operation from some of these groups on these particular laws. this is a concerted effort by republicans in other states as well who have been trying to ban

chinese citizens of vineland especially here -- especially near military installations. sonali: talk about the relationship between ken griffin and ron desantis. he donated $5 million to ron desantis for governor. there has been signs of tension. how significant are those tensions and is it signal a waning support in the billionaire to the florida governor? >> let's think about how things have changed. last year, desantis wins as his landslide governor and ken gives them $5 million and would like to see them run for president and that's the state of thing at the end of last year and the beginning of this year. now, there has been a clear cool off. he launched the presidential bid in his down the poles and way behind on donald trump and has

reset his issues and changed the campaign manager so there's clearly a lot of issues gaining traction. he also supported a lot of consequential things like restrictions on abortions and in effect on immigration that has alienated some donors. the important piece of data is griffin contributed to his governor campaign but not one cent for his presidential campaign so there is tension in the air. jon: thanks very much. this is a story you have covered with the transition of ken griffin from chicago to miami and dealing with new issues on his plate. sonali: we were talking about new york committing more of its office buildings to residential real estate.

it's interesting because the tension, the dispute, the wars between new york and florida keep ramping up and that's a place that the lienor among others have a lot of space to hold. jon: absolutely, this is bloomberg. ♪ avalarahhh ahhh