impressive cooling of the labor market through this year. >> we are expecting inflation numbers to continue to come down. >> a part of driving the inflation today is a lack of labor supply. >> i believe the soft landing scenario is the worst case scenario. announcer: this is bloomberg "surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: three day losing streak on the s&p 500, having a little look at day four. live from good -- new york city this morning, good morning. your equity market negative by a quarter of 1% on the s&p 500. president biden touching down in new delhi going into the g20 and last week, -- going over to

china and we got this new huawei. that drops as the president arrives at the g20 in india. tom: someone sent me a video and it showed the store packed. everyone looking at the new toy and the guy turned around and crossed the mall and look at the apple store which was empty. will that mood change at the apple meeting coming up? it is complex. what does it mean for apple, the defense characteristics and all that. it is a toxic brew. jonathan: toxic. two days, apple down 6%. lisa: especially 160 billion dollars of market valuation. a scope of what that kind of loss means. we do not understand exactly what the meaning of this probe

level is. we heard that from u.s. government saying we have to investigate this further. two things, what does it mean for a further sanctions, by the potential u.s. action if it seems like current measures are not working? is this a shift away from china supporting apple despite the fact that employees maser people? -- millions of people? tom: anastasia amoroso who boldly said step in the depths. apple done 8% of dollars. the answer here is it is a correction of a bellwether stock. jonathan: let's wave through it with purpose.

what have we learned the last 48 hours from our reporting at bloomberg? we are starting to see bands at government levels and potentially to state firms. do you think there's a difference between what the communist party think is good for the government and what to come's this party is think other people? i ask is not that i think we get a ban from apple soon across the whole country, it is not what i'm suggesting, i am suggest we are talking become the state that has made the decision something is not good for employees of the government. why do you think there'll be a big difference between what they think is good for the government and good for the people in a communist country? tom: i read every word of mark gurman published last night, i put it out on twitter. he said exactly what you said and that he alluded to where it becomes not cool. going back to mr. jobs and is a static of apple --

aesthetic of apple, that is the big fear, the toys are not cool. jonathan: totally on the same page. the mood to salver going into the launch next week. that's a bit softer. yields unchanged here. on the euro a little look at 1.06. against the dollar right now about unchanged. 1.0703. lisa: regard to see president biden head to new delhi ahead of the g20 meeting. i bilateral meeting at 10:05 a.m. is there some sort of deal to encourage production to move to india? today fed speak and including fed vice chair michael barr at 9:00 a.m., san francisco

fed president mary daly at 11:00 a.m. how do they frame nuance at a time when anything that is not hawkish viewed as edifying idea of cuts and holding and supporting rallies in the market? today, economic data light including household change network and consumer credit at 3:00 p.m. when the link was these are starting to creep up. -- delicacies are starting to creep up. retailer starting to see people failed to pay their bills. tom: that is a great chart. on video, your wonderful chart, we are not back yet to pre-pandemic delicacies. jonathan: you're in a good mood this morning. tom: i am a good mood. the kids are back in school. jonathan: you're nice to lisa. tom: we had a great panic yesterday. jonathan: monetary policy is in

a good place i am told by the new york fed president. jonathan stubbs, equity strategist joins us now. forgive me for the soundtrack, equity stretch expensive and narrow. that was you the last few weeks or so, if you believe they are stretched come expensive, or narrow mr right right? guess you're not buying the first sign of a call back? >> i think you have to be brave and have good purpose and reason to do so. surging liquidity around the world. you have to back a strong recovery in earnings next year. we think there is more downside risk as we go through the next few months. we are underweight technology for a number of reasons, not least u.s. tech sector trading above 60% relative to global equities and when that is happened your median return on

u.s. tech -20% relative versus global equities. the tables look stacked against global equities, u.s. in particular in tech. tom: how do you interpret the phrase a correction? it seems we almost forgotten what a correction is, how much a correction is, and how we should behave given a correction. have we lost our path they are? >> i think we lost our path in many ways. we are in a brave new world. there is lots of shifting sands. pretty much every investment decision has geopolitics involved. we have always seen a pullback 5% may be more in correction, 10% and beyond that you're in bear market territory. these markets could be right for a pullback and maybe more than that. to turn it around and to be

constructive on equities you need to back a liquidity search going into next year and a bellicose from a macro shot which is negative first back and return to strong earnings and one issue i have with that is all economist expecting a number of gdp growth in major economy not to accelerate into next year but to slow by over georgia basis points. -- slow by over 200 basis points. liquidity earnings are not they are in my view to support this strong move up and i think we have risk stewing markets to the downside to the next quarter. lisa: i want to touch on which you mentioned with geopolitics becoming a part of a conversation. how are you characterizing that in risk models, quantitative terms? >> i think it is challenging. we've had market backdrop for 40 years since the early 1980's

which has been globalization and global economy getting closer to the once just in time. variety of forces changing that so we appear to have this visible conflict between the west and global south expanding and that comes into every investment decision. it is driving the apple forms of tech this year because it is forcing the chips act on your side of the pond, fiscal policy to underpin growth, it is driving every element of what we think about. how do you hedge -- i think we bring it into our thinking in terms of risk. right now, we'll relate our models -- we overlay our models and we see an attractive trade and portfolio skewed and geopolitics is a part of that.

energy intake had broken away from 10 year treasuries the last six months. energy gets for the support in the months ahead. lisa: there's a tension between the why behind energy. it could be tighter global growth which supports more support backdrops didn't want you betrayed heading into early next year certainly for earnings and -- portrayed heading into early next year certainly for earnings and gdp. on the other end it could be geopolitics that because the rise. which is it? fueling your bet on energy? >> we bring fundamentals in here because if i am looking at five because european energy names or some of the u.s. energy names, the five biggest european ones are close to net cash so balance sheets are super solid. the average free cash flow the five biggest is 15%. these are incredible machines.

they happen to be called energy stocks. if they get some support from geopolitical dynamic shifting or prices in macro, they are set to perform, they are cheap, they look cheap against industrials, against tech. at the time were markets are stretched it is a good place for investors to raise exposure. tom: the heart of the matter you brilliantly said four questions ago we got a nominal gdp challenge to the top line. how do you bring that over to the risk to free cash flow? how do you get from reduce nominal gdp over to a free cash flow study for 2025? >> i think this -- it is been one of my hand breaks as i've gone through this year. if you look at top line group sales growth in u.s., 21, 22

double digit may be higher post-covid come your more so and this year topline growth slowing to nothing. and of this expecting topline growth to accelerate into next year. economist expecting that topline to slow significantly. in every u.s. recovery we have seen a five percentage point positive delta in nominal growth and as we go into next year, nominal the growth in u.s. expected to fold by more than 2%, i think there are challenges for earnings. that makes it tough to look at markets today and to really put significant way on upside risk into next year. some industries better positioned. some have better cash flow pushes but you bring tech back to this. the first time in 15 years the technology sector does not offer investors a free cash flow premium little to risk.

-- relative to risk. net the first time we've been there in 15 years. jonathan: jonathan stubbs, game changer. thank you. quite difficult two date loss of more than 6%. on my iphone, software update visible tonight. you know what that means, operation slow down going into the new lunch. lisa: i always delay it. tom: that is rumored. they do that. lisa: it was reported. this is just another think that is made of but no it was can -- it was true they had lawsuits about slowing down the operation system. i do not like the whole new interface. jonathan: i'm not sure they're doing it anymore just for

the record. shout out to coco golf. can we do that? tom: they are at like 1:00 a.m. it goes forever. jonathan: i cannot believe she is still 19. just amazing. congratulations. it is good to be a great weekend for tennis from new york city. good morning. ♪

>> see china's growth as slowing over time. that china has quite a bit of policy space to address these challenges so we are monitoring the situation. i do not see it as having very significant, direct impacts on the united states. jonathan: that was treasury secretary janet yellen speaking

in new delhi. the president touching down in detonation for the g20. from new york city this morning, good morning. equity futures on the s&p 500 negative here. apple is where the pain has been, down just a touch. no real drama there. in the bond market, yields basically unchanged. in the fx market, nothing about this dollar is unchanged. eight consecutive weeks of dollar strength and the euro thinking to 1.07. tom: looking across equities, bonds, currencies, i take your point foreign-exchange is where i want to look. on a boring friday, it is not because i have dxy at one 05 -- 105.

yesterday our panel here at the bloomberg, the dollar call is the indicator of these dynamics we have in q4. jonathan: there is a split going into the ecb next week. a bloomberg survey shows almost even split for those anticipating a 10th the second of hike and it doesn't is ready a hawkish pause. right down the middle. tom: we are in a good place. jonathan: i'm not sure anyone in the ecb can say we are in a good place. tom: a good place is u.s., there is symbolism for air force one to land in germany date refueled to india and he will land at 9:00 hour? jonathan: 9:25 eastern time. tom: we are so advantage in india to have menaka doshi a

bloomberg, really experience on the fabric. thank you so much for joining us this morning. what will that meeting be of president biden scheduled for today? there will be 10 miles and the greeting. what will be the underlying tension and topic of the meeting? menaka: i imagine the first thing they will talk about is china and china's no-show in india and by that i mean the absence of chinese president xi jinping. they will talk about both the optics of that and the politics of that and how that will impact many of the issues both leaders hoping to bring to consensus at this meeting. prime minister modi had a very successful visit to the u.s., not a long time ago. this is the fourth visit i

believe for treasury secretary janet yellen to india in just this calendar year and the year is not over. i suspect a second point they will talk about is the struggling relationship between the two countries, despite the differences they have. for instance, on the russia ukraine war. tom: on the war in ukraine, a tension point might be india's relationship with putin. rumor has it putin would not be in attendance. what would you presume the way biden or modi approach the delicacies of russia and the war? menaka: india has walked a fine line through the course of the last two years as of war has unfolded. wanting to be able to protect its national geopolitical and commercial interests.

the indian government -- wanted to buy discounted prices because the higher prices we saw, which have come back over the last few weeks, debilitating to india that relies on imported crude. the balancing of commercial interests with the geopolitical requirements of the g7 nations who have wanted india to denounce the war in ukraine, but the government refused to use harsh words and offered instead to mediate between the two countries, will also be a topic of conversation as the two leaders meet this evening. it is delicate but they have traveled this distance before and they do it again this evening. lisa: how much with the indian government and business leaders petition u.s. to become the number one producer, taking the place of china? we are seeing this with apple in the forefront and reports they are shifting some production to india.

how much are indian leaders going to be active in their recruitment of this? menaka: they're going to be very active. i suspect this is the one area there'll be no differences between the two sides. many u.s. corporations are keen to diversify their supply chain. the china plus one strategy and india is very keen to benefit from that. you cited the apple example and i think both governments are working to see if there are other such opportunities the u.s. corporations and indian government can -- let's not forget g20 summit precursor of sort for prime minister modi who will seek reelection next year for the third time and he hopes to win. he wants to come out of this summit looking strong, not just from the point of view of bringing all these global leaders together, but bagging key decisions that benefit the economy. this is the world's most

populous country growing at the fastest rate of any large economy but we need jobs and for that we need manufacturing and i suspect prime minister modi hopes to end of the summit with some key announcements to that effect. jonathan: going into the g20 within absence president xi jinping. lester apple into the conversation. this came from citi earlier, constructive on the stock, this quote, china about 20% of total iphones but however india with 1.5 billion population around 5% middle-class is the bigger incremental opportunity for apple. how quickly the bullish view changes. tom: it has been there for my lifetime. it is not it has been an enigma but it is like when every going.

i read reports that state what is the catalyst. may be the catalyst in and yet the people hope for is not from india but from china missing it up maybe we are seeing. jonathan: the latest on china and the new huawei. this is what the team over at citi had to say. they believe the technology is still three years behind iphone with limited production capacity. two points there i think are important. the technology and the production capacity. can they meet the demand in china to rifle would apple it might produce over there with the unveiling the new iphone in one weeks time? tom: i think it's critical for the hope of american manufacturing as well. we've had these dreams of rekindling manufacturing but we do we had the labor component to get that done. lisa: it is says may be is not there yet but to both of your points earlier, there is a major sentiment shift.

it is been six months since tim cook came out and said he is a symbiotic relationship with china. it is not looking so symbiotic now. it is looking different. basically the one he shot until china's get technology to compete with apple. apple may be move more of your production elsewhere and try to tap into the growth areas in other places. tom: or 8% correction here. if you believe they would do something september 12 like selling more iphones. i'm saying what am i missing. there is this asteria out there. i get it. how many times have i heard this? with apple? jonathan: we mentioned tim cook. he has been phenomenal at navigating tension between u.s. and china without getting in too

much trouble, if apple is in the crosshairs, what about everybody else? if apple is finding themselves in trouble and tim cook has done a phenomenal job at navigating this, what about everyone else? tom: my single determinant to china is foreign direct investment into china. that is the barometer for me. jonathan: steve major of hsbc up next. from new york city, this is bloomberg. ♪ ♪ explore endless design possibilities. to find your personal style.

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jonathan: i think we are tempted to break the heat wave in new york city. is it breaking later today? tom: i think we break it today. jonathan: so sticky. humidity september. tom: it is the way off of a horrific summer in america like in europe. jonathan: there is your weather check. on the s&p we down about a 10th of 1%. it's a few days for the s&p 500. three day loss, about to become for if this is anything to go by. apple is where the pain has been. the stock down more than 6%. tom: mark gurman publishing

definitive on apple. jonathan: to the bond market. 10 year, 4.2423. yields unchanged. conflict in the data. much better ism and a look at the end of the stuff, it screams slow down. the question we have asked the last week or so, how much weed should you put on each data point? that is bonds. two year, 4.94. tom: we are in a good place. he is saying we are there. jonathan: quiet period kicks off tomorrow. no more fed speak. i want to finish with foreign exchange. it consecutive weeks of dollar strength. euro holding onto 1.07, just

about positive here by 0.05%. tom: it makes lisa strips -- stronger dollar, she travels around -- it makes lisa's trips. the stronger dollar, she travels around the world. jonathan: -- tom: no one in america with associates -- celsius. jonathan: would you like to be fahrenheit? 90's to 60's. china u.s. tensions building in g20 meeting, u.s. saying it to again the probe into the c

hips in china tech company debuts new powerful phone. i'm not sure this to coincide with g20 or to coincide with the unveiling of the new iphone next week but the timing of this stuff has been phenomenal. tom: they are a government company. are they state owned enterprise? i do not know. we had a balloon flying over america but the place the linkage for the cell phone over to our fears of a balloon over montana. lisa: it raises questions for president biden. are the restrictions on chip exports working? are they doing anything? will this foster a harder line in washington? what is a do heading to the election on that front? it presents an awkward scene for him but of the upper front, they want to say we can compete and population, who is the audience of this? is it u.s. or is it a domestic audience to rally the troops and say let's get behind this new china made phone?

jonathan: apple in the premarket just about positive. gas prices rising as workers at shiraz show you implant begins striking today. the impact operations account for 7% global energy supply last year. this is sparking a move in european gas prices. tom: we are learning about it. i've been doing seminars for almost 40 years. lng dominate and we are learning about the geopolitics of this and maybe the one price of lng. jonathan: i promise and end of the weather check but more weather for you. hong kong canceling trading today as the citi hit with the heaviest rain storm on record. the pictures out of hong kong. in new york city we are hoping we did not see scenes like this as hurricane lee strengthens to a category five storm in the

caribbean. lisa: we were looking at these images at home and i said these look like some of the army getting pictures of climate change what happens -- armageddon pictures of climate change of what happens when you see rivers going past second floor buildings in honk honk. tom: surveillance bonus. jonathan: bonus rounds? tom: steve major. let's consider north macedonia, italy again. jonathan: let's not. tom: another macedonia scoring fleet a few years ago -- late a few years ago. how will italy proceed today? jonathan: the new coach. tom: they have to be fired up. jonathan: i hope they are fired

up because it was dreadful. bonus round? that is not a bonus round. lisa: it is the opposite. jonathan: i feel like they -- i have been trol led. tom: i have to watch north macedonia, italy. rooting for italy tomorrow. jonathan: i'm not going to be watching that. i am glad to say steve major joins us now. were going to talk about this bond market. you are bullish. what you think the bears have got wrong about the outlook for the bond market in america? steve: where to start. i think the list is getting longer and longer. i look at valuations absolute and relative valuations, treasury stand out. most of my colleagues have reined in their enthusiasms

because it is not attractive. i define the single em rate markets i want to buy right now, much of the total returns come through fx anyway. credit is tight. treasuries standing out versus equities. at some stage, people will start moving from bills into bonds because they have to start thinking about opportunity cost. i will tell you i think yields today, 10 year yield 100 basis points higher than the police summer, same level as they were october 22. since then the fed has high by 250 basis points. something is going on to contain that 10 year yield. i think it is difficult to say. i look at it and think it is a symmetric. i be nothing much happens and we go sideways for a bit but they

will move down and a lot. tom: you and hsbc hired wired into the china slow down and a knowledge of china and dynamic of gdp. if we get some form of new diminished chinese economic growth, is that a disinflationar y that drives yields lower, fix income prices up? steve: quite possibly, yes. it is not good for many markets. the em tends to like a song dollar, strong china -- soft dollar, strong china. it has the opposite now. it could be through capital flows. it could be through trade and therefore gdp. it could be through some form of contagion, some financial stability incident. the list is long. it seems already there's some

evidence. what the problem i see maker will say what is happening? -- what a policymaker will say what is happening? i think already you have a big gap between the yield levels offered by china and many other markets compared to u.s. and that is think i am focusing on at the moment. it is difficult to determine to what exactly what the process will be but i think it matters. lisa: how do you understand why we have not seen yields goal over? why they seem so sticky and with economic data surprising to the upside? steve: we just completed the most aggressive tightening phase in four decades. it looks like momentum of the tightening is fading. i think we are entering an important period where there is probably going to be a handoff from the focus on inflation onto

the real economy data. is going to be a slow process. but -- yields probably go sideways for now but when they make the next big move it is unlucky to be up. the next big move is likely to be down so you're better to be long. lisa: are you saying there is because for some sort of systemic event and you see one on the horizon versus the upside growth surprises we have been seeing which is led people to say the asymmetry because of the other side? growth connection can reignite? steve: gdp now is notorious volatile series. the smart people i believe recognize the r-star unchanged from before the pandemic so the policy rate is more than double

what the librium rate is going to be. -- bucha librium rate is going to be. it seems to be we are close to the peak in the cycle. tom: how do you place a bet here a year or two? what is the major strategy to the price up, yield down? steve: that is the key question. i've got more accountable without right long on 10 year plus, rather than to play anything fancy with the curve, if you stop buying two verses tends, you have too much kerry to overcome. the strategy take induration over yield curve. tom: i cannot say how important that is to see a bullish approach from a major bank. you do not see that every day.

major just said shut up and buy it. jonathan: is a similar story or is it different? steve: u.k. might be leading things today at least. it happens occasionally. i think for every hundred days, maybe there is 5-10 days were u.k. and eurozone can pull the u.s. around it. today might have been one of the u.k. got a life in it and seems u.k. could be the peak, data supporting that. it is all connected. i think the moment the relative value between treasuries and guilds favorite treasuries just as spread series of the markets. that is what struck me. that relative argument. jonathan: top four.

what to do to get a call up for the national team, west ham? steve: surely you must be on the list. -- surely he must be on the list. he has been a joy to watch. tom: i read the press on this. you are vicious as you guys are vicious over there. jonathan: the tabloids, the sports pages. steve, thank you for the update. a symmetric story around the 10 year bond and what he thinks yields are going to fall and the treasury market is going to rally. tom: i cannot say enough about a guy like that on a major bank saying shut up and bite the -- buy the point. versus a lot of spread talk and barbell. lisa: he said something in there that was important. he said smart people see r-star

going back to where it used to be and there is huge disagreement on that i am a curious to hear where the smart people are on that majorly. jonathan: he sounded happy. just got a note from deutsche about the ecb, they call it an uncertain pause and say real possibility of further hikes and later bought. later bought. ♪

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>> i am grateful to say we have seen inflation come down. i felt like we are in restricted space now and we need to let that restriction play out. let it bring inflation down to get back into the range of our target and we can do that that would be a good thing. jonathan: sounds like patient from the atlanta fed president echoing what we heard from the new york fed president.

it looks like rate hikes are on ice to the federal reserve meeting two weeks from now and into the quiet period starting this weekend. tom: we are in a good place which is important. the good place for us as you say quiet period starts tomorrow. that is very good. bostic gdp now . straight quarters of the nation is like really? lisa: atlanta gdp, people who capture the data say it is not account for certain factors and probably bring in significantly down. i was speaking with a number of people doing this on the. if you look at qualitative data,

it is painting a similar picture as quantitative data. things are slowing, but not breaking. what do you do with that? how do you nuance message at a time when there is not a clear angle to take? there's not a clear risk. jonathan: speaking to people that conduct the eu -- university of michigan survey? lisa: abba speaking to people close to the fed. jonathan: your friends? trying to work out who bramo has been hanging out with in new york. was this the u.s. open? lisa: i was not at fashion week, were you? jonathan: i was not at fashion week. can we move on. that was a good comeback.

tom: brent crude, $90.43. when you debrief -- we need a brief here. how tenuous is the path from $90 brent to $100 brent? >> i would say mostly stable from here. i did not mean there were not be volatility but i do think the move up has happened. we have been calling for $91 brent in q4 so we are pretty much of their. could we touch $100? of course, we can proceed are we expecting prices to average $100 yet without an outage? no. i think we probably see what you were discussing earlier, things are slowing in the economy. oil demand is very strong.

saudi arabia will keep supplies in check to make sure inventories drop. tom: the move 75 up to 90 demand is not diminished? demand continues, right? amrita: absolutely. $90. i do not think there is change versus 75. i always that you did not get a change until it is about $120. i will highlight the crude has what from $75 to $90. what has moved in some ways the opposite direction are diesel and gasoline even when brent was at 80. what you and i were paying at the pump sometimes higher because of taxes, the state budget per barrel.

now those products are coming off a bit and crude is going up it is a redistribution but the point stands below $120 you do not see an impact on demand. lisa: how much are we seeing growth drive this, u.s. outperformed travel spending seems to be robust. how much that underpinning just the out put cuts we have been talking about from saudi arabia? amrita: we started the year talking about are protesting 1.3 million barrels a day. i've highlighted we know we were on the low end but i thought we come in more 1.6, maybe 1.7. we are tracking 2 million. demand has come in half a million barrels a day higher than expected. refineries have come have a million barrels lower than we expected because we cannot get hold of alternatives once they have lost russian crude.

it is been a real struggle for refineries to meet demand but demand has outperformed. this is been a product lead rally in crude. when crude started rallying a couple months ago, it was products led to be a demand-side story. lisa: are you saying there's a floor for how much prices can go down, even if there is some sort of increase in production on the margins, even if there is a slowdown because of the roadblock that is refining? amrita: absolutely. refining is tightened, margins are tightened, that just means refining margins while they will ease for current crazy levels, remain higher for longer which provides a much more solid flow for oil prices and also why saudi arabia are in a comfortable place very much. situation as if you go in for a long bath on the sunday, that is

the kind of position he is in. he wants to make sure the market does not have too much volatility, it is stable. he wants to keep that going. tom: maybe off -- bloomberg has done wonderful work the last number of days on the rebuild of coal usage in china. has esg taking a step back from the lens of energy aspects, is esg reverted or retreated the last number of months? amrita: i would not say reverted. retreated, yes. i'm in asia right now. futures are a lot less the and used too. even in europe since the russian invasion in ukraine, when people have to pay out for energy, i think a lot of realism kicks in and that is what is happening.

esg remains here. it will not go away. all companies pushing towards a greener future but i think there is a bit more realism now you cannot just move away from fossil fuels overall and the pack needs to incorporate both. tom: the question here and j.p. morgan did some great work. basic idea that e.m., third world, wherever you want to call it, insatiable and demand not budged. is that the case? amrita: that has been our view demand will continue to rise because ultimately, nigerian minister put it well, we are transitioning but away from would oil and gas. for a lot of these countries electricity that a given and that is what they are focused on the. everyone wants to grow and get

wealthier and why and drive around -- and fly and drive around. it is easy for americans and europeans to sit and talk about energy transition when the rest of the world is just starting to grow and have similar affirmations of wealth and growth. jonathan: to true. thank you. marie to their of energy aspects. how do you reconcile the global slope down? it was just crude out to say this i supply story but it is not just crude. tom: totally agree. i look at the bloomberg commodity index. the fact is you are dead on and i wonder what it means for china gdp and the debate. domestic turmoil in china versus

a more economy china which gives you to the gloom of 2% gdp. lisa: leland miller said people are getting over there skis in terms of how terrible things are in china. it is not exactly collapsing. they're still demand. that is really plank out -- playing out. jonathan: brent crude i have a 1%. wti $87. do we know if espn and walt disney sorted off the stuff with spectrum? tom: we do not know but espn plus is critical tomorrow. north macedonia, italy. ♪

is we are expecting inflation levels to come down. i am not sure that we have seen all the pain increasing interest rates will put the economy out. i believe the soft landing scenario is the worst case scenario. this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: three day of losses on the equity market. the federal reserve in a couple of weeks time. the climate has affected assets.

tom: i just want to go back to it i am old school about this. everybody talks too much. jonathan: including us. tom: can we just get a rule? jonathan: live from new york city this morning, good morning. you think it would be better if everyone stopped talking? lisa: no i'm not talking about you. tom: i'm talking about all of the fed leaders. lisa: whether it is a good place or not, there is some value to waiting and that is a marred message -- hard message. we want to price and what is going to happen but there is no

answer. they want to get enough collection data and massaging a certain way because the data is confusing right now. tom: john williams, he nailed it without comment. he brings out the cocktails from a key consultant in williams last night. john said we were in a good place. jonathan: let's talk about the labor market. we use the word like rebalancing the labor market, a weekend labor market thus the objective here. you have a big union, gm, ford, still lantus, they are a .3 right now. you have this ongoing debate where 16% pay raise is not enough.

i am trying to figure out if these debates, these conversations between unions are the dying gasp of the hot labor market or another story of the sticky labor market. lisa: that's a frustration in getting some characterization. there is a soft thing in the labor market. you think walmart creating a new framework to pay differently. they change the framework and starting salaries. they are find because are not paying people as much but in certain industries there is a lot of pressure from the labor market. tom: i think there is a bigger deal than we think. are we going to have an auto strike at midnight september 15?

i think that is not under the radar at that is a week from now. jonathan: and the president's response from the campaign trail. he has said he's the most prone union president in the history of this country but then he would support that strike? tom: he will take the middle ground because there is so much baggage in detroit. jonathan: how can you take middle ground in the middle of that statement? lisa: it's not going to happen. jonathan: the most pre union president. there's a different story goldman that could kickstart later next month. tom: but that's what they do in

september lining up underperformers, 3% of staff, maybe i'm wrong plus/minus one. i wonder how that is unusual? jonathan: equity futures if you're checking in, -0.1%. yields different on the two-year of .07%, the euro, good morning. 1.07. lisa: geopolitics or front and center one thing that's hard to plan around. he has a meeting with pm bodie which is difficult between the difficult tensions between china and the united states. the fed chair is that michael bar 10:00 a.m. and mary daly as

well. we get a change in household credit and the feeling people have of wealth. household net worth at 12 noon and credit at 3:00 p.m. where it should be picking up a little bit but nothing to write home about. jonathan: joining us now is jamie wu silverman. let's start with volatility why do you believe the volatility and we have momentum for a pickup? amy: last time we spoke i said i was reluctant to be the strategist who cried lowball. we just got option prices at decades low in the issue we can stay low for a long time. what is different now and catalyzed higher volatility

because there aren't enough events happening. the autoworker strike, cpi, i think positioning is changed and you've seen that inflection in the markets options. those things can capitalize globally. tom: you talk about the october skew that is out there. what is the attitude in the market? are people gloomy and placing their bets gloomy? amy: that's a great question, the answer is nuanced. months ago, front and center was the fact that there was so much mega cap tech. there was nvidia and apple and essentially what has happened is a lot of

thought has to a weight so when you look at the call sheet portion of the market of the magnificent seven monastic that is bullish and reigned and taken the tailwind out of the market. the positive force field in the market has changed. but that could happen. lisa: when it comes to big tech giants, what we are seeing from apple is is coming at a time when sentiment has been shifting. and there could be a selloff in tech names than was expected a few weeks ago? amy: that's right, i was speaking with the client and initially when you look at the option market a lot of the sphere has been concentrated in china and the fx side and that

has been a flight to safety for mega cap tag. this time around they are not seeing that. perhaps this is apple specific news but in the past few months, because things are not going well from china a lot of tech in china you are not seeing that time around and much more hit and long-duration. tom: what is happening and people an apple within a percent pullback? amy: you see substantial waning in the call skews. the air has been let out of the market and you see that pickup in big tech. we are not seeing the highs yet but it is steadily declining each day as you see the news of what china is doing.

tom: are you loath to vote out apple because the skew has gone negative? amy: one thing we have been talking about politically is we will see the rotation from growth into value because this is a time that it really catalyzes that. this is where your lot of volatility remains contracted which you can play out in two ways. you can use it to be long something like volatility and high heels. jonathan: thank you for the update. amy wu silverman air. the biggest bear on wall street's are no longer the biggest bear on wall street. the bear capitulates. tom: that's a little south of

where we are now. these are all nuances. they reassess, readjust that is what you do. i've been wrong more than i care to admit. jonathan: and we will be wrong in the future as well. >> i think us have been surprised at the resilience of the data in the united states. not just resilience but so much better than anticipated looking at the surprise index. but it is starting to roll over and the other direction. lisa: but not meaningfully in the sudden spike downward. the surprising resilience has raised a lot of questions how restrictive our rates and how much further could things go and people don't know. how is it that the u.s. was able

to withstand 5.75 benchmark breaks without having a significant downturn with all the debt leverage? tom: that's the greatness call in the answer is we made the move for 12 months there is this longer thing, if your longer gear in a good place. jonathan: because no one is paying it. it depends on what the rate is. if you're in a home now with the 6.3 mortgages, if you're in the company that deals with date you have to wait where you start to see it by potentially further and potential refinancing at 5%. tom: in labor, we are 18 months into it. jonathan: equities right now, negative by 0.1%.

a big debate in detroit, the detroit three facing down uaw and potentially get into a strike a week away. tom: wall street will walk away, olivia waxman does a brilliant said that. the deal was in the fabric of the 60's when you begin to get aware of economics. 1958 was brutal. the leader of the uaw was pregnant it ended 1958, there was a hugely long strike from plumbing right now it's

only 10% union about that it was 35%. jonathan: there is a final draft we could get from the ub 20. gordon brown, michael spence, the permit crisis. what a timely release of that publication later on. later on we will have richard bernstein, this is bloomberg. ♪

it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david. connect with an advisor to create your personalized plan. let's find the right investments for your goals okay, great. j.p. morgan wealth management.

>> china has made decisions over the past years that have made it more difficult not just for canada for other countries, to engage in 2015 conversations we had was about working on a trade deal with china. but in real terms, the choices

and the actions of china have made them more difficult. jonathan: that was justin trudeau speaking to you eric chapter on china going into the g20. the president is touching down in new delhi, india. according to a person familiar, with the final draft of the communique leaders of the group of 20 nations will warn of the cascading crisis and challenges to economic growth while calling for a coordinated macroeconomic response. how much coordination can we expect. tom: how many people came up with that statement beforehand. i stayed in canada once where john snow at the g20 i remember the world was electric, will we get that in india? lisa: you have g20

correspondence where they want to boost competitiveness, tangible on the ground measures the g20 can't come to those agreements to make those strong actions. you raise a good point about the ambiguity in this. jonathan: i will not even make an attempt. with fashion week in soho and food. i just couldn't let it go. tom: saving the program is our washington dc correspondent annmarie hordern. i believe the president will return from india next week and return to the union strike.

i am fascinated with your reporting on the union tone inside the beltway? it has to be so different from 1958 or what biden knew was a senator. annmarie: he wants to be a tremendous amount of time i can't keep up but he wants to be the most pro-union president in history. he also has multiple goals. he has climate and he has to choose where he wants to lean into. is it the environment, or is it the labor union? what we are seeing right now we could see a strike as soon as

next week. the contract is ending and the language coming from the uae, let me read you this. after refusing to bargain in good faith for six weeks only after having federal labral charges against them. gm came back with a counter with the consulting proposal and gm does not care to make the necessary adjustment in the clock is ticking. that is the level of acrimony within this exchange happening now. and kind of like when the president went to the gc, he's facing this issues in india. tom: is he really pro union?

is america pro union? annmarie: it depends on where you live and who you ask. this is also happening is been a hot labor summer. workers really want to demand more from their employers. we don't have writers and actors on strike in california, we have flight attendants after the pilots were able to strike a good deal. as you go to the south with the right to work laws, you will not see prolabor individuals. it is right to work culture. it depends on where you are and who you ask. from john's point, the number of people who are part of unions has dropped dramatically then what we saw in the 1970's. jonathan: it is easy to say your

pro union when labor union participation is so low. time and time again that he believes he is the most pro union president, should he not be striking with them? annmarie: i don't think you will see the president go to detroit enjoyed a a picket line but he will use his bully pulpit. he has tried to work between these big three and union individual. a statement came out about these negotiations and the potential of a strike so when he said the uae can strike because clearly they are worried. they are worried there will be a strike, what is the impact on

the economy? what has that on the cars being built based on the fact they have been catching up since the pandemic and their inability to get supplies? what does this mean for his green agenda? jonathan: we have an acting labor secretary and a president who looks like he has a cozy relationship with mary barra from gm. >> i'm sure the labor department is involved but with marty walsh and no confirmation of the acting individual, jean sterling has been the person involved with both the big three and the uaw. lisa: real quickly, i want to finish up the last question

where you mentioned you are in washington dc, not in new delhi because there is negotiation with the rest the government is showing up. an important thing to be focused on, what are the chances that they will reach an agreement? >> depending on who you talk to, until you see with the lobbyists are talking about, we had a package from new york yesterday. people are seeing this potential. what i would watch for is the house and senate, we want a sub supplemental bill included in the bill that will keep the government functioning what you see from house republicans is mccarthy wants to siphon

off ukraine aid because democrats are controversial on the border and asylum seekers. it will be a huge fight not only between democrats and republicans but also between the house and senate and that will be a labyrinth for speaker mccarthy. jonathan: our chief washington correspondent on the latest relations in detroit between the big three and uae. next week, with the wages of the table i don't see it getting done. tom: will you get the labor group back to the competition they had in another time and place. they changed it during the bankruptcy crisis and will it change back? lisa: your right to ask about

president biden is he want to be big business or per worker? tom: his approval numbers are down. lisa: but that's not because of labor markets. jonathan: we have earl davis from bmo coming up. this is bloomberg. ♪ ♪ is it possible to fall in love with your home... ...before you even step inside?

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jonathan: my from new york city equities pulling back. three days straight on the s&p. over three days not even 1.5%. a lot of people looking at apple, a two day loss of more than 6%. there is a big unveiling of the iphone 15 and today they are down by 0.4%. two year, 10 year and 30 year are unchanged. two year 4.94. they are going absolutely nowhere. foreign exchange nothing his move for eight weeks of dollar strength. a breakdown from one .072 1.0

698 on the euro against the dollar. tom: this has been no giveback under 1.07. jonathan: there is pushback from japan and china trying to push back. you wonder if you see some signs of giving up that effort. in the euro with an inflation problem, the growth story is getting worse. the ecb is next week. it is in such a tough spot with president christine lagarde. tom: the german data, wow. let's raise rates, and affected

even more? jonathan: manufacturing is already buried. united autoworkers rejecting an offer ahead of the strike. they are asking for a 15% pay raise and a 56% hike for new employees. the offer comes short of the 46% raise. ford announced its boosting wages for 8000 audi workers. tom: i wonder what happens with the strike do they strike five days, 10 days, no big deal. in 1958, i wonder what duration of the team is there? lisa: did they miss them both? the bigger question about the mood shift in the labor market and one of the anecdotes there

is quite a bit of softening in the labor market and people are not getting hired as quickly and they are quitting frequently. tom: the lion's upset the chiefs and they got a win. jonathan: i thought they were terrible. lisa: how did the uaw argument turn into detroit lions? tom: oh come on, is detroit. jonathan: i thought about that before we came on the air oh detroit actually won. more job cuts coming to goldman sachs. the firm expecting underperformers go as soon as october and 01-5% cut.

they are out to reduce 3200 position but not random cuts. i know what you are about to say. tom: it is a normal calendar item. you have bo night in february and you paid the top 10 people more money than god. lisa: at a certain point, that part of the issue he was talking about he didn't even recognize -- tom: sabre is just brutal. jonathan: wrapping up the fed

speak ahead of the december meeting. skipping does not imply stopping. in new york, the fed president john williams telling mike mckee that the policy is in a good place. tom: we have three quotes lined up. it really shows the nuances that are out there. i will not pick one over another because they all have their own character and positioning whether it's hawkish or toughest. jonathan: it's time to think about the longer piece of this and move from the high part of it. we mention that with the chicago fed. there is a conversation already taking place. are they sufficiently constructive? how long do we need to stay

here? tom: at the heart of the matter, it's great to have him here with us, we have earl davis with the hair knowledge with bmo, i love the pedigree, it is your fault the maple leafs are terrible. you have been on the investment side of debt in working with bmo asset management in your code here is longer. we will be longer, longer. how much longer is longer? earl: i think they will be longer until 2025. i don't see any cuts anytime soon. they are telling us that we have to believe them and if you see the economic numbers they are

resilient. there is still excess demand for workers, is still positive. the question is not whether things are declining but whether there declining fast enough? i believe the secondary data is telling us know. they will not hike too much more because they have to wait to see cumulative effects and hold on for longer. tom: accumulated across 2020 42 4, to 2025, how does fixed income react? earl: we don't believe they will hike make sure we believe they will hold. in that environment the longer end of the curve starts to feel the inflation and that comes through the markets. two things have to happen, the market is even from dumping bonds.

that has to work itself out and that means higher yields across the board. we believe people are scared of the uaw negotiation because was see there is a 25% and wages that will not be felt immediately but it will be felt six months from now when car prices go up. we believe that we are in the wage price spiral. you saw that with pilots, ups. it will affect inflation until people pay with that increased paycheck. we don't believe we will see that until late 2024. lisa: we talk about long and variable lags and there's a

disagreement if they have already impacted the economy are yet to come. aside from the treasury market, when you take a look at credit are you seeing companies being able to absorb the higher rates and debt sales -- and debt sales or will that bite them? earl: let's look at the 10 year bond, the issue corporate credit and it stays above 10 year yields. they are still burning a positive return. before costing is much as people think, especially those who issued and still have 5, 6, 7, 8 years left. the reason we see the resilience of the market is no earning

compression and that is something that has to change from inflation to come down. lisa: if you have a wage price spiral are we on the cusp of a re-acceleration of the economy that people are not foreseeing in this low, soft landing is not an accurate for trail? earl: it depends. it depends on the fomc reaction is. it will be difficult to hike in 2024 because of the election. i know they are independent so it does not impact popular opinion when they talk about hiking with things are turning. depending on the action of the fed, if it needs to read counter the accumulative effects they will see ongoing volatility in

the bond market. jonathan: they are independent but, i struggle with that word. they are either independent or they are not. earl: they are independent but politicians, congress, senate, they are independent now but they could with the ongoing mandate it is something that could change. jonathan: you think that's something that could change? earl: that is in the cards. that has to be taken into account. let me rephrase that, i am a fixed income trader. when the fomc makes a decision they have to look at the impact not just immediately but and the next coming years.

part of that calculus is in there so you have to see there is longevity and what you day. and that's the game theory of monetary policy and that is how we put our risk on. jonathan: that's fascinating. thank you for the explanation. earl davis from primo management. -- bmo management. tom: that was an outlier call at least. jonathan: we have a negative yields by 0.2%. the fomc will skip hiking and deliver one final point to five point hike it all depends on core inflation picking up in august and september and labor markets remain tight. if that's the case they believe

there is one word that comes in november. tom: john williams is in a good place and data dependent. lisa: we are clearly in a place where they are on hold whether they raise one or two more times does that that much of a difference? what are the criteria to shift away and start cutting? we still don't have any since. we have john williams view of things. how do you game beyond that which is what these blue points are trying to do? jonathan: it is counterproductive to talk about because there is still effort to bring inflation down. if you talk about it you could get loosening up financial

condition so they don't want to do that. in the market and so what if. tom: who is the hottest team in baseball? the dreaded new york yankees are the hottest team in baseball. they are on a tear. jonathan: from new york, this is bloomberg. ♪ .

j.p. morgan wealth management knows it's easy to get lost in investment research.

get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app. right now, i think things are moving in the right direction. we have policy in place but we need to watch developments and that's what we need to do. we have to watch the data and analyze that and ask ourselves the question do we need to raise rates again? jonathan: michael mckee is

sitting down with john williams, where and a good place tk. tom: this comment on data dependency and next week it's a big week attached to the ppi and cpi. jonathan: next week and then the federal reserve after that. we bring up apple stock over the past couple of days. today losing streak down more than 6% over the last two days. after the story of china banning iphones and state firms as well. that's by 3%. while way having some competition - huawei having

competition. tom: we have mr. webb, alex webb is a student of all this technology out of london. does hallway have an ecosystem - hauwie have an eco system? >> when we think about china and ecosystems.

they use wechat and super apt platforms. it is easier to pull yourself out of an iphone and going to an android where are most widely found is ios and apple. tom: what will apple do? we've had a lot of speculation about how they will respond. you know the people. how will the apple management respond? >> they issued a profit warning and all of a sudden started writing off apple. and now, $3 trillion valuation. they will say don't worry about this it is a small term blip. they had a slip when there was a resurgent of purchasing and china where they were being encouraged to buy china made

devices, followed by chinese companies and apple had a bit of a head for a quarter or two. they have the long view on this stuff. jonathan: there's a conversation we had for apple and pick her. they have navigated that tension between u.s. and china without upsetting either side. i been thinking about everyone else, is there any other phone bigger than apple in china? >> you mean in terms of exposure? the whole apple supply chain. these people like qualcomm who have taken a bit of a head of a cup consequence of this.

tim cook is a good figure to have, he needs access for manufacturing and a market because they make all the devices and they are the second biggest market. apple needs china but china benefits for having that relationship with apple because they're able to argue the case that they don't carry out the existence of sanctions that you would want them to. lisa: i think tim cook has a more free leash as we go over to india and say let's start ramping up production here? >> yes and no it is taken them 15 years for them to supply an chain in china it doesn't happen overnight. at the same time india is not as

mature a market as china. they do 75-80 billion for china. with only 6 billion in india there is a huge delta there. lisa: when you talk about how did depends on apple's is just casting the several things that the chinese government has done a new ways? the encouragement of state owned phone companies or manufacturers. that was always encouraged with the state. some of these things are be trumped up to push back in the public eye against the u.s.. what is your view? >> we do see a real tit-for-tat

with u.s. manufacturing and the chinese making a response. this feels like a relatively easy thing for them to do. they are looking at 1% of their total unit sales in the region affected by this. does it affect demand in the broader chinese market? it's unclear that will be the case. tom: we didn't have you on this mumbo-jumbo, when they do their product launch is it a big deal that they change the plug into a usb is that earthshaking? >> it is something they're being forced by the european union. that is something around the fringes that makes various differences. tom: it is the most contrived

thing ever, the apple show. the launch. jonathan: it is called wanderlust? tom: do you really care if they're wearing a turtleneck? give us the back story on the show? alex i have very little tolerance for these things. i think you have to remember, most of people in the room are apple employees who make this. people who are quietly typing away on their laptops who are doing our jobs as journalists. tom: were there any genuine surprises? jonathan: why are you looking at me? we have to follow the clock and apparently you have to go. thank you alex, out of london.

tom: they really have to go to the show. jonathan: and deal with this garbage. lisa: i always love it because the employees are laughing and journalists rolling their eyes. jonathan: i mean they just order the new model through a telecoms company in order to devise. is pretty simple. tom: i get the chinese angst thing. they are in turmoil but it always gets fixed. lisa: one thing apple does well is branding and style. that's what they want from the . and then it's a staple so the idea of wanderlust, to create an ad to create the style?

jonathan: you want to go back to fashion in new york? tom: allied your style of frame? -- a lighter frame? jonathan: the battery lasts longer. the camera has changed. lisa: and the charging connector has that usb port. jonathan: whatever. michael barr wears it. he is saying that the lions are strong. that is what detroit is reporting. this is bloomberg. ♪

>> the market is waiting to see a definitive sign. >> we think about potential gdp in the u.s. somewhere between 1.5 and 2%. >> there is so much data which is really contradicting each other. >> it seems the desire is to pause and wait a little bit. >> we need to see a soft landing here without a recession. >> this is bloomberg

surveillance with tom keene jonathan ferro and lisa abramowicz. tom: good morning, everyone on radio and television. we are in a good place on friday. we are resetting for september which is quiet for the fed. the difference of opinions today on the show is extraordinary. steve major, hsbc, lower yields. earl davis, asset management canada, we are going to be longer for longer. jonathan: contradictions in the data and the markets right now. the data is jobless claims the lowest since february and claims are moving lower. never mind that break. at the same time, the ism was strong earlier this week and that conflicts from what we heard from the beige book. china and europe slowdown conflicts with what we see in the commodity market. when you have those kind of contradictions, it's confusing

area for the federal reserve, they will wait and be patient and skip september based on the communication from them so far. a big cpi print next week is not expected to change things. tom: i'm on my way to the november meeting already. we will have an equity conversation coming up. it folds into the stock market that. apple,omg. jonathan: losses of two days going into the unveiling of the iphone 15 next week. competition from huawei potentially and based on reports from the wall street journal and from here that this iphone ban is getting wider from state agencies in china across to maybe state firms as well. tom: yesterday, load the tech

boat. lisa: we were hearing from rbc capital that there was something that preceded the apple noise which is a shift in tone among the traders, people getting less long and less bullish and a little more caution coming into some of the trades we have seen so far. this is a really uncomfortable moment because it feels we are on the precipice of some change but people don't know which way it will break and you see that reflected in the data. tom: which way will it break? i will askjon the same question. it's friday and we are into the season. lisa: there might be a bigger risk that there is a acceleration and things keep going better than expected. we saw this from michael hartnett today. the biggest risk to stocks is not a recession or a

catastrophic event that causes rates to come down. it's that yields remain higher for longer and things keep chugging along and that creates a different valuation for what's out there. tom: we are pleased to have our chief football correspondent. saudi clubs spend eight point did 87% of a trillion zillion dollars on football players in summer frenzy. the saudi's are trying to buy of sports? jonathan: that window just closed in saudi arabia so we don't have the official tally. it could have been more. they were after liverpool and things were being thrown around. that number could have been more but it will not stop there. tom: did the red sox give him a million dollars? jonathan: i'm not sure about

boston sports. tom: $200 million check was written? jonathan: some of the european clubs are unhappy with the disruption coming from the saudi teams, offering up a load of money but the other side is european futbol has had dominance over talent for decades, monopoly on the best players. they are all playing in europe and now we have a different destination available to some of these players. it will be interesting to see what the younger players do. tom: how can they say no? the tall blonde guy in the front, his father's career was ruined by injury. these kids lived this. jonathan: there are players at a younger age in their early 20's who say no to that money.

they are getting huge sums of money. we will see if they go to the saudi's. i like to compare these numbers to the premier league but i don't have those numbers in front of me now. tom: that was your futbol rape port -- report for the day. $1.07 euro-dollar. jonathan: $1.06 in the last hour. dollar strength is the story for the past two months, eight consecutive weeks yields higher in the bond market. equities a touch lower, down by 0.1 percent on the s&p 500. tom: in the first week of the season, we need to recalibrate on the equity markets. you can do that with richard bernstein at richard bernstein advisors.

daniel suzuki joins us this morning. richard bernstein's work is definitive. it's so appropriate right now. how does he navigate the noise and invest in the new age of media and height? help us navigate the noise right now. how do you go along stocks amid all of the 2023 noise? >> that book was written well before the age of twitter and social media so you can imagine the exponential growth in the amount of noise you have out there. i think it behooves investors to come back to brass tacks and fundamentals. what are the prophets doing that you are buying and how much are you paying for those profits and i think people lost sight of that and they invest in stories without a care for the underlying fundamentals. the profit story for many of

these companies out there no matter what sector you talk about is still pretty good. we think it will accelerate from here. i think that is positive but on the negative side, people have no care for how much they are paying for some of these stocks and that's where i think the rubber meets the road. people are paying too much for certain areas of growth and not enough or other areas of growth. you alluded to style investing. as growth starts to accelerate, we think profits will start to accelerate over the next couple of orders and investors will become comparison shoppers and realize there is no need to pay 30 or 40 times four companies where there are other companies that created a fraction of the cost and can grow multiples of their growth rate and i think that's the classic rotation we could see going forward. lisa: are the magnificent seven among those that are too expensive or are they the ones that have the best growth picture going forward? >> from both sides, i think they

are the most expensive part of the market. if you take those sectors out of the market, you are looking at reasonable or very cheap valuations everywhere else in the world in every other sector of the world. that is the one area where things are expensive. does the growth justify those valuations? as i said before, people have gotten so excited about the growth prospects and the expectations are high. i think the growth expectations will get warped by the cyclical areas of the market that are more sensitive to pick up the prophets growth we could see. there is potential risk on both sides. lisa: if there is a pickup in profits, what does that mean in terms of the new neutral rate and what that does to

forward-looking returns? if you have benchmark rates that stay around 4%, doesn't that material change your valuation lower in some of these equity markets? >> absolutely, what you are saying that is that of growth is going to accelerate, demand will pick up and inflation pressures will pick up and that will result in a tighter fed and higher rates and we will have to price that in. in that world, there is certainly an argument that the more expensive stocks will trade cheaper but as i said before, there is one expensive part of the market that's ultimately at the biggest risk of the higher rate scenario. when you look at the equity risk where the pure valuations, we are quite reasonable. tom: how do you and richard bernstein avoid a disney? what a disappointment, what a seismic change in an industry.

for our viewers and listeners, how do you avoid a certified blue-chip stock that falters? >> you got to stay away from just investing based on the story. the story got everybody excited about the growth prospects, the new businesses, the technology applications, the franchises that you can rinse and repeat and i think the story got a little too exciting and people got too overhyped about that story. that because back to navigating the noise. it comes back to what of the prophets doing and what's the macro environment and how conducive is it to that story? that's where you ran into a little bit of expectations being too elevated. jonathan: thank you for the update. looking for opportunities in the rest of the world. the international story is not as dire for them as others.

tom: it is one of the five great books on equity investment, a heavy lift but there is meat in there from richard bernstein. i can't say enough about the intelligence of that effort. it was seismic when it came out near 30 years ago. jonathan: if you are tuning in, the s&p 500 negative over the past few days and trying to avoid a fourth day of losses with futures down by 0.1%. in about 18 minutes, we will catch up t withorsten slok. in just a moment, new street research on apple after a tough two days going into the unveiling of the iphone 15 next week. tom: an important voice, he is not a fan boy. it's just as simple as that,

he's doing securities analysis wrapped around not a skepticism and a meanness about apple but always considering the premium valuation jonathan:. jonathan:apple at the moment is between the u.s. and china and may be in the mix is while way. we heard it from alex webb in the last year. tom: how do you jonathan: pronounce it? is it while way -- while way huawei. on that particular phone, you heard from citibank, do they have the capacity to produce it en mass to compete with apple and the iphone 15? e tom: i don't know the price point but samsung says apple will die. we've said it,. jonathan: are we going to move

on? tom: larry haverty used to laugh of the people that said apple will die and the product is over. he said the airpods would never work. jonathan: i was one of those come i didn't want to wear them. now i use them all the time. maybe to stop people from talking to me. tom: i where the beats, the red ones. ♪ hey david. connect with an advisor to create your personalized plan. let's find the right investments for your goals okay, great. j.p. morgan wealth management.

hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald.

pam, you are a rock- i wasn't going to say it. ♪♪ is it possible to fall in love with your home... ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines. >> the small people i believe are advised that the all-star is unchanged before the pandemics of the policy rate is more than double. it seems to be we are at or very close to the peak in the cycle. jonathan: the bond market bull is still bullish. welcome to the program, counting you down to the opening bell.

futures are negative just slightly for most of this morning, down by 0.1%. apple is a little bit lower with to date losses of almost 6%. we are looking ahead to next week, the iphone 15. tom: let's get right to it, this is an important conversation. we have the global technology infrastructure head. i love your phrase the silicon wall. i will give you credit for that. that's the tension this morning. is there a silicon wall identifiable between america and china? >> don't think we see the wall yet. china is about 25% of any western companies. china is still a very big market

but both sides are working actively at the ling up -- and building up with the u.s. increasing restrictions and china doing their best to increase exports. huawei announcing their first height and phone -- first height and phone e --nd phone. it took a few centuries to build the wall of china and it's going to take a decade or two to build a second wall. it will take a long time for china to replace western technology. tom: your note is extremely constructive on short term for apple and china.

what is the power that tim cook has over the chinese government and over the chinese manufacturing establishment? >> you raise a good point. china has to be very careful with apple because china depends on apple for so many things. even if you take a step back, you can see what happened in 2021. china used a similar scope of china companies in state owned companies. they are struggling in china these days but apple is doing pretty well. [indiscernible]

that's the reason why i'm constructive on the situation. this ban will not affect them in the near term but it's a wake-up call. they are saying this situation with china is not getting well. it's not a coincidence we see two things in the same way. these guys like elon musk and tim cook have engaged with china as a market. market -- china understands the importance of them building factories. in building up the chinese supply chain. nobody's going to mess with them in the near term but in the longer run, you have to keep in mind that the wall is being built and slowly but surely, china will get out of the mix of the revolution of the tesla and

that technology. lisa: at what point are you looking to see tim cook move over to new delhi to have talk about expanding production in india? >> very slow moves that should play out over years and years. it took china a few years to be able to power the phone. they are still well behind. revenge is a dish that tastes better cold. now china is starting to put up this phone in a position to push back on the iphone. tim cook and his team are clearly cognizant of that.

that's the wall building slowly but surely. lisa: what you're saying is not frustrating or interesting but it's more going forward that it feels like we have these geopolitical headlines and we have people coming on and predicting with no basis of whether this is something meaningful. do you discount all the geopolitical headlines is near term noise and look at the fundamentals? do we have to wait and see? >> i wish i had started a hedge fund months ago on geopolitical headlines. the tensions between china and the west, the way i like to frame it is china is 20% of western tech. let's say in a decade or two

from now, china is out of the picture. that means western tech will lose value points of growth every year over the next 15 years. you can reflect that in the valuation this year, like a single digit headwind on valuation. at the end of the day, it's not a beach. we are ready for that. the market is reacting to something that will take at least 15 years. i tend to see these reactions. jonathan: i'm happy to open that fund with you. >> i'll be in touch. jonathan: thank you, always good to get your perspective. the iphone 15 next week. in the next hour, mohamed el-erian also sarah hunt anddan

ives coming up as well. mohammed this morning talking about china and why it won't necessarily become the world's largest economy because of their challenges domestically. we have to talk about china, the iphone and the economic challenge. tom: that's a great mix of people there. you've got two bowls there with money in the market but the summary is the tone of those four guests it up -- is about american exceptionalism which is the foundation of what john williams said yesterday. there is uncertainty in the toxic brew that is out there. you know what? we are doing ok. jonathan: he gets to say we are in a good place and we get to say we are in a good place relative to not just china but also europe. chairman powell is in a much better place compared to

president lagarde. on september 20, jay powell does not have the stress christine lagarde has. the ecb will convene and they have a much tougher decision to make over the next several months. tom: the answer is, there is this turmoil where america, it seems every conversation comes out better. how do you bet against that? jonathan: eight weeks of dollar strength speaks to exactly what we are talking about. lisa: i read an estimate from deutsche bank taking the $190 billion decline in apple valuation would have put it in one of the top 11 stocks of the stocks. just to give you a sense of how that relative valuation would be

on europe. they don't have the tech story. they didn't have the fiscal stimulus story and that will be a big discussion. jonathan: there is u.s. exceptionalism of a different kind. lisa: a sugar lobby? jonathan: from new york city, this is bloomberg. ♪ let innovation refunds help with your erc tax refund so you can improve your business however you see fit. rosie used part of her refund to build an outdoor patio. clink! dr. marshall used part of his refund to give his practice a facelift. emily used part of her refund to buy... i run a wax museum. let innovation refunds help you get started on your erc tax refund. stop waiting. go to innovationrefunds.com you really got the brows.

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tom: bloomberg surveillance on friday going into a hugely eventful week next week. jonathan ferro is changing into bright yellow for his next interview. lisa: i love his outfits with sneakers. tom: i don't think so, dan ives with his enthusiasm with gloom. the market is down 8% or 9% on apple so now what? lisa: it was just said our last guest wants to create a hedge fund. tom: there is no economic data this morning.

here is michael mckee doing a victory lap on what we saw with john williams yesterday. what was the williams surprise yesterday? mike: people may have been surprised by the fact that he's not wedded to our star. it's a useful item but it is not something that guides his policy. he admits he doesn't know what it is in real time. his monetary policy stance is as it has been for a couple of weeks and as most fed officials are feeling right now. they could skip in the data will tell them and i think they are waiting for the cpi to more or less give them a rubberstamp to skip than anything else. lisa: do you feel fed officials are kind of happy but they don't want to seem happy, but do they feel very happy? mike: there is no fun allowed. lisa: in terms of things being

in a good place? mike: yeah, if you were trying to design an environment that you would achieve from policy, this is it where you still have relatively strong growth and you've got inflation coming down. will both continue? they don't know so they can't take too much of a victory lap at this point. this is not what people expected a year ago. recession was the base case. lisa: we talked about the potential uaw strike and the discussion with the big three and what this could mean in terms of where the supply and demand is in the labor market but also have sticky inflation could be. how are fed officials thinking about this? are they paying attention? mike: it would have an impact on the economy, 150,000 workers at unionized auto plants3

. then you have a spillover effect to the suppliers and they have decide whether they will keep producing and buildup inventories that are not getting used and they may not get paid for right away so there is a knock on effect but we can't know if they will do it. you go into it knowing the strike will happen and then it will be over. then it works its way out of the economy. do you make policy based on that? probably not. tom: thank you so much. i've got futures flat right now and the vix is 14 .05. we are watching euro-dollar $1.07. there was an important summit yesterday. my final question yesterday of state street was on john williams. i was absolutely thunderstruck by the responses. you went all out on on way -- on

williams and saying go for 2% up to something higher, under 3%. how does our world change if we get a new interest rate regime out there somewhere? >> the important implication is that the cost of capital will be higher. it will be higher for companies and the cost of borrowing for consumers will be higher and all that will imply we're going to have more of a significant impact at least in the midterm of consumption and corporate spending. tom: do we see asset price reduction because they got yield up and price down? >> if you change the risk-free rate and you permanently increase that for whatever reason, whatever it might be, if you have the discount rate going up in any finance model, your textbook will tell you that risky assets will become less attractive. lisa: this has been a

fascinating week. we've seen the fastest pace of issuance when it comes to investment grade bonds. the third busiest post labor day couple of sessions going back to 2010. companies are saying rates will be higher for longer and we will sell debt because we will have to observe these higher costs. isn't this a positive sign that they are actually able to absorb these costs and able to access the credit markets and things keep going even at a more expensive rate? >> september doesn't have a lot of issuance. issuance has been hide this week but the other issue is that in the background, seeing the height yield the full rate is moving up quickly in the last six months. we are at around 4% according to moody's and if we keep rates at these levels, you see stories about companies that cannot get a new loan and companies cannot

roll an existing loan. companies with higher leverage and when it comes to interest ratios which measure earnings divided by interest expense, it's coming down for ig and high-yield so it's not the case that all firms have locked-in long-duration lending. we are actually seeing interest coverage ratios going down. lisa: it's interesting to see the spike up from low rates and still at historically low levels. when you pass that out, are you basically modeling the next 6-12 months? do you end up with an acceleration of these defaults or does it plateau? are we seeing the pain now as the rate hikes into the market? >> the soft landing argument is that it has been orderly as far as the slow down in inflation in the labor market. . in the background, if you had

this increase in default rates especially in high yield, it basically has employment of 11 million people in the economy. if rates will move higher because companies cannot do financing, maybe at the moment, these are names that many people have not heard about but just wait until you get default in a name everyone is heard about and that type of interest coverage ratio will be much more and that will change sentiment quite quickly particularly in high yield. lisa: across the board in terms of rate structure going forward as we heard from stephen major, that catalyst event. from your vantage point, how does this play out? is the bear case a deep recession and some sort of fissure in the credit markets where is this a recession, the one that everyone was calling for earlier this year? >> i think it will be a continuation of what we are seeing.

the fed and ecb are stepping harder on the brakes and it's not just about the change in interest rates. it's about the level of interest rates and has the process continues, have a look at what nonfarm payrolls tell you about the first quarter of next year. the consent -- the consensus expects it will be 12,000. if we are getting nonfarm payrolls in six months that will be close to zero for three months in a row, how do you think risk will trade on that? if slowing the economy down because of the fed, we should expect to see an ongoing slow down ahead of us. i think that will ultimately create risk of a hard landing. tom: with the supply shock we have had, so many things we got wrong. we got the recession wrong, we got transitory wrong and the red sox didn't work out.

what is the consensus call right now that we will sit back a year from now and say we got that wrong? >> what is fascinating is we went into this year expecting a sharper slowdown than what we saw. . this just took a longer time and people have been traveling on airplanes and staying in hotels and the service sector has been a lot stronger. it's ironic that this process of slowing things down has continued in the fed has kept raising rates and the cost of capital continues to go up. as all these things finally started appearing, everyone said we are not going to have more slow down, it's just goldilocks with a soft landing. tom: what do you think we are getting wrong? >> think about what the fed is doing. it's raising interest rates. they want us to buy fewer cars and fewer homes and that's the idea of slowing things down. tom:schell writing on china is

the death of china. >> that's a major risk in the fed had a working paper a few years ago with their view of correction in chinese gdp. they found there will be a 1% decline in gdp in china and only 0.2% impact in u.s. china is not only slowing for cyclical reasons but exports are slowing down but they have other issues. the housing situation is getting more serious and i also have a demographic situation it's getting more serious. all that combined will drag down gdp growth in china and have implications for europe and the u.s. lisa: one of the big counterpoints to the bears argument you're making is that

growth has surprise to the upside and it continues to even at a slowing pace. companies are still doing well. how do you understand the surprising resilience? >> the nuance to that is that growth in employment has continued to slow down and when it comes to companies doing well , all these things that credit conditions are tightening in the background and interest rates is the fed writing harder and harder on consumers and corporate's. combining that with student loan repayments and households running out of excess savings, you can't begin to worry about the next few months having a continuation of what the federal reserve does. lisa: what would you have to see to change your view? >> what we need to see is the cost of capital coming down because the first break in this process of the data we are watching is that the fed has

raised the cost of capital. maybe there are reasons why the cost of capital might be permanently higher. all this higher cost of capital is having an impact across the board, consumers and corporate's but also high yield the full rates moving forward. tom: we will continue with two data points. the standard & poor's 500 is on the screen, up 0.1%. lisa: i have to wonder how much pushback he gets from people who are sick of being wrong with recession calls of earlier. i see a lot of potential pushback. i'm curious what that is. tom: can i translate that? she sees a toxic brew. do you see a toxic brew out there? >> let's summarize what it means for investors. if we weigh the risks on a scale, the risks, the list of

bullet points to the downside continues to be lengthy. it could be that extra savings could last longer and it's true we could get some things that are ok. the fed wants to slow things down and don't fight the fed. we should continue to see things slowing down. tom: the conversation with pierre trudeau, strong canadian dollar. this dovetails in with your observation. the canadian dollar extends gain after jobs report beat in canada. lisa: and we just accelerated. wages accelerated but again, does this play into something else is going on here? it's just a swirling, toxic brew. tom: it goes to the surprises out there and the resilience we

see. we will run out of time here and we have to get you back on this. there are many ways to slice this. it's extraordinary. what can i say on a friday? good news from north of the border, futures up one and they explode higher, the vix 14.38. the loonie is one dollar 36, a stronger canada. ♪

>> china is not going to go away. we are always going to be here. it's like an arranged marriage not based on love. it's an arranged marriage we have to accommodate each other. that could be one of the results here. lisa: relationship counseling with max baucus talking about how we have to work together to

some degree but not working together now, giving some of the tit for tat we keep your number both sides. tom: max baucus will forever be 50 but he is 80 years old. he has so much energy and has been in service to the nation. this guy is authoritative. max baucus has an understanding of a china like nobody to beat the band. lisa: i want to give you a sense of why we are so focused on china with apple shares in focus after two days of losses of more than 6%. they have turned up which is interesting. up 0.3% and this is interesting, ford and gm shares are both of almost 2% even with the looming potential default on september 15 by the uaw and the offer from

general motors, 16% pay rise. tom: you said a default, it's a strike. i like that. lisa: it's basically -- tom: it's a pickup line. lisa: thanks for calling me out on that. there will be a question about whether longer-term there will be ramifications or whether this is the market gaming out some resolution. tom: i am in the camp with austin goolsby. he is right, it matters. i am old school and it matters. lisa: buy the dip with some of the names that have gotten attention recently. not a lot of action today. it's been a weird month. tom: it's been a weird after

labor day start to the week and it gets weirder next week. stay with us next week for huge news flow. then we will be in london looking at the huge challenges post ecb of what we will see from europe and any challenges of the united kingdom. i think we will vote -- devote tuesday to that. right now, working with the eurasia group is the director of china corporate affairs. we need a brief this morning. i'm going to cut to the chase, i see a lot of hysteria and we had some good voices, was down. take us away from the immediate hysteria of china to clear

thinking. how are you thinking clearly about the domestic challenges of china? >> it is quite a challenge to be the one who supposed to come up with a positive because china is facing some serious economic hurdles that are different from hurdles in the past. the slow down is systemic, the real estate crisis is affecting lots of sectors but at the same time, it's important to remember that while china may be growing at this present moment, more slowly than you united states which is odd, it's still growing and it's an enormous country but it's also growing in population with the middle class. there is a ton of opportunity that remains. one of the issues that is separate from the slowdown but also makes it harder and harder for foreign firms to do business successfully and has nothing to

do with regulations either is the fact that there is more competition in the chinese market from domestic companies than there used to be. tom: if i look at that do mystic companies, it comes back to the state owned enterprises like the waves every eight years we deemphasize and then reemphasize after that. what is the relationship of the state owned enterprises now with the new regime in beijing? >> definitely, xi jin ping is a state sector man. he has moved away from his predecessors and reemphasize the role of the state. in his pretty firm belief that the state needs to be involved in directing which parts of the chinese economy are going to be emphasized and are supposed to grow. interestingly, that seems to be the direction u.s. politics is

going to a lesser extent as well. lisa: we were talking about starting a hedge fund to buy the dip in some of the names most affected by the geopolitical headlines the tickly about u.s.-china relations souring. is this different? >> on the one hand, i agree. how many times has there been a prediction that china was becoming near the end of its miracle of growth and development. i tend e torr on the silent -- on - err on the side of china figuring it out. the big difference here is there really is no way for china to try to come in and bailout the economy and rescue growth with a huge stimulus without re-inflating the real estate bubble and if they came in with

the stimulus, it wouldn't necessarily do what they needed to do which is increased consumer and private sector confidence so there is more consumption. that really is a change. lisa: do you think there will be more of a response from the u.s. in light of the fact that the new development in the chinese phone was released during the commerce secretary's visit to china. the timing is very much on the nose and there seems to be a much more direct tit-for-tat. >> it is more direct. we seem that play out in a number of different forms in the last few days. there was the gina raimondo statement about not necessarily wanting to apply the word trust to the or improve trust to the relationship with saying we need to see action and there is a

similar tone from vice president, harris when she was at the east asia summit talking about the need for china to not do these activities in the south china sea. tom: too short a visit today, let's do it again, thank you. i'm going to bring this back to the g20. we will see the president land here within 30 minutes nighttime in new delhi. let's go to dr. bremmer and his wonderful effort. selected people aren't there and there is this massive confusion and there is a war going on as well. i have no idea where we are in

the backside of the g20 that it frankly matters. lisa: that's the communication we've gotten with an indication they've already drafted talking about risks to long-term growth from cascading crises which means we don't know. what kind of communiqué is this with a definitive response to what's going on. the more interesting part of these meetings to me will be the side conversations with saudi arabia with president biden and prime minister modi with president biden in terms of creating a closer tie there. some of these geopolitical faultlines, where they start to emerge. tom: it goes back to obama and the pittsburgh years. i look at the g20 meeting and less of a g zero effort. as you say, these buy laterals

they have off to the side can be more interesting. the elite need to agree to keep the dialogue going. lisa: do you think tim cook will show up? tom: he is g20 one. bramo gets a copyright on that. apple joins g20. lisa: we have no confirmation of that to be clear. tom: it's speculation. futures are flat and mohamed el-erian will be here. he will be in the next hour and that will be interesting. g20 one coverage. ♪

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jonathan: three-day losing

streak on the s&p 500. attempting to make sure it is not day four. live from new york city this morning, the count down to the open starts now. ♪ >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york. apple in pain ahead of next week's launch. gm, 16% pay raise offer slap down as goldman is gearing up to cut underperformance. a big issue, rate hikes on ice. >> the fed is on ice. >> pause and wait a little bit. >> unless you've got something significant on cpi, i think they are not going in september. >>