ently crushing it. tom: last sighting of jon ferro was in covent garden. he was outside the store. lisa: i love how you project on everyone. take the jet stream, spent time in apple store. >> the digest higher rates for tom: the bramo cam came with us. longer will take time. >> i don't think rates need to this is bloomberg. ♪ go farther than where they are today. >> what is going on in markets is quite different to the real economy. >> the soft landing narrative is being challenged. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. some of us are back to new york. jonathan ferro on assignment. lisa abramowicz and myself bring you an interesting monday on radio and television. we can get to the national rate

adjustment going on. a soup of higher yields. moments ago the u.s. 10 year real yield up to new levels. 2.12% rounded up. lisa: the highest real yield going back to 2009 at a time where it has something else to do than just inflation. it has something to do other than growth. there is something else going on in deutsche bank put out a note saying this is partly quantitative tightening and partly something else not tied to traditional reasons for yields going higher. tom: cannot emphasize enough how much i agree with that. we will go over the other factors into october. one of the other factors we have, and i did not see this in london. bank rate, 30% -- 30 year mortgage. 7.75%. lisa: we have been talking about

who is paying it. is this actually going into effect? michael mcdonough at bloomberg intelligence said the average monthly payment has gone to about $2300 from less than $1000. there is this feeling of things getting more expensive and the basic day-to-day necessities. tom: there are number of stories going on. a mystery of what china will do. you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! one of them is the strike. anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com. ♪ (captivating music) ♪ (♪♪) the first law of thermodynamics states that energy cannot be created or destroyed. (♪♪) but it can be passed on to the next generation. (♪♪) one of them at the shutdown. pres. biden: the government shutdown can impact everything good news from hollywood. from food safety, cancer research, head start programs for children. thank god there is something out funding the government is one of there. the basic responsibilities of there is a difference between congress and it is time for the screenwriters and the actors. republicans to start doing the job america elected them to do. lisa: the actors are usually tom: president of the united different phrasing one. that is some good news. states speaking to the is there a word quadfecta? congressional black caucus dinner on saturday, largely democratic room. you will have to give -- he will there is the auto strikes, have to go to michigan which is

government shutdown, student fractious. loan repayments, and higher gas a democratic and republican state. prices. trump looks at that is fairground. anyone of those could derail the lisa: which is the reason they u.s. economy. increasingly there is a question will both be in detroit. if put together this is a i am curious who will gain more different kind of toxic group. traction and whether that will -- this is a toxic brew. take over any publicity from the government shutdown. tom: welcome to all of you. tom: we are in a new studio. in our temporary studios in new what do you think? york. jon ferro with our interior it brings back memories. designers in london, picking up i got emotional. curtains for the new studio. me and scarlet fu and sara lisa abramowicz and tom keene eisen. they should put a brass plaque with interesting markets. stay with us through the morning outside, the alix steel room. lisa: i think john will not come as we see if yields adjust. equities quiet sent. back until we resolve the the vix shows the relative government shutdown issues. tom: we are building a new tension over 14 days, 10 edifice for your morning attention. they are working on it. business days. for four or five weeks will be west texas intermediate, we have here as well. to go to the yield space. the data checks are the same i'm sorry to walk in and see whether we will be here or in our new studio. 2.12%. the vix 17.83 says that all.

that shifts the game for any and all. lisa: how many days that we thought yields would go lower the doom crew has picked up on a number of things lisa has talked and think people would buy because everyone was saying they about including china real estate. were buying it as katy kaminski said they are all selling even negative three on xp x futures. though they said there buying. what will be more important, the we have to do bitcoin because government shutdown discussions john is not here. or detroit? annmarie hordern is back in $26,000. katie greifeld is up early washington, d.c.. watching. i am curious. what is more important? we are 4.49%, almost 4.5% on the the shutdown discussions or 10 year yield. detroit? annmarie: when you put them the spread gives us distant version. together that is when you have that is an important philosophy. concerns for the u.s. economy. even though shutdowns in the the real yield 2.12% is right near term do not impact the u.s. where we are. economy they do cost money in that is an absolute key the sense we are paying people determinant. to not work and so not i look at dollar strength. collecting fees at the national park. we have not broken out to new that can cost the u.s. dollar strength. government of their amount of yen rounded up. money. to the consumer there is not what is in the data that gets intense impact of a shutdown. your attention? lisa: crude. if you coalesce all of these things together and you have higher oil prices come the fact that on wti you are

above $90 and there is data over inflation, government shutdown, the weekend showing hedge funds are the most bearish -- the most and the autoworkers striking, that could be very difficult for the u.s. economy. in washington, laser focus on bullish on crude going back to the shutdown because there's not february 2022. tom: do the brief. a lot of time to get this done and you see a lot of positions within the republican party are just hardening and it is taking lisa: you know how you don't a lot longer. like fed speak? there was not a ton of movement there are seven fed speaks this this weekend. week. this week alone. they will be back in session tomorrow. speaker mccarthy wants to get me apple's fed president neel appropriation bills on the floor kashkari at 6:00 p.m. today. , potentially coming together tomorrow we have michelle with a hard right to show an bowman. olive branch that he wants to do fed governor lisa cook, chicago this by appropriation bills. fed president austin goolsby. maybe they would allow him to on friday the fed's john stop -- to pass the stopgap williams. funding measure. whether they lead into this idea there potentially could be a that they are done, because it shutdown, at least as far as seems like that in the literature, ellen zentner saying rick davis and jeannie shanes a they are done. note say in 48 hours -- and earnings, this is a big deal off jeannie's a note say in 48 hours mike wilson's comments. retail earnings in particular. -- i was wrong when i said it is

tuesday cosco. unclear of president biden would wednesday h&m and micron. join the picket line. he did put out an x poy with thd thursday is nike. women of the uaw as they fight curious to see whether these are for a fair share of the value they help create. bespoke stories or whether we get a theme. will this be viewed as a victory on the economic data front you politically for president biden talk about home prices and the or a liability? annmarie: looking at the mortgage rates. home price data as well as president schedule. new-home sales. tuesday it is black-and-white. we get that tomorrow. jobless claims thursday. wayne county michigan is where he will be. personal income and core pce on pete buttigieg. friday. the consumer. how much did they continue to he is definitely being backed up by the democratic party to join surprise to the upside? tom: is not a sleepy week into the picket line and stand in solidarity with american workers. october. on the des screen, a plethora of that is the tone from the democratic party. there are concerns because they are in the middle of a negotiation with the three big auto companies and obviously the data. president want to see auto jp morgan october 13. companies in america prosper. they also have december, when the president will make a show the bruins pull ahead. to make sure he is being seen as

joining us is luke kawa. the most prolabor union president in american history. he likes to tout it and now he what did you write about this weekend? is putting his money where his mouth is. what is the distinction you see in the cacophony of news we interesting this factoid from have? the washington post. luke: this weekend is a lot more labor experts say does probably the first time a sitting reading than writing. very interesting for us to watch president has visited a strike in 100 years. and year end. a couple of things that seem feels like a paradigm shift. tom: i want to digress for our like big highlights. a lot of the -- there is the international audience and americans in an iphone world. quintet. throw in higher rates into the i am fascinating how blind joe mix that the u.s. economy will be dealing with. mathieu in and reordered our when looking at polls -- joe we are dealing with a turn in the second derivative of u.s. mathieu and annmarie hordern are growth from q3 into q4. when looking at polls. the most persistent trend has given nbc pulp, you have a been u.s. growth accelerating washington post full, they are and surprising to the upside. not even close. that is something that will there used to be a time when change. people in bow ties said this is on the other hand two of the the way the poll is. biggest drags for markets have in the polls now that we are all been resilience of u.s. growth that has driven part of the higher real yield story. living on cell phones? also elements of term premium annmarie: i think they matter and supply. closer to an election.

that changing as a second derivative of u.s. growth. it is very difficult to look at these polls so far out. that relationship is at the four we are over one year away from in terms of driving markets. tom: be sure luke gets the memo the november 2024 presidential election. it is quite astonishing when you look at this washington post/abc news poll. that we do not do newtonian if even a slight bit of it is calculus on mondays. there is a great rule on that. true, the democrats have a big problem. we have a smart idea that trump is leading biden 10% in this pulp. earnings have not deteriorated. if you date -- in this poll. the site guys this morning is should i sell stocks? under 35 trump is leading by 20 dovetail that with the idea that percentage points. i really want to get out of this is a group that biden equities. luke: i guess we would take the scored major wins within 2020, other view to that. leading by double digits. we are not adding risk or at the moment this is an cyclicality of this pullback at this time. outlier, but looking at this poll it could be concerning if a our view is the real underlying story is what will win out at few other polls start to show up the end, there is a limit to how like this. also one thing is very clear. much good news for the economy can be bad news for stocks in americans continue to give this terms of value it -- in terms of administration pour remarks on the valuation pressure. the economy. even though they tapped the low you have a key driver of

earnings growth. unemployment rate come inflation since the s&p 500 peter, still seems to be the number one concern. earnings estimate still up. tom: what is the prescription to get michigan -- to get the under we think that is the story that will win out when it comes to 35 vote in michigan. the equity market but we are does everybody show up at a cognizant that some of the sites nickelback concert? annmarie: nickelback, i don't we have seen in markets, credit spreads perking up, some of the even know if they are still performing. tom: i price them for a family outperformance of defensive outing. equities, those are things that have us on alert. lisa: if you could frame where they want to $750,000, based you are, because you have been feet. let's continue. annmarie: i did not realize the bullish, whether you are becoming less bullish because of keene household were big the quintfecta, the five nickelback fans. i think this michigan trip, the different areas coming together, i can see tom looking at me like president will try to shore up everyone in the state to show he what did you just make up? is in solidarity with the workers and communities. i am making upwards. so many of these workers, their at what point do you see things families also work on the supply -- signs that things are turning chain impacted by what is going on. the democrats want to show we and economic data will start are on the side of workers, less surprising on the downside? luke: one thing we expect to see on the side of corporate america. or we will be judging is the odd this administration always touts

the idea of corporate greed and a low corporate tax rate they juxtaposition of the second derivative of turning in the have wanted to bring up after u.s. but still expectations seem the trump era tax cuts. too low. that is his mission in michigan you can quibble whether the and why michigan is so important economic forecast for q4 gdp in is because biden won it in 2020 the u.s. of .5% is what the market is pricing in. the market is pricing in a but president trump was able to better outcome. flip it in 2016, the first time since the 1980's. lisa: will we hear about the it is the juxtaposition of these temporary factors slowing growth green agenda from president in the fourth quarter but we biden? annmarie: i doubt it. probably see growth coming in ahead of that. how does the market deal with unless he is asked about it he the issue of the turn versus will say he wants to support a continuing to be positive versus fair transition to the green expectations. agenda where workers are the we are very cognizant of the first one to gets those jobs. you will not want to touch this idea that as you turn there will be points in this market that is industrial policy. going to be tough to tell tom: a terrific monday brief. whether you are headed for a soft landing or whether the hopefully she will be here for deceleration continues and you the tuesday brief. are heading into something more severe. the news flow extraordinary. our view is what is shaping up i love your insight about the in the fourth quarter will not uaw strike or government be that more negative outcome, shutdown, project lead of a but something we will continue to monitor. shutdown is presumed to be eight lisa: if yield stay where they days a week and everybody gets

paid at the end of it. are, can stocks keep doing well? we were pretending. luke: it is a mirror of the if uaw is long like the question we asked when we hollywood strike, that is may be started the year. more important. lisa: especially because you in the economy handle 5% federal funds rate for the entire year? have posturing from president the view then was yes. biden and former president trump in michigan trying to get that vote at a time where it is the view then with stocks is stability is what is needed, unclear where the allegiance lies. much more so than yields coming tom: if the encyclopedia. down. it is the negative momentum in the bond market does have to -- an expert at bloomberg on all of this. the election is only 10 states, nine states? the positive momentum in oil lisa: the swing states. prices has to pool a bit. the cooling for the second this is one of them. derivative for rates will be annmarie was talking about how a something that offsets the second derivative for u.s. growth and a little better for lot of people great biden risk assets. negatively with the economy and lisa: are you still bullish on it comes down to inflation. china? luke: we have been neutral on costs are going up in a notable way and real wages just crossed china for a while. where inflation was a couple of in china it is the continued months ago. it is tough when you're looking dichotomy between the fact that at a fixed cost. valuations are very depressed. gas prices are rising, mortgage it is not clear there is a rates are crazy.

catalyst to see faster growth in it becomes a difficult moment. china. when risk assets in china are at tom: right now we are feeling a this depressed valuation, when market check. the vix near 18 level. they are this unloved by fund managers, that is often a time the yield space speaks. you get to see more moves to the this inversion in place. upside. a neutral view on china but we bloomberg surveillance. are counting on some of the piecemeal stimulus putting more stay with us. ♪ of a floor under growth. do not expect anything bigger from chinese policymakers. tom: what is the bet on the street? is there a massive short bet out there? luke: the bet on the street is everybody knows what history says about buying the last fed hike, buying the end of cycle hike. i think the big bet is also the big worry. the idea -- lisa talked about it in the intro. the other factors pushing up yields. that is making the term premium argument. nobody understands it. we will all have different definitions of it.

some of the things people associate with term premium will correlate. what is different this time is supply is moving much more counter cyclically -- much more pro cyclically than it has in the past. that is something where you have this element of term premium we have associated with growth. with inflation that might be moving in a different direction and that is what causes a bit of a scare to relying on traditional models for how and when to be adding duration. tom: luke kawa at ubs. thanks for getting us started strong. miriam emails in and says what in god's name was that, bramo's quinfecta? i think it perfectly captures where we are. it is all the reason not to participate. lisa: i originally thought it

was a quadfecta but luke kawa, i was grateful to him to making it a quinfecta. when you put certain things together they take on a new meeting. that is the reason people are starting to feel like maybe this time we will care a little bit more about a government shutdown. tom: our focus after london and the greater picture is market dynamics. luke kawa with us. coming up katie kaminski out of boston. she is brilliant on the new trend. futures at negative two. this is bloomberg surveillance. ♪

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tom keene, jonathan ferro, and lisa abramowicz. he was back in a corner. everyone has an opinion on the game. arsenal didn't deserve to win. lisa: what a shocker. tom: the answer is ferro was down in the corner with the tots crew. he was not hugging players, but he was going mental. it is great. he is on assignment in london, recovering. futures negative four. we are focusing on the bonds space as we say. what is the curve inversion right now? 62 basis points. >> i still believe if you shut great -- the hand check will be down your in a weakened position. >> does that mean you will try great. we are dis-inverting. to push forward? lisa: maybe that is the tipping

>> i would like to. tom: he is the beleaguered point where you reach some sort of new reality where people speaker of the house. kevin mccarthy. start to understand may be this interesting background for him is the level we will live with for a longer period of time and below the imperial valley, bakersfield california, a that is why you are getting that different story of republican flattening. everybody has been saying that they are buying bonds but they politics. over the weekend -- there are are selling them. tom: a yield basis like price various sundry people in the keene house. down yield up that is where we are going. you must listen to the interview i had to watch like five arnold like zz top years ago. schwarzenegger movies. lisa: [laughter] i put them on for various people tom: if you are with the global in the family the arnold schwarzenegger speak at the 2004 wall street you half to listen. republican convention. it might as well have been from he was hugely controversial last venus or mars compared to what time. mccarthy is putting up with the president of the united today. lisa: does he drink martinis states wearing patagonia on the picket line. lisa: what is the political stew while he watches arnold schwarzenegger movies? tom: he gets the olives. that will take preceden

mccarthy is beleaguered as precedents -- precidence this arnold schwarzenegger never was. this is the shut down. lisa knows when the shutdown occurs. i have no clue. weekend. it seems like a government a little churn of the tape within the bramo quinfecta of shutdown is increasingly likely, unclear though whether the length will justify its ranking tension. comment on a 4.49% 10 year among the quintuple threats yield. lisa: this is being driven by facing markets right now. tom: the big thingtom: is the something ambiguous. story. it is not that growth expectations are going up. mogensen goes to emory. is this something else, whether it is a near-term, let's go it is people protesting the let's jumpstart this, but he has budget, or is it because the federal reserve is selling bonds, they are not the buyer of last resort in the same way. been trying to do that all summer. lisa: europe seems like it is a this is a game changer in a very well oiled machine. unusual cycle and that is morgan stanley is saying it is something people are picking up on. tom: we will watch this highly unlikely the fed hikes rates in november. carefully as global wall street greets the week. instead, they believe the fed is curve dissen version, we will done and they expect rate cuts get it -- curve disinversion. to the star in march of next year. "they have until the end of the

want to jump to a set of a series of interviews we will do year to decide if they are going to brief you on a shutdown of the federal government of the to hike further and they have united states of america. left the door opened a hike further if needed," basically it is different than many other processes. talking about how the bar is debt, deficit, budget shortfall. incredibly high, given that only annmarie hordern their baseline understands. briefing us on washington. expectation is for an acceleration. tom: jim carrey and applied it jeanette low, director of policy to the bond space. at research. you have a 75% chance of odds on this is the morgan stanley bet, shut down. price up, yield down at some what we listen to today or tomorrow to change your odds to point. calibrate a government shutdown? lisa: there is a conviction jeanette: good morning. right now. this is non-consensus, if you we will not have congress work think about it. on any potential bills until everyone says they are buying bonds, and if you believe -- tomorrow so that is where we will see the process development. our anticipation is the senate bonds, but they are selling. will move for -- will move first if you believe ellen zeller, it and try to put forward a budget resolution that will keep the government funded for a month or will be interesting whether people lean into that. two months into early december. tom: we will have to see.

then they will send it to the house. everyone will do their q4 the house has to decide do they have the votes to pass that cr estimates on outlooks. lisa: delivery times for apple's even if it is with changes or does mccarthy have to move with latest iphones, the iphone 15, the democrats to try to pass this or does he allow the government to shut down? which i know you are very we will be listening to the excited about. the lines to wait for apple's rhetoric we hear with the house. cheapest iphone 15 are twice as you have heard a lot of republicans over the last week long this year than it was for frustrated by the handful of its predecessor. conservatives who blocked any movement. as that course might change we preorders for the iphone 15 may see this potential change. promax increase to a record. we do not have a government significant upgrades to both shutdown if they are willing to models are what is driving work for democrats. tom: bramo but into morristown demand. even in china -- it is not only on the gulfstream. in the u.s.. if there is a shut down, is the you have to wonder if the push border check customs lines worse than they were when i came back backs of the chinese authorities do not have an impact on the two days ago? jeannette: that is always the risk. consumer, in terms of pushing them away from the iphone. tom: thank you for watching and there been thoughts that you have to be careful you might see more delays at the border, at listening in london. we just had a ferro siding --

the airports. they do have an essential component to a shut down. anything deemed essential should still be in operation. sighting. as we have seen in shutdowns in this is hugely anticipated. the past, if you are showing up this is what bloomberg to work and not being given a surveillance is about. paycheck, sometimes people do our team is 24/7. not show up. that is where we have seen over the weekend we said get issues in the past with faa and catherine kaminski and early transportation screening and the davis -- earl davis. like. lisa: this is a maddening issue. earl davis joins us to bounce there will be 800,000 workers, including military and teachers, off of what catherine kaminski who will not be paid as there is just said. this shut down. you have a greater conviction on that than the last time we this is at a time that is fragile. how much will this end up being talked. >> the answer is definitely yes. a political tit-for-tat where democrats count on republicans we still see significant room as gaining the brunt of the for a selloff on 10 to 30 year blame for this and how much will this be something larger that bonds, possibly 70 basis points leads to an economic slowdown that leaves both parties with egg on their face? jeannette: we have seen looking

at the shutdowns that have occurred, in general they do not higher by the end of the year. t have a major economic impact. positions slightly not by buying nominal bonds but by buying you do have people that are tips. we see tremendous value in the furloughed and not receiving paychecks. tip market not to say that it cannot get cheaper but that is generally shutdowns last eight days. the government reopens. what we are looking to buy. tom: where does the 10 year real that is paid back. everything is filled in to some yield, how can that come down extent. from acan it really jump out? there is not been a large economic impact. earl: it could really jump out alexis -- the last six shutdowns to 3%. occurred in positive economic let me explain the reason why. growth. when the real yields go up the issue is we are seeing increasing pressures on investors get a real return and consumers from student loans with the economy being so repayments, higher oil prices, you have the fed has higher resilient and so strong, solid as the fed said, what they have interest rates and that is leading to higher debt issuance in the u.s.. to do is take dollars out of the these things are putting a growth economy, put it in the strain on the u.s. economy. savings economy and you do, that the longer the shutdown last is by having a higher real rate to where the issues come into play. if we look back at the 2013 shut attract buyers. down, that lasted 16 days. possibly 3% at the very top end.

two weeks is a long time but it tom: this is so important. you have katie commenced -- is not as long or has as big of an impact as you might think. katie kaminski and earl davis if we have something about the same time period that would not pushing against the global consensus. be that egregious to the economy or to the stock market, but we this is a global wall street issue right now. do have to think about how does that comes down to the gamut that we see, the instability, the government reopen? usually there is political the velocity we see in equities. pressure that starts to keep in that then forces the hand of if we get a davis bond pricing policy to get back to this. this could end up being shorter two things unravel? do we get to end instability? or longer. the longer it lasts the more risk there is to the economy, to earl: the answer is yes but for the markets. the other thing we are watching a very short period. out for is there something like moody's could start to put the we believe that the market will u.s. on creditwatch because the credit agents have been more still do all right. focused on process rather than we like risk assets but now that the u.s. finances and those decisions. these valuations. we believe the unravel. lisa: president biden is heading once it does unravel we will be by yang. to detroit to join the picket we will be going overweight and line, the first time a sitting that is something important to president has joined strikers know. these are the ebbs and flows of

going back more than 100 years. the markets. what is the significance that the focus will be on detroit that is what we believe managers rather than washington during the shutdown jeannette:? should do. lisa: you are saying real yields jeannette:if there is 8 -- go to 3%. earl: nothing is for sure. rather than washington during the shutdown? jeannette: if there is a shut down a political price has to be paid but biden could have an lisa: this is the lead of this whole thing because a lot of opportunity to improve his people are saying this is not driven by inflation or growth. standing in showing he is trying to have the government reopened. it is driven by something else. the fact that there is a lot of what is that something else pressure on autoworkers is driving the real yield higher? trying to highlight a little bit about the impact this could have earl: expectations. on the economy and that will be when you read history books, important ahead of these decisions. we are probably not going to throughout the 60's and 70's know whether or not we will shut down or not until friday or inflation was not an annoyance. it was not public enemy number saturday as the deadline hits. tom: help me. one. it was not until reagan came in, i just listened to you very that he said inflation was public enemy number one. carefully on the path of a shut down. if it is eight or nine days and we are still in the annoyance everybody gets retro pay, why phase of inflation. are we doing this? it takes a lot for it to become

jeannette: this is usually about public enemy number one. lisa: you said you will be a making a point. buyer when the wrist some sort of unraveling. the 2013 shut down occurred what sort of unraveling will because the republicans were looking to block funding for the affordable care act going into cause you to buy? implementation at that time. earl: the way we taste risk -- this that argument about saying we want lower spending and we won something done about the take risk is a mix of structural southern border. usually the people in congress and strategic. feel that doing a shut down will allow them to get their message have there levelser and we have across. it has not been successful. our view. they do not win concessions. -- we have our levels and we this time if we look at what might happen we can see where have our view. the bipartisanship is in congress that we are going to we will ultimately be going long. have a spending deal. lisa: how concerned those are it will be higher spending. you about the quintuple risk? conservatives are the ones pushing for the shutdown. they have to see whether they will have leverage to get slower growth given shut down, something done on the border strikes, student loan which is what they want. repayments, the cost of shutdowns have not been useful borrowing going up as much as it political instruments. has. they do not get much of a point earl: i don't have any concern.

across. they allow people to get their it is all about framing and how frustrations out but then we you look at the market. have to go back to the governing. that can be a positive outcome i look at the market like a boeing airplane. that we have fleshed out some of we are getting all of these air the frustrations of both parties in congress, but then you have currents. to open the government and start we are getting turbulence. governing again and that can be a positive outcome that comes turbulence can shake the plane out of this. but it will survive coming out tom: thank you so much. of it so i have no worries, but i believe we will have a lot of i need to tell you about "balance of power." turbulence. jonathan: we will get a -- tom: we will get a little nerdy a very focused attention on what we see going on in washington. here. joe mathieu, and reorder, kailey earl davis, i have loonie at leinz, look for that in the early evening each and every 1.34. day. it is a stochastic weak ♪ discover the magnolia home james hardie collection. canadian dollar. if i get an earl davis market i available now in siding colors, styles and textures. curated by joanna gaines. get a stronger dollar. it does a stronger dollar solve the market? earl: that is a great question,

and i agree with the sequencing of that. what a strong dollar does is it allows us to play out the story that there will be some volatility in this quarter. the key to that stability from an economic perspective is a staple, strong -- stable, strong dollar. it plays into the story that we, that first time you take a step back and see everything you've accomplished. will go through rough times but i made that. we are on the best of airplanes with your very own online store. and we will be able to survive this. i sold that. as yields go higher that is a and you can manage it all in one place. longer expected return for pensioners, for investors in i built this. and it was easy with godaddy. bonds. there will be tremendous i am doing this. opportunity here. i see 2024 being a cyclical with a partner that puts you first. start for free at godaddy.com/sell ♪ bull. tom: this is what the show is about. i don't want you to move. you have katie kaminski and earl start for free i'm gonna miss you so much. davis back to back, both you realize we'll have internet waiting for us

at the new place, right? oh, we know. we just like making a scene. screaming about lower price transferring your services has never been easier. higher yield in the fixed income space is what a monday morning get connected on the day of your move is like. don cass emails in the day the with the xfinity app. liquidity died. lisa: he is really building on can i sleep over at your new place? the theme. can katie sleep over tonight? tom: the vix is down 2/10 of a sure, honey! this generation is so dramatic! percent. lisa: we are looking coming up move with the xfinity 10g network. at a number of different events. you talk about the dollar and the weaker yen and what, i find interesting is that the bank of the pan minister doubled down on his message -- japan minister doubled down on his message overnight. weaker for the yen, 1.38. tom: itom: don't know where it unravels for them, that this is one of the issues that gets you away from the calm. don casts down in florida, you should hear him play american pie.

lisa: after throwing back a couple? tom: remember him seeing vincent -- "dysttu, starry -- "starry, starry night." no is looking -- no one is looking for the solvency debate. lisa: no one is thinking we will get a credit crisis. some people said what happened was a stress test back in march with some of the smaller banks and the banking failures that did not lead to anything, so what will? the answer seems to be nothing. tom: there is not a chief u.s. economist and america that does for as tightly as lauren ron -- laura rhame.

even turkish lira, let's go at eoc craddick, lira 27 points. bloomberg surveillance, radio and television. ♪ tom: thank you for joining us. thrilled with the anecdotal evidence discerned in london about a global audience. thrilled you are with us around the world. futures flat. i am board. no i'm not. in the yield space volumes are being spoken. 10 year real yield, new level back to 2009. lisa: every thursday at 4:30 p.m. i am the person who looks at the fed balance sheet and i have been watching it and it is fascinating, it is down to about

a trillion dollars. the peak was about $9 trillion. $1 trillion of bonds that they have allowed rolloff. how much is that the underestimated story behind the real yields continuing to climb when it is a global quantitative tightening? tom: i look at the financial conditions index. there will not be a quiz. it has become more restrictive. .19%. not restrictive but not the accommodation that was confounding chairman powell earlier. brent crude rounded up $94 a barrel. we are over the atlantic ocean, flying in, doing circles over white river junction, vermont for an hour. lisa: not that you are bitter. jonathan: i am thinking -- tom: i am thinking are you going to run out of gas? lisa: we are talking about the

midlands and what will happen. we are watching president biden joining the picket line in support of striking uaw working. he'll be speaking from michigan on tuesday. tom: on wednesday does he go to the board meeting of ford? lisa: the union is expanding its ♪ explore endless design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™. ♪ (captivating music) ♪ (♪♪) the first law of thermodynamics states strike against gm and still am that energy cannot be created or destroyed. (♪♪) but it can be passed on to the next generation. (♪♪) >> there is a lack of reciprocity and a level playing just. -- and stellantis. field from china has forced not ford. europe to become more ascetic. is he picking sides at a time we stand at a crossroads. when auto many are getting subsidies from his policies with we can choose a path towards some of the electric vehicle makers and former president better relations or a path that slowly moves us apart. donald trump will be there on tom: mr. dombrovskis, i have wednesday. instead of going to the debate that will be happening. tom: jon ferro, do you remember jon ferro? he was very good on this. he is on assignment in england. come to like him. he is european commission someone says it was arsenal-tottenham. executive vp and trade

commissioner. he has a project going on. he works tirelessly. lisa: it is true. his huge success with daniel levy making global news ways. i think this is a really different tone than we have what was so cool as any of this heard. environmental stuff, is it i keep go back to hogarth economically feasible? that is a side project. meeting. he was saying the european lisa: is it economically region may be willing to take some pain in order to execute feasible on the timeframe they are talking about. this is with the rishi sunak some larger decoupling with china. london flavor where he is pushing back and delaying it. the other thing is this tom: good morning across america resolution, maybe, for hollywood on radio and on television. 'bramo and me are holding court writers strike. you can see the move in disney here in london. and netflix. uneventful trip. the wga say a tentative deal ferro on assignment after his late sunday night. leave the tottenham -- levy the new deal is expected to lift pay and create new rules around artificial intelligence. the screen actors strike ongoing . tottenham interview landed him the changes in technology underpinning some of the angst in hot water. fueling these strikes is something we cannot talk enough about. tom: if you go down to the right now we will digress to the delicacies that america faces in

university of texas in a fractured europe. screenwriting, it is lifetime that fracture is mostly around a employment. that is what this agreement is new germany, around a europe about. lisa: i do not know the around germany, and all of this contours. tom: ask your offspring. going on with a war in ukraine, lisa: she can read the deal. and a war with china. jonathan: -- lisa: executive maria, we got here in a europe after miracle. as dombrovskis speaks, it is a vice president for the european commission made the comments, he's in china and says the eu welcomes competition, however changed germany after merkel competition must be fair and we isn't it? will be more assertive and >> i'm glad you mentioned him tackling unfairness. earlier this month the eu did because for an international talk about some new probe into chinese subsidies for electric audience, you need to understand that this is someone who knows vehicle, but this trip in china how\ the european commission is very interesting at a moment that is pivotal for european china relationships. tom: it is interesting to see operates. this is a man who really gets the details so when he speaks the distance between berlin, people do pay attention. when i heard that you wanted to frankfurt, and london. talk about the speech i was happy because this speech is with the voice on this, picking

something. you have to look up what he up the debris of our london trip says. this is a crossroads for the are is the chief economist at berenberg and he has been incredibly perceptive about this relationship -- the relationship linkage of monetary and fiscal between the european union and china. economics in europe and china. tom: over the week, a lot of lisa: which is a key question at a moment of flux. i would love to get your opinion starting on what we were just talking about, which is this trip in china. really smart coverage of the south china sea and the expansion of america's military might and a new way in the what is the likely outcome to transpacific. that is not a european discussion. is it just an economic some of the rhetoric discussion? increasingly hard out of european leaders? >> germany, the european union is europe operating in a trade vacuum? maria: the figure that really is reducing its dependence on china. de-risking is the word, not gets europeans has to do with the trade deficit between the decoupling. european union and china. the message is clear. we are serious about this. it is growing every year. it is almost 4 billion euros. in a way we are self-confident in europe. we have some economic problems that underpins this changing tone. but china has problems that are worse. when you get the guy who handles we are the bigger market than china. the trade portfolio who goes to

we do not have to accept what china for 4 days and saying"we china does with subsidies, with need to fix -- four days and its distortions. we can push back. lisa: is there a tacit saying "we need to fix this acceptance of slower growth work situation," goes back to that number. recession during the transition process away from depending on the question is what happens trade with china? >> there is a tacit acceptance with germany. they have been fearful at times that the de-risking with china about potential retaliation, fes will mean short-term losses. there is also an acceptance that if we want to be less dependent on china in the long run, there is an economy in china that will struggle, it means we get less boost out of foreign trade with china. having said that, the lesson we have learned from putin is clear. if you are too depended on somebody you do not trust you may pay a heavy price. it is probably worth de-risking now with modest near-term pain

in order to secure a longer-term fairer and more equal relationship with china. tom: one of the great -- the plaza hotel has been shut for 20 years. beautiful and historic room. right now with dollar, up, up, euro down, down. are we getting a distance to a plaza court? how many kilometers our way from a discussion of a new plaza accord? >> i think we are far away from any discussion of that. the move is gradual and seems to reflect the u.s. economy is moving better than expected where the eurozone is in stagnation. as long as the currency moves gradually and does not seem to be fully out of kilter with the fundamentals i do not think we need a massive intervention. next year with european economy picking up and the fed cutting rates next year and the ecb

possibly not cutting rates, the euro will likely recover on its own. tom: this is important. a key thing you said is we are not disruptive right now. market participants feel we are disruptive. we are making jokes about five different things we are bouncing off of right now. what is the best policy prescription for christine lagarde and leaders in brussels? >> is basically stay the course. for monetary policy we have tightened more than we should have. now the clear message is we are at the peak, which has been reassuring for markets and for fiscal policy i would say the same, stay the course, which largely means we have a big fiscal program in europe, which is now about $800 billion. the task is more to make sure the money is being spent rather than thinking about any new

money. tom: is jerome powell central banker to the world. is central banker to europe? >> not quite. europe is not that dependent on the u.s.. for europe it is madame lagarde that we are glad to watch. lisa: you think people are too bearish in europe? >> not for the next few months. we are having a sharp inventory correction. the u.s. economy near-term will be slowing down. near-term europe is having trouble. next year, global manufacturing will pick up. inventory correction will be over. next year europe good surprise on the upside. lisa: will some of this slow down and negativity correct inflation? >> our inflation does not have that much to do with domestic demand. inflation is coming down because

there is a big shock on energy and food prices is fading. we have a bit of wage inflation for the next half year, but all in all inflation in europe is around 2.5% by the second half of next year. lisa: this is the dilemma to me. if it will not lead to low-inflation, if we are facing a stagflation environment in europe, how much is that the template that we are being forced to live with higher inflation even with taking the pain of de-risking, even with taking the pain of recession, even with all of the other toxic brew we are talking about this morning? >> stagflation is a description of where we are now in europe. we may see later this week a fallen the inflationary year into the 4% handle from a 5% handle on base effects. the rise in energy, especially

gas and electricity prices, drops out of the comparison. goods prices are stabilizing. even without needing to constraint demand further, inflation will fall to around 2.5% by the second half of next year on its own. tom: i look at our trip to london and i look back at how europeans, the united kingdom, how they perceive america in disarray. how is it different this time? >> it a weird perception. on the one hand we marvel the u.s. economy is holding up better than expected despite the massive fed rate hikes. we find reasons for that. consumers and companies had good money to start with. when we look at anything that comes close to u.s. politics, we basically shake our heads. how is this going to end? was there another talk of a government shutdown.

lisa: john is staying in london. >> we think european politics are not working badly. tom: thank you so much. greg bellyache publishes something -- greg valliere publishes this morning. he frames out the mccarthy options. he says this could be a crisis "well into winter." lisa: is one of ideology more than practicality. even if some of the desires of the holdouts goes into effect, the deficit will only decline slightly because it is a small package of cuts not affecting social security payments and some of the other major elephants in the room that a lot of lawmakers say need to be dealt with. tom: as churchill said in st. louis a few years ago, somehow

we get it done. where we will be october 2 or october 3 will be interesting to state. did you see the poll this weekend? lisa: washington post -- which one? tom: washington post. it put trump 80% ahead of biden. even abc washington post came out and said we are not sure about our pulling. lisa: it is so early. how can we know anything? i am curious to see who will be in the running. to me the bigger picture will be do you end up with virginia governor as the front leader of the republican party? do you end up with a different candidate for the democrats? i think that is increasingly the discussion. is this the field that will make it to the end? tom: republican debate wednesday. we will have coverage across bloomberg.

futures were up and then down off china news. right now dow futures at -35. vix to an 18 level. 17.98. vicks at 14 or 13 life is good and we ease back. 2.12% on the 10 year yield permeates the american financial experiment. that will be interesting to watch. brent crude 93.44. gold 1943 an ounce. lisa abramowicz and tom keene. jonathan ferro on assignment. this is bloomberg. good morning. ♪ (♪♪) (♪♪)

(♪♪) (♪♪) the first law of thermodynamics states that energy cannot be created or destroyed. (♪♪) but it can be passed on to the next generation. (♪♪)

>> weekend and will go all out if our national leadership decides companies are not willing to move. stellantis and gm will need a serious pushing.

all of the parts tricia bhushan centers -- all of the parts distribution centers are being called to stand up and strike. tom: inch by inch, mile by mile, leading a strike at the uaw. president of the uaw there. then on friday, which seems distant. this is for real. lisa: 38 new plants, none of them ford. what did ford do right? tom: they agree to negotiate. i would also point out they did not go bankrupt which is a heritage on the seismic shift in the uaw and the restructuring of american manufacturing. a quick market check. 2.12 percent on the 10 year yield. that is a huge deal on the real yield. 93.53 on brent crude.

vix nearing 18. there is some tension in your markets. following us across the atlantic ocean, craig trudell and i had to fly conventional, that was a nightmare. joining us running all of our auto coverage, craig trudell on his way to detroit. i would rip up all of discussion about the strike and understand that eisenhower or kennedy or lbj did not join the picket line. to me this is a huge deal. biden will picket. mi wrong? craig: there has been a lot of questions about that and the fact that the uaw went from being in no hurry to invite him to inviting him is fascinating. the fact that when it surfaced that trump had plans to go visit workers, the union very clearly gave him a brushing off and a

you are not welcome here message. the politicization of everything is coming to cars in ways we have not seen before. tom: is gina raimondo, secretary of commerce, will she drop by dearborn? what does the secretary of commerce, how does she respond? craig: it'll be interesting where the lines are drawn. at the factory level we have reporters in detroit speaking with workers on the picket lines about their level of comfort or lack thereof with biden joining them in these actions. i think they are wary of biden because of what happened with the rail stripes, the fact he inserted himself there. that said this is a president who calls himself the most

prounion president in history. has made no bones about the fact he wants to get behind the labor movement in the u.s.. absolutely putting money where his mouth is in terms of freeing up ira funds. the way he was trying to structure that law before it was passed to benefit union made ev's, he was not able to get that done. he is very much going out of his way to boost labor in the u.s.. lisa: there was an awkward moment on face the nation over the weekend without century of cause io cortez, the representative from new york -- with alexandria ocasio-cortez who bought a tesla during the pandemic that was not union made and had to square the circle that they want to put forward electric vehicles and it is not

benefiting the constituents they want to represent. how much do you feel that angst and reconsideration of policies you hear out of the white house? craig: it is really interesting, the fact that -- alexandria ocasio-cortez has said before she was looking to trade in her tesla. i think this is a long and the works move away from elon musk on the part of some members of congress in washington. absolutely it is the case that the union was not making a ton of electric vehicles until very recently and for the most part the cars they are making are on the higher end side. cadillacs and big pickups and expensive vehicles you would not necessarily see -- you would not foresee aoc in. we will see that change in a significant way in the next few years. maybe the lone exception in

making a cheap electric vehicle has been the chevrolet volt and they have not made those in significant numbers because the demand is not there. we are seeing a huge movement on general motors and ford to move down the price scale and bring electric vehicles to more of a mass-market and follow tesla into that. lisa: how much is president biden considering doing what rishi sunak did, the idea of pulling back some of the more ambitious goals to roll out vehicles in the united states? craig: it is more the case of the u.s. -- i think we have to call strikes. the u.s. is far behind in making the electric vehicle transition then europe has been making for several years. there is a lot of concern in europe about the fact that the ira is going to make an effort to significantly change that. you want to talk about anti-subsidy investigations the

eu just launched against china. the amount of money flowing into the sector, not only on the consumer side, there's a lot of attention, but a lot into the manufacturing sector and that is leading to huge investments. there is real effort to play catch-up and for the unions to come along in that journey. tom: this is the bloomberg advantage. we have the team in detroit. we have craig in london looking at the global ev market. what i learned in london way ahead of all this chitchat in europe and china is we have china, china, china and we go back to don mclean american pie, we have the chevy going over the levee but the levee is dry. not good. what did chevy do over the levee to compete against china? craig: one of the interesting things we are seeing is an attempt to go from a global industry to battening down the

hatches and bringing manufacturing -- tom: are we going to build american nonunion ev's in south carolina or are we going to try to build the $40,000 for a cheap ev in dearborn? craig: we will try to build a lot of chevys in general motors plants that have been making combustion engine cars. we will also see new plants in the south from some of these detroit companies. you see ford making big investments. that is the big questions and the big rub of the union negotiators. insouth i would be shocked if tt is not a unionized plan. in terms of the battery manufacturing, that is the big rub because these are joint ventures between ford, general motors, and and companies that are not unionized and have little desire to be unionized. down the south.

lisa: my favorite part of every day is when you ask a question like that and the guest tested answer seriously without laughing in with you about to break into song. tom: with craig. craig has been a huge value at. lisa, jump in. we are on radio. we are inventing bloomberg surveillance with jonathan ferro. that was overtime work. he is going on about africa and i started with the lyrics to toto. he is looking at me like what have i done? [laughter] lisa: is my favorite. how close are we to some sort of resolution? are we hunkering down for this lasting a long time? craig: i think we got a positive message about progress on the part of ford, but i do not think we have the details from his comments to have a strong sense of how close the union and this

company are. my bet is this will continue for several more weeks. the folks in dearborn are hoping we do not see any setbacks and a feeling of bad faith on the part of the union that not only prolongs the strike but results in the union adding additional ford plants. tom: for fossils like me, it is simple. biden walking the picket line is stunning. lisa: has not been seen. tom: i wonder if i'm overplaying this. lisa: we do not know if you'll be walking the picket line. he will be there. tom: in dearborn i hear the drums echoing. lisa: chevy to the levee but the levee was dry. craig, what you think about this answer. [laughter] tom: stay with us, i hope. jonathan: --

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>> to digest higher rates for longer will take time. >> i don't think rates need to go further than where they are today. >> it is not the level of rates, it is adjustment. >> what is going on in markets is different to the real economy. >> the economic soft landing narrative is being challenged. tom: good morning. "bloomberg surveillance" on radio and television. jon ferro on assignment after a 2-2 draw arsenal and tottenham.

i watch the highlight. lisa: i did, too. tom: jon ferro recovering. lisa: i do not take a private plane. people have stopped me and say why are you not on a private plane. i have never taken a private plane. carry-on. tom: i was stopped at heathrow about lisa on the gulfstream. you are waking up on a monday to a changed world. bramo nails it with the quinf ecta idea. real yield generational highs, 2.11%. china, the developers, that story unravels to the point i can say there is no bid in the market because there is no market.

there is a feeling there could be a real default and suddenly there is a difficult scenario the government is unable to control any meaningful way. we talk about the quinfecta that includes real yields and the government shutdown and this idea of higher gas prices at a time oil prices are rising. you put that together and it is hard to see how any of that -- maybe in isolation not that significant. you put them together it feels different. tom: it is like craig trudell and electric vehicles. no one can afford them but rich people. i will look at the housing market were no would can afford housing. when you and i were in london, i was west of mayfair looking at a closet. bankrate 37.75%. how close are we getting to an 8% mortgage? lisa: at a time people are not paying for that mortgage rate.

you could see the housing market is broken. it highlights how expensive things are getting. marcus put this out saying it costs $734 more each month to buy the same goods and services as it did two years ago for the average median household in the united states. you start looking at that and you understand dissatisfaction. you understand why people are less concerned about the pace of disinflation and loving at outright inflation and making more discretionary choices. tom: we have a guest on this. catherine kaminski will join us in moments. lisa: let's brief because this has to do with the week ahead. real yields climbing to the highest level since 2009. seven fed speakers. tom is on the edge of his speak -- his seat waiting to hear them all.

thursday the fed bonanza. chicago fed president austan goolsbee. tom harkin. on friday we hear from john williams. here -- keen to hear anything on real yields. how much do people keep buying if their overall expenses continue to climb? earnings on tuesday from cosco. wednesday h&m. thursday is nike. how much are we looking at new pressure on consumer discretionary? tom: sales of all of this is donna nominal, including michael mckee's retail sales number. i think you are dead on. this time around the retail pulse is a huge precursor to what we see getting october 13 with j.p. morgan. lisa: anecdotally we hear people pulling back. when we start to see that in the grainy only -- in the granular earnings data? why would people spend that if

they are spending so much. home price data as well as the new home sales, that comes out tomorrow. i'm curious if anything is moving. jobless claims thursday. the key day of the week is friday as well as core pce data. how much do we see the economic surprise inflict upward in a u.s. seeing this quinfecta of threats, this toxic brew that may be it is getting difficult. a hexfecta, what is that? tom: six. lisa: is that bill having a martini? tom: he has the olives. we have cut him off. if you are part of global wall street, arguably this is the conversation of the day. katy kaminski, the title is boring, chief retail strategist at alpha simplex.

far more importantly, out of the buying in m.i.t. boston, is trend based. she and her shop follow trends and the probability of coming out of a range into some trend across all assets like nobody on the street. katy kaminski to brief us. you correlate across bonds, economics, over to equity markets where you are more than tentative. tell us about the repricing we could see in the equity markets. katy: good point. this year what we have seen is that the equity market has been disjointed from the fixed income market. blissfully going along positively, ignoring the fact there might be issues and we might need to have higher rates for longer. we feel like last week we finally saw a point of recognition. we saw a breakout in the fixed income market where we saw yields higher on the long end.

this means the market has finally said wait a minute. upside risks are real. higher energy prices, that is a challenge. these things have to be solved for the equity market to waiver through this. tom: here to tread, 1978, with katy kaminski. cut to the chait -- cut to the chase. there is a great equity feel. it is a toxic soup of calculus. what are you learning right now from a broader s&p or nasdaq 100 available only on the bloomberg terminal? katy: if you look at most of the technical signals, they are all pretty consistent. if you look at fixed income, let's be honest, fixed income is said to have two years in a row of negative returns.

fixed income signals have been consistently short for months and working well this month. energy breaking out more recently and we have seen in the currency basket, we have seen the dollar trade being one of the stronger ones of the last two months. we are seeing last year repeating itself. lisa: are you basically doubling down on your bond bayer thesis and doubling down on oil prices going higher or are you seeing this starting to reach a topping point that makes you pullback? katy: this is a good question. we are not in the business of picking tops and bottoms but we are following where market gains are moving and what people are doing. what people have been doing all year is sold bonds but said that they liked them. it is a weird dichotomy. what we are seeing is continued acceleration in the bond market on the short side, not more than before. i would not say we are seeing more short positions, we're just

seeing a consistent view. we have seen someone of a bottom of the short end of the curve. earlier this year we saw the short end of the curve bottom. we are looking for more of a bottom on the long end of the curve. when are rates going to sell off? that is what we saw last week. that was our point of recognition where the market said wait a minute, you are right, maybe we have to be higher for longer and we need to just invert the curve. that is finally starting to happen. lisa: i was struck by may be people capitulate just ahead of the market turning their way or the economy turning their way. it feels like a market that wants to inflict the most pain on the greatest number of people. it feels like things are turning on the edges in a way that my challenge the thesis of how high yields can go. is this the point where you start to reassess that this is the capitulation moment where things start to normalize.

how much are you leading into that? katy: we did a study where we studied the short bond trade. empirically if you look over different cycles of the markets during inverted yield curves, trend signals work well being short fixed income. during a flatter yield curve it becomes more mixed. as we see a steeper yield curve we tend to lean more into longer positions. that is something we have been thinking about over the last year's this concept of finding that inflection point. since we have a much flatter yield, look at the 10 year, that is pretty flat. as we see the flattening and edition version, that means we will see more of that inflection point closer to the bottom of the bond market. tom: what you just heard his gospel from katy kaminski. i cannot say as much about this inversion. to pick up on that, i am looking at the bloomberg total return treasury index. back to 2016 pricing.

you mentioned two years of negative return in the bond market. on notes, on bonds, do they have gamma like equities? is there any motion where if we break through certain support levels on price, go lower in price, higher in yield, you get gamma or the emotion get me out? katy: that is part of what we have seen recently. at a certain point you have the moment. we have that in short-term bonds when people focus on the shorter end of the curve. right now you're getting the moment where people are saying if inflation is higher for longer, longer cash flows will be exposed more to that pressure, and even if we have higher yields, we have to have higher nominal rates until we deal with the problems. the problems are higher oil prices come inflation not going down, dealing with supply chain

issues and other things we did not have been a low interest rate world. tom: a clinic. thank you very much. katy kaminski with alpha simplex. luke kawa was doing newtonian calculus. quantitative and i do greek. alpha, beta, omicron. lisa: there was a techno song that my oldest son listen to to remember all the greek letters. tom: you should memorize your greek letters. katy kaminski, clinic for global wall street. the s&p 500 down .1%. lisa: what are you looking at most of this week? tom: killer question. lisa: i think retail sales might be the most interesting part, especially paired with earnings. tom: i think the earnings play

into it because that is the hope and the prayer of soft landing. i got china and i'm underplaying the gloom. i could be wrong. what am i watching? it's got to be the real economy. the parlor game, the fed, less important now than what does nike do, how bad is it? lisa: i would agree with that. i do not think the fed speak will have as much of a feature in market response. people have moved beyond and are looking at granularity. this might be the last data we get before government shutdown removes all the public data. the retail sales and core pce might be some of the last nuggets we get from official channels. tom: i will go back to the real economy, which is nominal gdp. what does it mean for revenues and the shock of constructive margins. the heart of the matter, waking up on monday, the basic idea is

will be going to earnings season and once again be surprised that everybody will play on the 7.5 stocks. that is what is not expected.

about potential retaliation, but you pick up a lot of different sentiment now.

this commission says the fact that we listened to germany for so long has prevented action that was valid and legitimate. lisa: this is what we heard, suddenly there is a willingness to take pain in the near room to de-risk. that was his word. how much pushback is their right now from germany? maria: for the time being, not a lot. they agree to that ev probe. it was not germany who pushed for that probe. it was president micron of france who -- president macron of france who pushed for the probe. the head of the commission is a german too and she is willing to open this probe. europeans to some extent have realized that trade is great but the market may have been abused and number of times. when they look at china they

take the experience of the solar panels. there has been a realization of that and the political news changing. i'm not sure how much germany will be willing to run with it. this is a relationship that has gotten cold. lisa: this is a question of whether this is an alliance with the u.s. order europe and its own right trying to make a move for long-term prosperity. how much is this being done in tandem with other nations in the west? maria: in terms of -- we'll know that both in the united states and the european union that decoupling is too late. that train left the station already. when it comes to this push from the european union i would say that it is very european. when you look at the single market, which really stresses. the europeans view this as their

crown jewel. it is their moneymaker. they're willing to protect it with actions but also with speech and a tone that is very different towards china. for dombrovskis to go to china and say "prepare to lose investment," that is very significant, i would say. when it comes to a trade war, european union has been clear that they do not want to see a trade war and they believe a lot of the trade that goes from the european union to china is beneficial for the european union. the reality is when you look at, however, the number that has triggered concerns is this fact that you see the trade deficit in favor of china every year and

no administration has been able to narrow that. we don't want a trade war but we need to narrow that trade deficit. tom: thank you for the brief from europe there, something that seems distant but all of a sudden mixes and with chinese- american policy as well. you -- lisa, i'm sorry, we are one week in london and we are out of touch. i think in any number of ways. how are the giants doing? terrible. how are the jets doing? terrible. none of it matters. none of what we do matters, folks. there is only one topic this morning. lisa: what is that, tom? tom: the bears beat the chiefs. . no one cares.

taylor made an appearance! i cannot even begin to explain the politics as ms. swift. off to her right shoulder, dressed in the garb of the receiver for the kansas city chiefs, travis's brother jason -- taylor is an eagles fan but she is wearing chiefs read. lisa: i knew you were going to go here. taylor swift is evidently having a romance with the chiefs tight end. tom: unconfirmed, but we will go there. lisa: travis kelce. even though she is an eagles fan. tom: this is bigger than biden. lisa: how do you catch up after you have been off for a week? tom: i go to the afterthought. i go to afterthought and get a briefing. i go to scarlet fu. she gives me a brief.

she knew the strike was over with the screenwriters before the screenwriters. lisa: there was a romance between the screenwriters guild -- tom: barbie is doing something in russia. this taylor's thing is really big. lisa: i am not making light of it. why is it the most seminal news item? tom: mrs. kelce, travis's mom had to choose between philadelphia and kansas city. lisa: did you see that usher is going to headline the next super bowl? i said to my son, "did you hear this?' and my son said to me "who is usher?' tom: first week at bloomberg, they put me about the writz. i am going down the elevator with a kid with diamond earrings

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>> really hard for the market to look for a bullish bed right now.

>> the markets -- a bullish bed right now -- a bullish fed right now. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. lisa: threats heading into halloween, a toxic brew of different issues. jon is off today doing some really cool stuff, which we will bring to you later. it is us back in new york. it feels different, tom. tom: there is a real change going on. the news flow is extraordinary. what we have focused on in the investment markets is price down, yield up. got it. nobody is pricing that in.

lisa: month after month the yields would go up. the bond bowls would come out and -- bond bulls would come out and say ed was time to buy. now the bond errors are coming out and saying this is the new -- bond bears are coming out and saying this is the new normal. tom: lisa is going to do the data check here, by you have the deterioration of the tape right now. michael purves is coming up. it is the perfect segue from what we did with katie kaminski and earl. it is a compendium of this day, this day, and this day adding up. lisa: 2 things -- i am focused on what is going on in detroit, the fact that we will have president biden there tomorrow. former president trump will be

there wednesday trying to rally the troops. that in tandem with earnings from the like of nike, cosco, do consumers keep spending at a time when prices are high? you're talking about yields are higher. you can see gas prices climbing. yet again reversing as hedge funds get bullish. tom: for those of you who are not part of the game, we appreciate you listening every day. the adjusted yield permeates through the system. i cannot emphasize enough how the effect here of taking us back to 2009 or to take some of these levels like the mortgage rate, 7.75% two days ago, it takes us back to another time and place. lisa: there is a

foreign-exchange component to this as well, which is getting to a level a lot of people think is disrupt the. we heard that last week from a number -- is disruptive. we heard that last week from a number of our guests in london. these different features that just paint a less stable backdrop. tom: you don't want to see the data check and get michael in here. you can warble gayly about commodities, but you never know what will be a commodity to break. it will be something dramatic like the argentinian peso. it could be loony going out to 135. lisa: we are seeing weakness after a particular weakness in the magnificent seven.

nasdaq continuing to underperform, and that is interesting in a time when it had been the stall work. you see a bit of dollar strength, still firmly below 107 for the euro and that 10 year yield, crossing the 4.5% threshold, continuing to climb higher to some of the post crisis highs. tom: bridgewater connecticut, it is a start up shop in connecticut, bridgewater said "japan's move away from negative rates seems overdue." lisa: joining us is michael purves. from your perspective do think yields can continue to climb from here or is this a tapping out? >> take the 10 year nominal yield. there is a big, tactical airpods

to 4.75 and then 5% here. if you look at technicals on the 10 year yield, it is looking like bitcoin a couple years back. it looks like it is going higher here. when you think about some of the fundamental underpinnings of it you have a situation where term premium has been expanding. you were talking about japan. we are looking at interest rates around the world the shifting higher. that means the anchor of chinese sovereign paper is not what it used to be. we had 18 dollars trillion -- $18 trillion in debt. this is a treasury different from last year's treasury selloff.

last year it was about how many selloffs is powell going to give us. we are groping through where our policy will be over the longer run. i think the 10 year will keep shifting higher. lisa: just to double down quickly, do say the bank of japan will inevitably back away? they are the next stone to drop on the steady march to higher rates? michael m.: the boj is playing with fire a little bit in a country that imports all its oil. it is a stretch to call the dollar a petro currency, but relative to japan, we kind of our. we cannot an importer of oil like we used to be. oil extraction is a big part of our economy. we are now producing as much as we ever had in you state's -- in

'the united states' history . you will start looking at the yen in a very difficult place. the doj has to join the hocking party or you will see some really interesting and potentially dangerous dynamics play out in a very important economy. that could be one of the tail risks that all markets will have to contend with in the coming months. tom: what do you do if you get a correction? it has been so long since we have had one. i take immense issue with where we are now, the gloom and all that. we have the spx down 5%, dow down the little bit more, nasdaq down 7%. i will call it a summer time drawdown. that is not a correction. can you see a correction coming?

can you plan for it? michael m.: there are parts of the market that have been overextended. that is the magnificent seven. if i am right that nominal real rates will regulate i think those valuations will come down. low out earnings in the next quarter, which is now not too far away, you can still have some ai buzz, but what i am expecting to have been is valuation will adjusted lower on the big tech part of the market, and the everything else part of the market will be ok. with all that said, i i'm looking at more of a range bound s&p into the rest of the year. the earnings growth in 2024

will be single digits. tom: michael purves, the basic idea is dollar strength becomes stochastic as people say no. are the institutional forces in place that if we do get a renewed dollar strength that can reverse rapidly? michael m.: there is a couple of different types of dollar strengths. one is from a risk off shop. the dollar gets big in a reactionary form. what is happening here is because real interest rates in the united states are heading in a higher place and they are relative to europe or japan, you are looking at a situation where the dollar looks like it will have the sort of structural support here that is more gradual. it is not a shock type of dollar

rally. it is more keep the dollar stronger longer, if you will. oil continues to stay at these higher levels. it will keep reinforcing back. we don't have the hydrocarbon vulnerability that europe and japan have. lisa:, quickly hear what is your highest conviction right now? michael m.: my highest conviction is that i think we will start seeing some of big tech continue to selloff, not because there is something bad happening per se, just that it is a valuation that runs against interest rates. tom: michael purves, thank you so much, greatly appreciate it. a dry norma's call on adxy on

the currency dynamics of the pacific rim. the tape deteriorates. i won't make a big deal about it, but the tape deteriorates. i have a 3/10 of a percent move on the nasdaq. the way it is deteriorating it is just giving away here. lisa: suddenly it feels like real rates are very much in focus, and there is a question about how much further valuations can continue to rich and, if you have this -- to richen if you have this rates backdrop. tom: a lot going on here to say the least. lisa: in the backdrop of all of this, tom, there is a question about going back to the office. did you see the story over the weekend of people counting badges in and out to determine

how often people are in the office? they did some surveys of office attendance requirements. one in five require five days back in the office. tom: there are 21 thousand people here at bloomberg making the terminal go every morning, and i am the only one does not have a badge. lisa: is that right? tom: they put a chip in right here. a little bit lower. dogs have a chip in case they get lost or stolen. lisa: every time you walk in -- tom: it. lisa: is a -- tom: it works out. lisa: you are seeing that on the margins in certain places, but not really. tom: conversations have been

really good. the heart of the matter for me is when in doubt you follow the deepest, broadest market and even if you are not part of global wall street on radio and television, get up to speed on your foreign exchange. terry haynes does not know anything about foreign exchange. lisa: great. tom: treasuries -- haines is so august his name was on the dollar once. he signed it. terry haynes will do that next. futures deteriorate -11. good morning. only $1,499. sleep next level. shop now only at sleep number if you're trying to get a view of the whole organizational financial health

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>> he is proud of being the most prounion, pro-worker president, not only compared to the trump

administration, but compared to any modern president. these companies can thrive in a win-win that the president has called for. record profits should lead to record pay and record benefits for the workers creating all that value. tom: peter buttigieg, u.s. secretary of transportation they are talking about where we are. i had a plane delay. we circled over white junction for 40 minutes. i called the secretary of transportation. you need to come over. you slide into middletown on a gulfstream, and it is a different world after all. futures are -11. the tape is deteriorating, not sure what to make of it. it was much more inverted.

weeks -- what gets you in the data? lisa: the fact that 10 year yields have crossed over the 4.5% mark, once again that it is being driven again by real yields colors the whole conversation. we are seeing real yields dominate, taking off some of the froth off the top. hyder borrowings at a time of otherwise strength and resilience, buffer how long? that is the question. tom: i was distracted in london, and i didn't realize thursday last 7% on the 30 year mortgage. lisa: i have read so many notes about how the housing market is broken. no one wants to buy an existing home because no one wants to pay that.

when do get the price corrections? how does the fed deal with this? tom: right now we will dive into the toxic brew of our politics. watch for balance of power this evening. annmarie hordern, kailey leinz helping out from time to time. it is fascinating on shut down and strikes and the rest in washington. terry haines is a student of this. talking to terry is always a win-win. how does president biden break the lose-lose moment? >> i don't know he can. the president is having to constantly sure up his base. the base is small but powerful. teachers unions, uaw, that sort

of -- the green lobby, those sorts of people. it makes it much harder for him to go to the center. you saw the cul-de-sac and the recent numbers. we were talking about over the break, his approval rating is at best a low 40%, but no one is giving him good marks on the economy. it is either even or loses to trump. he certainly loses to nikki haley. there is now a rising third party candidacy risk. tom: i have eight ways to go here, terry, and the time we have here. let me try the government shutdown. we spoke to people this morning who look at the government shut down as an eight day dalliance. what is the gravity of a shutdown?

>> a shy down -- a shutdown is likely. markets need to understand this is not the same old one and done they have been used to that does not have any economic impact. this will go on for three months. the reason is the stop starts. sometimes the government will be funded sometimes it won't. you have by then in the tank on his own numbers -- biden in the tank on his own numbers. you have a bicameral system that is lazy. they took six weeks off. they have not done any work on appropriations bills. they have not finished anything. it will take them the next three months to finish the defense authorization and defense spending wills by which time -- spending bills.

they can actually do something before christmas. a 1% cut goes into effect in januaryir know d -- january if no deals are done. there will be more volatility in areas that are heavily dependent on government. defense does not get funded. same with hellcat 0 -- health care. lisa: amid all these conversations about cuts to the deficit, are there any conversations about the major costs the nation is incurring. terry: not at all. lisa: what does that say to you about how much of this is theater and how much is ideology and how much this is a defect and necessity of a shutdown, regardless of any agreements? terry: i increasingly have to

restrain myself from saying kabuki theater over and over, but that is what this is. you have people who claim to be seriously concerned about the direction of the country and one fair policy priorities put in place, and yet -- and want their policy priorities put in place and yet for weeks they did nothing about it? lisa: who is this kabuki theater for, and is it working? terry: it is for the bases of the parties. it is for those who fundraiser off of outrage, whether it be on the left or the right. does it work? it works in the sense that outrage gets a response in righteous anger and more campaign contributions. does it work in the sense that they are any closer to solving the problems they claim to care

about? no it doesn't. tom: let's get beth to -- let's get back to brass tacks. president biden won 80 million votes in the last election. that tells me massively about turnout. can you gauge in any way, shape or form the measure of turnout in october of next year? terry: my instinct is that the turnout is driven by outrage and driven by alvin eyes on issues. my sense is that those who are -- driven by galvanized on issues. my sense is that those who are on the right -- you .2 biden's

vote total -- you point to biden's vote totals. that turnout will make all the difference. i think the outrage that comes from a lack of movement in washington just stokes things a little bit more. tom: terry haines with pangaea policy. every once in a while, headline comes across and you stop. it is a crimo quality headline to say the least. there it is in technicolor. lisa: 10 year and 30 year yields are high. you can see the 30 year yield, 4.6% up less has been the two year yield.

w havee seen a plateauing out, which highlights the -- we have seen a plateauing out, which highlights the flattening of the curve. tom: there is a tight correlation across equities, bonds, dollar strength comes up here with a vengeance. the real yield 1.2%. lisa, or than anything i have to go to the currency market. i think you will get a 1.21 handle on sterling. ferro will never come back. lisa: he has to get paid in dollars to really make that work. tom: stay with us. sco james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

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tom: bloomberg surveillance on radio and television. 'bramo predicted this to be blunt. we are up on the vix. there is a weight to the tape that is extraordinary. the vix 18.19. lisa: the idea of 10 year and 30 year treasuries both crossing round numbers -- looking out to some of the highest yields going back to 2011 for the 30 year and

2006 for the 10 year. at what point do we reach some sort of capitulation, tom? are we reaching a point where people are saying "this is sustainable"? lisa: the tandem -- tom: the tandem of katie kaminski and earl davis, the basic idea that two of them from different worlds are asking what happens is a big study on monday. lisa: at what point does froth come off the risk assets fear? on the other side people are saying "ma we can live hereybe -- "maybe we can live here" lisa: -- tom: we were jetting back living lazy living large and our team

got to work. a great time to speak to miss rhame, but first we have to go to head of our surveillance shutdown central. michael mckee joins us. shutdown correspondent this morning. i know it is funny, but it is not. michael m.: there are so many, but one easy thing to look at is the number of people who get furloughed who do not have any money coming in.. they are kids becoming ineligible for reduced or free meals but there is no money for the reduced or free meals. there will be a lot of pain and suffering, especially at lower income levels because of this. it won't be a huge macro issue unless it lasts for a long time. terry haines is probably right that this could go on for months. if so we have some problems

beyond just money. lisa: we are talking about a data-dependent fed at a time when data may not come at all. what data might we not get if the government shuts down? michael m.: you won't get construction spending. jobless claims, factory orders, and of course it september payrolls, the jobs report which is considered reasonably important to the fed and their futures. we also would not get the next month's cpi if it continues to go on because there wont be anyone to collect the data for october. lisa: are there people collecting the data and not releasing, or is there not people collecting it, giving us a data vacuum? michael m.: data comes in. the establishment survey is a survey of companies. they send their data in. someone has to collate that.

there may be people who are brought into work without pay, but in previous shutdowns we have not had the government released data. the last one we had in 2019, we went several months without getting data until they could catch up to everything. if you are the fed trying to make policy november 14, you may have a real problem. tom: in the papers on your desk, which amazingly are read, in the 142 papers on your desk is there a political tinge to the shutdown? michael m.: historically, it has been republicans who have taken the blame, even when there once was a shutdown during the obama administration. tom: what about the public? michael m.: the public tends to

blame republicans for it. if there is some lasting damage, it might linger, but if you look at the consumer sentiment numbers, people don't even notice. it does not show up in consumer sentiment. tom: for surveillance shutdown central, michael mckee helping us get perspective on this potential shutdown. lara rham joins us nowe. timely interview to say the leasta. lisa: you are listening to michael mckee talking about what we might get and a data dependent federal reserve making crucial decisions. how important is that aspect of a shutdown that is underappreciated in markets? lara: still have a disconnect between what the fed says they want to do and what markets are

expecting, and the only way to close that gap is for the fed to come in and jump on markets. they would ostensibly use the data to do that. if they don't have the data to back it up -- the economy has been very strong, the data has looked very solid and i, think the fed has used that as a foundation to try to push markets towards the fact that we need another rate hike and we won't be cutting. it makes it hard for them to close the gap between what they have signaled to us as policy in the dot plots. lisa: number of guests have come on the show this morning and said that they expect yields to stay here. they think this economy can continue to keep going, regardless of the fact that it is that much more expensive and discretionary income is going to

a lot more basic assets around the house. do think it is getting to a point where you think these -- do you think it is getting to a point where these yields are unsustainable? lara: i don't think the yields are unsustainable. the fed held the fed funds rates in restrictive territory for 3 years. i think flattening this bearish steepening where bonds are sold off will continue. i think there is a huge disconnect, which people are talking about enough between equities, expecting the economy to be strong, and revising earnings estimates up next year. consists is earning -- consensus earnings estimates are up if you look at the broadest base.

that implies significant economic acceleration at a level when we are already feeling strong. you cannot get that without the fed not only keeping rates where they are, considering rate hikes into 2024. that is not my forecast, but this is a big desk connect -- big disconnect. are not shining tom:tom: how close are we to where the stochastic history of a strong dollar adjusts fed policy, where powell is overcome by the strong dollar? are we getting close to where those dynamics take over for decision-making -- over fed decision-making? lara: we are not there.

the rate of change is important when you think about the fed taking that on this part of their decision. when the fed looks at the landscape today, they are seeing shadow tightening. i don't think they are displeased with that. i think this is their bargain with markets. "we won't give you a lot of rate hikes if you allow this tightening to bubble up in the background and squeeze demand over the long-term." i think if it moves really fast is when you start to see the fed take center place. i do not put it past fx to be the market that really breaks out. it is highly volatile when you least expect it. i do not put it past fx especially in the emerging markets to come out of left field and cause a broader market disruption. tom: i was talking to jon.

h this step in the united kingdome. i-- he is stuck in the united kingdom. i was telling him it is wonderful to see the glow of the autumnal leaves in the hurricane. it is the time of season when we go into the seasonal quarter and retail becomes important. what will the american consumer do? lara: right now it is fascinating that given how strong the economy is and given how much people are spending, consumer sentiment is still dragging. i chalk that up to inflation. inflation is down to 3%, 4%. for households the sticker shock they are still experiencing is a clear and present pain point. from here, student loan payments

start up again. it will not be a main driver. despite the fact that households have a solid foundation, a get slower from here because this level of spending is not sustainable. lisa: does that mean recession or does that mean a slowing down and does inflating of the economic trajectory? lara: i have been in cam session thinking that the fed, even the dramatic nature of this rate hike is going to cause the economy to contract sometime. i had originally said the beginning of next year. the way things are going, that looks like that will be pushed out. all of the reasons i was thinking this would be a mild recession may be the reason we get a slow down and not a full on retraction. that list includes the scarcity of labor, the shapps act,

broader -- chips act, broader underinvestment in labor that we are catching up on now. it may keep us on the line of a soft landing, but when i look at the bond market it is pricing in a slow down. when i look at the equity market, it is not. the equity market is historically a terrible indicator of the market cycle. just because they are up does not mean we are out of the woods. tom: beautifully linking in foreign exchange. a strong dollar this morning. the markets are interesting. it is not an abrupt move, but nevertheless vix over 18. lisa: coming up we will be speaking with former fbi see chair sheila bair, and it comes

at a time when we are -- fdic chair sheila bair. did the banking crisis earlier this year mean anything or did it just show the resilience of the system? tom: out of the academics of amherst, massachusetts and onto some real public service for the country during some trying times. from robert mcteer to sheila bair in recent times. whither are banks? it is off my radar. it is not one in done with silicon valley bank. lisa: where did they lend? we were in london last week with the credit conference we put on, and we were talking about how

many of these private asset managers want to take on the role of these banks. where does that put the regulatory oversight? where does that put some of the questions about who will do lending at a time when lending is more expensive? tom: the keeper yet index, and the answer is do you come back and retest pandemic lows? a timely conversation for global wall street. sheila bair will join us. futures are -11. we are on radio, television. for global wall st, this is bloomberg surveillance. ♪ look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald.

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>> in general we are going

through very challenging times in term of geopolitical tensions. i do believe that they still see the long-term potential of china. it is exactly how to navigate the current situation that makes our job even more important. lisa: over in china sergio ermotti the head of ubs talking about the relationship in that nation and exploration with regards to credit suisse. we have been talking about a number of events this week having to do with the strikes. i was noticing the divergence between the companies getting close to resolving the strikes and those who are in the heart of it. you can see that with disney and amazon shares up theo news that there may be some sortn of deal

with the writers guild and they will get some moving forward. it's a lantus on both -- stellanis on the other side is down. tom: people are making $60,000 a year on an assembly line in detroit. lisa: there is a way to conflate them, which is technological changes have trumped all to create a new urgency. artificial intelligence is on the forefront of the conversation in hollywood. on the auto manufacturing side, questions of new facilities. these are the technologies creating the frameworks of a lot of angst. tom: to me it will be absolutely fascinating. what do you make of this market

this morning? it is extraordinary. i have 2.11 on the real yield. real yields circle higher, harkening back to the time of bair. lisa: can we live with this idea of a fast-moving freight chain of people -- freight train of people moving away from the bulls and towards being a bear. we may be going into a blackout period for data. tom: in combat sometimes people are called. sheila bair is from the university of massachusetts amherst. her acquaintance with senator dole began her public service to the nation. she was selected in 2006 for the

job of being fdic chair. this -- she survived until 2011. she is the author of 2 neo-children's books -- new children's books. sheila bair joins us this morning here in another time and place from 2007. if i read daisy bubble, what would you have written about to sprightly seven-year-olds? >> to you i would have said you should have read daisy bubble in 2005. i would say to young people, as

i said to them in the book, that speculation is dangerous. how many times have we told our kids, don't do something just because everybody else is? gen z has a word for it -- fear of missing out, fomo. for the young investor, they should stay away. tom: you are a sage with accolades from democrats and republicans alike about a patient approach in times of crisis. we had a banking crisis a number of months ago. that crisis is over. is it? lara: i hope the crisis is over. i don't think three regional banks failing was a crisis. i think more banks are going to fail.

i think it won't be a crisis. thanks -- banks do fail. the heavily reliant -- the smaller banks are heavily reliant on uninsured deposits. the inverted yield curve, costs are going higher than your long-term bond rates you have, a big problem. there will always be more bank failures. i don't think it will be a lot. i think the fdi has thec tools to deal with it. lisa: let's put together some of the ideas you were talking about, people chasing the fomo

trades which we saw en masse over the past few years and then we have this rate regime that harkens back to the time when you were the fdic chair. are the bubbles yet to be worked through the system? will we see that reckoning that people said what happened back in 2013? lara: there are some bubbles left that need to be popped. hopefully, it will be gradual. you are seeing values come down. the stock market has probably got some ways to go down. it is a matter of whether the expectations are right and people know what is going on. there are many issues left to drop. -- many shoes left to drop. a lot of debt needs to the

refinanced. these are shoes left to drop. i so glad that the fed has been hitting pause. i thought they were going too fast. there's only so much of this transition to higher rates that the economy can absorb. lisa: you have been saying that you think ultimately it is good to have the discipline that higher yields does invoke. you think it has been too fast. does that ensure something of a recession that people are perhaps overlooking? lara: if you go too fast then you, trigger a crisis and then the fed has to do a u-turn and ratchet back down, then you start this whole problem all over again. there is little research that suggests low rates promote economic growth.

smaller bit -- high rates help smaller businesses. it is easier for banks to lend when rates are higher. overall, i think it will make the traditional banking system stronger. i have been on a lot of corporate boards since leaving, and my sense is that they don't borrow to invest in productivity. they want to do that anyway. if you make it cheap to borrow, that goes into m&a activity. there is no evidence that you need to borrow cheaply. i think that low productivity we have had since this accommodative policy stance has taken hold shows that. tom: sheila bair, former fdic chair.

it has been percolating there, but you get out a technical chart of the keith brouillette and woods index and it is not pretty. lisa: people say banking crisis averted but not for people who own those shares in terms of valuations. what sheila was saying there is at a certain point there needs to be a reckoning that has not come to the for. people have been pointing to commercial real estate, including some big bank executives. there has been a lot of threats but it has not come to the foree yet. tom: we will have to see. coming up here on bloomberg radio, phil cap rally. young ferro is in london on the site meant. i-- i londonn -- in london on

assignment. this is bloomberg, stay with us. ♪ ¡se fue la luz!

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matt: i am matt miller in for jonathan ferro, a risk off session. equity futures extending losses on concern about high for longer, the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading, this is bloomberg: the open with jonathan ferro. ♪ matt: traders bracing for a busy

week of fed speakers.