>> we look at the broader market sentiment, and that is clearly becoming a little bit more bearish over the last two weeks or so. x even though the fed has raise rates, their parts of the economy that still remain very insulated from it. >> we are coming to the end of hikes, without a doubt. this is a hard cap. >> the extent to which we get global disinflation might touch markets by surprise. >> it is ok to say the coast is clear. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. >> morning. from our new york city studios, for audiences worldwide, this is

bloomberg surveillance. i matt miller alongside damian sassower. tom and john and lisa are ahead -- are jackson hole ahead of their special coverage. they will be on air for four hours throughout the speech. definitely, show that you don't want to miss. i think it is more important now because yesterday, going into earnings on wednesday, the narrative was earnings may be more bored than jackson hole, but with the action we saw, i don't think that is true. >> it felt like last year already. as we set up for jackson hole, the full on effects from higher services costs, and the physical level, the chipset, but the household level, student loans. did you know that word was mentioned 40 times in earnings. the most ever. the fact that student loans are resuming, households are going to resume payments on student loans to impact consumption. >> it will shrink.

a real concern for sure, and i thought it was interesting. nvidia had such a blowout quarter, and the shares rallied. they are up 7% in the session, and they closed up only .1%. we had all of the major indexes closing down below 1%. tech really let the losses, so everyone is looking forward to jackson hole to see what the fed has to say about reach raises. if there is one hike left. >> if you look at the action to asia, the big chinese food delivery service, revenues were up one third. now, the shares are down. down 7% overnight because and you can't get anyone to buy anything. >> the debt servicing costs, we saw elizabeth mccormick with the estimate now is considering the size of deficits. 1.6 trillion the debt servicing alone in the years ahead is

going to be 20% of all federal revenues. if we don't change something. >> fundamentals don't matter. >> all right. that could be the case. it could happen in other countries. let's look at the markets right now. we did have come as i said, april big drop in the benchmark index is the s&p 500 futures are up, but only by .1%. as we fell down below 4400 on thursdays trade. you can see euro-dollar is down right now. the green back is stronger against the euro and the pound, so the dollar index is moving up just a little bit, and we have a 107 handle there. we are some strategies yesterday. considering the interest rate differentials, could be 105 to 106. look at the 10 year yield. it it come down. he substantial after the rise up to more than a decade high. it was a little -- it was the highest level since two the

collapse of lehman brothers. that was the last time he saw anything over 430. at the beginning of the week, we saw 434 at the high. we then came down below for 20. we are now at 4.25. the crude prices over eight dollars a barrel, but it also lost a lot of steam this week read now, we are trying to see that come back. a drawdown yesterday, and there are reportedly talks between the biden administration in venezuela into easing sanctions to bring some more of that. we will cover all of this in the program, ahead of crude trading. . we want to bring in our chief strategist broker with this. great to have you on the program. what do you expect from jackson hole? what is the big issue you are going to watch for? >> good morning. thank you for having me. i think what i will be watching for is do we get a replay of last year's type of speech.

that is a stern talking to a camera. a nice prairie amount backdrop. but what we've gotten before from powell is sort of on one hand, it is this, but it could be that. we will raise rates but we can cut them. i think he does that when he is in the room with reporters, and that is a nice enough guy. standing by a script, he sticks to his message. i think his message will be number one. we continue to fight inflation. number two, we may be time hiking rates, but we are not cutting them. the analogy i am using is, with all dues sensitivity, affected by the fires, the fight against inflation is 80% contained. we basically done about 80% of the work we need to do to get inflation back towards the fed target. but we are not there yet. just as firefighters to not put away their equipment when the

fires 80% contained, he is going to remind people that the fed is not going away until the job is done. i don't know if they need to hear that. >> only you can present resurgence inflation, especially with the resurgence in gdp growth did the pain where you look, you consider more important, and we are looking at for, five, 6% nominal growth rated are you concerned about resurgence in inflation? are the embers going to spark the fire back to life again? >> i think so. although there are some different -- you mentioned student loans at the top of the hour. i think that is going to be a bit of a headwind. i also think the fact that, call a third of americans facing utility bills are headwinds, and remember the consumer is two thirds of the economy still. the bottom line is, people have

jobs. unemployment is low. people spend the money with the way they want. there are necessities away from discretionary spending in many cases. people have jobs, which is great, and they are earning more money, which is also great. not if you are the fed or the employer. then that money will be spent on the economy. i'm not too concerned about that, but this is why the fed has to remain vigilant and continue to give that message of the joints. >> i know it is early, but i wonder if you can put on your options at for me. cross assets, i'm talking to equities. it very well hate as of late, but these wrist that you mentioned are still out there. what's really going on. >> is never too early put on my options had. it's actually actually kinda fascinating because you would think that a strict monetary

environment would induce inflation. -- would induce volatility, but we haven't seen that. part of that isn't -- is a fair amount of dispersion between assets. certain and equity side. with an index or a basket, that depresses volatility. the index is gone nowhere. that is depressed on the equity side, and also the idea that people have the rest -- and this drives the vix. we are starting to see volatility pick up again. in terms of cross market effects, again, we have these relatively well-behaved regimes. prone ever reason, as you stated, the euro probably is a little overvalued here on a

technical basis. as long as investors are going to sit on their hands, i don't know where the complacency comes from, but if people remain relatively complacent, it is realized and applied volatility. mention cash and complacency. with these levels, is this the time you believe investors? we are going into the season on timber october. i hate to talk seasonal, but for whatever it's worth, is this the time to buy protection. >> yes. by the dip. that's an important mantra and it is in -- especially important with volatility. when you talk about seasonals, the best month, the best seasonal month for the vix is august, and the reason being is that the vix -- i don't know that people always appreciated, but the vix is designed to be the best estimate of volatility

over the coming 30 days. >> what comes 30 days after august? september. the idea that we haven't seen much of a rally in volatility, we haven't seen people looking for volatility protection, that comes from the idea that institutions that are the big traders feel they have de-risk sufficiently so they don't need the volatility protection. that is one of the things where it's like selling an umbrella. during a drought, nobody wants that. it hasn't rained in a while, but with clouds, you can't get enough of them. so that is why i like to be very opportunistic, and a 16 or 17 fix like yesterday before he moved up, that provides an opportunity. we are below long-term averages in terms of major volatility measures on the equity side. >> you're not wrong.

i pulled at the sag function, which is a tremendous -- gives you a tremendous picture of seasonality. put on the heat map, and over the last 29 years, we have added nine points on average in august. more than any other month of the air. i think that is fascinating. what happens? speaking of volatility with nvidia. this was the earnings report that is most important in recent history. and expectations were so high, and they knocked the ball out of the park nonetheless. there was a 7% gain between 930 and 10, and then i dissipated by the end of the day. we were basically trounced on nvidia. why is that? i was thinking this was among the most consequential earnings reports i can remember. this is what happens when you out kicked the coverage to a

certain extent. my fear is they wouldn't change their guidance. that it was fabulous and they were going to stick with it. i shudder to think what would happen, considering how built the stock got. another important thing to remember is that traders react, investors consider. so, traders look at the number. i look at the number when it comes out, and i said oh my gosh. i can't believe they came out with this. but as you thought about it, what were the valuations and how much were the valuations expanding. not just in the aftermath of last quarter's report, but in the weeks or two coming into this report. there wasn't really much left. i think the investors who thought about this more coolly than the traders were reacting, they said this was still a pretty fully valued company even with this new guidance. we are not going to chase into this, so we didn't have the

follow-through that i think you have from the first round of buying, and without profit-taking, you end up with a messy kind of blog day that you ended up with yesterday. >> may be traders wanted to get a little neutral into the jackson hole speech. steve from interactive brokers. radiator insight. we are awaiting jackson hole, one of the conversations yesterday was whether the fed would even consider moving the goal posts on inflation. i don't and so. but i look down and see that we are getting you mesh inflation expectations out today, and when you're out, it below loathes -- it looks like this survey is 3%. growth is slowing, credit is tightening, and it's not unusual to see unemployment at low levels before things roll over. i take what is being said to heart.

the markets are really not reacting to some of the wrists i think are out there. but i want to ask was really, what do we think the trade is for markets. is this a long treasury yields rising in recent weeks. can the extent? that is the question for me. >> we have people to talk to about that, including dana of investment. she joins us at 7 a.m.. interview you don't want to miss, and we will continue to build up to our coverage. with tom john and lisa out of jackson hole. that starts at 8 a.m.. on this friday. good morning. this is bloomberg.

how can you sleep on such a firm setting? gab, mine is almost the same as yours. almost is just another word for not as good as mine. save 50% on the sleep number® limited edition smart bed. plus, 60-month financing on all smart beds. shop now only at sleep number®. was also the first time

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 if you're trying to get a view of the whole organizational financial health and you're trying to do that through multiple systems, that makes it very, very cumbersome. ♪ it's not just tech, it's not just people. it's how they work together to provide that experience to the customer. as a finance organization that is what you want to do. ♪

>> you have to be cautious this time around because the downside is that we identify this in the forecasts and it materializes. this is an inversion of what happens around the pandemic recovery. usually we have a surprising upside. >> there is mario. the governor of the bank of portugal speaking yesterday to bloomberg the annual jackson hole symposium. we are going to go out to jackson hole shortly, and tom and john and lisa have special coverage for you all morning long. one of the things -- one of the

key factors that played into inflation over the past couple of years that the fed is trying to deal with, as well as the is oil. we saw a big run-up in prices at the pump that came back down. now we are back up to levels that we haven't seen in quite some time. as we saw a resurgence in the underlying barrels of crude as well. the cofounder and director of research and energy joins us out of italy for a look at what is going on in terms of oil. the march up made sense to me as we have saudi's and russia tightening supplies rated on the other hand, we see some weakness which also makes sense because a resurgence of the chinese economy has been far weaker than expected, post-covid. what is your general view of the oil price now, and $85 a barrel

for brent, essentially. $80 for non-crude. >> exactly right. there are quite a few pull and push forces. it is not clear that this is like a very bullish market or bearish market. i think what i would highlight is fundamentally, the saudi cards and the blast carts have been instrumental in getting a crude inventory joint. we are looking at wickard growth in august for inventory overall around 4 million dollars. we have rarely seen a monthly draw that sort. we are keen not to have inventories rebuilding, and we will reverse the cut overnight, and we have highlighted that, but even when you take that away, it is tight with how

important product markets are, you mentioned the prices at the pump. that has been going up as has been diesel. fundamentally, demand has been surprisingly upside. significant, even with china. the macro is weak, but oil demand has grown by 200 million barrels. refining capacity has really struggled. >> i'm wondering if you can talk about the marginal producers and oil and gas. when we talk about oil, i don't think of iran the way i used to, but this has really reentered the market at the margins, and algeria, the important of that nation, and the energy supply, i wonder if you can talk about those countries in those worlds we live anywhere countries are being asked to pick a side between china and the u.s.. >> da ran thing is interesting for the simple reason that everyone has been talking about what could around bring back should sanctions be lifted.

administration has taken an active strategy to not really in for sanctions, so iran has been able to surprise us in the market this year. they are exporting quite a lot. we think production is almost 3 million barrels today. it is rising further in year end but that is where in some ways, if sanctions were to get lifted, it would really make a difference between iran is making what he can. you are right. that has been the one mrs. here for oil market fortunes where supply has outperformed expectations, and that has definitely had an impact on prices at the margin. similarly gas, the big news has been australian strikes or the potential strikes. that has gas prices across the board, and we have been saying that we don't think anything, especially the strikes won't materialize.

gas prices will come off, and supply wise, i think europe is being given plenty of supply from algeria and the middle east or even from the u.s.. stocks are actually brimming. it's a complete contrast of what is happening from the last time. >> despite the strike being averted, it is my understanding that wheatstone and cora gone, we are not out of the woods yet are we? >> we're not out of the woods yet. i guess the market is a little more hopeful, given that at least one of the strikes have been averted. we are watching that closely. obviously, that will have a material impact in terms -- in terms of gas flow, but it will actually be at the margin to have an impact. the on-again off-again recessions, they may be getting worse. unlike americans, if the economy

is bad in europe, they can leave their volkswagen at home and get on a train. >>. true, but they pretty much, most europeans have probably already left their volkswagen at home and they do take the train. one is fascinating for me. -- what is fascinating for me is the recession. when i talk to you guys, it is a 12 month thing. we keep talking about this recession, and oil demand has been around. at the start of the year, we are expecting demand to be 1.3 million barrels, but right now, we are tracking 2 million barrels. that is how much it is a price spike. again, it is china, u.s. and europe. three places where the data is appalling. i think you are at a point, particularly in europe where it is a baseload demand. not that people are driving -- trying to pick up milk. it is the bare minimum people need to go to work. industrial demand is already by the way in the cover. whatever demand there is out of that. i think that is the main driver.

one thing i will say is that no prices have meant a restock. there is a consumer level, people tend to use heating oil. they have restocked over the summer, and that is standing artificially. it is small in the margin, and overall, what you are seeing is the consumer is still holding up very well, but industrial demand has been we read >> global oil inventories are at a six-year seasonal low. where do we see oil prices headed from here? >> i think prices are going to head higher. we will rope and $90, and we do have a refinery maintenance which is seasonal. this always happens, but the pace at which they are drawing, in my belief that south america is seeing this continue, and we won't get into oversupply, that does suggest that partial cuts if not full cuts towards your end. that does tell me that inventory draws will continue week counter seasonally which will push

prices higher. i am more concerned about diesel and gasoline prices because i think they are already trading at crazy levels, and that will go even further. >> thank you so much for joining us. of energy aspects, talking about the oil price. that is one of the biggest oil etf's. one of -- 180 million dollars, and one day on wednesday. if the flow skill like that, you can expect to see the underlying fall as well. >> i'm just looking at the weather outside. record heat waves in iowa, and texas. i really wish i had a chance to ask her this, but climate change is real and we are feeling the brunt today, and that is not reflecting energy prices. ask the grid cannot handle this. if we continue to get that kind

of heat in the winter, and everyone is trying to -- it gets cold in texas now. sometimes. that hasn't happened so much, and that is a problem for the grid. it will plug-in our ev's, that is going to add to the issue. we've got to really boost our capacity in terms of those grids. later today, tom keene's interview. we're talking about what is happening year. he is live from jackson hole. obviously, that is all morning, but at 4:00 p.m. on bloomberg television and radio, he will talk to the european central bank. this is bloomberg.

wow, you get to watch all your favorite stuff.

it's to die for. and it's all right here. streaming was never this easy, you know. this is the way. you really went all out didn't you? um, it's called commitment. could you turn down the volume? here, you can try. get way more into what your into when you stream on the xfinity 10g network. so, you've got the power of xfinity at home. now take it outside with xfinity mobile. like speed? it's the fastest mobile service around. with the best price for two lines of unlimited. only $30 bucks a line per month. that's hundreds in savings a year when you wave bye to the other guys. all on the most reliable 5g network nationwide. you really shouldn't walk out the front door without it. switch today at xfinitymobile.com.

>> this is bloomberg surveillance. i am matt miller alongside damian sassower. com, john and lisa. we are with you from 8 a.m. new york time. special coverage, live from jackson hole. straight through noon. straight through the powell speech. really looking forward to that program. right now, what we're looking at in terms of markets, we have s&p futures bouncing after the big drop yesterday. we are down were the 1% on the dow, the s&p and the nasdaq did almost 2% drop in the nasdaq. a .7% was the loss so we are looking at a bit of a dead cat

bounce. we are seeing traders sit on their hands until jay powell has to talk to maybe even turning off computers this morning, so very interesting, going to be interesting to watch. definitely the event of the week, overshadowing. euro-dollar at 10790 seven. essentially, one away. we heard a little earlier, technical support is higher, lower euro-dollar. that is what we are hearing from people. in terms of the yield, we've been all over the place. 434. the highest level since 2007. on the 10 year, we are down below for 20. we are looking at 4.25 or sure. traders are waiting to hear what jay powell has to say, and mx crude. 8009 right now, holding steady right around there. we just heard from an readout

that demand has been consistent, even with recession concerns in europe. it has been stronger than the macro picture in china. but there is a lot more supply coming online. under surveillance this morning, investors are awaiting fed chair jay powell's speech. looking for clues on the central bank economic outlook, he said to speak at 1005, and later on, tom keene has an exclusive interview. she is also out there in wyoming. that comes at 4 p.m.. clearly, damian sassower our, clearly, the markets are awaiting the for the speech. >> this is going to be about data dependency. it's going to be about moving slowly. the real question is can he communicate that without sounding dovish. the ball is squarely in his court. think about where he was last

here in jackson hole. recession indicators recalling 100% probability of recession in the next 12 months. i think bloomberg economics was saying the same thing now. the consensus --. >> anna wong's model was calling for a 100% chance of recession. i thought that was pretty aggressive. >> look at this. she wasn't alone. now, most recession indicators are calling for a soft landing. something is changing. let's see if powell can deliver, and sent a message. >> he says september was light. he said they won't cut rates for years. he is certainly hawkish more than the dot plot, for example. donald trump is back on twitter. we are supposed to call ask, but i don't think that will stick. he posted his own mugshot in his first tweet on the site since he was banned in 2021. this comes after he was booked in a fulton county jail in

georgia. if i read this story right, the former president spent 20 minutes in jail. i don't think them and see what -- i don't think that means he was in a cage. there was little editorial is asian on style. great mugshot. >> look, matt, my question is president trump back on twitter. he used to have 86 million followers. that was after the tucker carlsen inter-you. is the former president back on x? >> it looks like he's back read i know what i want to call it. not ask. china is unveiling new mortgage policies aimed at halting a slump in the residential robbery market. this includes more support homebuyers as they look to revive the world's second-largest economy and china has been slower than many market participants have expected in terms of the stimulus. they are asking for big banks in

terms of mortgages. what is the story? >> they're asking for investors to invest more. they are calling a meeting. goldman sachs, and other managers are being invited to talk about why they are retreating from local equities in china, and they cut the stamp tax. they are cheapening the ability to invest in their chinese stocks, and clearly there are issues there. they want to bring warners back into the pool. >> was talk about the weird ian shepherdson with us. the chief economist at pantheon. macroeconomics, and i want to talk about the fed and the important speech from jay powell today with you. but first, on china. we expected them to do a lot more after the reopening seemed fairly lackluster. and rita said to us that at least gasoline demand is longer than the other macros in the

economy. what is going on? what do you expect in the authorities? >> i think the story of a really disappointing post reopening rebound is real and will be sustained. and we will see that not turnaround any time soon, but the response, as you said, it's been piecemeal. it's been no big bang events like we saw after the crash in 08 when china was extremely aggressive with stimulus. we haven't seen that. it is much more gradual. let's try this and see if this works privileged try that. cross our fingers. and, i think that continues for a while. whether later down the road, you are forced to do that much more aggressive is kind of an open question, but the backdrop all of this, i think, it you need to appreciate the fundamental problems that aren't going anytime soon. they won't be fixed by any calls small cuts in interest rates to lend more to a potential mortgage borrower.

it is an over burn didn't and over indebted private sector. you can afford to bail it out. but the private sector is carrying this enormous burden of debt. the consumer doesn't want to spend excess capacity in the manufacturing sector, and prices are falling predators profits. there is a really big mess. plus, the problems with commercial developers that we know about, so can this be fixed? no. will it require more policy responses? yes. one day we will wake up no sign of that. >> is a great piece on the bloomberg today. liz mccormick talks about the fact that our current president in the united states and the previous president have opted to for physical stimulus into the economy. right now, even though we are not in a recession, we will be at $1.6 trillion in deficit. is it possible that while biden and trump have opted to run the economy hot, it is spending

trillions and trillions of dollars in building up a ton of debt. they are trying to break china's addiction to stimulus. trying to pull back on the debt fueled growth model of his predecessor. >> if he could wave this magic one more quickly and sustainably, they would do it. that's what they are doing now. with a drip reading interest rate cut to pressure on lenders and attract. that is in place of doing something more drastic. they don't want to throw a consumer a huge pile of money. when the u.s. did that during the covid pandemic, that is a mistake. with consequences. they don't want to get people addicted to physical stimulus.

that's not an accident. it is likely to rise further. so, there is a limit to how far they are willing to run this experiment of not doing more aggressive stimulus. what we don't know is where is the limit. when will that be ramped up, and what form will it take? clearly, we are in the let's try this in a piecemeal sort of mode, but there is a clear chinese authority position depending on maintaining some degree of growth in the economy. the 5% target will be difficult, so they will have to do more. >> i wonder if you can square all that fiscal stimulus in the united states that matt is referring to that chips act. student loans in the u.s., and what the more impact will be on inflation and productivity. >> the impact of the chips act

is clearly boosted commercial construction, main fracturing construction and jobs. it is quite a big event, but at the margin, that becomes less important going into next year. the big bang comes at the first year. the student loan repayment is 1%. if people choose to stop paying it all off at once, that is a big hit. consumption is 70% of gdp, and taking out that amount of money overnight, potentially that is a threat. this is why i am nervous about all of these blase declarations. the recession risk is over and it will be a soft landing print we don't need to worry anymore. that makes me nervous. we don't know how people behave when repayment start. we do know that the excess savings which is as a result of very generous fiscal policy, those three quarters have been spent. plus, what everyone doesn't want to talk about, they raise rates by 525 basis points and that is a thing.

longer the markets wanted to take, and longer than the media wanted to take. interest rates will work through. we've now suffered all of the pain we will suffer from this rate hikes. that is delusional. whether the lag effect is enough to trigger a recession is a different question, but it is far too premature to see that the risk is over. >> dr. shepherdson, do you feel that the market currently underestimates the fed determination to normalize policy, and if so, what does that mean for a 10 year yield? >> i think the markets getting out. there was a. where markets didn't get it, and i think chair powell clearly, made it. clear the fed will do it ever takes. now, inflation is falling unambiguously. even with the sticky things and services, they are looking better now. my guess is that this will continue. it is not a flash in the pan. it is sustained disinflation, but i don't think they will

declare any sort of victory. i think they will want to obtain optionality, just in case things go wrong again. i would be disappointed over the last couple of years where there would be good numbers followed by bad numbers. he's not going to say we are done. he's not going to stop promising rate cuts, but ultimately, there comes a point in every economic cycle where the market says, you are talking tough, but you've done what you need to do. at that point, we are seeing yields rallying. the fair bit of scope is between now and year-end. the tenure will make a fair bit of progress. i will be disappointed if we didn't get a meaning below 3% by the end of the air, and i hope by the time we get to the middle of next year be more like 350. definitely improving, but we need to be cautious that they will not waive a victory flag today. we agree he's not going to change the goal. we will keep it there, but why would they want to raise it. there is aggressive taxed on the poor. it is as violent as a mugger and

flight that frightening as an armed robber. as deadly as a hitman. why would anyone want to run inflation at 3%? >> i don't think it's ok to run at three. it looks a little bit nervous. remember, the target was 2% in 2012. it was persistently below that level, so there was a signal we would get it up rather than run the risk of a japanese-style deflation which was a significant concern for quite a while. the context has changed with lots of other countries with targets, and a range. it seems to work perfectly well, but i agree that there is a sustained inflation. it says inflation is easiest with all the people, and i am right. sustained inflation changes behavior and that's a bad thing compass not clear to me that will do that.

>> that is all about structural's shifts. thank you for joining us. we appreciate your conversation. a pantheon macroeconomics. tom and john and lisa will be live on jackson hole. there will be a special edition of bloomberg surveillance starting at 8 a.m.. don't miss the show at jay powell speech, plus the peterson institute's adam posen, krista lena george eva from the imf philadelphia fed president patrick worker, insight with bloomberg opinion colonists mohamed el-erian. this is bloomberg. he snores like an angry rhino. you've never heard an angry rhino. 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, 60-month financing on all smart beds. shop now only at sleep number®.

>> if there's ever a soft landing, taking six percentage points off the headline inflation rate without any increase in unemployment would sound like a soft landing to me. >> that was jim bullard, former st. louis fed president speaking with bloomberg's mike mckee yesterday. mike was in jackson hole. bullard was in purdue. he is now the dean of the business school. interesting conversation he brought up had may be a new inflation regime as well which we will talk about in just a moment with cameron crise. we are looking at the market, and where we are. just about three hours, may be less than ahead of the market open, but you can bet there will be low-volume and traders kind of sitting on their hands until we get through the jerome powell speech at jackson hole. right now, s&p futures at .3%. you've got the euro a little weaker against the dollar and

the pound, but not a big move right now. still at one away. 10 year yields creeping slowly higher. holding at .425. crude also holding at $80 a barrel print we see brent at just under 85 i think wait and see is what we are doing right now. let me bring in bloomberg's cameron crise to talk about what to expect from jackson hole. i was reading a lot of your work last night. fascinating stuff. it reminds me of an interview the tom keene did. she said that the most important or interesting thing would be a discussion about a change in our star which i thought was already like an ephemeral bowl -- ephemeral bowl abstract. is this the case that everyone kind of agrees what it is now, and we are going to raise a

forecast today? >> yes. it is ephemeral. when did that ever stop academic policies from talking? i would say this is not a case writing -- that everyone agrees with this is. certainly, the fomc seems to think that it is 0.5%, given that is the dot plot median and has been for some time. the distribution of those dots have moved up somewhat. a few weeks ago, the near bed staff released a paper suggesting that looking at a couple different models. this is the neutral real after inflation levels with policies. the other model has it at 0.7%.

it is kind of like a carnival barker, pick a card any card. pick a star, any star. i think it is fair to say that 0.5% implicit in the fed's dot plot is awfully low. compared to what those fed model suggested, and also what is seen empirically in the economy. if the neutral novel rate was really 2.5%, or the real -- we would expect the economy to perform much worse than it has over the last year and a half. the fact that it hasn't, i think that is a testament to the fact that something has changed, and to quote the title of the symposium, maybe there is a structural shift away from the regime of very low inflation, low nominal growth and low

mutual interest rates. >> i -- even when i was a kid, i was obsessed with this neutral rate of inflation. mainly because on the bloomberg terminal, if you type in t a y l go, you will have a tailored rule. you will see john taylor's rules estimate that the fed benchmark rate. and you have to plug in your own variables. you can plug-in what your nehru's, which is also really interesting, and your own interest being rate. i used 2%, but i think consensus is 2.5. as that moves up, you will change everything. the estimate is that we should be at 2.5%. it only makes sense that we should be talking about the fed ahead of jackson hole. there is a lot of other central banks that carry a lot of great meaning, and we have powell at 10, but we have christine lagarde at 3 p.m..

for me, i wonder if -- 4:00 p.m.. >> sorry. he is right. my bad. given the pmi data, and all of the things going on in the world, does that carry a little bit more weight markets that chair powell is a 10. i wonder what you're paying is on that? >> no. for the simple reason that u.s. is still the world's biggest economy. the fed is still the most important financial institution, and very prosaically, markets are showing the speech. obviously, it's wide open. as mr. powell says. clearly, europe is in something of an inflection point. in so far as they put rates up much more aggressively than anyone would have thought possible here. a year and a half things are feeding more vigorously.

there were a couple days ago. it is kind of an unfriendly trade-off. you have to confront and lead to sacrifice and growth. to get inflation back down to target. we've had some leaks this morning, from the ecb sources. that suggests that the arguments are filled in for a pause. but nothing is decided yet. five bucks will get you a cup of coffee. these days, or four euros or five euros. whatever it is. i guess the question is, in your opinion, was the biggest paid for market. we saw that the yield spike higher and we felt the pain. is it treasuries? is it the dollar?

is it the end? i am curious to hear your thoughts on that. >> i guess the rejoinder question is sort of a short-term trader or --. >> yes. >> investors tend to have a portfolio, so obviously, the biggest trade in that regard is as set prices, consuming the fall. the equity rally this year, i think that took a lot of people, including myself by surprise. not only in how it shot out of a cave, but what we have seen. i think at this point, giving this position, the biggest pain trade out there would be technology going back to where it was 12 months ago. i think the reaction to yesterday's nvidia earnings which are up, clearly, barely -- very good. it was clearly very good. it opened up a lot.

and, it closed more or less unchanged. i was just looking, and the 500 calls expired today. they open at $15 or something, and they close at $.26. that is pretty painful. i would suggest that the pain trade is that everyone who's been buying the short data options to drive the market higher find the money starts turning worthless, and if and as interest rates continue to adjust higher, we find the entire equity market rally turns out to be something of a head fake. will that be the case? >> part quite possibly not. but certainly, that would hurt a lot of people. >> we are looking at the starbucks in berlin. right on the brandenburg gate. a venti lottie. that is might go to with five euros. >> i can't drink that stuff. >> if you are just looking for a filtered coffee and you want to go with a grande day, you can

get 319. that is pretty good. >> that's my jam. 319 is not bad. >> great having you on the program. thank you for joining us. you can read the macro man column on the bloomberg terminal or check it out if you go to the website. bloomberg.com. fascinating stuff. it gets pretty wonky. cameron gets wonky. >> it is a struggle with strawberry. maybe a child latte or something or other. but no. that is great. interesting that he says pain trade, and he is right. the market and equities, that makes sense. it reverses in on itself. there will be a lot of money lost. coming up, dana diorio. she joins us from investment. get her view on what to expect out of jay powell and christine lagarde. at jackson hole. the main event, tom, john and lisa. it starts in one hour at a.m. this is bloomberg.

202 pounds on golo.'ve lost 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

and follow the plan, it works.

>> what is supporting equities despite the higher rates we are seeing is earnings. >> i think the probability of a recession is high. >> i think we are on the cusp of a seminal change in how we target inflation. >> this is bloomberg surveillance with tom, jonathan ferro, and lisa abramowicz.

matt: good morning for our audience worldwide this is bloomberg surveillance. a matt miller alongside damien. we are feeling and because tom, john, and lisa are in jackson hole. but we have live coverage from them at 8:00 a.m. that goes through jay powell's speech and goes through the afternoon. and then there is an ask was the interview with christine lagarde. a lot to cover today. there's not much going on in markets, knows going to say there's a lot going on, but that's not true. damian: when you look at how great it has been in the u.s. we are at about 4% growth in the u.s..

matt: that is a big delta but better than a stick in the high no matter how you look at it. dana over at envestnet is joining us to give us her take. with the september live meeting, we are not done with cutting rates, we will do that for years, what is new? dana: i think that is why you may not see movement in the market. pretty much what chairman powell will say i think is already priced in. when you look at the fomc minute s from july they were already striking a hawkish tone. inflation has come down since then, but at the same time most economic indicators have been

good. gdp blowout compared with what was anticipated as you are discussing. the world looks fantastic right now. no recession yet. i think chair powell was empowered to continue with the tone he is that all along -- he has had all along. he will say we will look at the data and we are not done until we have the right data. matt: is the growth we are looking at right now concerning because it means inflation could be reinvigorated? will this boom be a problem leading to more rate hikes or a bust? dana: it could. you do not want to say growth is a bad thing. who would predict that? if you look at the beginning of the year, pretty much everyone was saying expect a recession in the second half. and it's not that i think we are

past that necessarily. to a certain extent that can be pushed out a bit, but the economy has been fasting. the fed mandate on inflation and unemployment may hold longer. whether we get a rate increase in september or not, expectations of a rate increase are probably too early. unemployment remains low. the economy is doing well, the fed knows inflation comes in waves. with energy and other sectors these are signs inflation could come back. think it is entirely possible we get another hike. damian: i agree with everything you're saying the economy is healthy. this is much of the same as it relates to jay powell in jackson

hole. to deliver the message that they will cause -- pause, the messaging, how will you thread the we've? --weave. are the markets prepared if powell messes up the endgame? dana: i think he has the end at his back. i actually think christine lagarde has a more difficult needle to thread so to speak. chair powell can stay pretty hawkish in the market will not be surprised by that. we saw the minutes and it's been since the last fomc, i think the market expects a hawkish tone from him. i think you would have to go far to upset the market this point -- at this point. we could have a pause, he might

talk about that, a little bit of dovishness, the market may reap well. the market i think expects him to signal he will retain a firm hand and we will not blanket the face of potential increases in inflation. the good news is it came down very fast. i think he has tailwind for today. damian: i love that you mentioned christine lagarde. i wonder if you could build on that what are the challenges she faces with dictating her message . dana: i think it is tough for her because the economy there is not showing as much resilience. definitely, i spoke about the fact that economists, some economists think the u.s. economy soft landing -- i get a lot of information from different sources and some are

pushing on the work asset saying we will not have a recession -- we may have a recession but later. and i think eurozone more of the statements are with a recession. with the pmi data that has come out and the survey data. she still has an inflation problem to a certain extent. does she do another hike? that is kind of difficult. i think that message, that narrative is difficult that you're talking about. matt: it seems that the market

feels like all of the good --

>> endo kimi wrong, is not by any means my messages should get out of equity markets. again i -- we work with advisors and one of the main jobs is to keep the client disciplined in the market so they are not obviously selling out of the wrong time. i think it is a question of your posture in the market, not a matter of it out of the market because you could well miss great additional upside and you

are not going to make that back, you are not going to time it right. most retail investors, if they are not flat out market waited, they are in some sort of actively managed portfolio that is probably low tracking error. i won't say closet index below tracking error to be expected and if you're anywhere in your market cap way, you have a ton of these technology growth, communication, the magnificent seven as he said. you will automatic we have that by being in market way or close to market way which most of these investments are. so what i would say to people is posture a little more defensively. start telling us that there is potential turmoil and the bond market is pretty good indicators -- pretty good as indicators go. it is a decent indicator. quality type companies, even though volatility.

these types of style factors where you can tilt a little bit, not that you are taking on math the -- massive tracking error but the extent you tilt away from market cap weight, that is the direction i would be going in. >> thanks for joining us. dana of investment talking about what she would do in markets. she points out the bond market is a great indicator and i go back to cameron chriss's macro piece from two days ago and he has a great chart of the 10 year annualized growth in nominal gdp and the tenure yields. and they track so well. now that we are starting to see yields to come, you got think nominal growth is going to go with it. >> i think it's also the equity risk premium, your risk-free rate on a real basis and inflation adjusted basis in the u.s. is more than the equity yield you will find on stocks. you don't see that very often.

matt: no, interesting stuff. let's look at what is going on in the markets. we got about an hour -- two hours and if teen minutes until the market opens but more like three hours until jay powell starts to talk. you have s&p futures up after a big drop, more than 1% yesterday, futures gaining .2 5%. eurodollar unchanged at 1.08 oa. maybe that is good luck. the tenure hanging around for 25 after bouncing back a little bit yesterday from under for 20 and dime x crew just under $80 a barrel at 7985. brent crude, the global benchmark, under $85 a barrel. tom john and lisa -- tom, john bang, and lisa are going to be there live from jackson hole with a special edition of bloomberg surveillance starting at 8:00 a.m. and is a show you don't want to miss because jay powell speech will happen i

believe 10:05 a.m.. we are waiting for 10:05 a.m. start for jay powell. on the program, we have adam pozen from the peterson institute, the imf's chris delina george eva will join us, the philadelphia fed president is on the show and friend of the program. bloomberg opinion, -- columnist and cambridge president mohammed al arian will be on the show. later today, you don't want to miss tom keene's exclusive interview with the ecb president, christine le guard. that is live from jackson hole on bloomberg television at 4:00 p.m. eastern. this is bloomberg. ♪ my cpa told me i wouldn't qualify for the erc tax refund, so i called innovation refunds. their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies.

wake up, achievers. take the first step to see if you're making the most of every hour of your life. except the hours that you're sleeping. so why do we leave so much untapped potential on the table? this is a next level bed, for a next level you. my circadian rhythm is kicking your circadian rhythms butt! it's not a competition. i know, but i'm still winning! so, it is a competition. save 50% on the sleep number® limited edition smart bed. plus, 60-month financing on all smart beds. shop now only at sleep number®.

>> what has taken place here is a travesty of justice. we did nothing wrong, i did nothing wrong, and everybody knows it. we did nothing wrong at all and we have every single right to challenge an election we think is dishonest. matt: former president donald trump speaking after turning himself in at fulton county jail. he got a mugshot, not sure if he got fingerprints. you must have i think. that was procedure so maybe he had to get printed. damian: when i get arrested they take my fingerprint. matt: same with me. and very hard earned has never been arrested i am relatively

sure. she is our bloomberg washington correspondent joining us at the nation's capital and we joke around about this, it is very serious. a president of the united states has been arrested essentially, he has been in jail reportedly for 20 minutes, he got his mug shot taken, we assume he got fingerprinted, and i guess this just goes and boosts his popularity with his base. >> it absolutely does. it is an unprecedented moment in american history you have a former president, not just arrested. this is the fourth time he has been indicted, he surrendered, a mug shot taken, they recorded his weight and height, 6'3" 215 pans -- pounds. matt: i will call that is not the case. i am to 10. as donald trump only 5'7" to me?

>> this is something people are debating on twitter but in all seriousness, this is what happened in fulton county, georgia yesterday for about 20 or 30 minutes when the president showed up to surrender. he then went to the airport and talked about how this was all a sham and within really minutes you had his super pac campaign putting out fundraising alerts and they are selling his mug shot on t-shirts for $34. they are already monetizing this and we know the trump campaign does bring in a ton of money, and he is using a lot of those funds from individuals to actually pay for these legal fees and these legal challenges continuing to pileup and this being the latest. matt: this i think supports his base but maybe not. republicans, it is a great mugshot, not that it matters but it is a cool look. it does not matter to those so

that is with the debate was all about. i thought a lot of her answers on different from the answers you would've got from trump in terms of the government spending. both sides of the aisle, and terms of abortions, she said she believes it is a woman's right to choose what she wants to do with her own body in terms of health care, so didn't you find that surprising as well? >> a lot of things nikki haley set on the debate stage and in our interview is tailored as well to how the republican side candidates would need to pit in terms of a general election to gain independent voters. and we look at stats following the debate and who won, washington post, if sows, they did a poll and they found a santos topped the stage and then

vivek ramaswamy and nikki haley. when it comes to independence, nikki haley, the former u.s. ambassador and south carolina governor did well. it is issues like this, like abortion that we have seen really dominate when it comes to moderates and independents and whether they want to go out and vote. what you had on stage were a lot of individuals that want to talk about a six-week band, 15 week ban, and she said to the american people we should be honest about the fact there can never be a national ban because we don't have the votes in the senate so she was trying to find some consensus on any item like abortion. when it came to the economy, she did not just throw out the biden administration out the window when it came to spending, she also criticized the trump administration which, by the way, she worked for. she said $8 trillion was added to the federal debt under trump and she also talked about individuals on stage who voted in congress to add to the debt, ron desantis, mike pence. so she really took aim at everyone and this would be how

an individual from the republican party have to start to pivot in a general election to pick up the independent moderate votes. damian: let's get serious for a second, interest payments, $1.6 trillion in student loans begins re-accruing on the first of september. a group of 90 democrats including schumer and warren are petitioning biden to do something about it. i am curious, at this stage, is there anything fighting can do to stop the september 1 deadline and what is the risk of doing nothing? >> the deadline is around the corner. i think the biting camp ones to say we gave it our best shot, supreme court recently struck down what their plan was to help individuals with student loan debt, i think it was up to $20,000 per person. they can campaign on we will continue to try. it does seem like it is too last-minute as these repayments are going to be due. they have been frozen since the

trump administration. trump, during the covid economic camp, a lot of individuals were facing student loan payment. it is much as coming up in washington, on a lot of endless calls, for businesses it is coming up. levi's, target, they are concerned a lot of discretionary spending will bite in the fall. matt: mortgage debt is due as well, have interest payments on mortgage. you think they could cancel that. can you cancel all that? when you agree to alone, don't you have to pay it back? i don't understand why we are trying to wiggle out of this. >> i have to put my emerging markets had on this. on venezuela, removing sanctions for free in their elections in venezuela, maduro, is that real? or are they trying to bring oil back online? >> i think is probably twofold,

the sanctions in venezuela has crippled their oil market. you have concerns about how gas prices may react going into an election year but this is about if there was free and fair elections. we have seen maduro in the past not allow free and fair elections. he it coerced individuals so this -- she would have to make massive concessions in terms of an election in order for sanctions to be weak. bloomberg is reporting there are talked about this. we are not there yet. matt: and reordering, thank you for talking to us from washington dc, our chief washington correspondent on the trump arrest and what we can expect from the biden administration. a total of $17.1 trillion in mortgage debt, wow. you one start wiping away debt -- damian: the $1.4 trillion sounds like a more manageable number.

we go right back at it. what is interesting is what this inflationary, the impact of the payments coming online may be. everyone is talking about opinion inflation target and i'm concerned inflation may come down faster once the student loan payments come back online. matt: we want inflationary. we are trying to get rid of inflationary. damian: i don't know if we won a hard landing or recession but i -- matt: i think we want inflation back down to 2%. that is the generally accepted level and we are pretty far away from that still. if you look at the core pce it is more than double that for ped targets. damian: that data comes on next week's and we will see it happens there. we see what happens when the student loan payments come back. i'm skeptical. matt: we probably will see it because the supreme court didn't let them cancel those. looking at the markets, we don't have much happening in futures, .25%. you did have a drop yesterday of

1% as a p and 2% on the nasdaq. gaining back a little bit of the overall. waiting for the jerome powell at jackson hole. 425, and crew trading at $80 a barrel. don't miss the interview with christine look our live from jackson hole as damien point out she will be giving a speech at 3:00, probably take that live as well and then our exclusive interview with ecb president christine the guard. coming up, the head of fixed income at strategic, a bear company. this is bloomberg. ♪

the first time you connected your godaddy website and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

hi, i'm jason. i've lost 228 pounds on golo. so when my doctor told me i needed weight loss surgery, (we did it) i knew i had to make a change. golo's helped me transition to a healthier, sustainable lifestyle. i'm so surprised just how crazy my metabolism has fired up. i have a trust in golo 'cause i know it works. golo isn't like every other program out there, and i'm living proof of it. (announcer) change your life at golo.com. that's golo.com.

matt: this is bloomberg surveillance, i'm a miller alongside day millions -- amy assess our. tom, john, and lisa will be in 30 minutes time having a live from jackson hole. it is a show you don't want to miss. we will get the speech from jay powell, the markets may start moving at that point and later on, christine the guard will speak and tom keene has an exclusive interview with the ecb president, so looking forward to all of that. let's look at the markets are now, relatively state after the big drops we saw yesterday, frankly pretty amazing drops

considering nvidia had such a massive be to and without so much was riding on it and the s&p was down 1.5% and nasdaq down almost to sew a bit of a bounce on s&p futures, .25% right now. no change in eurodollar, no change in tenure yields, and imac screwed coming up to $80.11. under surveillance this morning, investors awaiting fed chair jerome powell's speech from jackson hole. we will be looking for clues on the central banks outlook, the economic outlook obviously at 1005 eastern time -- 10:05 eastern. later today, tom has an exclusive interview with christine the guard and that is at 4:00 p.m. eastern which is an hour after her speech. she will give a speech at 3:00 but the cool thing will be her interview because not only is that exclusive -- damian: it is tom keene.

matt: it is tom keene, much washed -- must watch, and they will get to dig into that. damian: he is prepared in the questioning he typically asks which we all know. matt: it is definitely good television. damian sassower here with me to fill in while tom, jon, and lisa pratt. let's talk about something damien knows about china, unveiling new mortgage policies aimed at halting slump in its residential property market including more support for homebuyers as they look to revive the world's second largest economy. you are well versed in this because emerging markets is your wheelhouse, your specialty for the eye. what you think about this? damian: i am the chief income mortgage strategist in my day job. the pmi data comes out next thursday which will be weak and the fact they just cannot get the consumer moving in the right

direction domestically. household are in trouble, they are highly geared toward the property sector which is in a funk. today we find out if country garden, once the largest private property developer, is able to come to terms with creditors in the verdict is out but ever grand in some of those passed before and we are waiting to see. matt: it is key to markets and we continue to read your excellent research to find bloomberg intelligence. i want to talk about something frankly near and dear to my heart. switzerland plunging after rolex revealed they bought fine jewelry seller bukher. it's in question given the world larger's luxury model will own its own stores and this is key because rolex has always said it will be independent of retailers

and that is why it has had such a good relationship with its authorized dealers and this puts that relationship in question. will the favorites own stores? damian: rolex does have one store in his home city of geneva, so it is not like the whole -- i'm kidding. giving their daytona, submariner's out through train of 100 stores, it will be interesting to see how things shake out. matt: i am following this one closely because we still have rolex, used rolexes are still going for more than rolex is because if you want anyone you have to get in line, you have to know an authorized dealer and wait for months to get it. the head of fixed income research at strategic joins us -- joins us now. we are happy to have him here with us especially on such an

important day for fixed income. what are you watching and listening for from jay powell? tom: i don't envy jerome powell. no matter what he does the markets will move. if he suggests there is more work to be done which i think is what he will suggest, then you will see likely the treasury curve moves higher, risk assets wobble in particular, discretionary spending sectors. if he comes out and somehow suggests we are coming to an end of the tightening cycle and we ca light of the end of the tunnel, he everything except the u.s. dollar is going to rip higher area that is a problem in and of itself because that means easing financial conditions when it is clear to us we are not getting close to the end of the tunnel, we are at a point where inflation is getting sticky and could easily wreak celery, especially when you see crude higher and wages continuing to remain 4.5 to 5%. no matter what he does, the market will move. my hunch says he will side

toward the hawkish side and say we have more work to be done which we know for the most part but he will leave it open-ended what that means. in particular what that means rate hikes could happen, they are probably done but there could be more, but balance she reduction will continue indefinitely. lisa: i'm watching the wages picture also closely because wearing about student loans coming back we have seen unions gain a lot of ground starting with deare and ups, getting $170,000 per year including benefits and now the uaw is going to negotiate -- renegotiate contracts with gm and others and that will be absolutely fascinating. where do you see the 10 year yield in this case? we are up above for 30 at the beginning of the week, the highest level since 2007 which i thought was absolutely fascinating, higher than the great financial crisis and we

heard larry summers told david weston a couple weeks ago he thinks for 75 will be the decade average going forward. that is pretty high. damian: let me put it this way, i'm surprised the 10 year hit a new high this year. not because i don't believe the fundamental support it but i believe and still believe -- believed and still believe that we will have a reversal lower, a recession before the next cycle high in the next cycle. with that said, the second wave of inflation has already started. we have wages rising and we have wage inertia in the pipeline for years to come so that tells us the second wave of inflation is six months to 24 months away at most. eventually tends should go up to those levels larry summers is speaking about, 475% -- 4.75% of 5%. consistent with nominal growth around there. the question is do we have a

recession before getting there? that is there oh question mark. there comes down to when does the consumer pullback? do they pull back and stop spending spontaneously or do we have to see credit cracks emerged to force the consumer to pullback? damian: if you assume the consumer will not pullback, then absolutely it is higher on the tenure yield until we had the recession. somewhere around 475 -- 4.75% to 5% is reasonable. damian: let's say that's by 2025, will that be driven by breakeven's or real yields? tom: both. real yields need to move higher so let's focus on tenure breakeven's. somewhere around 3% seems to be a logical level because, one, that is where inflation is sticky, two, wages are sticky above 3%, and there is a good chance in the next two to three years the fed pivots to a 2% to 3% target.

so 50 basis point rise in breakeven's are reasonable. not a huge move attack at 22 475 time. with a move in breakeven's, real nields need to probably rise a little bit if not then monetary policy is loose and you can have an even bigger move in inflation so both. -- that is a safe haven for most investors. that outperform in the short run is specially if the fed only gets a few rate cut skin along the way. the rate cut comes down 3.5 44%. that is not much of the movie. and contrast, let's say we have a recession. we go up to 5%. you're talking about 12 sent or

15% loss in tends. we will have another round of duration losses. damian: and probably spread whitening off of that as well. -- widening off of that as well. >> yes and the point is you may have a recession before we have a second wave of inflation. i believe the recession will come, but that is what we are expecting with long-duration. matt: yesterday we spoke with michael darden with mkm he said junk is insanely expensive. those were his words. if you start to see defaults at a higher rate, isn't that likely? especially if the consumer is delinquent on loan and the student debt payments come back. isn't it likely that mower -- more companies will default?

it's very likely. in the last two credit cycles, in the bank space we have not a clearing of the rot in the junk space. you see average default around two-3% when typically they are averaging at four sent. at some white in time we will have a decade -- at some point in time we will have a decade high default rate. if you have 3% default rate, that is slightly higher than what we averaged over the last decade. high-yield is not too rich. -- the important thing is that we are not seeing a need to refinance any of the maturities. much of the maturity is 2025 for high yield.

we are still 6-9 months away from a big pickup from refinancing. when new supply hits, that is where spreads wide in and that is where you see presley -- public credit move to a place where it is not sustainable at a cash point. were not there yet but we will be. damian: we saw the 30 year tips tail yesterday. talk with us about the plumbing of financial markets specifically u.s. treasuries, does that give you a cause for concern? >> absolutely. matt: by the we the -- by the way this is a treasury account. my mom watches this. not everybody knows all this jargon. tom: it seems insane to me that the treasury is finding it cannot come to market without paying up but we expect corporations to indefinitely not

pay up. the treasury is giving us a look at what is to come in the future . supply is no longer going to be easily digested whether you are a treasury or triple see -- ccc . it is no longer t-bills. when the treasury was blasting t-bills into the market from june until august, much of that was coming out of the reverse facility. it was essentially paralyzed liquidity buying new sterilized issuance. that has changed because the treasury cannot continue to finance it self at 5.5%. that is not a logical strategy for the taxpayer. they have to increase their coupons which we see that. and some say when you open that, there is more to come and you have a bigger and bigger concession. the question is do you have a

recession before the supply jumps another leg? if not you will see a build in treasury yield until something snaps. matt: it is great having you in the studio. that is thomas tzitzouris at strategas securities say hello to your coworkers for us. a great group they are we look at the futures rising not substantially about .25%. and a change -- little change in a number of assets except for oil that is up 1.3%. and we join tom, john, and lisa in a jackson hole in about 15 minutes. this is bloomberg. ♪

>> this re-acceleration we put upward pressure on inflation and we stem the disinflation we are seeing. instead, it delays plans for the fed to change policy. matt: former st. louis fed president jim bullard speaking to bloomberg mike mckee yesterday. kicking off our jackson hole coverage. in about 15 minutes, tom, john, and lisa will be live with special coverage throughout the morning. we check on the markets right now, not much going on. and futures are up .25%. the euro stuck at 1.08. the 10 year yield at four .25. and we have a crude oil move. it is up over $80 a barrel.

and we see the global benchmark brand under $85. that is one of the few assets we see moving. i think traders are waiting for jay powell speech. that is 35 minutes after the market opens. maybe then, you will see some volume on this friday. and chief u.s. economist at s&p see -- at smbc nikko securities america is joining us this morning. in terms of what the fed is going to say, you heard jim bullard talk about the reacceleration in the economy and we see estimates from new york to atlanta that are growing 3.8% and 5.8%. the concern is that inflation -- we get the embers turning back into a fire. what are you thinking about the

economy and inflation right now? joseph: if you look at past recessions, it will not -- it is not unusual. for the economy to rollover. we've had it several times where the economy goes into a recession in the quarter or the quarter after we are at 3%. gdp tells us nowhere about where we are going. it will change. where i pushback is the comments, if you look at the good side of the economy, the new york fed has a supply chain pressure index. if you look at import prices from china, both of those suggest a continued ongoing deflation and goods. the goods part of the economy is going to continue to soften, that is number one, and number two, if you look at the ranch, we have a nice rental turnover

index adjusting rent will collapse. it is the notion that inflation will remain sticky. i do not understand where that is coming from. the inflation trend do not go lower every month, but the trend is weaker. if you look at the index indicators, with mortgages, credit cards, personal loans, all of it suggests the consumer is coming under significant duress. damian: you are a fan of the soft landing scenario. i am happy to inform you you are not alone. what will the soft landing look like? will it be shallow or more prominent? joseph: recessions are nonlinear events. in 2008, it was very mild, the services economy you were

looking at someone recovering -- looking at it recovering through the spring many were saying they avoided a downturn. leading indicators were turning up then we had limen. what may have been the most shallow recession ever became a very deep recession. this time around it depends on what the fed does if the economy starts to weekend further. what will the fed do? what will happen on the physical side? the politics will not be good for growth giving the uncertainty and election outcome. that could cause a freeze in business investment outside of hot areas like ai. it will really depend on what happens as we enter this. we cannot say, we cannot say at this point if it will be hard or soft. it will depend on what the policy response is an regulatory response is when it begins. damian: you point out the surge in real yield that markets

witness in 2001 and 2008. when i look back at those years, do we think a correction is upon us? what will that look like? joseph: if you look at three months of yield 5.5%. that is significantly negative. a correction could look like what we saw in 2001 where valuations are totally skewed from what you can earn risk fear -- risk-free in the bond market. when you look at the narrowness of equity performance is suggest that stocks are overvalued. however, if the fed becomes less hawkish, a lower interest rates. most of the rise in real rates that has been due to expectations the fed will not be as aggressive in cutting. it is not a breakeven story. if the fed does cut rates, i worry the fed is going to keep rates too high for too long. that will be a break in the

system. it will be self-sustaining and the fed will not move as quick as it is supposed to. that could cause a deep recession. stocks would be around 3100. matt: i want to ask about your former boss, president biden also both spending money like it grows on trees. i think resident biden but a $1 trillion deficit this year. trump spent $8 trillion. is there anyone that will call for fiscal responsibility or are we all modern monetary theorists now. joseph: no. i did not like the monetary theorists they are, there may be a valid point they are, but what we saw with what you spend for a committee response budget, we had $6 trillion in covid spending and we spent almost how -- all of it.

there does not seem to be any desire in washington right now to be more fiscally responsive. unfortunately i would argue the fact that the fed has the playbook of qa it has given washington on both sides the ability to spend perhaps in the old days where it was not the case. where alan green had a push for 41 access. we push interest rates and that is what has happened. that is a relic of the past. right now, while i argue that mr. trump and mr. biden's policies are very different, there does not seem to be a desire to have a good fiscal out. matt: there's a story out saying that just the interest costs servicing the debt we have will eventually eat up 20% of our tax revenues. when does this become a real problem? when did we see a debt bomb?

joseph: we see a debt bomb because -- very is not really anything that can replace this are for the next few decades. we can binance ourselves, but it depends on the cost. one of the reason the cost has risen is because we have a rise in interest rates. that is in the past 15 months. that is what drives interest costs. the yield curve is massively inverted and it tells us monetary policy is too tight. when the economy goes into a recession, the fed eases and lowers interest costs. that is what we -- and then we see what happens thereafter. matt: good time talking with you. we hope to speak with you soon that is joseph lavorgna at smbc nikko securities america talking about what to expect from jackson hole and the u.s. economy. when we look at markets, we did not see a lot.

i think you will see light volume at the open as well. futures up .2%. no change in euro and crude pouncing up a little bit. and u.s.-backed traders to not really do anything serious until they hear what powell says. damian: bacon egg and cheese, it may be like an early lunch. something light like a salad. matt: i already ate which is why i am 210. but with president trump, is he really 215? i think they meant to 50. did they weigh him on a real nail? damian: probably. matt: i do not believe he is to 15 pounds. that seems made up. i cannot believe they would do that at the fulton county jail in georgia. next a special edition of bloomberg. adam posen joins us from peterson institute of national economics. and them we also go to the

jackson hole conference where we hear from christine lagarde. this is bloomberg. ♪

i don't think you will be inclined to say much about the short-term outlook.