>> bus along with many on the street were looking for a slowdown and recession this year and it hasn't manifested. >> there is. still >> is far from robust but still in positive territory but the momentum seems to be shifting to the downside. >> i think the consumer is incredibly stressed right now. >> i think the instinct of investors is to get out quick. >> this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. jonathan: inflation in america, live from new york city this

morning, good morning, good morning for our audience worldwide, this is bloomberg surveillance on tv and radio. your equity markets are slightly negative on the s&p 500. minutes away from cpi this morning. tom: somebody stopped me on the street last night and asked me what i looked at and i look at cleveland cpi. there is now casting. bramo is now casting. cleveland cpi, we will not go into the details no but it's at 4.80%. that comes down again off the data this morning which is disinflation. jonathan: later today it's about the split between headline cpi led by gas prices and core cpi potentially. lisa: levels will change for people who will not look at one print?

the fed will not look at one print so how big of a boost could you potentially see a reaction from? where is the threshold and where is the market biased, toward upside or downside? jonathan: this sets us up for the fed next week. the ecb will be this thursday. reports yesterday from reuters that the ecb might have to upgrade their inflation outlook to north of 3%. that's going in the wrong direction and moments ago, report suggesting germany will have to downgrade their outlook for growth this year to a contraction. we are talking about the biggest economy in the euro zone in contraction for the year and the ecb upgrading its forecast for inflation potentially thursday into next year. tom: i will let larry summers speak about this and if it feels like stagflation. jonathan: it smells like it. what do you do as president

lagarde next week? tom: people don't listen to larry summers on this. do you attack growth? the politicians will attack that every time or do we have to do something here and the distinction is for austerity. are you going to goose the economy in germany and there economic culture? jonathan: we start the conversation on the s&p 500. equity futures are negative by 0.7%. in the commodity market, new highs for the year and crude. we are getting closer to 90 four wti crude. $89.36 right now. jonathan: lisa: that will be a key discussion as we get the headline number on cpi.

i'm also looking at real wages which is calculated once you look at inflation and you can see they've started to take down and the census bureau put out a word saying u.s. inflation-adjusted housing income fell last year by the most in over a decade. barclays global financial services, -- conference continues today. yesterday, david solomon of goldman -- david sullivan of goldman sachs said this is going to restrict access to companies big and small and it 2:00 p.m., real yields as lead this whole charged up and yields will get the august u.s. budget statement. the u.s. is getting more in debt and selling more debt to cover that. jonathan: looking ahead toamh in washington later this morning and the potential for a strike in detroit. this line is so important --

there is a line in the sand for the sustainability of the company. we heard that yesterday as well, the viability of the company, can they take on the kind of pay raises the uaw is pushing for? tom: i've known bill ford for years and he's very good at pond hockey. jonathan: like the mighty ducks. tom: you are outdoors and you are on the pond and you are competing with old fords and bill ford leads the charge on this. then we talk about the fabric of the family. we didn't go bankrupt, they did. ford in dearborn will do everything they can to avoid what they avoided back when steve ratner was the car czar. jonathan: amh his joining us

from washington dc later. let's start with 830 1 a.m., what are we looking for a minute after we've had the inflation report? how would you expect the market to respond? >> we will get mixed results when it comes to inflation moving higher but i would focus on the core number because i think that will continue to go lower and that's the broader picture of what's happening with inflation. i think inflation is going lower. the economy is starting to slow and it will continue into next year. when you get goods pricing, yesterday the adobe digital price index came out of her 12 month in a row, goods pricing has gone lower. then i think we will continue to get supplements with lower prices with the fact that shelter prices will start to the reflected in these numbers. if you look at real-time data like zillow, the core cpi number

will probably be below 3% if he puts some real-time indicators in that. i think the trend will continue to show deceleration in inflation. tom: let's get real on nominal gdp. it ties directly into revenue growth. are we anywhere near the tipping point where we see substantial lessening of revenue growth? is that because nominal gdp will come in lower? >> i think we will go into a mild short recession into next year. it's simple in the sense, do you think you will spend the same or less over the next six months that you did over the previous six months? most clients say they will spend the same or less over the next six months. assuming the job growth remains constant, that means you're are in a recession because after inflation, you are in a recession. i think you will see the economy

modestly struggle into early next year. tom: give me the spx update. we are at the atom level on the stock market. can they adjust to the recession? >> era target for this year is 4400. we've only seen a 5% pullback year to date. historically, you get 3-4 pullback in a given year. i think you are likely to see some downward pressure in this equity market over the next couple of months and i think that will set up a better buying opportunity into next year. when it comes to inflation, i'm not so sure if inflation comes in as expected, you will see a big rally. we've been rallying on the same news for most of the summer. i don't think that will lead to a big upside if those numbers continue to show inflation. lisa: back in august, you talked

about how you are cautious. you were optimistic for a lot of the year. does cautious mean by tech? how do you express caution in an equity market driven by the biggest companies that even though there was a soft reaction yesterday, they have really been delivering. >> tech continues to be an area we like. they have the most attractive valuations. some people think that's not correct because it has an elevated pe but we always want to look at what will be in the future. when you look at tech earnings, it continues to be the one sector that consistently beats its expectations. when you start to apply the consistent beats we've been saying, tech is not that expensive. that's an area where it growth gets constrained, that's one place where investors can look for growth and you will continue to see fund -- funds flow into that sector. jonathan: spirit air is cutting

its third-quarter total revenue forecast, blaming increased fuel prices and steep discounting. the stock is down about 2.8%. the airlines on the s&p 500 are down about 20% from the july highs so the airlines of already been punished over the last few months. fuel prices are up and costs are bad and ultimately, are we seeing some pressure domestically leading to lower fares? this is a big part of the conversation in america. tom: i go to google flights and the prices are lower. they have a big discount for spirit. 100 $87 to go that far? who was making money? jonathan: i wonder if it's a

spirit problem or a broader story? higher costs of the back of higher fuel prices and maybe testing her ability to pass them on to the consumer. is there a story there? >> it's pretty complex. i think the consumer is going to struggle going forward. third-quarter growth will be pretty healthy. we all knew it would be healthy because everybody was getting out in the summer of revenge. looking forward, we've already seen a lot more struggles with the pricing going forward as people are starting to pull back on their travel. i think that's why we will go into a recession. higher energy prices will continue to pull spending from the consumer. as we get higher prices, it will affect what people can spend and it will lead to further weakness in consumer spending to year and. lisa: what gives you confidence that the consumer spending will be short-lived if there is a

true recession with a feedback loop? >> we think it will be a mild recession because we've already had some rotating recessions into this. i'll take it will be is broad-based but i think the consumer being the biggest part of the economy is going to have a digestion period and that would lead to a mild recession. it could last six months and total growth will be attractive, about half percent instead of 2.5% and the total number of jobs being lost will be around half a million. usually you lose 2.5 million in a recession so i don't think you'll see a deep rollover in consumer spending. jonathan: great for you to be with us this morning. your equity market is pulling back just a touch. we are negative by zero .2% on the s&p 500. news from spirit airlines, cutting their outlook for their third-quarter forecast of the

back of increased fuel prices and steep discounts with that stock negative bite 2.8%. tom:bramo looks at paris but i look at business class into lax. i am looking at the international flights, used to be about $7,000. $14,000 for a loving couple, 7000 plus to over 3000. jonathan: that's international. it's arguably where the strength might be. domestically, that's where the struggle has been flagged. lisa: i like the question if this is a broader story if it's an airline that caters to families and vacations and people watching their budgets. are you seeing more of a pullback there?

the walmart ceo yesterday didn't have that kind of tone in an interview but there is this feeling that there are people who are getting severely hammered by inflation with wages not keeping up. lisa: u.s. bc, $29 on amazon. tom: get three or four of them. lisa: but it includes a cord. tom: inflation leads today but the apple is fascinating. ludlow killed it. jonathan: he was fantastic. from new york city this morning, with inflation data a few hours away, good morning. ♪ to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

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>> since the very first iphone, we focused on giving her users a device that's incredibly powerful remarkably easy to use and beautifully designed. every year, we built on this foundation to create experiences that make a real difference in our user daily lives. today, we are pushing what users love about iphone even further. jonathan: so much marketing buzzwords in their, experiences, beautiful, the apple ceo tim cook yesterday at the annual product launch on the iphone 15

and the stock lower this morning by 0.5%. here is the quotation we believe the company cannot rely on iphone sales to drive their stock higher. tom: we are doing the best we can on this and when ed ludlow leads the charge, it's best in world analysis on this. what we've done is get away from blah, blagh, blah and what it means for the stock and america. ta davidson is with us. i thought some was fascinating and the rest of was mediocre. what does it mean for the broader apple ecosystem? when you have storage, everybody complains about two terabytes of storage and they pop that sucker

out to six. what does yesterday mean for the apple ecosystem? >> what i thought was most interesting is that they are taking a defective price increase on the pro mac and not offering the 128 megabytes model anymore so it's a hundred dollars more to get and i pro max. and then the dongle, we are talking about accessories not the phone is bad news. the good news is that it should be creative to the margins. the $29 dongle should be fantastic. you may not see the incremental new buyer this year. as you pointed out earlier, the wireless carriers seem to want to subsidize their 5g networks which is also good news for apple. tom: i got eight ways to go here.

john and lisette more intelligent questions. a they haven a17 ship so is it enough for someone to upgrade in china or sitting to my right where he is adamant he will not fall for the fan boy baloney? is that new chip enough to upgrade? >> i do not believe it is. when i thought about the buzzwords and new things on the iphone 15, i was chuckling at titanium and titanium golf clubs and how no one has pointed out that they are operating on star. i'm concerned that there is a lot of small, incremental adjustments but there is no one item that will get you to wait in line like we used to for an iphone. jonathan: the bullish thesis is there are tons of people who haven't upgraded. the iphone 15 will get them to upgrade.

you are not buying into that so you are rating a neutral 180 price target. we are right now at 176 so given the multiples the stock is not affected don't believe in the bullish thesis, why is this not asell and why isn't that 180 lower? >> i think you have an amazing balance sheet so they have the potential to buy back billions of dollars of shares to support the stock. i don't think they would ever raise their dividend yield to 3% to track the pure dividend investor. the foundation is still there and i don't think the stock is so overheated that it will accelerate at this point. lisa: if there is and anything to catch everyone's eye, there's an issue of the increasing geopolitical concerns especially after this launch, china said they flagged a number of unspecified security incidents with the iphone.

how do you factor that into a price target? >> about 10% of the revenue comes from china. they are so heavily dependent on china from a supply standpoint. i'm thinking of protectionist behavior by the chinese government. we have that in the u.s. as well when you think about banning tiktok and things of that nature. 10% of their sales are at some level of risk and that's bad news for apple. lisa: if you are looking get a product that will don encourage a refresh kind of cycle, where is the bulk of the revenue going to come from, services or the fact that this will break j and evenon will have to upgraded? >> there isn't element of the slow to upgrade consumer. this is why there was a lot of enthusiasm for the vision pro.

we still think vision pro which looks to be on track for the next calendar year, they will not achieve massive sales with their virtual reality headset. if you don't have the next new thing and you've got the iphone aging on the vine, it's challenging for apple. it somewhat remarkable house -- how well the stock is done. they have tipped their hand that they will report their fourth consecutive quarter of declining revenue. it's still a foundation of iphone and buybacks might be the things that hold up the stock on a near basis. jonathan: is that worth 30 times forward earnings? >> no, it is not. the services element is what enabled them to get the premium multiple versus where they were trading before. services is still a good story but at some point, the iphone

will have to exceed all of our expectations and the vision pro will have to do better for the stock to continue to go higher over the next 12 months. jonathan: let's finish on this line from china -- what would be the response from apple on this? this is from the chinese foreign ministry spokeswoman, we noticed there have been many media reports about security concerns with apple phones. what are they alluding to? >> i think they are alluding to the reports that government workers in china are not able to use apple devices. i'm trying to figure out the chess piece for apple with the chinese government. they are not upon and they are not the king or the queen so maybe they are ak night. they have tremendous sway in china with foxconn but i think they are getting caught in the middle on this increasing tension between the two countries. jonathan: without a doubt, thank

you. the big reveal of the iphone 15 and that tension between china and the united states, that story will be pretty wild for the next quarter or so to see with the sales look like on the ground in china. lisa: especially if they are on flip -- if they are flagging unspecified security concerns. they say it's not an outright ban but they are specifying that. is this a tit-for-tat after selling the iphone more aggressively in china? tom: i think it's demand. i don't have a bullish case on china as to what they will do but look at luxury sales in china and it's a mystery right now. the apple sales in china are not the same aslvmh. jonathan: like in north america. we've seen that with many luxury retailers.

tom: i don't have a lot of certitude on what we will see in china and the next 90 days on luxury in the iphone 15, the promax as one terabyte of storage, that's $1400. the bottom line is, that's a lot of money. jonathan: how much storage does one need? it's a ridiculous amount. tom: 250 will get it done. one terabyte -- jonathan: futures are a little softer, this is bloomberg. ♪ re trying to do that through multiple systems, that makes it very, very cumbersome. ♪ it's not just tech, it's not just people.

it's how they work together to provide that experience to the customer. as a finance organization that is what you want to do. ♪

jonathan: the first day of losses in three on the s&p 500 with equity futures slightly negative this morning going into cpi. we are down about a quarter of 1% on the nasdaq 100. if you look since august 10, the last cpi report, this equity market is dead flat. further signs of disinflation and the stock market has gone nowhere. tom: there is a wall of money out there.

the bottom line is, there is this wall of money holding things up including would you say corporate spreads? lisa: yeah, everything. tom: put the bid on bonds and notes and bills? jonathan: you can actually get some yield. in the bond market, the two-year through 5%, the 10 year through 4.30. if you look at the equity market since the last inflation report, dead flat on the bond market is anything but. absorbing and internalizing the high for longer message. lisa: it has not disrupted riskier assets but pairing those two ideas really speaks to a tension. can you have a soft landing with higher for longer? that is increasingly a debate.

jonathan: a stronger dollar off the back of it. it's been an interesting week already. monday, the u.s. dollar is weaker and tuesday stronger and it's stronger again this morning. the euro right now is $1.07. i don't know what the ecb can or should do. tom: i'm using the euro-swiss as a barometer and it has not moved. my litmus paper is the euro compared to zürich and it has not shown a strong swiss franc. jonathan: two hours away from u.s. inflation data and cpi's expected show price pressures risky. in europe, the economy is shrinking at the fastest pace in about seven months reviving fears that a recession may be on the way. traders are ramping up bets that the ecb will raise rates when it meets tomorrow following a report from reuters yesterday

that the central bank sees inflation remaining above 3% next year. tomorrow, we will get the forecast and that will be available to the government counsel when they convene to set interest rates. if they have to upgrade that outlook of inflation to above three 2024, does that embolden the hawks? tom: how valuable are the forecasts? let's look at the forecast six month or year ago. we get to talk about it here and people have to make a forecast. bnp paribas said i have to look bearish. what is the value of a 3% ecb forecast? jonathan: they've underestimated inflation time and time again. tom: they've underestimated the rigidity in europe.

jean-claude trichet will say it more romantically. jonathan: i hope he's not listening. looking forward to our coverage of the ecb tomorrow. in the united states, united auto worker strike looking likely as the union and the big three remain far apart on a new labor contract. the uaw chief will confirm the strike before the contract officially reached -- expires. they are at 36 and i've come down from 40. what gets it done and something 20 will get it done. i don't know if they are near coming to the table. lisa: it's unclear what other details are on the table. there was a report about absenteeism and it was about 23%. that's one of the things they

want to remedy because it's cost them a lot of money and they set of people showed up to work for their ships, we would save enough money to offset this. the rancor is underpinning the discussions on both sides and showing how difficult it is to come together. tom: the idea of the fiction of the 32 hour work week, maybe europe is leading the charge on this. how do you make money in america on a 32 hour work week? jonathan: we are finally talking about the elephant in the room. it's such a difficult line for the president to walk. he wants the transition he wants to establish his credentials but he also wants to establish his union credentials. we know these automakers will struggle to compete with their chinese rivals. the europeans are talking about this morning. we will have that conversation in about an hour. will the ev transition cost the

workers? tom: i'm not sure what the transition is. they put all the harvard business review's on my desk at home. it's allai, ev eie i/o. nobody knows what ai will do. do we know what ev's will do? what will we do with the lithium batteries? lisa: how much is underpinning this negotiation? what is the outlook for certain workers in an automated space at a time where the actual technology is changing. we just don't know when it's underpinning some of the concerns. jonathan: the iea's warning that oil supply cuts by saudi arabia and russia will create is significant supply shortfall and

threaten a renewed surgeon price volatility. that's a day after brent touched a 10 month high above $92 per barrel. this morning, $92 50 eight cents. we have crude at the highs of the year. tom: it has been a surge since july 4. it's got to change behaviors. right now, we will go into april of next year. we are riveted on the north london situation of april 24 -- april 27 of 2024. high frequency economics says when we are at the north london derby next year, we will have a to handle on u.s. inflation. no one believes you, how do we get to a sub 3% inflation by the time the tots take out arsenault? >> good morning, great to be

with you. what we are seeing now is a little bit of a to economy between headline inflation and core inflation. the fed's mandate is acceleration and that's a concern book we are seeing the right sign on core inflation. the pressure from that will diminish but if you are traveling and you look at airline travel, that is still very strong but we don't think that will keep going at the pace it has. the labor market is key to this data. the labor market is slowing in our base case remains that as the labor market continues to slow and wage growth continues to moderate, even as inflation diminishes and as real income is positive, we think the inflation pressure will continue to diminish. we think we will be able to handle it by the second quarter of next year. tom: how does our study of real estate now or the study of real

estate in the north london derby in april of next year, how does it affect what the fed will do about 2.8% inflation? >> the fed is looking -- it's a difficult thing. they are looking at backward looking data and they are data-dependent but at some point, they also are talking about the housing component will start showing up in what we see in inflation going forward. whichever way you look at it, inflation is too high, the fed has to rethink they are done hiking and have to maintain this policy stance for some time. are they sufficiently restrictive or do they have to push more? we think they are done. the peak in the fed funds rate is where we are now. is just, can they call on

inflation? absolutely not, you have to lean into that. i think the message from her perspective is they have reached the peak and they will stay here for some time until inflation is on a sustainable basis. we think that will happen for the rest of the year going into the first half of next year. lisa: an hour ago, germany put out a revised forecast to a full contraction of 0.3%. we were talking about how the ecb is grappling with the nightmare of central bankers which is stagflation. how far away from stagflation is the united states? >> i don't think we are close to stagflation at all. look at the momentum in this economy. we have underestimated the business and household sector but going into this recession, we saw such extraordinary support for households and businesses that they were fortified.

it's coming off of a strong base and that's what we constantly underestimated. the economy still has positive momentum and positive job growth. we are concerned about the fact that if the fed keeps pushing, what is going to happen to the deceleration in job growth and what will happen to unemployment? right now, we are not seeing any signs of distress that could suggest that the u.s. economy is going toward a recession or a contraction. lisa: certain papers are conflicting about how much of the fed increases in rates and trickled through to the economy. some people say most of them have come through and other people say the bulk of it will slam into the economy in the next 12 months. we heard from j.p. morgan yesterday on this so where do you sit? >> i think a lot of that effect is already going through. we've been talking about lending standards and talking about arming costs at high levels.

the consumer has still been very resilient despite those headwinds. i think we are looking at a different cycle. it's not a typical business site -- cycle or a typical reaction. i think things are a little different now. we do still expect that these tightening's will affect the labor market. things will adjust and that will filter through to businesses and households. it will go toward the demand side of it. i think we are going to see the effects but it's just that the economy has surprised as to the upside over and over again. we are still looking for glows to re-accelerate in the fourth quarter based on the fact that the labor market will soft and but we are also prepared for upside surprises given what's happened so far this year. jonathan: what do you think will be captured in the forecast from

the federal reserve next wednesday? >> i think they have to upgrade their growth forecast and downgrade their inflation forecasts. what happens with the fed funds rate is important and i think they will leave it where it is. they don't want to give the impression they are at the peak and not ready to do more. jonathan: thank you. looking ahead to the federal reserve next wednesday. north london is already complaining, did you spell derby with an a? that's how we say it but that's not how we spell it. i feel like you knew that. tom: i am learning every day. jonathan: just wanted to correct you quickly. tom: wanted to say derby? jonathan: it's adarby? tom: his mercy as well?

jonathan: will kennedy will join us shortly on the oil market with a warning about a deficit in the crude market, a deficit, not enough supply that's driving up crude prices again, $92 $.63 on brent crude. will kennedy of bloomberg is just around the corner to weigh in on that and crude prices are elevated at new highs in the latest prices going into a higher cpi print out the back of more costly gasoline. we will talk about headline inflation and the difference between that and core in the next hour of the program. from new york city, this ♪ ♪ bloomberg ♪

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>> the market is tightening in the second half of the year.

with the extensions of the cuts by saudi arabia and russia through the end of the year, we are seeing demand overtaken supplied by about 1.4 million barrels per day in the fourth quarter. this risk of typing the market and increasing volatility. jonathan: warning after warning yesterday from opec and the iea. the head of the oil markets division warning of the deficit we could see in the crude market, not enough supply and it's driving up prices. $92 $.63 on brent crude and wti is $89.44. supply and america's near record highs and a slowdown we're told in china with crude up in china with crude up and equities look like this. equity futures are negative by zero point 4% on the s&p 500 and yields are higher by a couple of basis points. cpi a little later this morning

and the estimates look like this , headline month over month because of this moving crude oil and gasoline prices could come in at 0.6% according to our survey. the previous number was 0.2%. if you look at core month on month, different story, 0.2% previously and 0.2% is the estimate in our survey. do you ignore what's happening in the headline and what's happening in the commodity market if you are the federal reserve? j.p. morgan has this to say -- the potential for the commodity price surge to feed inflation and extend the hiking cycles over at central banks, is that the risk going into this fed meeting next week or should we embrace the softer core figure for another month? tom: to me, these are two separate conversations.

if i look at a gallon of gas at $3.84, my long term moving average is down from the spike of five dollars. we are a long way from $4.30 bet at this rate, we could get there sooner than later. lisa: are higher oil prices inflationary or disinflationary? if you have the appearance of inflation, that could create a self-fulfilling kind of prophecy in the university of michigan sentiment survey. that will be important to politics but also the fed. tom: they are looking at a gallon of petrol in the u.k. they gallon of gas in london is like seven dollars? >> it is but i by millett -- but i drive an electric car these days. it's definitely going up. tom: how does saudi arabia seem

to be in the driver's seat and it -- and out of the deal with you driving and electric car? at what price of brent crude to more people by electric cars? >> that's a good question but lots of us are driving electric cars but the important thing for the saudi perspective is it isn't doing that much yet to affect demand. demand is robust around the world. it's looking quite strong and part of that is people switching into hybrid cars. in china, people are driving more electric cars. it's moving around after being locked up and they are moving around again. one of the facts about the market now as their works concerned about chinese demand. when you look at the numbers, it looks pretty good for the saudi's now. tom: do you have a diesel

vehicle in your family? jonathan: we had a land rover. tom: we had a vw diesel. jonathan: the german manufacturers really push that stuff. that's talk about supply deficits. this quite a big difference in these numbers, opec gave us a number and iea gave us a number. -- gave us another. what's the number do i need to think about, what will the supply deficit be? >> even the iea numbers are pretty chunky when you look at global demand, over 100 million barrels per day. you are almost 1% even on the iea number. you split the difference between the iea and the opec number, you are looking at chunky deficits and that's what driving markets higher. it's clear the saudi decision to keep that cut in place by the end of the year is fighting the market.

it's driving down inventories quickly but the market will be focused on what that number looks like in the first quarter of next year. there will be some year on year growth that won't be as strong -- as in that will come into focus but no matter which number you choose, if you look in between, we are looking at a tight market where inventories are coming back quickly. lisa: will we be talking about the weather and how cold the winter will be in the value of oil but also gas? >> yes, i think the weather is always a question and many people use diesel to heat their homes as heating oil. the diesel market right now looks extremely tight. refiners are being rewarded for

making the spread between diesel and oil prices blown out between the global resilience in industrial demand as the economy keeps going. if we get a cold winter, that will continue to be under pressure. a cold winter always drive demand. it's worth pointing out that in europe, natural gas inventory situation looks as good as it can be for this time of year. lisa: when we talk about winter and the inventory and how depleted they are, i wonder about lag effect not of monetary policy but cuts. do we have a sense of how quickly saudi arabia could turn on the tap and change that balance or is this something that could have them targeting $100 prices? >> they are going to have to watch the market carefully. clearly, they want to see prices

rise and they don't want to to become a full-blown upward ramp because then it has an impact on the economy. the saudi's meet their pledges and follow through. it takes weeks for them to get oil on the tankers into market but they do respond and they do tend to do what they say. they always reserve the option to readjust. jonathan: a monthly review they will have. i'm watching the weather but somewhere else with hurricanes heading toward the united states. the spr was built up for a reason. i'm sure it wasn't midterm elections a year or so ago and it's been depleted. given where crude output is in america, how vulnerable is the market with the spr as low as it is? >> i think there is enough there

to cope with hurricane season. they also need oil products if refineries are knocked out which is the greatest risk. the market is watching the hurricanes in the gulf of mexico region is becoming more important to the global energy system. got refineries there and oil production and oil expert terminals for shale to get to market and you've got energy expert terminals so that hurricanes need to be watched across all those markets. a really big hurricane blowing up in the louisiana/texas area could cause havoc. we are not at the end of the season yet. jonathan: thank you, sir. will kennedy on the latest off our london desk on the commodity market. output in america, down good -- thank goodness it's near all-time highs after what we are seeing develop elsewhere.

tom: the former energy secretary and governor of new mexico died last week in it's one of the terms of america as we never really had an energy policy in america. we just went out and did technology and nobody saw the technology of shale coming. now what? jonathan: $92 is now what. i've been asking this question. is this crude price a reflection of the extension of the cycle or the recipe? that's what i've been asking to a lot of guests. which one is it? lisa: if it's driven by supply cuts, then you could argue it has a greater chance of ending the cycle because it's not driven by strength. jonathan: we will continue this conversation with blackrock shortly. crude at new highs for 2023 and equity futures are slightly lower, about -- down about 0.1%.

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>> us, along with the straight was looking for a slow down a recession this year. it has not manifested. >> the u.s. economy is far from robust. it is still in positive territory but the momentum seems to be shifting to the downside. >> i think the consumer is incredibly stretched right now. >> reaction function is to get a quit. -- get out quick.

>> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city this morning, good morning. for our audience worldwide, this is "bloomberg surveillance," alongside tom keene and lisa abramowicz. i'm jonathan ferro. the data is 90 and it's a way. --minute away. tom: nominal in the core number. we studied it all. we will give you michael mckee's treatment at 8:30. the ten-year pops up to 1.69%, a two basis point move. that is underlying churn between nominal and real analysis. jonathan: the difference between core and headline in the data itself. core, we are making progress. headline, do we have a problem?

the bti at $89.50. lisa: does headline matter? if you see a pop up in response to higher oil prices, do we care? does the fed care? jp morgan says the fed will game out oil prices in response. it is how they are increasing. is increasing in a way that reduces consumer spending? do you see that show up in the numbers? tom: jon is looking at wetland of noris does when he goes to singapore. we are up above two standard deviations above five dollars a gallon gas. $3.84. now is when the tension starts. jonathan: i was doing one thing. tom was doing the other. i was reading this moments ago. the fed is likely to skip hiking this month but stronger core inflation could convince the fed

to leave the 23 median dot in november. we have to work out with this oil story does to demand. it is so important. let's pick a company. in the last hour we heard from spirit airlines. domestic focus airline here in america, citing increased fuel costs, steve discounting and cutting -- steep discounting and cutting the outlook for revenue. the stock is down. lisa: some airlines are beaten up more than others. you raise a good point, do you see discretionary spending coming in dramatically or is that strength and surprising resilience come to the fore and consumers can keep spending past when people expect? jonathan: futures a little softer. down by .1% on the sb 500. 87 minutes away from the economic data. futures pulling back just a touch.

429.22 on the ten-year. the euro is slightly weaker against the dollar. lisa: in about 90 minutes we get the key data point of the day. arguably of the month. u.s. cpi comes out and we are parsing the headline number as well as the core figure. i'm looking at how it compares to the pace of wage increases or not. this is important because it's basically a question of, does the inflation reduce the spending power of the average american? if it does, is very different response from the fed reserve? we here for more banking executives at the barclays global financial services conference. we hear from the citi cfo mark mason. the resilience in ipo markets but raising increased capital requirement and how they can hamper the access to capital markets companies. we have heard this from a lot of banks. maybe it is a little different. 2:00 p.m.

tom, you were talking about the real yield on ten-year treasuries. how much does this have to do with the do with -- have to do with the deficit in the u.s.? as the deficit increases and as you have other regions move away from buying like japan, what does that do to the real yield? how much can that drive some of the gains we are seeing? tom: i get the debt and deficit discussion will be politically huge. i'm going back to jeff curry from goldman sachs who said this real yield permeates everything we do, including buying the next iphone. the real yield is different. it is back to 1994, 1984, etc. it's a whole new world. jonathan: jeff is no longer at goldman but can we give him a victory lap for his crude call. what a forecast. we are up here in the 90's. tom: each of these guys is different. jeff curry.

i don't know what he's going to do. maybe he will teach microeconomics in chicago. tom: a two-part question. what to expect the data to look like this morning? how do you cite this market to respond to it? >> good morning. for the cpi data this morning i think the expectations are for a stronger-than-expected headline around .6. the market would put more focus on the date of where we get a stronger point to. expect this one closer to 23 or 24 basis points. i'm looking at some of the details. where are we seeing weakness? are we still seeing the goods weakness? still seeing goods weakness and

used and new cars, which is my citation. focusing on the shelter and the owner's ability to rent. that moved up last month. this month will be important. the last point i will make is that despite the weaker data from the forefront last month, bond markets really did not have the reaction he would have expected. -- you would have expected. see how the bond markets react if we get that .2%. tom: you research notes say 1994, which is the last time the yankees and red sox were fighting for first place. the bottom line is, i'm looking at a research note talking how quaint the belly of the curve. teach us about the value of the midpoint, the belly of the curve. gargi: sure.

it was great to be in boston where i'm joining you from for that. sadly, i did not get to go to the game. i was at a client event. the belly of the curve. the part you are talking about is that three to seven year point. it gives you access. the reason we are talking about the belly, number one, that is the most advantage to investors. you can pull the five-year point or anything from that three or seven-year point. rates can still move higher and that's really important for us to remember. rates can still move higher by about 60 basis points or so for the next 12 months. you can still have a positive outcome in your portfolio. number two is, and as you know we have been speaking about this before, we have come into this year and we talked about bonds are back in yield of dreams, but we focused on the very front end.

now we are telling investors to add some duration and that five-year point, in the belly. i think with the consumer slowing down in the second quarter -- sorry, the fourth quarter the year, as well as inflation moderating or core inflation moderating, all that behooves a little bit more duration. would not go out past the ten-year point quite yet. you were talking about the deficit earlier. the bank of japan and their actions. there can be a lot of reasons for the longer end to move higher and the yield curve to move steeper. the sweet spot is that three to seven-year point. lisa: if oil prices keep rising what does that do to your call? gargi: that's a really important point. it depends on how it rises. whether it is a grind higher or a sharp move higher. the second point will be where it gets to.

between $90 to $100. that's a very high number but i think this is an economy that can withstand that. differ looking at an oil shock at $120 or something, significantly higher than today's levels, that becomes a huge problem for the fed. they have not historically focused on headline. they would have to. that brings in the question of anymore rate hikes. also it brings up a question of the consumer slowing down. that is a huge tax on the consumer at that level. that brings us to a point of buying duration again. that means growth slows down pretty meaningfully. everything we are talking about from before having the one plus handle on growth, we would have to question that. the very front end would suddenly suffer because the fed would have to raise rates more than what is priced in.

the valley could probably be ok, especially you think of the carry that is priced in. one of the things we talked about in our research note and have been recommending is talking about owning real rates here. especially as he moved closer to the 2% level, real rates become really attractive and the supply portfolio. if you have that real rate allocation, that can work out pretty well and that higher yield situation as well. lisa: do you notice fewer potential buyers when you're talking with clients? you mentioned the bank of japan. are there fewer international buyers and enough domestic ones to take over? gargi: that's exactly what is beginning to happen now. in the fixed income market specifically. we talked about how some of the international buyers may be stepping into their own domestic markets given the yield available. i think if we look historically

at who owns treasuries, we look at households, they have historically been a buyer of treasuries. they have not really bought as much yet. they have a lot more room to add. if you look at the last 15 years, the last 10 years, there was not much need for investors, households particularly to own fixed income at 2% or 1%. now above 5%, sitting in the two-year point or little lower on the five-year point, households will gravitate towards owning fixed income. not just as a diversifier to an equity risk but a real source of income. i think that is why they can be volatility in the short term if we continue to see actions from the bank of japan or other central banks. for the most part i think there will be buyers coming in in u.s. market. jonathan: the yield of dreams.

gargi chaudhuri, thank you. welcome to the program. s&p 500, equity futures lower by .16%. the conversation will continue. darrell cronk in the next hour. we will check in with annmarie . the impeachment inquiry launched by house republicans. tom: we have seen it before but it's like on steroids. it is the same debate as before. it has been an amped up, ramped up. all of this leading into the election next november. jonathan: the prospect of strikes. thursday night in detroit. it is like right there. it's on the horizon. tom: you mentioned your conversation with our great team in dearborn, southfield and detroit. is it like the cable tv thing? they get it done so we can watch the jets go down in flames.

jonathan: and record viewership for espn off that game. tom: is the power of sports. uaw does not and its romances. jonathan: espn and carriers. lisa: this does not feel like a marketing tool or the beating of chests. they are really far apart. when you look at the details, it makes you feel like they are even further apart. jonathan: though stories are coming up next with bloomberg's annmarie. equity futures negative on the s&p 500. crude making new highs for 2023. from new york city, good morning. ♪

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>> i am directing our house committee to open a formal impeachment inquiry into president joe biden. this logical next step will give our committees the full power together all the facts and answers for the american public. it's exactly what we want to know. jonathan: the latest from the nation's capital with annmarie. tom: he looks tanned, like john boehner. i wonder what is going on. jonathan: i'm not sure how arrested speaker mccarthy is in

the last 24 hours. we will talk about that in a moment. equity futures on the s&p, one hour and 13 minutes away from inflation data in america. equities pulling back by .2%. a little softer. dollar stronger and the euro weaker. we are talking about the recessionary environment this year in germany and the latest forecast set to be unveiled this week. we discussed the reuters report that came out yesterday suggesting when we get new forecast from the ecb tomorrow they will be upgrading, not downgrading, their cpi outlook to north of 3% for 2024. all that they come in the next 24 hours. the yield on the ten-year, 4.30. tom: 1.96. enough of the chitchat. we need to go to our soap opera correspondent annmarie hordern in washington. for those that are on inside baseball, and we know everybody listening and watching is, how close is kevin mccarthy to the

edge of boehner? annmarie: that's a great question. i would turn to matt gaetz from florida who says he wants to come in and it will be the prayer, the pledge and the motion to vacate, meaning he is looking to potentially ouster speaker mccarthy from the job. he gave this fiery hot floor speech yesterday saying kevin mccarthy is not in line and doing the job he was elected by those members to do, which is potentially why you see everybody -- mccarthy going to the podium and without house floor vote which he indicated he would take this to the floor first. he just launched an impeachment probe in the president biden. tom: there's a ways to go. we don't need a civics lesson on boehner of ohio down in flames getting democratic votes to get things done as the republican speaker the house.

cut to the chase. how big is this group of republicans? is there a dearth of republicans in name only in the house? annmarie: the issue is that every single one of them wants something different. a member of the house freedom caucus, which many would say these are hard right members of the conservative republican caucus says there is no evidence right now to go along with an impeachment inquiry. you have others that are more focused on not want to get continuing resolution. scott perry, the chair the house freedom caucus as we will not go on with a continuing resolution. we want deeper spending cuts. we don't care about the deals speaker mccarthy cup with the administration when discussing this back in the debt ceiling drama. every single member has some sort of provision they want in order to get their vote to say keep the government open. that is what makes this so difficult for speaker mccarthy

to navigate. lisa: one thing to do you best is focus on the political drama, the soap opera, the theater versus what is real. is it fair to say the impeachment is theater and most everybody in washington, d.c. is treating it as such? annmarie: it is. it's an inquiry at the moment. even for the house was to have a vote on impeachment, there's no way to be a conviction and a democrat held senate. this is an impeachment to nowhere. it's going to be a ton of theater in the house judiciary committee, the house oversight committee. james comer, jim jordan. subpoenas for bank records, etc. a lot of this is going to be noise. at the same time, while there is no evidence yet, potentially keeping this in the news, the biden administration will have to deal with it and so was the campaign. he's running for reelection in november of next year. lisa: that is the theater side

and here's the real side people are looking at now away from the political circus. the uaw strike and the potential for some sort of breakdown in negotiations. goldman sachs saying a potential strike would reduce quarterly annualized growth by .05% to .1 percentage point for each week it lasted. what is the response from the biden administration and the response from republican leadership? annmarie: wally said -- he's who we have on the record talking to cnbc saying he does not think there will be a strike. the reporting we have from our colleagues out of detroit is they are very far at this moment. sean fain will have plans in place if there is no agreement to go on strike. maybe not at all three or at all plants but a certain number of plants there will be strikes and walkouts if they don't have this agreement. between the labor workers, the

union and the big three, they are not coming in on the hard demands that both sides have laid out. sean fain has said we are willing to strike over this. this is going to be a difficult position for the white house. the president wants to make sure he's on the side of the union, but at the same time he does not want to see growth impacted because of this or strikers on the streets in detroit. and, he wants to move the auto industry into a greener future. what you sought the end of last month was $15 billion to retrofit those factories instead of having these companies go to the south and doing joint ventures for battery operations for ev's. last month, almost a month ago, a month to the day the contract expiring, the president talked about how it's union workers should get the first shot at any of these jobs. there needs to be a just transition.

union workers should have the wages they deserve to support a family. you can see the line is trying to walk as he's trying to balance two big goals of his administration. jonathan: i'm not sure how he walks this wind without picking aside. you have the auto manufacturers warning about the sustainability and viability of the companies as they make the effort to make the transition. how does he keep on walking the line without keeping aside? annmarie: it would have been easier if in the inflation reduction act an extra bonus tax credit for those who bought electric vehicles that were made by unions. guess what? toyota has a huge nonunionized factory in west virginia. they were never going to get senator joe manchin's vote on that. this is the predicament for president biden. at the end of the day they will be a lot of phone calls works between the big three and the uaw. he's already tasked jean sperling in the middle of this.

so far there is no agreement. jonathan: has the president made it harder for himself by saying he's a most pro union president in the history of this country? annmarie: potentially, if you're going to see a strike and the uaw feels like they are getting a lot of pressure from the white house to settle for something they do not want. they can say to the president you are supposed to be backing us. at the same time a big bedrock of this discussion and a source of serious consternation for uaw workers is being left behind in the ev transition. what we have seen from the administration is the biggest industrial policy when it comes to ev's, climate change since the end of world war ii. that is why it is so complicated for the biden administration. jonathan: it could be a massive test for his position later this week. annmarie, thank you. someone saying they are the most

prounion president in this country. let's see how the white house response to a potential strike later this week. tom: the election is data 10 states, i will say as an amateur. the bottom line is, those states have a tendency towards manufacturing. the rust belt. even the romance of it. the look back at the heritage. he plays to that and so does mr. trump as well. jonathan: coming up shortly, megan robson on the credit market. plenty to discuss. we had a ton of supply issuance from corporate america through september so far. equity markets slightly negative on the s&p 500. inflation data that america one hour at about four minutes away. -- and about four minutes away. ♪

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jonathan: inflation data in america is 60 minutes away. equity markets look like this. futures on the s&p 500 slightly negative by .1%. similar move on the nasdaq. negative by .12%. look up a low in the equity market. a big upside surprise on inflation later. in the bond market, two-year, ten-year, 30-year shaping up as follows. stubbornly around 5%. will not go away. up a single basis point. for all the talks in bullish

bonds, screaming by. morgan stanley calls a day buy. wells fargo calls a day buy -- calls it a buy. up two basis points. 430.21. lisa: i love that you framed it this way. it raises the question, who is not buying at how much is this international withdraw? japan for example versus something more persistent that maybe has legs? jonathan: a week away. a week away for the federal reserve. for the ecb, a day away. it's getting harder as we get closer to that decision. the euro against the dollar, 107.37. late yesterday a reuters story. this was meant to be a quite period.they can just leak whatever they want to leak. it is reality. writers came out and said

according to officials close to the decision we will get an upgrade to the inflation outlook for 2024 north of 3%, which re-introduces the risk we get a rate hike tomorrow from the ecb. that risk is now on the table in a more profound way, more pronounced way. we have reports that germany be downgrading their growth outlook to contraction for 2023. that is the mess that president lagarde has to confront and 24 hours. tom: with the overlay of the drama from mr. putin, the gentleman from north korea and that meeting, it is unspoken is the were advances. overnight there were legitimate missile attacks on crimea by ukraine directly at the russian navy. i'm sorry. that's an overlay to the strategy lagarde has to impart on a herd of cats. jonathan: the story of the year. the fragility of the energy. tom: the war is going full bore.

jonathan: it is all connected. tom: yes. jonathan: the latest cpi reading is less than an hour away. high gas prices are pushing month over month prices. core is where the good news is for the federal reserve. we focus on core, headline, and the commodity market. lisa: or, do you focus on both and windows headline start to matter more for the fed when it comes to the potential for rate cuts next year? can you see rate cuts with headline figures that are sticky on the heels of oil prices? i don't know the answer. maybe we will get a sense today. jonathan: earlier today we heard from spirit, which had to downgrade his outlook for revenue. had to do so because of higher fuel costs. ultimately maybe even lower prices. this is from american airlines. the new range for eps. $.20 to $.30. the previous range was $.85 to

$.95. the stock is down by 3.4%. that is another downgrade from the airlines. this market was in front of it. we've had a 20% move off the highs of july for the airlines on the s&p 500 off the back of higher costs, thank you energy, and may be lower ticket prices. tom: what's important is capacity is actually up. there are fannie's and the seat -- fannies in the seats. this was a train wreck, no pun intended, before the pandemic. since the pandemic they have enjoyed going from 30 to 10. maybe they rebounded a little bit but they are rolling over now at the 13 level back on their way potentially to break support and go down to pandemic worry levels and american airlines. -- adamek and lines -- at american airlines. jonathan: they have to recognize a retroactive pay expense as well.

it is all going in the wrong direction at the moment for the airlines. labor union costs are up. jet fuel prices are up. lisa: we get some consumer pushback. at first we said prices are not going down. anecdotally, you look at prices to paris as tom does every day, you get the sense that maybe they are going down. is this just the airline industry? they were one of the outliers in terms of the strength. if they are fading, is this just a specific industry issue or a broader question, especially the uaw and the labor pushback because that would eat into their costs and profits? jonathan: this is that a perfect time for the inflation debate this morning with cpi about an hour away. if you look at fuel now can you pass this on? if costs are going up in corporate america, labor costs, energy costs, can they pass that on to the consumer?

arguably, relative to 12 month ago the answer is no. how much has it changed and how much weaker will it be into year-end? tom: i don't think the airlines are good example. they are near pandemic lows, unlike the standard & poor's 500 and every thing else out there. it's the sum of the parts. why used car analysis different from airline analysis? prices are maybe imploding -- maybe it is to and strong of language but is this inflated. -- dis-inflated. lisa: cars are what people bought in the pandemic. then it was the revenge travel in they pulled back from cars. are we seeing the point where margins have to compress? we see this with american air and spirit and across the industry but is not just there. tom: meghan robson joining us and senior vice president at bnp

paribas. we had a guest who frames out somewhere next year a sub 3% inflation. what is your credit world do if we get airline disinflation, new car disinflation, aggregate disinflation has some are suggesting? meghan: we are starting to see signs of that with inflation coming down. a side effect that goes underappreciated is revenue slowing. leisure has been a main top performer among high-yield over this year. we are seeing early signs of weakness and some of those more cyclical sectors. gaming is an example where we see softer demand in some regions. airlines is another great example that can be impacted further by this risk of higher energy prices. as revenue slows and you get deflationary pressures expect margins to compress. you have a maturity wall that's approaching in the next year.

lisa: basically priced to perfection types of level if you look at the extra yield over benchmark treasuries. are we really accounting for margin compression and corporate america in the credit sphere? meghan: we don't think so. we see downside for credit spreads. we forecast wider spreads into year-end. decompression should play out. to break out of this more narrow range we think we need to see more material weakness in the consumer. we are watching for that as a catalyst. risks are negative. in addition to these dynamics you have investor positioning which has gotten longer. the dynamic of rates being elevated in combination with margins. jonathan: tons of supply. when does high-yield coming to play? meghan: we had a large investment grade calendar well absorbed spreads unchanged on the week. what's interesting about investment grade is despite the supply you did not see much on the long end of the treasury curve.

decision-makers are so reticent to really commit to issuing long-term capital. we have seen the yield supply come back to market this week, a good sign. most of that has been on the refinancing side and higher quality. we have yet to see that expansionary type of supply from lower quality issuers on secured bonds. jonathan: can you give us an idea the average coupon? meghan: it depends by the rating. we are looking about 8.5% for the high-yield market. jonathan: can they live with that? meghan: the lack of real pickup and high-yield tells you high-yield issuers don't want to unless they have to. i think there is issuers can come to market and access borrowing so far if they need to. over time we will see that higher coupon as it is digested that will eat and interest coverage more than it already has. we have seen interest covers drop by about one times in the

high-yield market to about four times interest expense or even over interesting spence. tom: are you managing for total return or to click the coupon? -- clip the coupon? meghan: it depends on investor mende. tom: my mandate is not to lose money like i have for the last three years and bonds. meghan: we do think there is a narrow range for credit to trade in and spreads will go wider. given how elevated yields are, carrie is an attractive prospect for returns. -- carry is an attractive prospect for returns. to my point about investment grade supply, there's a positive technical on the long end. we have lower issuance from investment grade issuers in the 10 to 30-year bucket. our rate strategists actually have constant, relatively steady

10 and 30-year treasuries heading into the end of the year. calling for a 420 that could support along in performance. lisa:lisa: the reason people say the bulk of rate increases have not made it into the economy is because most companies have not part of these rates. one is a starts of bite in a more material way for those that do not want to borrow, if rates are at this level and they have to borrow at a percent or 9% coupons, the business model does not work? meghan: it has started to happen for floating-rate issuers. you have seen the leverage loan default rate creep higher. next year we think it starts to hit the fixed rate bond market and a gradual way. for high-yield we forecast about 13% of the market will have to refinance by the end of 2024. this will cause interest covers to drop. there's a lot of dispersion across sectors. it depends on the amount of lower quality issuance, lower quality refinancing sector will see.

that will drive the impacted coverage. some areas we see is more risky. cyclical sectors were places like tech and leisure where you have not all he the high maturity wall but also this cyclical revenue exposure that we have talked about that can come down. jonathan: meghan robson, thank you. some of the supply we have seen from high-grade companies in america. kinds of it to kickoff september. one of the busiest starts ever to the month of september. whether that continues is a separate question. but question is when the high-yield stuff starts to come down the pipe. tom: what is luca doing in cupertino this morning? how many gazillion can we raise? jonathan: it means one thing. spreads are going wider. fantastic market time. futures on the s&p 500 negative five -- by .08%. equity futures down by .1%.

just after the cpi report, his first interview with us right here on bloomberg tv and radio follow the inflation report. tom: this is the single best guy i know on wage analysis at america. he was a wonderchild on it. he was brilliant. this guy understands job market and wage dynamic like no one. jonathan: and cost pressures and inflation and all of that. we need to recap this american airlines story. from spirit, a cut to the outlook of american airlines an hour later. who is next? who are awaiting for now? united, delta? lisa: this is not just oil prices going higher. there is something more when you talk about the cost of employment and you hear about that kind of pushback. does this lead or signal a wave of margin compression that is not yet priced in? this is something we have heard from michael wilson.

do we see this continue for other sectors? tom: the have to put fannies in the seat. capacity is still there. they are hyper managing price discrimination within the cabin. look at the paris trip. $7,000 whatever. $14,000 for two people to paris. jonathan: total revenue for available seats. this is the range for american airlines. previous range was -4.5%, -6.5%. coming up shortly, republican congressman french hill of arkansas on an impeachment inquiry in washington, d.c. this is bloomberg.

>> i am directing our house committee to open a formal impeachment inquiry into

president joe biden. this logical next step will give our committees the full power to gather all the facts and answers for the american public. it's exactly what we want to know. jonathan: the latest in the nation's capital. that was house speaker kevin mccarthy. that conversation coming up shortly with congressman french hill, the republican from arkansas. just coming into the inflation report at about 43 minutes time in america. inflation in america. the cpi report just around the corner. down by .0% on the s&p. -- .06% on the s&p. tom: a lot going on here. the countdown clock is helping me. 43 minutes, four seconds and counting to the cpi report. it matters in new york in finance. it matters in arkansas as well. it is just that way worldwide. the only way to put it.

joining us now the gentleman from arkansas, french hill. republican. i have 14 ways to go ending with arkansas football. forget about that. kevin mccarthy is playing right now. i read cason steen's magisterial book "impeachment" cover to cover. it seems like were almost downgrading impeachment as a concept of our civics lesson. have we ruined the phrase impeachment? rep. hill: you bring up such a good point, tom. that is how i felt during the nancy pelosi impeachment for president trump. i felt like it was rushed. i do think people collected the evidence. i don't think they even looked for the facts during those years. that is why i was pleased to see mccarthy this year really encouraged jim jordan and the judiciary committee, jamie, who

chairs the oversight committee, and the same for ways and means with jason smith, do your homework. don't rush this. for the last few months they have asked simply basic questions about joe biden says he did not know anything about hunter biden's business dealing. he was not involved. he did not have a business relationship. what they have uncovered is those assertions from president biden were not true. that is what has led speaker mccarthy with jordan and comer to take the next step and asking for the legal records they need to answer those questions definitively. tom: do you have any sense as an adult in the room, congressman, banker from arkansas, do you have any sense there are high crimes and misdemeanors involved? rep. hill: one of the constitutional lists of impeachment items in the constitution is bribery.

in the whistleblower testimony from the irs agents and other people that have come forward there is that suggestion that potentially there was a bribe involved here or a cover-up of illegal activity when vice president biden was in office and hunter biden was taking action. it leads to the question of whether -- what has happened since joe biden has been president? we have both sides present those assertions and look for the evidence and follow it where it goes. tom: lisa wants to jump in here. these are important questions. where is this going to be into the republican primary season? i understand there is theater here. there are partitions of gop. you are in a certain partition. where does your type of republican want this to be in february? rep. hill: i think for all

republicans, all democrats and independents, to get to the bottom of this quickly and probably is important and see where the facts layout. perhaps president biden and hunter biden, their attorneys and lawyers can prevent -- present evidence that those suspicious activity reports, the llc formations, the $21 million in payments to those llcs, etc., are completely logical and don't have anything to do with president biden today or as vice president. that will clear of the matter. i hope it is over as soon as possible. we want to make sure the word gets -- work gets done in an effective way. i do contrasted with how the trump investigations were carried on by the house democrats. lisa: in your bentonville there is probably less concerned about the impeachment proceedings and were concerned about the uaw strike discussions. what this means going forward for worker earnings and

negotiating power. what do you hope happens tomorrow at 11:59? rep. hill: again, this administers and has been very prounion. they have taken the side of the union at every legislative battle. i think that question is better left for the administration. obviously the united states does not need a strike right now. this administration has had such a prounion policy in every way stretch and form, i'm sure the unions feel quite empowered to take action. that is concerning to me because i think the economy is at a fragile low. lisa: i was looking at reports calculating with the earnings of some union workers work and extrapolating out to a 40-hour work week. it's $45,000 to $67,000 a year when. inflation is continuing to rise we saw the biggest drop in household real income last year

going back a decade. what do you propose to actually increase wages at a time where on a real basis households are basically being taxed by inflation? rep. hill: first of all, stop inflation. we could have done that if we take in our foot off the gas at the federal reserve and the fourth quarter of 2020 and of doubling down and buying another $1 trillion of bonds and keeping interest rates at zero. if we had not unleashed an avalanche of spending to where we are now spending on an annualized basis over $6 trillion a year when we were spending in fy 2019 $4.5 trillion. beating inflation is the number way to help the working families. lisa: i guess -- i apologize for interrupting. i'm wondering what the cohesive plan is instead of saying the fed, the fed, the fed. yes, spending cuts although it is on both sides of the isle you see spending expansion. what is the plan in the near

term to bring down inflation from your side? rep. hill:. they are linked you cannot separate them. the fed's job has been made much harder because the incredible fiscal stimulus and regulatory burdens put on by the biden administration. that is white the debt ceiling deal we propose get more workers available for the workforce by encouraging work and the assistance programs, cutdown regulatory burden, make it easier to get up project permitted, and cut spending and try to get spending back to pre-pandemic levels and stop having these huge budget deficits that joe biden has forecasted. tom: a very serious question. we are so focused on three zip codes here, the doings of financial america and the global reach. what are you hearing from small business people in arkansas? the unappointed rate is low. life is great. arkansas is stealing for a game

against lsu in two weeks. i get it. what are you actually hearing from small business in your state? rep. hill: i spent a lot of time talking to businesses all over the eight counties of central arkansas. labor is still an issue for both white collar and manufacturing where they are trying to find the right people for the right seats with the right training. governor sanders has put an emphasis on workforce development. that is something i worked on for the past 15 years as a bank president and chamber chairman and now is a congressman. -- as a congressman. the technical skill attainment and the bodies. it continues to be an issue. we have low unemployment in arkansas despite inflation and despite all the economic challenges. that is what i hear about both with community bankers and with individual business owners when i'm at home. jonathan: the razorbacks at tiger stadium. are you proud of me that i know

all this now? rep. hill: i see engagement. we are taking a baby step forward. the next step is to visit razorback stadium in fayetteville. jonathan: congressman, thank you. congressman french hill. the cost of living in america, top? tom: we are 34 minutes from the key inflation report. timmy the heart of the matter --to me in the heart of the matter is the people we talk to about this inflationary pressures in place. in arkansas, that is not how they feel. jonathan: i have been surprised president so candidates are going after chairman powell. i'm not sure how that pulls. -- polls. the reason rates are highest because they have been doing x, y, and z in the white house. how many people in this country no chairman powell is on the federal reserve? tom: are you busting my chops

because i didn't know what generation x, y, z was yesterday? jonathan: darrell cronk of wells fargo is up next. ♪ ♪ 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.

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>> the fed is getting its way

here. it is removing some of that froth, and yet not crushing the economy. >> it is more likely there will be one more rate hike. >> this is bloomberg surveillance with jonathan ferro, tom keene, and lisa abramowicz. tom: the countdown clock says it all. 9, 7, the gantry separates here. jonathan: lift off. tom: we have the airlines may be telling washington authorities what is really going on. jonathan: they are telling two stories. labor union prices are higher, jet fuel costs are higher.

can they pass it on to the consumer? that is what we will be talking about and about 29 -- in 29 minutes time. tom: we are looking for a model doubt sub 3% inflation in 2024. what does it do to the saudi's in oil? what does it do to the stock market? jonathan: crude, 92 is the number that matters right now. headline inflation is going to be atypical because of gas prices. i is baked intot -- it what we are estimating. where does core land? 0.2% is where people are forecasting. there is an expectation that -- this fed needs to be cautious,

t.k. tom: lisa, the real question is what do we do at 8:31? how do we readjust? when up the ducks. a strike, formula one in singapore, then we move onto a fed meeting. we are going to london -- on a reduced fare, did you see that? jonathan: i booked mine six months ago. tom: there we are. lisa, what do you think of this? lisa: it is a really good question. what is going to move the needle given that everyone is looking at court, expecting it to be in line and not showing any react seller a? -- re-acceleration? when does headline really matter? can the fed be cutting rates next year if the headline figure

is still running north of 3%? tom: torsten slok has been channeling harvard. slok publishes today the trend, the vector in nonfarm payrolls. 700,000. he is out at about the same time as the arsenal tottenham derby next year. that begins to fold into the debate after 26 minutes away. jonathan: torsten slok is joining us and about 57 minute'' time on the open. he put out some great charts over the weekend. i have talked about that over a couple of days. tom: excuse me. jonathan: he has put out some great charts over the weekend about why he thinks we are sufficiently restructure of away from the mortgage market. what else are you seeing elsewhere? that will be part of the

conversation we have with him later. tom: 10-year really ailed -- jonathan: how fast? tom: we have a guest. jonathan: your yield, 4.30. tom: chief investment officer at wells fargo joins us now with decades of experience. do i add to my portfolio now? do i go to cash? what is the attitude at the margin? >> at the margin people are renting the market with a vix that is at 14. you can use the options market to get your exposure but it is quick to sit near the exits. it is like your airline ticket to europe. you want to buy the best seat and sit near the exit. we are stuck between this 4300 and 4600. at this point you need something

to change in the baseline in order to accelerate beyond the 4600. equity risk premiums are at an all-time low. jonathan: i was looking back to the last inflation report august 10, since then the market has been dead flat. we got the signs that we needed, didn't we? darrell: let's talk about inflation. what no one is talking about this morning -- everyone talks about core coming down. double-click on core. what is powell's super core doing at shelter? it will go up 4/10 this month from up to tenths last month and it will still be running north of a 5% number. if you book end this with headline, super core with core in the middle -- core in the middle is a good story.

headline is not a good story. lisa: what are we talking about here? what industries are accelerating? i'm getting lost in the core, super core. what is the fed keying in on? people are seeing goods prices does inflate at a pretty hefty pace. darrell: think about inflation. it is commodity prices, wages, that's housing. out of those three housing is giving us some good data in the form of slowing. you are seeing mortgage applications go down. rents are coming down. commodity prices and wages are still sticky. if you get into that super court, wise it up 4/10 -- super core, why is it up 4/10? travel is beginning to fade and health insurance numbers are

fading. it is still running much hotter than people expect or want. you have to look into the data deeper than what a lot of people are doing. they want to take the core and run with it. i will use a jon analogy. it is goldilocks and the three bears. everyone wants goldilocks in the equity markets but your three bears are oil prices, interest rates, and earnings. earnings growth is going to still be zero for a third quarter, which is going to be challenge. who will win that battle? lisa: you are saying oil prices matter and they will matter for input prices for, how high does the headline figure have to be to capture the market's attention, to mean that the fed has to respond to a headline figure that is very volatile? darrell: i think the upside is

calibrated well. i don't the headline number can get them off center for september. it might put november back into the conversation but if you saw 8/10, 9/10 on the headline number, which would take your headline basically and put it somewhere -- that would get their attention. food have moderated some, but the headline does not move it move it. jonathan: are they still willing to be down growth to get inflation lower? darrell: absolutely. jonathan: i didn't get that impression from jackson hole. darrell: in june 12 of the 18 members who have a vote to still say there are more hikes ahead of them.

that did not change in july. we will see if that changes in september. they are still saying we have at least one more hike. the market has taken solace from that. it is what everybody talks about. it is keeping rates high for long. tom: i want you to talk to wells fargo clients who hit a homerun with the 7 big tech stocks. if i take a 30 times forward multiple like microsoft, how does that react given the presumed growth scarcity? do they become evermore treasured? darrell: that has been the trade this year. when growth is scarce you take whatever growth you can get, which is the place you have been getting growth. if you break down things like the semiconductor industry, which is the darling, you have

half of that industry failing technically right now. consumer discretionary, half of the names in the s&p 500 are below their 280 moving average. -- 200 day moving average. you are starting to see them fall below the 50 day. you are losing engines. if those were the engines for the first half of the year, think in terms of a plane, you are losing those engines that you need to drive us forward. i agree with the conversation you had yesterday. the consumer is stretched year. jonathan: what kind of downside are you thinking about? darrell: we think the risk reward for equities, if you just

use the s&p as a proxy starts to turn around 4200 or less. i would much rather see it around 4000 4100 to get multiples where they are. jonathan: you sound super gloomy, so it is not that drastic. it is 300 points. darrell: it is a correction. at 20 times earnings, you not only need earnings growth, the market is starting to demand it. we have to turn that at some point. tom: this was thoughtful -- jonathan: this was thoughtful. if you are just joining the program, welcome. we accounting down to cpi and america. we are positive by 0.01%. coming up shortly, pg&e fixed income to weigh in on that data. regina mayor anton parcel will

join us -- mayor and tom parcel will join us. tom: regina mayor brings great scholarship to us. next week we are scheduled to meet with malek. look at the airline shortfall. back to pandemic lows, the basic idea i would have is are we going to get clarity here? i'm going to say yes, we are going to have a clearer picture here at 8:31. jonathan: on what specifically? tom: on the monthly vectors. i was trained to take 90 days of data and to squeeze out one year as a respectful guesstimate. that is a raging debate among

the nerds right now. lisa: i actually agree. i think we will get a lot of clarity, not because of the actual numbers, but because of how the market responds. it will be interesting to see where the balance of risks are right now in terms of upside or downside potential surprise. tom: i don't think that is a small matter. jonathan: i don't disagree. it is near cycle highs. that inflation report is about 16 minutes away. live from new york city, market is totally changed on the s&p 500. ♪

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>> it is more likely that they hold rates here or may one more rate hike, as opposed to going ever higher. we have basis to think that the fed is going to ease in 2024. i think that means that the fed will take 2 rates higher. jonathan: the bloomberg opinion columnist, i remember the conference. it was the september of 2021 and

bill was talking about fed funds going through 5%. we were all shaking their heads. we are staring down the prospect of getting near 6%. tom: how did he do this? it was dudley and mckelvey at goldman sachs who picked up the coffee -- jonathan: they are doing all right at goldman now, yeah. tom: the crucible of economics, he would crank this out. he is a loan doc in our monetary policy. -- lone duck in our monetary policy. jonathan: let's go to the price section together, going to this inflation report about 13 minutes away. equities are totally unchanged on the s&p 500. in the bond market yields are a little bit higher by 3%. here is the number i want to

talk about -- 89.20 on crude. labor unit costs are up, fuel cost are up and the outlook is not looking good. we hear from american into spirit airlines this morning. lisa: incommensurate airlines across the board. it is not just spirit, which is more drastically focused, it is also american. this is a broad-based weakening when it comes to profits and the compression you are seeing with costs going up. jonathan: we are on the same page. lisa:lisa: is it just an airline story or is this a broader economic story? jonathan: can they pass it on? let's go back to. is oil an example, a reflection or extension of this cycle?

things are better than we thought they were, and we can absorb prices like that. let's throw in yields as well. a higher yield -- lisa: six months ago, everyone said a recipe to end it, and now here we are. the economy kept grinding along. if that is the case, are we misunderstanding some of the oil prices that everyone is saying are purely from supply cut from saudi arabia? jonathan: can this economy get by with $92 brent? , 0.6%, the previous month 0.2%. month on month for core better reading. 0.2% previously, 0.2% in our survey. mike mckee, you have to break

this one down for us in 10 minutes time. michael: airline fares have been down for four months in a row. they dropped 8% last month. cannot continue? maybe in august it did, but with fuel prices abend now they have to pay these huge wage settlements airfares could be going up again and that is a fairly heavily weighted category in the corner. we also looking at shelter costs . do we still see -- everybody's favorite, used cars. here is a tipping point. will it change because the uaw goes on strike? the big three have very large inventories right now so it won't matter for a while, but if it were along strike you would probably see used car prices go up again. lisa: just to build on the oil question, at what point based on your knowledge of the fed and

its history, at what point does the fed feel compelled to raise rates in the face of higher oil prices? michael: they probably don't in the sense that they would not directly attributed to higher oil prices because the fed can raise rates all at once. what they would be watching as consumer expectations. do inflation expectations start to rise because people are paying more for gasoline? that would have an impact on them. how you attack that is difficult when it comes to oil. tom: first thing i did when i walked in the door this morning was go to my favorite cleve leaned 16% number. a great series out of the cleveland fed. which series gives you better core knowledge than core? michael: the dallas fed has a

trimmed mean as well. what is kind of interesting is this only gives us a look backwards but the consensus forecast of economists surveyed by bloomberg is one of the most accurate of anything we survey on. if we come in at '02 that will show you, pay attention to the people who have bloombergs. tom: we are seven minutes away from this important report. what else matters? regina mayor is global head of clients at kpmg with military service to the nation. thank you for joining us today. your research note is demand, demand, demand. are the saudis aware of the resilience and demand that kpmg

predicts? regina: w are anticipating supply drawbacks through the rest of. we are in the tightest supply conditions we have been. what i am looking at our underlying indicators. u.s. prediction is almost at a record high. 17% of the rigs are off the market. that is 127 fewer rigs with the saudi's intentionally keeping barrels off the market. demand continues to go up, and we think opec is perfectly keeping about 1.8 million barrels of oil a day off of the market, and there is no global relief out. we cannotrely on the

spr . lisa: given the fact that production is so high in the united states, is that an indication that inventories are the tightest as you have said going back 10 years? this is not so much about supply as it is ongoing, continued demand and that people are underestimating the strength on the others that is also fueling some of these price increases. regina: peak demand happened pre-covid. we have put that in our rearview mirror. average demand for 2023 will be over 101 million barrels every day. we just came off of one of the hottest summers and a lot of years and we estimate it is 100 30 one million barrels every day. when is peak demand going to take place? some are predicting it is this decade, some are predicting it is next decade.

regardless we know it is coming. if you are a major resource holder, you are trying to figure out when is the last marginal dollar of investment i'm going to put into grow supply against the backdrop of that supply being in excess of demand. lisa: if there is a downturn in the economy, could that offset the tightness in the oil market? could oil prices come down sharply in a surprise even with all of these technical backdrops simply because you get a weakening of the consumer? regina: if we start to see more signs that the economy is slowing down, you will start to see oil prices come back down. w are seeinge the potential for supply rebuild in 2024. some will say it is triple the differ longer that is coming. i think there are signs in the market, but right now it is all

upside. tom: one final question with great respect for your upbringing and international relations, does the united states have an energy policy? regina: i think we have different aspects of energy policies. some of the things we have recently seen is more politics versus substance. it would take billions of dollars of investment into drilling product to get it to market. where are our greatest resources? the gulf of mexico. there are lots of different factors that slow down the ability for our industry to exploit those resources. i think there is room for a more effective energy policy overall. jonathan: the policy is lower prices, t.k. regina, whe doesn demand

destruction start kick in? regina: i think if gas prices go substantially over four dollars -- we are at the end of the summer driving season and gas prices are $.12 per gallon higher than they were this time last year. that is not enough to drive demand destruction. the pinch people are starting to feel relative to how confident they feel about the future, some of th pressures could harm demand. jonathan: crude and brent through the 90's. the inflation report is about two minutes away. given what we are discussing here, what is more important inflation in a few minutes or sales tomorrow?

are retail sales more likely to change fed thinking? that number drops tomorrow morning. tom: i agree. retail sales dovetails in here. that goes into where torsten slok is, nonfarm payrolls coming down. jonathan: that speaks to the question you have been asking all morning. lisa: i what point are retail sales a reflection of whether higher inflation is eating into discretionary spending? that is the issue we are facing off with. retail sales is the kicker to the chaser, does what we will get today. we don't know. it might have been boosted. some of the peripheral data, there was amazon prime, people are back-to-school, and when you strip out all of those distortions -- it has always been stronger. jonathan: when the data starts to contradict, we are at a

turning point. there is a lot of data out there at the moment that seems to be contradicting with each other. claims are superlow, and then you look below the surface of the jobs market, and you start to see some cracks. lisa: i was asking a policymaker "is the data manipulated? are people not responding to all of the surveys?" they looked at me and said "this always happens at these moments. we just don't know which way it is going to turn. it is to vasile to shrug it off as -- facile to shrug it off as wrong." jonathan: we are slightly lower on the s&p 500. yield -five -- 5.03%, yields are higher. >> economists are pretty good at

forecasting, and they were pretty good at forecasting this time except for the core. it comes in the little hotter at 3/10 on the month, which pushes the year-over-year core to five point read percent. -- to 5.3%. the year-over-year number rises to 3.7% fomr three point -- from 3.2%. let's take a look at some of the categories here. food prices are up only 2/10, so no real change their. gasoline up 10.5%, no surprise to anybody. it has a weight on this index. used cars and trucks follow again, 1.2%. that puts pressure on the other direction. services, less energy services up o4, but that -- 04.

jonathan: stay close. that small upside surprise on core inflation lies suffused under the dollar. the dollar is a whole lot stronger off the back of this. yields are a whole higher in the bond market. 5.07%, higher annually by 10 basis points. we have a 10 year high by six basis points at 5.34. it is that piece of the curve that gets your attention. equities just a little bit softer here, lower by about a quarter of 1%. mike, you have had a chance to take a second look. what stands out to you now?

michael: airfares did rise during the month so that is important. breaking down the housing numbers, we see shelter as i had mentioned is up 3/10 of 8%. rent is up, budget rent of a residence is up 5/10. it does suggest there is an issue with housing still not coming down the way t fed would like tohe -- way the fed would like to see it. it it's hard to say at this point that anything would derail them to a september hold. tom: i have a 10 year real yield about three basis points, popping a 1.96 right now.

does an elevated real yield figure into fed calculus? michael: it does over a longer period of time. real yields are going to rise so the fed has to keep an eye o thatn. the pce is the fed's indicator and that has been moving at a slower pace than cpi. lisa: what i find interesting just in the price action of the markets is that the long end is also affected in tandem with the short end. the robustness of the u.s. economy can continue even with rates where they are. from your vantage point, is it surprising that we got some of these upside surprises in the core element, which is exactly where everyone was expecting to

see softness? michael: it is a bit surprising. year-over-year base effects means that we don't lose any ground. we see the core come down every year some. the services prices will be a concern for the fed. one of the things we had seen in the past is commissions on wall -- past is commissions on wall street had pushed up that services next housing number. i had not gotten that far into the data yet, but that is something to look for as well. jonathan: the fun and games lasted about 60 seconds, s&p futures are back to where they are negative about 0.1%. treasuries, two-year, 10 year, 30 year, yields higher but that move fades as well.

if you take a look at the chart, the euro, if you can access one we are basically back to where we started. the dollar is still stronger, 107.32. up next robert to, all of that in the next hour. tom: what does that mean for retail sales tomorrow? jonathan: 60 minutes of that on bloombergtv. lisa: [laughter] tom: joining us is thomas purcell he, chief u.s. economist at pgim. truly great work on wage dynamics in america. congratulations on a new shingle across the hudson. i went to go to your wheelhouse. you were talking to greg peters, which is very difficult. >> he is the best! jonathan:jonathan: you are talking to --

tom: you're talking to greg peters, and he will turn to you and ask "what about wage dynamics?" >> here is the problem for the backdrop with regard to wages. we all appreciate are performing decently but the challenges if you have real revenue that is moving sideways, which it is, and you -- which obviously is a function of the consumer who is slowing down to some extent, how do companies respond to that? how do companies respond to real revenue moving sideways? i think that is a perfect recipe for companies to go after labor, particularly if it means you will get a margin compression, which is something we have been talking about for a while. that to me is a challenge as it

relates to the labor dynamic in the united states. lisa: to translate, there will be layoffs. if you see consumers pushing back on prices, the next step is people will lose their jobs. how much pushback is there actually to pricing? tom: what we know is that wage pressures again, remaining in real terms, it it is coming in the context of inflationary pressure that is now slowing down. this 2/10 that we got, i get it, it was firmer than expectations that does not change the trend. the trend of inflation is moving slower. that means the pass-through is getting harder for companies. lisa: we saw this with american airlines and spirit earlier this morning. the pass-through is getting more difficult. tom: i think it is such an important idea.

not only do you have this dynamic where the pass-through is becoming more complicated, but look at what some of the retailers have been talking about. they have been trading down. i think that is such an important idea. lisa: the problem is we were saying that six months ago. we were saying that consumers would pushback and savings would be beaten down. suddenly, we were going to see a recession. it didn't happen! the data keep surprising to the upside. how can you explain that? tom: there are a couple of ways to explain that. the idea of excess saving is real. the consumer is still working that down. the consumers had a massive pool, with which to dive into. excess savings was one of those ideas. credit usage has been off the charts. you are looking at revolving

debt running at $1 trillion. the consumer has been able to perpetuate the consumer backdrop as part of these 2 ideas. that is drying up a little bit. excess saving continues to fade. it is not gone. banks are getting stingy with respect to how much credit they are willing to lend out. you can see that in obviously the banks' willingness to make these kinds of loans. this whole backdrop is drying up . the ammunition is drying up for the consumer to some extent. tom: what i think is so important here, you have to turn to a punch of pond animals with the ambiguities between your economics and their portfolio management. can you assume a disinflationary tendency means price up, yield down inm -- price up, yield down

in bond portfolios? tom: one of the things we have been talking about is the fact that the rates can stay ready hi, and you can have -- pretty elevated. i get it. on cpi day we are talking about inflation, but the thing i keep coming back to and trying to bring a back to this today is the labor backdrop. when push comes to shove the fed will be very responsive to the labor backdrop. i can easily make the case for the fed to engage in an easing cycle. it is not going to be aggressive. it is a dynamic where the fed cuts back. tom: their easiest path with an asymmetry is to go longer. i agree. tom: that is the big challenge here for the fed. it doesn't have to be a big,

aggressive easing cycle. our call has been you can easily see a dynamic where the fed cuts 50 to 75 basis points over the coming year. that is how you get to this dynamic where rates still remain evaded. lisa: i wonder if goldilocks and a soft landing is the best case scenario for risk assetss or if it is the worst case scenario over the longer-term, particularly corporate credit when you face off at this idea of refinancing. is that problematic? tom: it could be. the rollover risk idea could become a challenge. a lot of companies have done a good job of trimming out their debt. one of the things we have been talking about at pgim. my boss has been fantastic about highlighting this important, structural idea which is out there, something i have been

talking about since my prior life. the pieces are in place for productivity to really kill it. that's another really important idea to insert into your question. jonathan: when you look across the hudson river, does hinckley let you use his boat? tom: i'm just happy-- tom: i'm just happy to be near him. tom: i'm going to call it flat and porous, down a 10th of a percent. lisa: we are looking at pink lee pink lay because i have no idea what that is. tom: it has side turbo thrusters so you can ease into the dock in nantucket. lisa: good to know. tom k.: --

lisa: if anyone is tuning in and trying to figure out what he is projecting onto me, it is boats. they thought we would see an upside surprise. i disagree. put together with that three-month rolling trend, it gives you this feeling that people are underestimating the downside surprises. tom: i'm with porcelli. i think the jobs data all of a sudden became more important here. get out the calendar. stick with us for futures at -10. on radio and television this is bloomberg.

♪ 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. >> in many ways we have already had some rotating recessions to

come into this, so i don't think it will be as broad-based that i think the consumer is going to have a digestion period, and that is what will lead to this mild recession. lisa: this is larry adam earlier this morning, chief investment officer at raymond james talking about whether soft landing means, because we are always looking for definitions as people cling to these words that have very different meanings. it was a pretty significant move in some of the treasury yields in particular and the dollar, and it has struggled off as people -- shrugged off as people look at it and say "it's a months. tom: page three of his report, which was read street wide, on the right side he would list all of the components of inflation. the phrase i use is that

rosenberg slices and dices like no one. it takes time to go through the 85, 90 slices and dices so we will have a different view of this. do we have a countdown clock? we are 17 minutes afterwards. rosenberg is trying to get through it by 12:00 noon. lisa: what goes up, we saw airline tickets go up in this latest report. when we hear about the margin compression, i went to take a look at american airlines and spirit, which came out earlier devising downwards their outlooks. shares at spirit are down. they have come off some of the lows. this highlights the question,

what do companies do when their input costs are going up and their prices are not necessarily being received well by consumers? tom: it has been a theme for me for 12 months. corporations are going to adjust. what the airline thing today signals to me is the continuum away from the pandemic. it is like we are in some new phase after we traveled like idiots. we are all the same on this. we all took the seven flights we did not want to take, and now it is now what for the airlines. speaking with hurley from jetblue here coming up on bloomberg, she is grizzled financially about what do you do in the room when you face $93 brent. lisa: it is a larger story because it is not just energy prices. it is also labor. there was a push back there. these two poles are creating a

confusing stew. we don't know how companies are going to respond. will they hoard labor or will they take the tom porcelli route and start laying off workers? tom: the retail sales report tomorrow -- joining us is rob waldner, chief strategist, head of macro research. i was thrilled he could join us today. rob, ambiguity in microeconomics, you don't really know each way the curve is going to go. in fixed income, i have lots of ambiguities right now.what is the lead ambiguity for you at invesco? >> let's look at where the market is. we saw that cpi was slightly disappointing. cora came in higher month over

month than we were expecting. nonetheless -- it keeps the disinflationary trend in place. that tells you that the market has not totally bought into this disinflationary trend idea, and it tells you that the market is more worried about inflation then maybe it needs to be. tom: in a bond portfolio and there are 472 of them at invesco, the basic idea is you have to adjust. how do you adjust a bond portfolio now? is it a duration dynamic? what is the variable of action into the fourth quarter of this year? rob: as bond managers we have two components to yield.

real levels of yield and the other is credit spread. when we look at the balance now going into the fourth quarter and going into 2024 we were of the view we would have a bumpy landing but with a growing risk of a potential slowdown in 2024, in that environment where we have seen real yields come higher and the spread component has shrunk over the balance of this year, i think that favors putting more of your resources towards real yield. we know that the market itself has been putting money into money market funds instead of into duration. we have close to $1 trillion of money that has flown into money market funds this year. we would be reallocating towards real yield into a more traditional on portfolio, and

using that as the core building block of our portfolio structure. lisa: what we have seen today is that the market has not bought into this disinflationary idea. there may be more worry about inflation then there ought to be. are you going out and buying every 10 year treasury note that you could find? rob: we do think we are at the top, close to the top of the near-term range. load the boat. i'm not sure -- we are getting overweight from a bond perspective in high-quality credit. we think it is a good buy opportunity. lisa: at what point when we talk about margin compression, and this question of what do companies do with the fact that there costs are up and they

cannot raise their prices commensurately? how much does that weaken or break credit as opposed to improve it? rob: the fundamentals, i think you are driving at the fundamentals behind the corporate sector. there is no doubt that the nominal high gdp growth we have had has been very, very supportive for the corporate sector. as nominal gdp comes down -it- is trending around 4% to 5% -- that will put pressure on the economy overall, including the corporate sector. fundamentals will be less positive going forward, but the offsetting benefit will be if you are in longer duration bonds you will get some benefit from that duration. tom: i did a wonderful panel

last week with christina campanile. we all didn't like her. she stole the show. rob: [laughter] tom: she made it clear that with a reduced nominal gdp, a reduced animal spirit things change. what will cfos of corporate america do? rob: as that number -- the problem is people will get squeezed. cfos will get squeezed if they do not have that pricing power police was alluding to -- elise was alluding to. cfos are in a pretty good place. as far as we can tell in terms of financing there's not a lot of near-term financing needs so it will, be more of a longer-term as things reset higher, squeeze rather than an

immediate impact. it will be difficult to manage in an environment where your top line is not growing as fast as your costs are going up. tom: this is so important. i will go back to a huge mentor and someone of great importance, phillip craig who enjoyed living until 104. he founded pioneer funds up in boston. he would say to me "tom, don't forget the bright lights of inflation." under the bright lights of inflation, it is easier for cfos. inflation helps people feel in real time that things are great. it is getting a little dimmer out there right now. lisa: it is a transition moment, and what we are transitioning to is the really big question that we just don't understand, but it is getting harder for the cfo to understand exactly how to navigate. tom: matthew miller in conversation with the cfo, the of financial ex at jetblue,

ursula hurley perfectly timed given the challenges of the airline business. that tonight.

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