Bloomberg Surveillance 8/10/2022 Inflation Report

[00:00:00] Speaker 1: FOR THE FED RIGHT NOW, IT ACTUALLY MIGHT BE EASIER FOR THEM TO CONTINUE TO ATTACK OR AT LEAST TRY TO BRING UNDER CONTROL THIS INFLATION ISSUE. THE FED IS OPEN-MINDED AS THE [00:00:17] Speaker 2: FED ALWAYS IS. WE ARE AT AN IMPORTANT INFLATION POINT IN THE INFLATION STORY. IF YOU LOOK AT THE 25% DECLINE EARLIER IN THE YEAR, I THINK THAT WAS THE BAKING IN OF A [00:00:27] Speaker 3: LATER. THIS IS BLOOMBERG SURVEILLANCE [00:00:33] Speaker 4: WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWITZ. GOOD MORNING, EVERYONE. JONATHAN FERRO, LISA ABRAMOWITZ AND TOM KEENE, AN HISTORIC WEDNESDAY, A STATEMENT ON INFLATION IN AMERICA. I TALKED TO FERRO YESTERDAY, STUCK IN ROME OFF THE TRAIN FROM Naples. LISTEN TO THE FED AREA, I THINK IT IS A STRUGGLE. LISA, LET'S GET RIGHT TO IT ON INFLATION. [00:01:02] Speaker 5: YOUR OBSERVATION AS WE GO TO 8:30 THIS MORNING. LISA: IT IS GOING TO BE ABOUT THE HEADLINE CPI NUMBER, THE CORE CPI NUMBER, THE READ THROUGH TO THE REAL ECONOMY, REAL WAGES, WHICH WE ALSO GET AT 8:30 A.M. HOW NEGATIVE DO THEY GO? THEY ARE CURRENTLY THE MOST NEGATIVE IN DATA GOING BACK TO SOMETHING THAT WE ARE HEARING ABOUT ON THE MARGINS WITH [00:01:18] Speaker 4: DISPLOSABLE INCOME EVAPORATING. JONATHAN: I AGREE WITH YOU, REAL WAGES UNDERPLAYED HERE AND VERY, VERY IMPORTANT AS WELL. I LIKE WHAT ELLEN RUSSKIN SAYS AT DEUTCHE BANK. WE ARE GOING TO GIVE YOU SOME OF THE RESEARCH DONE HERE IN THE LAST 12 HOURS, AGAIN, THAT'S WHAT SURVEILLANCE DOES. AND HE HAS WITH DEUTCHE BANK, THANK YOU FOR BRINGING IT TO MY ATTENTION. WITH BANK OF AMERICA, WITH FOUR GLIDE PASS, WE HAVE INFLATION BACK NICELY INTO THE SECOND QUARTER 2023. LISA: [00:01:50] Speaker 5: THIS IS THE ISSUE AND YOU HAVE RAISED THIS MANY TIMES, TOM, AND IT IS YOUR RIGHT TO DO SO. AT WHAT POINT DOES THE FED SIGNAL WE ARE DONE OR WE CAN START MOVING AWAY? HOW FAR DOWN DO WE GET? AND THEN YOU HAVE TALKED ABOUT HOW DO WE GET FROM 4% TO 3%. IT IS A BIG LEAP. IT IS A BIG LEADER. IT IS A BIG LEADER. WHERE PEOPLE SEE IT GOING, THAT IS WHY WE ARE WATCHING FED [00:02:13] Speaker 4: SPEAK TODAY AND GOING FORWARD. JONATHAN: KAILEY, THE INFLATION HERE IS ABOUT THE CORE, THE TRIMMED, ALL THE FANCY GLOBAL WALL STREET, BUT FOR AMERICA, IT IS A [00:02:22] Speaker 6: NUMBER THAT IS SHOCKING AND HEARKENS BACK TO THE EARLY 1980s. THE AMERICAN PEOPLE FEELING THIS IN EVERY WAY, AND JEROME POWELL HAS RECOGNIZED THAT, WHICH IS WHY INITIALLY HE SAID THE FED IS RESPONDING TO HEADLINE INFLATION, BUT AS LISA AND YOU BOTH HAVE MENTIONED, IT IS GOING TO BE MORE ABOUT THE BASIS POINTS. HOW HIGH THAT TERMINAL RATE IS, AND THE RESEARCH OUT OF BANK OF AMERICA OVERNIGHT, IF THAT TERMINAL RATE IS PRICED AT 4% OR MORE, WE COULD BE LOOKING AT A YIELD CURVE THAT INVERTS MORE DEEPLY, POSSIBLY DOWN TO -85 BASIS POINTS. [00:02:54] Speaker 4: THAT IS JUST ASTOUNDING. WE HAVEN'T SEEN THAT SINCE THE 80s. THIS IS A SHOW AND BRING IT TO COMPLETE HALT ON RADIO AND TELEVISION FOR OUR AUCTION UPDATE. WE HAD A THREE-YEAR AUCTION YESTERDAY, A TEN-YEAR AUCTION TODAY THAT I DON'T CARE ABOUT. LET'S DO AUCTION TALK WITH BRAMO. WHAT'S THE SO WHAT ON THIS, LISA? [00:03:12] Speaker 5: WE HAD A LOT OF WORKERS. WE ACTUALLY SAW OUR LOWEST EVER DEALER UPTAKE OF THE THREE-YEAR NOTE YESTERDAY. BASICALLY, PEOPLE ARE STARTING TO SEE VALUE AT THE FRONT END THAT PERHAPS IS FULLY PRICED WHAT THE FED IS GOING TO DO. TODAY WE GET $35 BILLION OF TEN-YEAR NOTES. THE REASON WHY THIS IS INTERESTING IS WHERE IS THE CONVICTION TRADE AT A TIME WHERE THE FED IS GOING TO HAVE TO DO MORE, WE WILL GET A CPI PRINT THAT MAY SHOW PEAK INFLATION, IT MAY NOT, ACCORDING TO SOME. [00:03:41] Speaker 4: WE ARE GOING TO GO INTO THE LONG END. TOM: WE WILL ADDRESS THAT IN A MOMENT WITH CHRIS VARONE, NOT THE EQUITY MARKET, BUT VARONE FOCUSED ON THE BOND MARKET. LET ME LOOK AT THE DATA RIGHT NOW. FUTURES UP 62, NASDAQ, GREEN ON THE SCREEN ACROSS. VIX HAS CHURNED HERE FOR THE LAST NUMBER OF DAYS, WAITING FOR 8:30 THIS MORNING, 22.19 ON THE VIX. IN THE FIXED INCOME SPACE, I DON'T KNOW WHAT TO SAY. THAT IS GOING TO HAPPEN TO HAPPEN. THE BASIS POINTS IS EXTRAORDINARY. IAN LINGAN AT BEMO CAPITAL FRAMES OUT TECHNICALS TO GET FURTHER INVERSION OUT TO NEGATIVE 56 BASIS POINTS. I HAVEN'T EVEN SEEN THAT NUMBER YET. THANK YOU, IAN, FOR BRINGING THAT TO OUR ATTENTION. OIL PULLS BACK FROM THE DRAMA YESTERDAY IN RUSSIAN OIL PIPELINE. [00:04:31] Speaker 5: THANKS FOR JOINING US. INCREDIBLE DRAMA, 8:30 AM, IT WILL BE DRAMATIC. THE U.S. JULY CPI FIGURE, CONSUMER PRICE INFLATION, HOW MUCH DO WE SEE THAT HEADLINE NUMBER BEING THE ONE THAT PEOPLE FOCUS ON, THAT THE FED FOCUSES ON AS THEY TALK ABOUT THE OIL AND GAS PRICES COMING DOWN. HOWEVER, CORE CPI EXPECTED TO POTENTIALLY EVEN ACCELERATE IN REAL WAGES, AS I WAS MENTIONING EARLIER. THEY HAVE GONE TO THE LOWEST GOING BACK TO 2007. THAT'S HOW FAR THIS DATA GOES BACK. WITH NEARLY NEGATIVE 4% REAL WAGES, THAT IS HOW MUCH THE DISPOSABLE INCOME IS GOING DOWN FOR HOUSEHOLDS IN AMERICA AS A RESULT OF THE HIGH INFLATION AND WAGES NOT KEEPING PACE. WE'RE GOING TO SPEAK WITH BRIAN DEESE FROM THE PRESIDENT'S CABINET LATER THIS MORNING. WHAT DOES HE SAY ABOUT THIS? THANK YOU SO MUCH. THANK YOU VERY MUCH. AT 30:00 A.M., WE GET EIA CRUDE OIL INVENTORY REPORT. WE TAKE A LOOK AT HOW TIGHT THE SUPPLIES ARE. TOM, YOU WERE SAYING THAT OIL PRICES ARE COMING DOWN JUST A TOUCH TODAY. HOW DO WE DOVETAIL THIS EXPECTATION FOR A FALL-OFF IN DEMAND WITH THE REAL-TIME DATA, WHICH IS INCONCLUSIVE? TODAY WE GET A HOST OF FED SPEAK, INCLUDING CHICAGO FED PRESIDENT CHARLIE EVANS AT 11:00 A.M. MINNEAPOLIS FED PRESIDENT NEIL KASHKARI AT 2:00 P.M. ALONGSIDE BLACKROCKS LARRY FINK AND LARRY SUMMERS, WHEN YOU GETTING FORWARD GUIDANCE ANYMORE, EXCEPT WE ARE GETTING FORWARD GUIDANCE. [00:05:53] Speaker 4: HOW DO THEY SPIN WHAT WE HAVE GOTTEN AT 8:30 A.M.? THEY ARE ABSOLUTELY ADDICTED. GET IN FRONT OF THE MICS AND PONTIFICATE ABOUT WHERE WE ARE GOING. I YEARN FOR THE DAYS OF GREENSPAN SILENCE. IT WAS HARDER FOR CHRIS VARONE IN THE TIME OF ALAN GREENSPAN. YOU JUST HAD TO REALLY GLEAN WHAT THE FED WAS DOING. WE WELCOME HIM THIS MORNING. CHRIS, YOU TURN YOUR NOTE UPSIDE DOWN. IT'S NOT ABOUT THE EQUITY MARKET. IT'S ABOUT THE BOND MARKET. TECHNICALLY YOU SEE TWO-YEAR YIELDS MOVING HIGHER. [00:06:26] Speaker 7: DISCUSS. I THINK THE IDEA THAT THE BOND MARKET BUYS THIS IDEA OF A FED PIVOT, WE JUST DON'T SEE IT ON THE CHARTS. I MEAN, TWO-YEAR YIELDS ARE BASICALLY BACK AT THE HIGHS. IF YOU LOOK AT THE FED FUND FUTURES FOR, SAY, NEXT MARCH, THEY'RE ALREADY BACK TO 4%. WE WENT BACK AND WE LOOKED AT EVERY SINGLE TIGHTENING CYCLE BACK TO THE EARLY 70s. WE CANNOT FIND A TIGHTENING CYCLE WHERE THE FED FUNDS RATE ULTIMATELY DIDN'T END ABOVE THE RATE OF INFLATION. SO THIS IDEA OF PEAK INFLATION, THAT'S JUST A MATTER DEATH PROBLEM TO US. I'M NOT SURE IT'S INVESTABLE. EVEN IF YOU GET CPI LOWER HERE OVER THE NEXT 12 MONTHS TO SEVEN OR TO FIVE OR TO FOUR, YOU STILL NEED A FED FUNDS RATE ABOVE THE RATE OF INFLATION. THAT'S WHAT THE HISTORY HAS SHOWN US. I THINK THAT'S WHAT THE TWO-YEAR YIELD IS REFLECTING. I THINK THAT'S WHAT THE SHAPE OF THE YIELD CURVE IS REFLECTING HERE AS WELL. AND IT'S VERY CONTRADICTORY TO THE MESSAGE FROM THE MARKET THE LAST FIVE, SIX, SEVEN WEEKS. SO WE HAVE AN EQUITY MARKET RESPONDING TO THIS. I NOW THINK OVERBOUGHT AT RESISTANCE IN A DOWNTREND. I JUST DON'T LOVE THE RISK REWARD HERE ON BONDS OR STOCKS. [00:07:30] Speaker 5: SO, CHRIS, WHEN YOU SAY OVERBOUGHT WHEN IT COMES TO STOCKS, I WONDER HOW FAR YOU SEE THE DOWN DRAFT THAT IS TO COME IF YOUR VIEW IS CONFIRMED THAT THE FED HAS TO RAISE RATES A LOT MORE AND THAT THE MARKET HAS NOT YET GOTTEN THAT REALITY CHECK. [00:07:43] Speaker 7: WHAT DO YOU THINK THAT IS A GOOD QUESTION HERE? YEAH, I THINK IT'S CERTAINLY A GOOD QUESTION HERE. AND I THINK WHAT'S BEEN NOTABLE THE LAST, LET'S CALL IT TWO MONTHS AS THE MARKET RALLIED, THIS HAS NOT BEEN A RISING TIDE. I MEAN, JUST LOOK AT THE TAPE THE LAST WEEK OR TWO. THIS IS NOT EVERY GROUP, EVERY STOCK, EVERY INDEX WORKING. WE SEE THE WEAKNESS IN CHINA. WE SEE THE WEAKNESS THE LAST COUPLE OF DAYS IN SEMIS. WE SEE, I THINK, FRANKLY, SOME OF THE GROWTH AND TECH RALLIES STARTING TO FRAY HERE A LITTLE BIT AS WELL. SO I THINK THIS IS MORE ABOUT RISK REWARD. WE'RE INTO RESISTANCE. LET'S CALL IT 4150, 4200 ON THE S&P. I THINK LOWER HERE MAKES MORE SENSE. WE'LL SEE IF THAT'S RIGHT OR WRONG. BUT THIS HAS NOT BEEN A RISING TIDE, THIS RALLY. THAT'S WHAT I THINK IS MOST IMPORTANT. [00:08:24] Speaker 6: BUT, CHRIS, WHERE'S THE FLOOR THEN? [00:08:28] Speaker 7: SO OUR VIEW ALL YEAR HAS BEEN EVERYTHING IS GOING BACK TO WHERE IT WAS PRE-COVID. AND YOU'RE TALKING ABOUT, YOU KNOW, 32, 3400 ON THE S&P KIND OF GETS YOU BACK TO THOSE PRE-COVID LEVELS. THAT'S STILL OUR VIEW HERE. CLEARLY, THE MARKETS CHALLENGED THAT OVER THE LAST FIVE OR SIX WEEKS. BUT, YOU KNOW, S&P UP 15% OVER THE LAST 30 DAYS, RIGHT? THAT IS AN AVERAGE BEAR MARKET RALLY. SO WE HAVEN'T SEEN ANYTHING AS EXTRAORDINARY OR REMARKABLE TO SAY, HEY, THIS MOVE IS AN OUTLIER. THIS IS SOMETHING NEW. SO WE'RE STICKING WITH THE VIEW THAT THIS IS STILL A DOWNTREND. I DON'T LIKE THE RISK REWARD UP [00:09:01] Speaker 4: HERE. CHRIS, A CORE ISSUE IN TECHNICAL ANALYSIS IS HOW DO YOU DO A STOCHASTIC TIME SERIES? WHAT THAT MEANS, FOLKS, IS A POINTY SERIES THAT GOES UP AND MAKES A SHARP POINT OR COMES DOWN AND MAKES A SHARP POINT. CHRIS, THAT IS A 2-10 SPREAD, A VANILLA SPREAD OF CURVE INVERSION. HOW DO YOU STUDY THE 2-10 SPREAD IF IT'S SO POINTY UP AND DOWN? [00:09:28] Speaker 7: WELL, I MEAN, WE HAVE TO GO BACK TO APRIL OF 2000, THE LAST TIME WE HAD 2'S AND 10'S KIND OF IN THIS CATEGORY OF NEGATIVE 50 OR SO BASIS POINTS. BUT I THINK WHAT'S IMPORTANT HERE, WHEN YOU LOOK AT THE HISTORY OF THE CURVE, BELIEVE IT OR NOT, THE CURVE TENDS TO GET THIS INVERTED PRE-RECESSIONARY, NOT DURING A RECESSION. ACTUALLY, AS YOU BEGIN TO ENTER AN ECONOMIC SLOWDOWN OR A RECESSION, ACTUALLY THE CURVE TENDS TO STEEPEN. SO THAT FIRST STEEPENING THAT YOU SEE AS THE ECONOMY SLOWS IS NOT A BULLISH STEEPENING. IT'S ACTUALLY A MESSAGE THAT, HEY, THE ECONOMY IS SLOWING. SO I WANT TO BE CAREFUL HERE IF THE CURVE STEEPENED OVER THE NEXT COUPLE MONTHS. I DON'T WANT TO MISINTERPRET THAT. IT WOULD BE NORMAL FOR THE CURVE TO STEEPEN INTO A SLOWDOWN. [00:10:10] Speaker 4: CHRIS, THANK YOU SO MUCH. THANK YOU SO MUCH. I'M GOING TO BE A STRONG EARTH WITH STRATEGIS. LISA, I'M GOING TO DIVE INTO WHAT WE SEE WHEN WE PARSE INFLATION. I DID IN THE 5:00 HOUR, GOODS AND [00:10:22] Speaker 5: SERVICES. HOW WILL YOU PARSE INFLATION THIS MORNING? I'M GOING TO DO THAT? I'M GOING TO DO THAT. I'M GOING TO PARSE IT BETWEEN RENT, BETWEEN MEDICAL EXPENSES. ON THE FLIP SIDE, OIL PRICES, WHICH WE KNOW HAVE BEEN DECLINING, AND FOOD PRICES, WHICH ON THE MARGINS ALSO HAVE BEEN DECLINING. THAT GOES TO THE CORE ARGUMENT. THE CORE IS GOING TO BE SO [00:10:44] Speaker 4: INFLATION THAT CONTINUES. OFF OF A 3% OWNER'S EQUIVALENT RENT, WE ARE OUT ABOUT 3.6 STANDARD DEVIATIONS. THAT'S BEEN THE SPIKE IN THE RENTAL, THE LIVING COMPONENT THAT WE HAVE. EVERYONE IS LIVING THAT COAST TO COAST. [00:11:02] Speaker 6: THAT'S WHAT WE ARE SEEING. THAT'S A KEY STATISTIC. IT IS, AND IT'S A POLITICAL ONE AS WELL, TOM. AS WE GET CLOSER AND CLOSER TO NOVEMBER, THAT IS WHAT THE AMERICAN PEOPLE ARE FEELING AND WHAT A LARGE MAJORITY OF THEM ARE GOING TO END UP VOTING ON IS THE STATE OF THE ECONOMY THAT THEY FEEL. AND, YES, THE PRESIDENT HAS NOTCHED SOME POINTS IN HIS CAMP WITH GAS PRICES COMING DOWN WITH THAT INFLATION REDUCTION ACT THAT HAS NOW BEEN PASSED BY THE SENATE. IS THAT ENOUGH, THOUGH, WHEN WE ARE STILL TALKING ABOUT PRICES THAT MAYBE AREN'T ACCELERATING AS FAST, BUT [00:11:28] Speaker 4: ARE STILL GROWING? I WANT TO TELL YOU ABOUT THIS MORNING, FOLKS. WE ARE REALLY EXCITED ABOUT THE SHOW. WE HAVE CLEARED OUT BEFORE THE 8:30 REPORT FOR THE TRUE EXPERTISE OF MICHAEL MCKEY. HE WILL JOIN US FOR THAT ENTIRE SECTION TO GET YOU READY FOR THE INFLATION STATISTICS. EMILY WILKINS FROM WASHINGTON ON THE SHOCK OF MAR-A-LAGO THAT WE HAVE SEEN IN THE LAST 24 HOURS. AND, OF COURSE, DAVID STUBBS WILL JOIN US FROM J.P. MORGAN PRIVATE BANK. THIS HISTORIC DAY, AN INFLATION HISTORIC DAY, AN INFLATION RECOVER, AN INFLATION RECOVERY [00:12:01] Speaker 8: REPORT. KEEPING YOU UP TO DATE WITH NEWS FROM AROUND THE WORLD, WITH THE FIRST WORD, I'M RITIKA GUPTA. IN NEW YORK, FORMER PRESIDENT TRUMP SAYS HE WILL BE QUESTIONED TODAY UNDER OATH ABOUT HIS DEALINGS AS A REAL ESTATE MOGUL. THE INVESTIGATION INVOLVES CLAIMS THAT THE TRUMP ORGANIZATION MISSTATED THE FEDERAL INVESTIGATORS SEARCHED THE FORMER PRESIDENT'S HOME IN FLORIDA. REPUBLICANS ECHOED THE ASSERTION THAT THE SEARCH WAS POLITICALLY MOTIVATED. WHAT HAS BEEN CALLED THE MOST SCRUTINIZED ECONOMIC REPORT IN THE WORLD COMES OUT THIS MORNING AND IT WILL GIVE US A SENSE OF WHERE THE FIGHT AGAINST SOARING INFLATION IN THE U.S. STANDS. ACCORDING TO A BLOOMBERG SURVEY, THE CONSUMER PRICE INDEX PROBABLY INCREASED AN ANNUALIZED RATE OF 8.7% IN JULY. THAT IS DOWN FROM JUNE'S FIGURE BUT STILL WAY ABOVE THE FED'S 2% TARGET. THE CPI IS OUT AT 8:30 A.M. NEW YORK TIME. CHINA HAS ENDED THOSE UNPRECEDENTED MILITARY EXERCISES NEAR TAIWAN BUT IT SAYS IT PLANS TO CONDUCT REGULAR PATROLS IN THE REGION. THE CHINESE BEGAN THE DRILLS LAST WEEK AFTER U.S. HOUSE SPEAKER NANCY PELOSI DEFIED BEGINNING TO BEIJING AND VISITED TAIWAN. ELON MUSK HAS SOLD $6.9 BILLION OF STOCK IN TESLA, HIS BIGGEST SELL EVER. THE WORLD'S RICHEST PERSON SAYS HE WANTS TO AVOID A LAST-MINUTE SELL-OFF OF THE CARMAKER'S SHARES IN CASE HE IS FORCED TO GO AHEAD WITH HIS DEAL TO BUY TWITTER. MUSK SAYS HE WILL BUY TESLA SHARES AGAIN IF THE DEAL DOESN'T CLOSE. BLOOMBERG HAS LEARNED THE U.S. JUSTICE DEPARTMENT IS PREPARING TO SUE GOOGLE FOR ALLEGEDLY ILLEGALLY DOMINATING PARTICIPATES. THE SUIT COULD BE FILED AS SOON AS NEXT MONTH. TWO YEARS AGO, THE JUSTICE DEPARTMENT SUED GOOGLE IN A CASE INVOLVING ONLINE SEARCH. FILED IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. [00:13:57] Speaker ?: I'M RITIKA GUPTA. [00:14:06] Speaker 9: YOU'VE GOT TO BELIEVE THAT TO GO AFTER A FORMER PRESIDENT'S HOME WITH A WARRANT, YOU HAVE GOT TO HAVE THE HIGHEST LEVEL OF CONCERN SUPPORTING THAT IS ESSENTIALLY JUSTIFIED BY THE PROBABLE COST FINDING. I THINK THAT IS THE JUDGMENT [00:14:22] Speaker 4: THAT IS TELLING HERE. SOMEONE QUALIFIED. IT IS ALWAYS GOOD TO SPEAK TO SOMEONE LIKE DONALD AYR, FORMER U.S. DEPARTMENT FOR DOCUMENTS AND, OF COURSE, THAT IN MAR-A-LAGO IN FLORIDA. WE'RE GOING TO FOCUS ON THIS NOW WITH EMILY WILKINS, SORT OF DAY TWO AFTER WE PICK UP THE DEBRIS. EMILY, PEOPLE PUBLISHING, REPORTING AXIOS MOMENTS AGO, GREG VALLEA MOMENTS AGO, CNN MOMENTS AGO, AND ON AND ON. IT SEEMS TO BE A DAY OF DISCOVERY. WHAT IS THE BIGGEST MYSTERY WE ARE TRYING TO DISCOVER DAY TWO? [00:15:07] Speaker 10: ONE OF THE BIG THINGS THEY'RE TRYING TO FIGURE OUT IS WHAT LED TO THE SEARCH WARRANT IN MAR-A-LAGO. YOU ARE HEARING FROM REPUBLICANS, PARTICULARLY, I'M THINKING, LIKE, MITCH MCCONNELL, HAS COME OUT AND SAID, HEY, THIS SEARCH WARRANT, THIS IS A BIG DEAL, THIS IS UNPRECEDENTED, AND WE NEED TO KNOW EXACTLY WHAT THEY'RE LOOKING FOR. NOW, AT THIS POINT, WE'RE SEEING A NUMBER OF REPORTING COME OUT SAYING THAT IT SEEMS THAT TRUMP, WHEN HE LEFT THE WHITE HOUSE, TOOK DOCUMENTS WITH HIM THAT SHOULD HAVE BEEN KEPT WITHIN THE FEDERAL GOVERNMENT'S CARE, KEPT WITHIN THE NATIONAL ARCHIVES. I REMEMBER, EARLIER, FOLKS FROM THE NATIONAL ARCHIVES CAME AND RETRIEVED ABOUT 15 BOXES OF PAPERS FROM MAR-A-LAGO. THE "WASHINGTON POST" REPORTED THAT ADDITIONAL BOXES WERE REMOVED AFTER THE SEARCH YESTERDAY. WE WANT TO TALK ABOUT THIS. I THINK A BIG QUESTION, THOUGH, IS WHAT IS IN THESE DOCUMENTS, AND IS THERE ANYTHING IN PARTICULAR THERE THAT MIGHT SEGUE [00:16:02] Speaker 4: INTO ALL OF THESE OTHER INVESTIGATIONS CURRENTLY LOOKING AT TRUMP? CIVICS 101, CAN THE PRESIDENT APPLY PRESSURE ON THE ATTORNEY GENERAL TO SAY THIS TIME IS DIFFERENT OFF THE PRESIDENTIAL RECORDS ACT OF 1978, AND CAN BIDEN SAY TO BIDEN'S CABINET. [00:16:22] Speaker 10: LET'S GET VISIBLE ON THIS AND AT LEAST EXPLAIN WHAT WE'RE DOING. IS THAT FEASIBLE? SO OBVIOUSLY, MERRICK GARLAND IS A PART OF BIDEN'S CABINET. AT THE SAME POINT, BIDEN HAS REALLY TRIED TO TAKE A BIT OF A HANDS-OFF APPROACH WITH THE ATTORNEY GENERAL. REMEMBER, WE DID SEE TRUMP TRY TO PUT A LOT OF PRESSURE ON HIS ATTORNEY GENERAL WHEN HE WAS IN OFFICE. BIDEN IS TRYING TO BREAK WITH THAT, SAY, NO, MERRICK GARLAND IS GOING TO TAKE A LOOK AT THE HAND. I THINK THERE ARE KIND OF RISING QUESTIONS AROUND THE TRANSPARENCY AROUND THIS, AND I THINK IT'S VALID TO ASK WHETHER THE CURRENT WHITE HOUSE WOULD BE BENEFITED BY TRYING TO GET MORE OF THAT TRANSPARENCY AS FAR AS WHY THE SEARCH WAS CONDUCTED, WHAT THEY WERE LOOKING FOR, AND IF THERE'S GOING TO BE MORE REVELATIONS FROM -- THAT COME FROM WHATEVER DOCUMENTATION THEY WERE LOOKING FOR. [00:17:05] Speaker 5: AS YOU MENTIONED, EMILY, A LOT OF PEOPLE ARE EXPECTING PRESIDENT BIDEN TO PUNT THIS ISSUE TO THE DEPARTMENT OF PEOPLE ARE EXPECTING THE DEMOCRATS. I THINK IT'S THEIR TERRAIN AND THEY ARE INDEPENDENT. HE ALSO HAS ENOUGH ON HIS HANDS. WE'RE ABOUT TO GET A CPI REPORT THAT HIGHLIGHTS PERHAPS WE'VE SEEN PEAK INFLATION, BUT IT'S DECELERATING NOT TO ANYTHING THAT IS COMFORTABLE. STILL 8.7% IS THE OVERALL ASSUMPTION. [00:17:28] Speaker 10: HOW ARE THEY PLANNING TO POSITION THIS? I DON'T KNOW THAT INFLATION IS GOING TO BE AN ISSUE THAT ABSOLUTELY DOMINATES THE NOVEMBER ELECTIONS. IT'S NOT GOING TO BE IN THEIR FAVOR. IT'S REALLY HELPING OUT REPUBLICANS RIGHT NOW. YOU'RE SEEING SO MANY REPUBLICAN CANDIDATES AND LAWMAKERS REALLY SAY, HEY, YOU NEED TO ELECT US THIS NOVEMBER SO WE CAN GET INFLATION DOWN. DEMOCRATS HAVE REALLY TAKEN THE TACT OF LOOKING AT THE CHIPS BILL THAT THEY JUST PASSED AS WELL AS THAT TAX AND CLIMATE BILL THAT WAS PASSED IN THE SENATE LAST WEEK IS NOW GOING TO BE TAKEN UP BY THE HOUSE THIS FRIDAY AND SAY, LOOK, WE'RE MOVING THIS MAJOR LEGISLATION. IT'S GOING TO LOWER COSTS. IT'S GOING TO LOWER PRESCRIPTION DRUG COSTS. IT'S GOING TO LOWER ENERGY COSTS. AND THROUGH THIS, WE'RE GOING TO BE ABLE TO PROVIDE RELIEF TO AMERICAN FAMILIES. THAT'S KIND OF WHAT DEMOCRATS ANSWER. IT'S NOT NECESSARILY THAT THEY'RE GOING AFTER INFLATION PER SE, BUT THEY'RE TRYING TO GO AFTER THE DAY-TO-DAY THINGS THAT MOST AMERICANS BUY. [00:18:17] Speaker 6: EMILY, YOU RAISED THAT THE HOUSE STILL HAS TO VOTE ON THE INFLATION REDUCTION ACT, AND IT STRIKES ME THAT THERE WERE A NUMBER OF LAWMAKERS FROM HIGH-TAX STATES LIKE HERE IN THE TRI-STATE AREA OF NEW YORK AND NEW JERSEY THAT WERE ADAMANT ABOUT THE SALT CAP, AND YET THAT IS NOT INCLUDED IN THIS BILL. THEY'RE EXPECTED TO VOTE YES ALL THE SAME. I WONDER HOW THAT PLAYS FOR THEM IN THEIR HOME DISTRICTS. [00:18:38] Speaker 10: I THINK THAT'S A REALLY GREAT QUESTION, KAYLEE. OBVIOUSLY, IT'S A HUGE ISSUE FOR A LOT OF FOLKS IN THE NEW JERSEY AND NEW YORK AREAS. I DON'T THINK THAT'S WHAT I WANT TO DO. I THINK THAT'S WHAT I WANT TO DO. AT THE SAME POINT, THESE LAWMAKERS WERE LOOKING AT A REALITY JUST A FEW WEEKS AGO THAT THEY WEREN'T GOING TO GET ANYTHING DONE ON THIS PARTICULAR ISSUE. NOTHING MORE ON HEALTH CARE, NOTHING MORE ON CLIMATE, NOTHING MORE ON TAXES. NOW THEY ACTUALLY HAVE SOMETHING. AND I THINK FOR A LOT OF LAWMAKERS, THE ABILITY TO HAVE SOMETHING, TO HAVE SOMETHING TO GO HOME AND TELL THEIR CONSTITUENTS ABOUT BEATS HAVING NOTHING, EVEN IF IT DOESN'T HAVE EVERYTHING THEY WANTED. I DON'T THINK THAT'S A LOT OF PEOPLE WHO HAVE LEFT OUT OF THIS BILL ON THE CUTTING ROOM FLOOR. A LOT OF VOTERS UNDERSTAND THAT DEMOCRATS AREN'T GETTING THROUGH EVERYTHING THEY INITIALLY PROMISED. [00:19:23] Speaker 4: BUT AGAIN, THIS IS WAY MORE THAN WE WERE EXPECTING EVEN A MONTH AGO. WHAT DOES THIS DIALOGUE FOREVER CHANGED YESTERDAY WITH THE SEARCH OF A PRESIDENT'S RESIDENCE? [00:19:35] Speaker 10: I THINK, OBVIOUSLY, THE SEARCH IS UNPRECEDENTED. IT IS A HUGE NEWS STORY. ON THE OTHER HAND, IT'S NOT SOMETHING THAT REALLY IMPACTS AMERICANS IN THEIR DAY-TO-DAY LIVES. CERTAINLY, FOR THOSE WHO ARE MAYBE HARD-CORE REPUBLICANS, HARD-CORE DEMOCRATS WILL HAVE THOUGHTS AND FEELINGS ABOUT THIS ONE. BUT WHEN YOU TALK WITH LAWMAKERS, PARTICULARLY THOSE WHO ARE RUNNING IN THE MOST DIFFICULT CAMPAIGNS, THE FIRST THING THEY WILL TELL YOU OFF THE BAT IS KITCHEN TABLE ISSUES. WHATEVER HAPPENED DOWN IN MAR-A-LAGO THIS WEEK ISN'T REALLY IMPACTING THE AVERAGE AMERICAN FAMILY. [00:20:07] Speaker 4: EMILY WILKINS, THANK YOU SO MUCH. GREATLY APPRECIATE IT THIS MORNING WITH A BRIEF THERE ON THE NEWS OF WASHINGTON. FUTURES UP 10, DOW FUTURES UP 73 IN THE VIX WITH THAT BIG CHURN AROUND A 22-POINT. THANK YOU VERY MUCH. JULIAN EMMANUEL OVER AT EVERCORE ISI HAS REALLY BEEN OUTSTANDING ABOUT KEEPING TRACK OF THE BEANS. [00:20:31] Speaker 5: I'M SORRY, REVENUE GROWTH IN REPORTED EARNINGS HAS BEEN DOUBLE-DIGIT, BIG, BIG INFLATION-AFFECTED. IT HAS BEEN INFLATION-AFFECTED AND FOR NOW IT HAS BEEN RELATIVELY STRONG. IT HAS BEEN FASTENING TO SEE HOW EVEN WITHIN THE SAME SHOP YOU HAVE DIFFERENT STRATEGISTS WHO ARE ARGUING AGAINST EACH OTHER. THANK YOU VERY MUCH. THIS IS A FAITH-BASED MARKET IN TERMS OF WHERE EARNINGS MARGINS ARE GOING TO GO. YES, THEY HAVE HELD IN SO FAR, BUT WE HAVE HEARD FROM MIKE WILSON AND MORGAN STANLEY SAYING THEY ARE GOING TO SHRINK, A LOT OF PEOPLE LOOKING AT PRODUCTIVITY, HOW MUCH IS DECLINING, A LOT OF PEOPLE LOOKING AT THE PRODUCER PRICES [00:21:08] Speaker 4: THEY ARE GOING TO GIVE. I'M GLAD YOU BRING THIS UP. I HAVE BEEN REMISS ON THIS. PRODUCTIVITY, I'M GOING TO CALL IT A THREE RATIO DYNAMIC. A LOT OF MOVING PARTS. WE ARE GOING TO CALL IT A NUMBER OF INFLATION. [00:21:26] Speaker 6: THAT IS WHAT YOU MENTIONED EARLIER, WHICH IS YOUR WAGE AFTER INFLATION IS NOT SO GOOD. THAT IS GOING TO BE SOMETHING CRUCIAL TO WATCH. THESE ARE GOING TO BE CRITICAL, ESPECIALLY IN SERVICES AS WE WATCH THE SERVICES METRIC IN THE CPI TODAY. [00:21:40] Speaker 4: WE WILL DO THAT AT 8:30 HERE IN TWO HOURS. RIGHT NOW, DOLLAR FRACTIONALLY WEAKER. I DON'T WANT TO MAKE A BIG DEAL. EURO EXPLODES OUT TO A 102. THAT WILL HELP JOHN FARO AS HE TRIES TO GET A PLANE BACK FROM ROME. YOU ARE LOBBYING HIM? SET HIM TO GOLD STREAM, TOM. INFLATION IN TWO HOURS. STAY WITH US ON RADIO AND TELEVISION. [00:22:04] Speaker ?: GOOD MORNING, EVERYONE. [00:22:10] Speaker 4: BLOOMBERG SURVEILLANCE AND INFLATION DAY. WE ARE COMING UP ON TWO HOURS AWAY FROM THE MOST IMPORTANT INFLATION REPORT I HAVE SEEN IN AGES AND AGES. KAILEY LIONES IN FOR JONATHAN FERRO. LISA BRANWITZ WITH US TODAY. LOOKING ACROSS FUTURES UP 10, FUTURES UP 74. THANKS FOR JOINING US TODAY. [00:22:37] Speaker 5: THERE'S THE NUMBER ON THE BLOOMBERG TERMINAL. NEGATIVE 48 BASIS POINTS. IT'S SHOCKING. WE ARE BUMPING UP AGAINST HISTORY. PEOPLE ARE SAYING IT COULD GO EVEN FURTHER. DOES THIS MEAN THAT BAD THINGS ARE GOING TO HAPPEN IN THE ECONOMY? YOU GET REALLY UNCLEAR ANSWERS FROM PEOPLE. [00:22:55] Speaker 4: WE ARE LOOKING AT THE DEPTH OF A POTENTIAL DOWNTURN. THE OPERATIVE WORD THERE IS AMBIGUITY. MAYBE WE SEE THAT IN CURRENCY MARKETS AS WELL. ON THE HOLISTIC ECONOMY, ON THESE INFLATION REPORTS, AND PARTICULARLY WITH HIS EXPERTISE OF THE DOLLAR, MARK CHIEF MARKETS, CHIEF MARKETS STRATEGIST AT BANNOCKBURN AND TRULY LEGENDARY IN THE ASTROLOGY, IF YOU WILL, OF PIECING ALL THIS TOGETHER. MARK CHANDLER, WHAT DOES SUSTAINED HIGH INFLATION DO TO THE ASTRONOMY OF THE MARKET? [00:23:25] Speaker 11: I DON'T KNOW. I THINK IT'S NOT JUST THE U.S. OF COURSE IT HAS HIGH INFLATION, BUT THE WORLD IS GOING THROUGH IT NOW. I KIND OF THINK THAT TO YOUR POINT ABOUT THE IMPORTANT OF TODAY'S CPI NUMBER, I'M NOT SO SURE THAT IT'S GOING TO CHANGE ANYTHING. AFTER THAT STRONG LABOR DAY THAT WE HAD BEFORE THE WEEKEND, THE MARKET IS PRICING IN ABOUT AN 80% CHANCE OF A 75 BASIS [00:23:50] Speaker 4: COIN HIKE NEXT MONTH, AND I DON'T THINK THE CPI NUMBER IS GOING TO CHANGE THAT VERY MUCH. IS THE DOLLAR DYNAMICS HERE PLAYABLE? WHEN YOU LOOK AT THE NOISE, THE DAVID ROSENBERG-LIKE NOISE THAT'S GOING TO COME OUT IN THE INFLATION REPORT TODAY, GO OVER AND MAKE A PLAYABLE BET ON RESILIENT STRONG OR WEAK DOLLAR? [00:24:08] Speaker 11: I DON'T KNOW IF IT'S JUST SO MUCH ON TODAY'S CPI NUMBER, BUT THE THING THAT I'M FOCUSING ON REALLY IS THAT EVEN THOUGH THERE'S BEEN THIS BIG RATE ADJUSTMENT, THE SPREAD BETWEEN THE U.S. PREMIUM PEAKS BEFORE THE DOLLAR DOES. SO I'M CONCERNED BETWEEN THE ITALIAN ELECTION NEXT MONTH, THE WEATHER, THIS UNUSUAL WEATHER, WE SHOULD SAY, IN EUROPE, DRYING UP THE RIVERS, ALSO A NEW SUPPLY SHOCK AS WELL AS THE ENERGY COST. SO I THINK THAT EUROPE IS FACING A COUPLE OF SHOCKS IN ADDITION TO [00:24:52] Speaker 5: THAT INTEREST RATE DIFFERENTIAL AND THAT COULD DRIVE THE EURO BACK TOWARDS ITS LOW. THAT'S SOMETHING I'VE HEARD FROM AN INCREASING NUMBER OF ANALYSTS, MARK, THAT PERHAPS WE HAVE A LITTLE BIT OF THE EMPLOYMENT MARKET. HOW MUCH DID THE EMPLOYMENT REPORT ON FRIDAY CHANGE THAT PICTURE? ARE PEOPLE GETTING NOT FALSE OPTIMISM BUT OVERLY CONFIDENT ABOUT THE HEALING OF THE GLOBAL ECONOMY OR THE RESILIENCE OF THE GLOBAL ECONOMY BEFORE THEY CAN [00:25:16] Speaker 11: SEE IT ACTUALLY HAPPENING? I DON'T KNOW. I THINK POWELL MAKES A GOOD POINT. WITH INFLATION, THERE IS ONE NUMBER WE THINK THE FED COULD FOCUS ON, PCE HEADLINE DEFLATOR. WEEKLY INITIAL JOBS CLAIMS ARE RISING. WE SAW SOME WEAKNESS IN SOME OF THE SURVEY DATA. WE'VE SEEN CONTINUING CLAIMS BEGINNING TO EDGE UP. THE LABOR MARKET IS NOT AS STRONG PERHAPS AS A NONFARM PAYROLL SUGGESTED. BUT AGAIN, THE LABOR MARKET IS A LAGGING INDICATOR. THERE'S MANY PEOPLE WHO THINK THE U.S. IS ALREADY IN A RECESSION. I'M NOT ONE OF THOSE PEOPLE. BUT I DO THINK THAT BETWEEN THE YIELD CURVE -- I WOULD POINT OUT THAT YESTERDAY, IT'S NOT JUST A TWO TO TEN YEAR CURVE YOU'RE TALKING ABOUT. WHAT HAPPENED YESTERDAY, THE ONE-YEAR T BILL WAS AUCTIONED AT THE SAME RATE THAT THE THREE-YEAR NOTE WENT OFF YESTERDAY. 3.2%. I THINK THAT REALLY TELLS YOU -- IT'S NOT THAT IT'S REFLECTING THE RECESSION, BUT THOSE CHANGING IN FINANCIAL CONDITIONS MAKE IT MORE DIFFICULT FOR BUSINESSES. [00:26:13] Speaker 4: MARK, HOLD ON A MINUTE. LISA, WAS THAT AUCTION TALK WITH BRAMO? DID I JUST HEAR THAT? [00:26:19] Speaker 5: IT WASN'T WITH ME, IT WAS WITH MARK. BUT IT WAS VERY WELL DONE. IT WAS VERY WELL DONE. I NOTTED OFF. THAT WAS BEAUTIFUL. THAT REALLY READ WELL ON RADIO. MARK, OTHER THAN NOTTING OFF WITH THE BOND AUCTION TALK, THERE IS THIS QUESTION ABOUT POSITIONING RIGHT NOW AND THE FACT THAT PEOPLE ARE GOING INTO THREE-YEAR NOTES AT A TIME WHEN THERE ARE SO MANY QUESTIONS ABOUT RATE HIKING. HAS POSITIONING IN THE DOLLAR MADE IT MORE VULNERABLE TO A RALLY BECAUSE PEOPLE HAVE CLOSED OUT THEIR LONGS IN THIS BELIEF THAT WE HAVE ALREADY SEEN THE PEAK? [00:26:51] Speaker 11: I DON'T KNOW IF WE HAVE REALLY SEEN THAT. OF COURSE, IN A FEW CURRENCIES, THERE HAS BEEN SOME ADJUSTMENTS. I THINK THE MARKET -- THE FUTURES ARE LONG CANADIAN DOLLARS, FOR EXAMPLE, BUT THEY ARE STILL SHORT THE EURO. THEY ARE STILL SHORT STERLING. THEY ARE STILL SHORT THE YET, EVEN THOUGH NOT AS MUCH AS THEY WERE BEFORE. I'M NOT SURE POSITIONING IS THE BIG BLOCK FOR THE DOLLAR RIGHT NOW. I THINK THAT IT'S REALLY JUST THE SUMMER DULDRUMS AND I THINK THAT AS WE GET INTO NEXT MONTH, I THINK THEY WILL SEE THE DOLLAR BEGINNING TO STRENGTHEN AGAIN. [00:27:21] Speaker 6: WHAT WOULD BE THE CONCOCTION FOR DOLLAR WEAKNESS, MARK? LITERALLY, WHAT WOULD IT TAKE IN ORDER TO SAP THE STRENGTH OF THE GREENBACK? [00:27:30] Speaker 11: THIS IS WHAT I WILL TELL YOU WHAT I'M WATCHING. WE ARE ALL LOOKING AT THE FEDERAL DESERVE RAISING RATES 75 BASIS POINTS NEXT MONTH, MAYBE ANOTHER 50 OR 75 BEFORE THE END OF THE YEAR. WE ARE LOOKING AT THE DECEMBER FED FUND FUTURES FOR NEXT YEAR. IT IS TRADING BELOW THE DECEMBER FED FUND CONTRACT THIS YEAR. THAT MEANS THE MARKET IS PRICING IN A RATE CUT IN THE SECOND HALF OF NEXT YEAR. I THINK THAT AS THESE FORCES GATHER STEAM, I THINK THE MARKET IS CONCLUDING THAT THE FEDERAL DESERVE IS GOING TO BREAK SOMETHING BEFORE THEY THINK THEY WILL. THAT IS WHETHER IT'S THE LABOR MARKET, WHETHER IT'S THE ECONOMY, THINGS WILL SLOW DOWN SUFFICIENTLY BETWEEN THE END OF THIS YEAR AND EARLY NEXT YEAR TO PUT THE FED ON HOLD. SOME OF MY COLLEAGUES AT ITC HAVE DONE A STUDY OF THE LAB TIME BETWEEN THE LAST HIKE AND THE FIRST CUT. THAT IS AVERAGED ABOUT TEN MONTHS. I DON'T THINK THE MARKET IS SO FAR OFF, EVEN THOUGH THE FED PUSHES AGAINST IT, WE HAVE SEEN EASING OF FINANCIAL CONDITIONS, I THINK THAT STILL SEEMS TO BE A REASONABLE BET THAT BY THE END OF NEXT YEAR, WE ARE TALKING ABOUT CUTTING THE FED POLICY. [00:28:32] Speaker 4: TODAY, WE ARE TALKING ABOUT THAT. I THINK IT IS GOING TO BE ABLE TO GO TO THE ECONOMY. MARK, THANK YOU SO MUCH. MARK CHANDLER WITH BANNOCKBURN THERE. IT RESOUNDS WITH WHAT WE SAW FROM BANK OF AMERICA IN THE CHART GETTING US OUT INTO THE SUMMER OF 2023 WITH ELEVATED INFLATION. YESTERDAY, SURVEILLANCE, EDGE OF HYSTERICAL. THE PIPELINE ACROSS RUSSIA, MOVING INTO UKRAINE AND SPLITTING INTO THREE PARTS FROM LATVIA DOWN TO I CAN'T [00:29:00] Speaker 5: EXPLAIN. WE GOT A HEADLINE SAYING TRANSNEFTA IS GETTING READY TO RESUME THE FLOW VIA THAT SOUTHERN LEG OF THE PIPELINE. THERE HAD BEEN DISCUSSIONS THAT THIS HAD BEEN REALLY A UKRAINIAN-LED SHUTDOWN, NOT A RUSSIAN-LED SHUTDOWN, WHICH WAS PART OF THE REASON WHY YOU SAW OIL GETTING LOWER TODAY ELECTIONS THAT IT WOULD RESUME. NEVERTHELESS, I DO WONDER WHAT THE PREMIUM IS GETTING BUILT INTO OIL PRICES BECAUSE THERE IS AN EXPECTATION THAT RUSSIA IS GOING TO PLAY WITH THE FLOWS. THIS IS GOING TO BE SOMETHING THAT IS GOING TO HAPPEN THROUGH THE END OF THE YEAR. PERHAPS THIS ISN'T THE PERFECT EXAMPLE OF THIS. THAT IS SOMETHING THAT MANY PEOPLE ARE EXPECTING. THAT IS A PART OF THE END OF THE YEAR. [00:29:44] Speaker 4: THAT IS A PART OF THE END OF THE YEAR. THAT IS A PART OF THE END OF THE YEAR. IT IS A CALENDAR ITEM. THE HEAT IS BREAKING IN NEW YORK. WE HAVE GONE FROM THIS RIDICULOUS HEAT WAVE. [00:29:54] Speaker 6: FOLKS, TWO DAYS AGO, I HAVE NEVER SEEN IN THE NORTHEAST EVER. IT WAS LIKE VIRGINIA WEATHER. IT WAS TERRIBLE. IT HAS BEEN BRUTAL BUT ALSO IN EUROPE. WHILE WE ARE TALKING ABOUT OIL AND GAS FLOWS FROM RUSSIA, WE ALSO HAVE TO TALK ABOUT THE EFFECT THIS HEAT WAVE IS ON THE RHINE RIVER THAT BY FRIDAY COULD BECOME IMPASSIBLE FOR CARGO. THAT IS ALSO COAL WHICH GERMANY HAS COME TO RELY ON TO A MUCH HEAVIER EXTENT GIVEN ALL OF THE CONCERN AROUND RUSSIAN ENERGY FLOWS. WE ARE TALKING ABOUT CLIMATE CHANGE. WE ARE TALKING ABOUT AN ENERGY CRISIS IN EUROPE THAT COULD GET WORSE BECAUSE OF IT. THAT DOES NOT LEAVE THE EUROPEAN ECONOMY IN A VERY SOUND PLACE. JONATHAN: [00:30:29] Speaker 4: CENTRAL ITALY AND ON DOWN SOUTH HAS BEEN EXTRAORDINARY THE LAST COUPLE OF DAYS. WE WILL HAVE TO SEE WHAT HE SAYS WHEN HE GETS HAPPENED. WE WILL HAVE TO SEE WHAT HE IS DOING TO DO. IT HAS BEEN QUITE SOMETHING. WE ARE MOVING UP HERE IN TWO HOURS TO THE INFLATION REPORT. I SHOULD NOTE JULIAN LEE SERIOUSLY WILL BE WITH US IN THE 7:00 HOUR ON OIL AND EUROPE AS WELL. THE MOVING AVERAGE OF THAT IS FRIGHTENING. IT IS AMAZING HOW THE MOVING AVERAGE THAT I USE ON NETHERLAND'S NATURAL GAS IS SHARPLY ABOVE WHERE IT WAS WHEN THE WAR STARTED. [00:31:07] Speaker 5: WHAT WE HAVE HEARD FROM BLOOMBERG OPINION HAS BEEN THAT YOU STARTED TO SEE GERMANY IN PARTICULAR TRANSITION AWAY FROM GAS AND TRY TO INCREASE RELIANCE ON OIL AND COAL. HOW QUICKLY CAN THEY DO THAT AHEAD OF THE WINTER? THIS IS GOING TO BE A HUGE PRESSURE POINT AND A MASSIVE PART OF THE INFLATION OVER IN EUROPE. WE ARE SEEING THAT BE A DECLINING PART OF THE INFLATION HERE IN THE UNITED STATES. WHAT TAKES OVER FOR IT AND HOW LONG CAN YOU COME ON THAT AS A DISINFLATIONARY MEASURE OF THE [00:31:36] Speaker 4: HEADLINE NUMBER? JONATHAN: FROM THE HASSLER IN ROME EMAILS IN. THANK YOU FOR EMAILING IN FROM THE HASSLER IN ROME. HE SAYS WHY AREN'T YOU GUYS DOING ITALIAN SPREADS? [00:31:49] Speaker 5: WHY AREN'T WE DOING ITALIAN SPREADS THIS MORNING? LISA: BECAUSE HE IS NOT HERE AND WE ARE ON STRIKE. HE IS DRINKING ESPRESSO AND HAVING BUFFALO MOZZARELLA. WE DON'T HAVE TO LOOK AT IT. THIS HAS BEEN SOMETHING WE HAVE ALL BEEN WATCHING AS WELL. WHAT HAS BEEN GOING ON WITH AROUND, ESPECIALLY AFTER WE HAVE NOT NECESSARILY SEEN THE TEETH OF THE EUROPEAN PROGRAM, THE ECB. THEY FACE A LOT MORE PROBLEMS IN EUROPE. [00:32:14] Speaker 4: THAT IS BASICALLY THE THEME THAT WE KEEP HEARING. JONATHAN: IN THE LAST 24 HOURS, HAS DONE SOME TERRIFIC WORK ON THIS. IT IS IMPORTANT TO UNDERSTAND ON THIS DAY OF INFLATION IN THE UNITED STATES HOW DIFFERENT THE EUROPEAN STORY IS AND WHAT WE SEE IN THE UNITED -- IN AMERICA. THAT IS A BASIC BASIC BASIS POINTS. WE HAVE TO GO BACK TO THE BOND MARKET. WE HAVE TO GO BACK TO THIS CURVE INVERSION STORY. I GUESS THE VELOCITY OF IT CAN GO RIGHT THROUGH. [00:32:46] Speaker 5: IAN LINGEN LOOKING AT NEGATIVE 56 BASIS POINTS. WE HAVE TO GO BACK TO THE FED AND WE HAVE TO GO BACK TO THE FED. I THINK THAT IS REAL CREDIBILITY BY THE FED IN THE MARKETS, AT LEAST RIGHT NOW. PEOPLE BELIEVE THAT WHATEVER THE FED IS GOING TO DO IS GOING TO WORK. THAT IS WHY LONG-TERM YIELDS ARE COMING DOWN. HOW LONG DOES THAT CONTINUE? [00:33:08] Speaker 4: WE HAVE TO GO BACK TO THE UNITED STATES. WE HAVE TO GO BACK TO THIS MOST IMPORTANT DAY. MICHAEL MCKEE WITH A COMPLETE INFLATION BRIEF. WE WILL DO THAT AT 8:15. WE HAVE A NUMBER OF ECONOMISTS TO ATTEND AS WELL. WE HAVE A NUMBER OF EARNINGS IN MEDIA. MICHAEL NATHANSON WILL JOIN US HERE TO FINISH OUT SURVEILLANCE THIS MORNING. COMING UP, RUBILA FARUKI, CHIEF U.S. ECONOMIST WITH HIGH-FREQUENCY ECONOMICS. OUR FIRST BRIEF OF THE MORNING ON THIS HISTORIC INFLATION REPORT. PLEASE STAY WITH US. [00:33:45] Speaker 8: THIS IS BLOOMBERG. GOOD MORNING. KEEPING YOU UP TO DATE WITH NEWS, FARM AROUND THE WORLD, HIGH-FREQUENCY ECONOMICS. FORMER PRESIDENT TRUMP HAS LEGAL ISSUES ON TWO FRONTS. HE SAYS TODAY HE WILL TESTIFY UNDER OATH IN A NEW YORK INVESTIGATION INVOLVING THE VALUE OF HIS REAL ESTATE HOLDINGS. THAT COMES TWO DAYS AFTER FEDERAL INVESTIGATORS SEARCHED THE FORMER PRESIDENT'S HOME IN FLORIDA. REPUBLICANS ECHOED THE SEARCH WAS POLITICALLY MOTIVATED. IN THE U.K., HOUSEHOLDS ARE ALREADY ALMOST $1.6 BILLION DRIVING THE END OF THE YEAR. BRITISH CONSUMERS TYPICALLY BUILD UP CREDIT WITH THEIR PROVIDERS DURING THE SUMMER WHEN ENERGY USAGE EASES. THAT LIMITS THE SHOCK OF HIGHER DEMAND IN THE WINTER. SOARING GAS AND POWER PRICES HAVE MADE THIS SUMMER THAT MUCH MORE EXPENSIVE. THANKS FOR THE COUNTRY. THE RIDE HAS DRIED UP TO THE POINT OF BECOMING VIRTUALLY IMPOSSIBLE AT A KEY WAYPOINT. THAT IS SLOWING DOWN VAST FLOWS OF DIESEL AND COAL. IN SOUTH KOREA, THE CITY OF SEOUL IS BRACING FOR MORE RAIN AFTER BEING HIT BY ONE OF THE WORST STORMS IN MORE THAN A CENTURY. WIDESPREAD FLOODING HAS KILLED AT LEAST NINE PEOPLE IN THE CAPITOL. MORE THAN 20 INCHES OF RAIN HAVE FALLEN. OPPOSITION LAWMAKERS ARE CRITICIZING PRESIDENT YUN SUK YOL FOR HIS RESPONSE. COLLEGE ENDOWMENTS IN THE U.S. DECLINED THE MOST SINCE THE GLOBAL FINANCIAL CRISIS. THEY LOST A MEDIAN 10.2% BEFORE FEES IN THE 12 MONTHS THROUGH JUNE. THAT IS ACCORDING TO WILSHIRE TRUST UNIVERSE COMPARISON SERVICE, THE LARGEST FUNDS, THOSE WITH $500 MILLION OR MORE, DID SUBSTANTIALLY BETTER, GAINING 9/10 OF 1%. THE PREVIOUS YEAR, ENDOWMENTS RETURNED TO A MEDIAN 27%. GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICKTAKE POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. [00:35:58] Speaker 1: THE FED RIGHT NOW, IT ACTUALLY MIGHT BE EASIER FOR THEM TO TALKING UP INFLATION. WE ARE TALKING UP INFLATION BECAUSE THAT'S WHAT EVERYONE IS TALKING UP INFLATION BECAUSE THAT'S WHAT EVERYONE IS TALKING UP INFLATION BECAUSE THAT'S WHAT EVERYONE IS TALKING UP INFLATION BECAUSE THAT'S WHAT [00:36:15] Speaker 4: EVERYONE IS TALKING UP. THIS MORNING, WE WELCOME YOU ALL TO A MOST HISTORIC DAY. WE WELCOME YOU ALL TO A MOST HISTORIC DAY. LET'S TALK ABOUT THAT BECAUSE WE REALLY HAVEN'T SAID INFLATION NOW THAT YOU'RE LIVING, TOP LINE CORE, TRIM THIS, TRIM THAT, AUCTION ADJUSTED ACCORDING TO LISA, IS A 40 YEAR HIGH INFLATION. WHETHER IT'S 41 YEARS OR 38 YEARS, WHO CARES? IT'S FOUR DECADES THAT WE HAVEN'T SEEN THIS INFLATION. WE'VE GOT A ROLL OVER AND WE CAN EXTRAPOLATE OUT A PATH IN THE NEXT YEAR, EXCEPT IT HASN'T ROLLED OVER YET. MAYBE WE'LL SEE THAT HERE IN LESS THAN TWO HOURS. RABILA FARUKI IS CHIEF U.S. ECONOMIST AT HIGH FREQUENCY ECONOMICS. OUR FIRST CONVERSATION OF THE MORNING TO DIVE INTO THE DETAILS. RABILA, WHAT IS THE DETAIL BENEATH THE HEADLINE DATA THAT MATTERS AT 8:30? WE ALL EXPECT TO SEE HEADLINE [00:37:17] Speaker 12: INFLATION DECELERATE IN JULY. AND OUR ESTIMATE IS A LITTLE MORE TO THE DOWNSIDE THAN THE CONSENSUS. BUT IT'S REALLY ABOUT CORE INFLATION AND WE EXPECT TO SEE AN ACCELERATION. IT'S ALL ABOUT RENT AND WHAT WE SEE IS A PERSISTENT PUSH THAT WE'RE GOING TO GET OVER THE NEXT SEVERAL MONTHS. OUR ESTIMATES SHOW THAT RENT SHELTER INFLATION IS ABOUT 5.5%. IT'S GOING TO PEAK AT 6.5%. SO THAT'S GOING TO KEEP THE PRESSURE ON CORE CPI OVER THE COMING MONTHS. REALLY, IT KEEPS THE FED IN PLAY ON A VERY AGGRESSIVE POLICY STANCE. OUR ESTIMATION, OUR JUDGMENT IS THAT WE'RE GOING TO SEE A 75 BASIS POINT RATE HIKE. IF WE SEE A VERY NEGATIVE SURPRISE TODAY, EVERYTHING IS ON THE TABLE. A FULL PERCENTAGE POINT AS WELL. WE CAN SEE 125 BASIS POINTS THROUGH THE REST OF THE YEAR. [00:38:13] Speaker 4: WHAT YOU JUST SAID THERE IS OUTRAGEOUS. YOU'RE SUGGESTING IF THE INFLATION REPORT GOES THE WRONG WAY, WE MAY BE JAWBONING 100 BASIS POINTS IN THE 9:00 HOUR [00:38:22] Speaker 12: THIS MORNING? THIS IS EXACTLY WHAT WE THINK. ALL OPTIONS SHOULD BE ON THE TABLE. IF THE FED IS EXPECTING TO BRING INFLATION BACK DOWN TO 2%, GROWTH IS SECONDARY, INFLATION IS IN FOCUS. IT REALLY ALLOWS THEM, IT GIVES THEM THE LIEWAY, GIVES THEM THE RUNWAY TO TAKE ACTION TO BRING INFLATION DOWN. THIS IS THE WAY THEY ARE GOING TO DO IT. BASE CASE IS 75 BASIS POINTS, BUT LOOK OUT FOR A NEGATIVE [00:38:51] Speaker 5: SURPRISE ON INFLATION. YOU SAID YOU'RE A LITTLE BIT OUT OF CONSENSUS. TO PUT IT INTO PERSPECTIVE, YOUR 8.5% HEADLINE PROJECTION IS THE LOWEST AMONG THE PROJECTIONS THAT WE TRACK HERE AT BLOOMBERG AMONG ECONOMISTS. WHAT ARE YOU SEEING IN TERMS OF THE DECELERATING FACTORS THAT OTHERS PERHAPS ARE UNDERESTIMATING? [00:39:08] Speaker 12: IT'S JUST THE ENERGY COMPONENT, RIGHT? WHAT WE SAW IN GASOLINE PRICES, WHAT WE SAW IN SEASONLY ADJUSTED PRICES, WHAT WE LOOK AT, WE THINK THERE IS MORE DOWNSIDE RISK FROM THAT TO THE ENERGY COMPONENT. AND THAT JUST MEANS THAT WE HAVE A FLAT READING MONTH ON MONTH THAT BRINGS THE YEAR ON YEAR DOWN TO 8.5 RATHER THAN 8.7. 8.5, 8.7 REALLY DOESN'T MATTER, BECAUSE AT THE END OF THE DAY, AN EIGHT HANDLE ON INFLATION, HEADLINE INFLATION IS UNACCEPTABLE. WHAT WE EXPECT TO SEE IS MOVING FROM A 5.9 TO A 6.2. THESE ARE JUST NOT NUMBERS THAT ARE MOVING IN THE DIRECTION THAT THE FED WANTS TO SEE. AND REALLY, YOU KNOW, KEEP TRACK ON KEEPING INFLATION OR BRINGING INFLATION BACK DOWN TO TARGET AND KEEPING INFLATION EXPECTATIONS ANCHORED. THIS IS WHAT THEY NEED TO DO. [00:39:54] Speaker 5: ONE FEATURE OF INFLATION THAT IS STICKY IS A MOVING TARGET, BASICALLY THAT THE AREAS OF INFLATION KEEP SHIFTING, WHICH IS EXACTLY WHAT WE HAVE SEEN OVER THE PAST YEAR OR SO. HOW STICKY ARE SOME OF THE INCREASES THAT WE ARE SEEING IN RENTS, IN MEDICAL COSTS, SOME OF THESE OTHER AREAS OUTSIDE OF GAS, OUTSIDE OF OIL, OUTSIDE OF FOOD? [00:40:18] Speaker 12: THIS IS A VERY GOOD POINT. THIS IS WHAT WE ARE LOOKING AT. WE ARE LOOKING AT MEDICAL CARE INFLATION AND WE ARE LOOKING AT SHELTER IN PARTICULAR RENTS BECAUSE THEY HAVE SUCH A SUBSTANTIAL WEIGHT IN THE INDEX. I DON'T THINK SHELTER IS GOING TO BE A MAJOR FACTOR. IF WE ZERO OUT INFLATION AND WE KEEP SERVICES INFLATION ACCELERATING, WE ARE STILL GOING TO HAVE INFLATION, CORE INFLATION THAT WILL BE WELL ABOVE TARGET OVER THE NEXT FEW MONTHS. THIS IS GOING TO BE STICKY. IT IS GOING TO HAVE A LAGGED EFFECT. THE FED ITSELF DOESN'T EXPECT PCE INFLATION TO GO BACK TO 2% BY THE END OF THE YEAR. WE NEED TO MOVE IN THE RIGHT DIRECTION. RIGHT NOW WE ARE NOT. WE ARE GOING TO SEE HEADLINE INFLATION DECELERATE. WE EXPECT TO SEE CORE CPI ACCELERATE. [00:41:06] Speaker 6: THAT IS NOT WHAT THE FED WANTS TO SEE. THE FED IS ACTING TO REBALANCE THE LABOR MARKET. THERE IS A WAGE COMPONENT TO THAT. TOM WAS BRINGING UP EARLIER THE 10.8% JUMP WE SAW IN UNIT LABOR COST IN THE SECOND QUARTER AND DATA YESTERDAY. [00:41:20] Speaker 12: HOW CLOSE ARE WE TO THE EDGE OF A WAGE PRICE SPIRAL? IT IS DIFFICULT TO ASSESS RIGHT NOW. IF THE FED IS ACTUALLY ACTING TO REBALANCE THE LABOR MARKET, WE ARE NOT SEEING IT IN THE LABOR MARKET DATA RIGHT NOW. BUT WHAT WE ARE SEEING IN THE TIME LEAD FIGURES, WHICH IS THE JOBLESS CLAIMS NUMBERS, THAT WE ARE SEEING AN ADJUSTMENT IN THE LABOR MARKET. SO I AM NOT SURE THAT WE ARE IN A WAGE PRICE SPIRAL RIGHT NOW. WE DON'T REALLY SEE IT. BUT THIS IS SOMETHING WE ARE WATCHING VERY CLOSELY. BECAUSE LIKE YOU SAID, UNIT LABOR CLASS SURGING, ECI AT ALL-TIME HIGHS AND AVERAGE EARNINGS MOVING IN THE WRONG DIRECTION. WE ARE JUST NOT SEEING THE DECERERATION THAT WE WANT TO SEE. [00:42:01] Speaker 6: SO, IN YOUR BEST ESTIMATE, WHAT LEVEL OF UNEMPLOYMENT ARE WE GOING TO BE AT WHEN WE SEE INFLATION BACK DOWN NEAR 2%? [00:42:08] Speaker 12: IT IS REALLY DIFFICULT TO ASSESS THAT BECAUSE IF YOU LOOK AT WHAT THE FED IS SAYING, THEY ARE SAYING MAYBE THE SITUATION IS DIFFERENT, MAYBE WE CAN BRING DEMAND DOWN WITHOUT REALLY CAUSING A BIG JUMP IN UNEMPLOYMENT. WHAT WE ARE SEEING IS WE ARE SEEING A DECLINE IN OPENINGS. WE ARE ALSO SEEING A DECLINE IN HIRING. WE CAN SEE A REBALANCING WITHOUT BRINGING THE UNEMPLOYMENT RATE TOO MUCH. IT IS OUR EXPECTATION THAT THE UNEMPLOYMENT RATE IS GOING TO MOVE ABOVE 4%. THAT IS ALL THE FED'S [00:42:41] Speaker 4: EXPECTATION. THERE IS A WIDE RANGE OF CERTAINTY AROUND THAT FORECAST. WE ARE SEEING A LITTLE BASIS POINT. WE ARE SEEING INFLATION WITH HIGH FREQUENCY ECONOMICS. SOMETHING WE HAVEN'T TALKED ENOUGH ABOUT, WHICH IS OOPS, HIGHER STATISTICS, GREATER INFLATION. [00:43:02] Speaker 5: THE SHOCK AT 8:31 THIS MORNING OF FRAMING 100 BASIS POINTS, I AM NOT PREPARED FOR THAT. THAT IS A LITTLE BASIS POINT. WE HAVE A LITTLE BIT OF THIS CONVERSATION. THE PARLOR GAME, I KNOW YOU LOVE IT SO MUCH. WE GET THE FORWARD GUIDANCE THAT ISN'T FORWARD GUIDANCE THAT IS JUST YAMMERING LATER TODAY FROM THE FED MEMBERS, INCLUDING THE BASIS POINT TO THE FED MEMBERS. WE CAN REALLY GLEAN ANY INSIGHT FROM THEM OTHER THAN FED SHARE JAY POWELL HIMSELF, WHO DOES SEEM TO, I DON'T WANT TO SAY LEAN [00:43:31] Speaker 4: DEVISH, BUT MAYBE PERHAPS GUT CHECK A LITTLE BIT MORE SEVERELY SOME OF THESE OTHER FED OFFICIALS. WE HAVE A LITTLE BIT MORE DEVICES. WE HAVE A HOPE AND A PRAYER IN APRIL OF 8.3. WE PULLED BACK. NO, 8.6, 9.1. THAT GETS ME TO WHERE LIZANNE SAUNDERS IS, WHICH IS LOOK AT [00:43:53] Speaker 6: SHELTER, LOOK AT RENT. THAT IS THE KEY NUMBER TODAY. IT IS AND ONE WE ARE GOING TO BE WATCHING VERY CAREFULLY. HAS INFLATION PEAKED OR WAS IT GOING TO BE LIKE INFLATION WAS TRANSITORY AND WE QUICKLY LEARNED IT WASN'T? [00:44:05] Speaker 4: IS IT GOING TO BE A LITTLE BIT MORE? IS IT GOING TO BE A LITTLE BIT MORE? THAT IS STILL A LONG WAY AWAY. THAT IS A REALLY INTERESTING QUESTION. THAT BEARS STUDY, THAT BEARS CONVERSATION. WE WILL DO THAT WITH DAVID STUBBS HERE. [00:44:24] Speaker ?: FUTURES UP 8, THE VIX, 22.34. THIS IS BLOOMBERG. [00:44:27] Speaker 1: STAY WITH US. THE FED IS OPEN-MINDED AS THE FED ALWAYS IS. WE ARE AT AN IMPORTANT INFLATION POINT IN THE INFLATION [00:44:42] Speaker 2: STORY. IF YOU LOOK AT THE 25% DECLINE EARLY IN THE YEAR, THAT WAS THE BAKING END OF A MILLE RECESSION. THE ECONOMY IS NOT OUT OF THE [00:44:53] Speaker 3: WOODS. THIS IS BLOOMBERG SURVEILLANCE [00:44:59] Speaker 4: INFLATION AND INFLATION. JONATHAN: GOOD MORNING, EVERYONE. JONATHAN FERRO, LISA BROWITZ AND TOM KEENE ON RADIO ON TELEVISION. A MOST HISTORIC WEDNESDAY ON INFLATION IN 90 MINUTES. [00:45:17] Speaker 5: LISA, LET'S GET TO THIS SO WE CAN GET TO DAVID STUBBS. THE ANSWER IS NOTHING ELSE MATTERS EXCEPT 8:30. LISA: THAT IS PRETTY MUCH TRUE. WE ARE LOOKING AT MARKETS AND BASICALLY INFLATION. WE ARE LOOKING AT THAT POINT. WE ARE LOOKING AT THAT POINT A MOMENT AGO. ARE WE TALKING ABOUT 50 BASIS POINTS OR 100 BASIS POINTS? [00:45:38] Speaker 4: WHAT IS THE DIFFERENTIAL IN THE FED TRAJECTORY AFTER THIS PRINT THAT WE GET AT 8:30? JONATHAN: MORE OPTIMISTIC TECH COMING UP IN MOMENTS WITH DAVID STUBBS [00:45:45] Speaker 6: OF JP MORGAN. KAILEY, YOUR OBSERVATION IF YOU LOOK AT THE RESEARCH OVERNIGHT. JONATHAN: WE HAVE A HOT INFLATION PRINT THAT RAISES EXPECTATIONS OF THE TERMINAL RATE. THE BANK OF AMERICA IS SAYING [00:45:56] Speaker 4: WE COULD GO AS LOW AS -85. HOW MUCH DEEPER CAN THE INVERSION GET? JONATHAN: IMPROVING THE BASIS POINTS ON THE EDGE OF VOLKER AS WELL. LET ME DO THE DATA CHECK RIGHT NOW SO WE CAN GET TO MR. STUBBS. THE VIX REALLY SHOWING THE RANGEBOUND 22.30. THE TWO-YEAR YIELD IS STUNNING 3.27%. THAT IS THE NUMBER TO WATCH AT 8:30 THIS MORNING, THE MARKET WATCH OFF OF WHAT WE SEE. OIL GIVES BACK OFF SOME PIPELINE NEWS OUT OF UKRAINE, OUT OF BASIS. THE DOLLAR CHURNS SLIGHTLY WEAKER AS WELL. WE NEED A BRIEFING. [00:46:38] Speaker 5: IT WILL BE KNEE DEEP IN THREE AND TEN YEAR AUCTIONS. IT WILL BE KNEE DEEP IN THE ONE STORY OF THE DAY, WHICH IS 8:30 A.M. WE GET U.S. TO LIE CPI. WE WILL BE TALKING ABOUT THE HEADLINE FIGURE, THE EXPECTATION BEING 8.7%. WE WILL BE TALKING ABOUT THE CORE FIGURE, EXPECTED TO COME IN AT A FASTER PACE THAN THE OTHER, THE NON-CORE ELEMENTS. I AM TALKING ABOUT REAL WAGES, WHICH IS GOING TO BE HAPPENING. WE'VE BEEN CONTINUING TO DECLINE AND ARE ABOUT NEGATIVE 4%. THIS IS THE DECLINE IN THE DISPOSABLE INCOME OF INDIVIDUALS AS THEY GO AROUND BASED [00:47:10] Speaker 4: ON HOW MUCH INFLATION IS TRIPPING WAGE CASE. THIS IS ABSOLUTELY THE MOST IMPORTANT CHARTUP. FOR THOSE OF YOU ON RADIO, ALL YOU NEED TO KNOW IS IT'S REALITY FOR 10 YEARS. AND THEN THERE IS SOME PANDEMIC [00:47:22] Speaker 5: DURATION OF PAIN IS REALLY ADDING UP. YOU ARE SEEING THAT ON THE MARGINS AT PLACES LIKE WALMART, AT PLACES LIKE TARGET. YOU ARE SEEING THAT WITH ANECDOTAL EVIDENCE OF PEOPLE TRANSITIONING AWAY FROM HIGHER COST ITEMS TO LOWER COST ONES. YOU ARE SEEING THE MOST NEGATIVE DECLINE. THANK YOU FOR JOINING US. THE ONE REPRIEVE HAS REALLY BEEN OIL AND YOU TALKED ABOUT THE DECLINE TODAY ON THE HEALS OF THE RESUMTION OF FLOWS. WE DO GET THE EIA LATEST OIL INVENTORY REPORT FOR THE UNITED STATES. HOW MUCH DOES THIS GIVE A SENSE OF PERHAPS A BUILD IN INVENTORIES OR LACK OF DEMAND? WELCOME. WE WILL TALK ABOUT THE REPORT. DON'T CALL IT FORWARD GUIDANCE. I DON'T KNOW WHAT YOU WANT TO CALL IT. WE WILL HEAR FROM CHICAGO FED PRESIDENT AT 11:00 A.M. AND MINNEAPOLIS FED PRESIDENT AT 2:00 P.M. ALONGSIDE BLACKROCK'S LARRY FINK AND LARRY SUMMERS, THE FORMER TREASURY SECRETARY WHO HAS BEEN OUTSPOKEN ABOUT HOW THIS FED HAS BEEN BEHIND THE CURVE, HOW THEY HAVEN'T BEEN EXACTLY UP FRONT WITH WHAT THEY ARE LOOKING FOR IN TERMS OF INFLATION, IN TERMS OF HOW HIGH EMPLOYMENT WILL HAVE TO [00:48:40] Speaker 4: PAY THE ECONOMY MIGHT HAVE TO SUFFER. LET'S DO THIS NOW. WE WILL GET TO THE INFLATION QUESTIONS WITH LISA AND KAILEY. RIGHT NOW, SOMEONE WHO GAVE ME MY ESSAY OF THE SUMMER 12 MONTHS AGO, DAVID STUBBS OUT OF LSE AND NEW SCHOOL OF SOCIAL TECHNOLOGY. HE JOINS US FROM J.P. MORGAN PRIVATE BANK. I WANT TO DO A SUGUE INTO INFLATION. BUT THE TECHNOLOGY OF THE MOMENT, WHICH DEFINES, AS YOU SAID LAST SUMMER, THE HAVES AND HAVE-NOTS OF THE AMERICAN ECONOMY, THEY ARE AFFECTED DIFFERENTLY BY INFLATION. THE TECHNOLOGY WINNERS ARE NOT AS [00:49:19] Speaker 13: INFLATION. IT IS A BIGGEST INFLATION. THAT HAS BEEN ONE OF THE KEY DRIVERS OF THE GROWTH IN WEALTH INEQUALITY, INCOME INEQUALITY IN THE U.S. AND MOST OF THE DEVELOPED WORLD, FOR SURE. CERTAINLY, WHEN YOU ARE FACED WITH SUCH A MAJOR INFLATION PUSH IN THE CORE NECESSITIES OF FOOD AND GASOLINE AND RENT THAT WE ARE SEEING, AND WE ARE GOING TO SEE AGAIN IN A SHORT [00:49:48] Speaker 4: INVESTMENT, AND WE ARE GOING TO SEE IT. WE ARE GOING TO SEE IT, AND WE ARE GOING TO SEE THAT IN THE [00:49:54] Speaker 5: DEVELOPED WORLD. YOU HAVE FOUR WEEKS LEFT IN THE SUMMER. I SAID TO JOYCE CHANG, BE SURE STUBS WRITES A DECENT THING ON TECHNOLOGY BEFORE THE END OF THE SUMMER. LISA? PERHAPS TECHNOLOGY, BUT ALSO GOLDILOCKS. WE ALL LOVE THAT STORY. YOU SEE, DAVID, THE POTENTIAL FOR A GOLDILOCKS TYPE EVENT IF YOU GET A MISS IN THE CPI PRINT. IF IT COMES IN LOWER THAN EXPECTATIONS, YOU COULD SEE A SURGE IN THE S&P. YOU CAN SEE THE INFLATION SURGE AND THE FED WILL START TO INCUR SOME PAIN. [00:50:24] Speaker 13: THIS IS A DISCUSSION OF MARKETS OVER THE SUMMER. THEY TEND TO BE THIN AND A LITTLE VOLATILE. THE MARKET IS DESPERATE FOR SOME KIND OF HARD EVIDENCE THAT THE INFLATION SURGE IS LESSENING. THE FED WON'T HAVE TO DO AS MUCH AS SOME PEOPLE FEAR. THE SOFT LANDING IS LIKELY. IF THAT IS THE MESSAGE FROM THE COMING CPI REPORT, ABSOLUTELY YOU COULD SEE RISK ASSETS RALLY VERY SIGNIFICANTLY TODAY AND PROBABLY BACK IT UP TOMORROW AS WELL, BUT THESE ARE SHORT-TERM MOVES FOR SURE. ULTIMATELY WE DO SEE A LOT OF DOWNSIDE IN THE EQUITY MARKET IF WE DO GET A RECESSION. AS YOUR PREVIOUS GUESTS HAVE BEEN DISCUSSING FOR THE LAST HOUR HOUR AND A HALF OR SO, THE MESSAGE FROM THE CPI REPORT IS PROBABLY GOING TO BE CORE STICKY INFLATION AROUND THINGS LIKE RENTS CONTINUING TO ACCELERATE EVEN AS HEADLINE PULLS BACK. WE ARE ENTERING A NEW PHASE IN THE INFLATION DEBATE, ONE WHERE KEY DRIVERS OF THE LAST NINE MONTHS OR SO AROUND FOOD AND ENERGY START TO REVERSE A LITTLE BIT, BUT ULTIMATELY THE FED FOCUSES ON CORE MORE THAN HEADLINE. THE MESSAGE FROM CORE IS STILL GOING TO BE WORRYING AND STILL GOING TO MEAN THE FED IS GOING TO DO A LOT MORE IN THE [00:51:30] Speaker 5: THREE MEETINGS THROUGHOUT THE REMAINER OF THIS YEAR. IS IT FUN TO BE A STRATEGIST RIGHT NOW AS YOU TRY TO GAME OUT ALL OF THE POTENTIAL AMBIGUITIES AND TRY TO COME UP WITH WHAT PEOPLE SHOULD DO WITH THEIR MONEY? [00:51:41] Speaker 13: IT IS ALWAYS FUN TO BE A STRATEGIST BECAUSE THERE IS ALWAYS A LOT OF INTERESTING THINGS GOING ON, BUT WE HAVE BEEN THROUGH A WHIRLWIND OF A CYCLE. WE SEE CLEAR EVIDENCE AT THE MOMENT OF LATE CYCLE BEHAVIOR. LOOK AT THE LACK OF LABOR SUPPLY GROWTH. LOOK AT THE ACCELERATION OF INFLATION AND WAGES. 12 MONTHS AGO, 18 MONTHS AGO, WE WERE TALKING ABOUT EARLY CYCLE CONDITIONS. WE ARE STILL IN THE SHADOW OF COVID AND IT IS THROWING ALL KINDS OF TRADITIONAL RELATIONSHIPS OUT THE WINDOW, MAKING IT VERY DIFFICULT FOR MARKET PARTICIPANTS, NOT JUST STRATEGISTS. [00:52:15] Speaker 6: WHICH IS MORE CONFOUNDING, THE EQUITY MARKET OR BOND MARKET? [00:52:19] Speaker 13: I THINK THE EQUITY MARKET RALLY HAS GONE A LITTLE FAR, FOR SURE. THERE ARE SO MANY ITEMS OF EVIDENCE THAT THE GLOBAL ECONOMY IS SLOWING RAPIDLY, THAT CORPORATE EARNINGS ARE GOING TO COME UNDER PRESSURE FROM MARGINS. THE MESSAGE FROM THE BOND MARKET MAKES A LOT OF SENSE, AND THAT IS THAT CENTRAL BANKS ARE GOING TO HAVE TO DO A LOT MORE, THAT THEY ARE CREDIBLE, THAT WE HAVE AN INFLATION TARGETING INDEPENDENT CENTRAL BANK FRAMEWORK THAT IS GOING TO DO WHAT IT IS DESIGNED TO DO, WHICH IS BRING INFLATION BACK DOWN TO TARGET, BUT IT IS GOING TO HAVE TO FLIRT WITH RECESSION AT THE VERY BEST OUTCOME TO DO SO. THAT IS WHY YOU HAVE THE VERY SIGNIFICANT CURVE INVERSION YOU HAVE BEEN DISCUSSING ABOUT. IT LOOKS SET FOR ME FOR THAT CURVE INVERSION TO GET EVEN LARGER AS YOU MOVE INTO THE FOURTH QUARTER, EVIDENCE OF SLOWDOWN CONTINUES TO STACK UP, AND YET CENTRAL BANKS HAVE TO CONTINUE TO HIGH RATES. [00:53:09] Speaker 6: THAT IS THE CAMP THAT BANK OF AMERICA IS IN AS WELL. OF COURSE, THE REASON THE CURVE IS INVERTING IS THAT WE HAVE SEEN THE SHORT END MOVE SUBSTANTIALLY HIGHER, AND WE ARE SEEING YIELDS COME IN AT THE LONG END, WHICH IN THEORY, DAVID, LOWER YIELDS SHOULD BE SOMEWHAT SUPPORTIVE OF EQUITIES, SPECIFICALLY THOSE THAT ARE IN THE GROWTH WHELM. IS THAT STILL A GOOD THING, IF THE REASON YIELDS ARE LOWER IS BECAUSE GROWTH IS SLOWING DOWN? [00:53:32] Speaker 13: I THINK MECHANICALLY, OF COURSE, INTEREST RATES HELP WITH THE DISCOUNT RATE AND ANYTHING THAT IS A GROWTH ASSET WITH THE EARNINGS THAT ARE WAY OUT INTO THE FUTURE GETS IMPACTED. CERTAINLY, WE HAVE SEEN GROWTH OUTPERFORM VALUE SINCE MID-MAY. TWO THINGS CAUSE THAT. ONE IS THAT YOU SAW JOBLESS CLAIMS START TO ARISE, AND THAT WAS THE FIRST SIGN THAT THE ECONOMY AND THE LABOR MARKET IS STARTING TO SHOW A FEW CRACKS AROUND THE EDGES. ALSO, YOU SAW THAT MOVE IN INTEREST RATES, AND THAT IS WHAT BOOSTED GROWTH. OF COURSE, IF THE INTEREST RATES KEEP GOING DOWN, IT IS PROBABLY NOT BECAUSE THE FED IS CREDIBLE AND GETTING A HANDLE PART OF THE ECONOMY SLIDING INTO A RECESSION, AND THAT [00:54:09] Speaker 4: SHOULDN'T BE GOOD FOR ANY PART OF THE EQUITY MARKET. LET'S GO TO THE GEOMETRY TAUGHT AT THE LONDON SCHOOL OF ECONOMICS ABOUT SMOOTH GLIDE PASS, AS THE GREAT PETER ORZEG PUTS IT. DO YOU PERCEIVE THE DECENT OF CORE INFLATION INTO 2023 IS A SMOOTH MEASURED GLIDE PATH, OR DO WE MOVE DOWN AND PAUSE? MOVE DOWN AND PAUSE. [00:54:31] Speaker 13: I THINK, FIRSTLY, WE ARE GOING TO CONTINUE TO GO UP IN NEXT YEAR IN THE COUNTRY IN THE COUNTRY IN THE COMING MONTHS. ABSOLUTELY, YOU WOULD LOVE TO THINK THAT WHEN WE GET TO THE FOURTH QUARTER, THE COURSE STARTS TO DECELERATE YEAR ON YEAR, AND THEN THAT GLIDE PASS IS REASONABLY SMOOTH. DRIVEN BY GOODS, DISINFLATION? DO YOU THINK THE FED INCLUDES RENTS IS THE REALLY WORRYING PART OF INFLATION RIGHT NOW AND THE FED NEEDS TO SEE THAT ROLL OVER. IT'S NOT GOING TO ROLL OVER FOR A GOOD FEW MONTHS YET, BUT IT SHOULD DO GOING INTO NEXT YEAR, AS YOUR QUESTION LAYS OUT. WHAT IS THE BIG DEBATE, AND QUITE SCARY IN SOME WAYS, YOU COULD GET INFLATION COMING DOWN THE FED NEXT YEAR AND STAY THERE. THAT'S THE ISSUE. THAT'S CERTAINLY A GOOD POSSIBILITY, AND THAT WOULD PREVENT CENTRAL BANKS AROUND THE WORLD FROM CUTTING, CUTTING NEXT SUMMER, CUTTING END OF THE YEAR, WHENEVER YOU WANT TO ASSUME THAT THEY WOULD BE ABLE TO CUT. [00:55:27] Speaker 4: I'M RUNNING OUT OF TIME, TO BE CLEAR, YOU ARE SAYING SERVICES, X ENERGY, X SHELTER IS THE SUBINDEX YOU ARE [00:55:35] Speaker 13: WATCHING. SERVICES AT X ENERGY IS ALMOST 50% OF CPI, SO THAT'S THE ONE THAT'S STRAIGHT AWAY. IF YOU HAVE A COUPLE OF THINGS, YOU WANT TO FOCUS ON SHELTER, ALSO THINGS LIKE HOSPITAL COSTS, SOMETIMES YOU TAKE THAT OUT TO GET A CORE MEASURE, BUT IF YOU START [00:55:51] Speaker 4: REMOVING TOO MANY THINGS, IT DOESN'T MAKE ANY SENSE. SERVICES AT X ENERGY IS WHAT I'M FOCUSED ON. DAVID STUBBS WITH JP MORGAN GIVING A FABULOUS BRIEF THIS MORNING ON INFLATION. EQUITY MARKETS WITH A LITTLE BIT OF A BOUNCE, I'M NOT GOING TO OVERSELL IT. YOU ARE GOING TO OVERSELL IT. [00:56:15] Speaker ?: THE NEXT HOUR, MICHAEL MCKEY WILL PREPARE YOU FOR THE [00:56:17] Speaker 8: INFLATION REPORT. KEEPING YOU UP TO DATE WITH NEWS FROM AROUND THE WORLD, I'M RITIKA GUPTA. WHAT'S BEEN CALLED THE MOST SCRUTINIZED ECONOMIC REPORT IN THE WORLD COMES OUT THIS WEEKEND? THIS IS A LITTLE BIT. THE CONSUMER PRICE INDEX PROBABLY INCREASED AT AN ANNUALIZED RATE OF 8.7% IN JULY. THAT IS DOWN FROM JUNE'S FIGURE. CHINA WILL BE QUESTIONED TODAY UNDER OATH ABOUT HIS DEALINGS AS A REAL ESTATE MOGUL. THE INVESTIGATION INVOLVES CLAIMS THAT THE TRUMP ORGANIZATION MISSTATED THE VALUE OF ITS PRIZED ASSETS FOR TAX REASONS. THAT COMES TWO DAYS AFTER FEDERAL INVESTIGATORS SEARCH THE FORMER PRESIDENT'S HOME IN FLORIDA. REPUBLICANS ECHOED THE ASSERTION THAT THE SEARCH HAPPENED ON THE INVOLVES CLAIMS. CHINA HAS ENDED THOSE UNPRECEDENTED MILITARY EXERCISES NEAR TAIWAN BUT IT SAYS IT PLANS TO CONDUCT REGULAR PATROLS IN THE REGION. THE CHINESE BEGAN THE DRILLS LAST WEEK AFTER U.S. HOUSE SPEAKER NANCY PELOSI DEFIED BEIJING AND VISITED TAIWAN. ELON MUSK HAS SOLD $6.9 BILLION OF STOCK IN TESLA, HIS BIGGEST SALE EVER. THE WORLD'S RICHEST PERSON SAYS HE WANTS TO AVOID A LAST-MINUTE LAST-MINUTE A LAST-MINUTE TO AVOID A LAST-MINUTE. IT'S A LAST-MINUTE. THE TALK COULD TAKE EFFECT AS SOON AS THE END OF NEXT YEAR. IT'S ESTIMATED THE CHARGE WOULD REDUCE TRAFFIC IN THE DISTRICT BY UP TO 9%. GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICK TAKE POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. [00:58:11] Speaker ?: THIS IS BLOOMBERG. THIS IS BLOOMBERG. [00:58:20] Speaker 14: YOU'VE GOT FOOD AND GAS PRICES COMING DOWN. YOU'VE GOT BIDEN HAVING A PRETTY DARN GOOD SUMMER. SO IT'S POSSIBLE THAT MAYBE THE DEMOCRATS' LOSSES WILL ONLY BE THE DEMOCRATS' LOSSES, MAYBE THE DEMOCRATS WILL KEEP THE SENATE. BUT I CAN'T SEE THE HOUSE [00:58:42] Speaker 4: STAYING DEMOCRATIC. I THINK THE HOUSE WILL FLIP. YOU'VE GOT TO BE THE DEMOCRATS' LOSSES. THIS IS THE SHOCK OF WHAT WE SAW IN THE SEARCH OF PRESIDENT TRUMP'S RESIDENTS IN FLORIDA. WE DISCUSSED THAT IN THE LAST HOUR WITH EMILY WILKINS. THERE'S THE UPPER, THE LOWER PRONINSULA OF MICHIGAN. AND OFF TO THE WEST, I BELIEVE, LONELY AND COLD, IS WISCONSIN. WE GET A BRIEF FROM EMILY WILKINS OF WHAT WE LEARNED THE FIRST TUESDAY OF THIS WEEK WHERE WE HAD ELECTIONS. EMILY, WHAT DID WE LEARN IN WISCONSIN? ALWAYS AN INTERESTING TWISTED STATE. [00:59:18] Speaker 10: WISCONSIN IS REALLY GOING TO BE ONE OF THE STATES TO WATCH. IT IS GOING TO HELP DETERMINE WHETHER OR NOT DEMOCRATS WIND UP KEEPING THE SENATE OR NOT. YOU SAW DEMOCRAT MANDELA BARNES WIN THE DEMOCRATIC NOMINEE. THAT WAS KIND OF EXPECTED. YOU SAW A LOT OF OTHER DEMOCRATS WHO ARE RUNNING DROP OUT AND ENDORSED HIM IN RECENT WEEKS. HE'S GOING TO BE UP AGAINST RON JOHNSON, THE CURRENT REPUBLICAN SENATOR FROM WISCONSIN. HE HAS CAUSED A GOOD AMOUNT OF CONTROVERSY IN RECENT YEARS WITH HIS REMARKS ON COVID-19. HE'S ALSO VERY MUCH LOYAL TO TRUMP AND HAS SORT OF BEEN SEEN AS HAVING VERY CLOSE TIES WITH THE FORMER PRESIDENT. WISCONSIN, THOUGH, IT'S AN INTERESTING STATE. IT IS A SWING STATE. IT'S A STATE THAT HAD ELECTED A DEMOCRATIC GOVERNOR. BUT AT THE SAME POINT, YOU'VE SEEN A LOT OF REPUBLICANS ALSO BE ELECTED AT THAT TIME. SO I THINK IT'S GOING TO BE ONE OF THE ONES WHERE WE'RE GOING TO BE SEEING A LOT OF MONEY SPENT, A LOT OF TIME SPENT FROM NOW UNTIL NOVEMBER. [01:00:10] Speaker 4: I AGREE WITH THE SWING STATEDNESS OF IT. AFTER THE EVENTS OF THE LAST 24 HOURS, HOW DOES THAT AFFECT SWING STATE POLITICS? DOES PRESIDENT TRUMP SURGE BECAUSE OF REPUBLICAN OUTRAGE OVER THESE SEARCHES? [01:00:26] Speaker 10: TO A CERTAIN EXTENT, YES. I THINK GREG VALLIER REALLY DID AN EXCELLENT JOB LAYING THIS OUT IN HIS NEWSLETTER, THAT TO A CERTAIN EXTENT, WHAT HAPPENED YESTERDAY WAS A BIT OF A LIFELINE FOR TRUMP. IT PUT HIM BACK ON THE FRONT PAGE OF THE HEADLINES. THE SEARCH AT MAR-A-LAGO REALLY UNITED A LOT OF THE REPUBLICANS BEHIND HIM, INCLUDING A LOT OF FOLKS WHO WERE CONSIDERING CHALLENGING HIM FOR THE 2024 REPUBLICAN NOMINEE. AND SO TRUMP IS REALLY HAVING A BOOST RIGHT NOW IN THE SUPPORT THAT HE'S SEEN AFTER THIS SEARCH, AND THAT COULD REALLY TRANSLATE TO SOME MORE STRENGTH FOR HIM AND FOR HIS BRAND. [01:01:02] Speaker 5: BUT, EMILY, THERE'S BEEN A QUESTION ABOUT HOW REPUBLICANS WILL HANDLE THIS, AND PRETTY MUCH ACROSS THE BOARD, THEY'VE HAD THE SAME KIND OF MESSAGE, WHICH IS QUESTIONING THE VALIDITY OF THIS TYPE OF SEARCH. IS IT HAVING THE SAME SORT OF SUPPORT IN THE POPULIS? IN OTHER WORDS, FROM THE POLLS, IS THIS SUPPORTING SOME OF THE REPUBLICAN CANDIDATES THAT HAVE TRUMP'S BACKING? [01:01:21] Speaker 10: TO A CERTAIN EXTENT, IF CANDIDATES ARE TRYING THEMSELVES TO TRUMP, AND MANY OF THEM ARE, AND TRUMP'S BRAND GOES UP, THAT CAN CERTAINLY BE SEEN AS A POSITIVE THING FOR THEM. AT THE SAME POINT, I WOULD JUST REITERATE THAT A LOT OF THIS ELECTION, IT'S GOING TO BE DECIDED UPON THINGS LIKE INFLATION. THE CPI NUMBERS COMING OUT TODAY ARE GOING TO BE REALLY IMPORTANT AS TO WHAT'S GOING TO HAPPEN IN NOVEMBER. SAME THING WITH ABORTION RIGHTS, GIVEN THE OVERTURNING OF VERSUS WADE. THOSE ARE GOING TO BE THE BIG MOVERS AND SHAKERS IN THE NOVEMBER ELECTION. CERTAINLY A LOT OF FOLKS ARE WATCHING THE JANUARY 6TH. THEY ARE WATCHING WHAT'S HAPPENING WITH TRUMP. A NUMBER OF THEM MIGHT BE WATCHING THE DEPOSITION THAT'S GOING TO HAPPEN TODAY. BUT TO A CERTAIN EXTENT, THOSE AREN'T THINGS THAT THE AVERAGE AMERICAN THINKS ABOUT EVERY DAY, EVEN THOUGH THEY ARE VERY IMPORTANT STORIES WITHIN OUR NATION. [01:02:08] Speaker 4: IT'S ALREADY HAPPENED HERE. EMILY WILKINS ALWAYS GETS ME IN TROUBLE. NATHAN FROM MILWAUKEE TWEETS IN AND SAYS, TOM, YOU ARE DISPARAGING WISCONSIN. WE ARE NOT LONELY, WE ARE COLD, WHICH IS SOMETHING TO [01:02:24] Speaker 6: CONSIDER ABOUT MILWAUKEE AND POINTS WEST. IMPORTANT CLARIFICATION. I WOULD HAVE LIKED TO BE TURNED BY THE NEW YORK ATTORNEY GENERAL TODAY. HOW CONSEQUENTIAL IS THAT FOR THE FORMER PRESIDENT? [01:02:37] Speaker 10: WELL, WE KNEW THAT TRUMP WAS GOING TO HAVE TO SIT FOR THIS DEPOSITION. IT WAS SUPPOSED TO BE LAST MONTH. IT WAS MOVED FOLLOWING THE DEATH OF HIS FIRST WIFE. CERTAINLY, THIS IS AN INVESTIGATION THAT'S BEEN LONG GOING, BUT WE HAVE ALSO HEARD ATTORNEY GENERAL LETITIA JAMES SAY THAT THEY THINK THAT THEY ARE CLOSE, THAT THEY HAVE A LOT OF EVIDENCE, THAT THEY ARE READY TO ACTUALLY MOVE FROM THE INVESTIGATION TO THE POINT WHERE THERE ARE ACTUALLY GOING TO BE CHARGES INVOLVED. SO THAT'S GOING TO BE SOMETHING TO LOOK AT VERY CLOSELY. THERE ARE A LOT OF INVESTIGATIONS GOING ON RIGHT NOW. IT'S NOT QUITE CLEAR WHAT THE RESULT IS GOING TO BE FROM A [01:03:11] Speaker 4: NUMBER OF THEM. SO THIS SEEMS LIKE ONE THAT'S GOING TO BE HAPPENED. I THINK IT'S GOING TO BE HAPPENED. I THINK IT'S GOING TO BE HAPPENING TO BE HERE. IF THE REPUBLICANS ARE THE PARTY OUT OF POWER, DO THEY WANT HIGH INFLATION OR DO THEY [01:03:24] Speaker 10: WANT LOW INFLATION? WELL, I THINK IF YOU ASKED ANY REPUBLICAN LAWMAKER, THEY ARE GOING TO TELL YOU THAT, OF COURSE, THEY WOULD LIKE INFLATION TO BE LOW. BUT THIS IS AN EXCELLENT TALKING POINT FOR REPUBLICANS. I MEAN, THEY CAN REALLY SORT OF PIN THIS ON AVERAGE AMERICAN GOING TO THE GROCERY STORE, GOING TO THE GAS PUMP, SEEING HIGHER PRICES. IF YOU LOOK AT THE TV ADS, IF YOU LOOK AT THE MESSAGING, YOU ARE GOING TO HEAR ABOUT INFLATION, INFLATION, INFLATION FROM REPUBLICANS UNTIL NOW AND UNTIL NOVEMBER. OF COURSE, THE BIG QUESTION IS EXACTLY WHAT ARE REPUBLICANS GOING TO BE DOING TO ADDRESS INFLATION IF THEY WIN THE HOUSE AND POTENTIALLY THE SENATE? [01:03:57] Speaker 4: EMILY WILKINS, THANK YOU SO MUCH. GREATLY APPRECIATE THAT AS WELL. OF COURSE, LISA, MY METRIC HERE IS WHAT UNILEEVER IS DOING WITH MARMITE AND THEY ARE UP 11% IN PRICES PRETTY MUCH INFLATION. WE ARE LOOKING AT THE EARNINGS ACROSS THE BOARD AT UNILEEVER. [01:04:16] Speaker 5: MARMITE INFLATION IS A MAJOR CONCERN FOR YOUNG PHARO. [01:04:18] Speaker 4: I DON'T EAT THE STUFF. STICK WITH TAG. [01:04:23] Speaker 5: HE WALKED AWAY. HE ROLLED OVER AND PASSED OUT. WE ARE SEEING EARNINGS ACROSS THE BOARD THAT REVENUES ARE INCREASING, BUT IT IS BECAUSE OF INFLATION. COMPANIES CAN INCREASE THE PRICE. I WAS LOOKING AT WENDY'S, WENDY'S, YOU ARE NOT SEEING REAL GROWTH. YOU ARE SEEING INFLATION ADJUSTED ISSUES ACROSS THE BOARD TO YOUR MARMITE POINT. I'M LOOKING AT WENDY'S. I'M GLAD YOU BRING THIS UP, LISA. YOU ARE SEEING INFLATION ADJUSTED ISSUES ACROSS THE BOARD TO YOUR MARMITE POINT. I'M LOOKING AT WENDY'S. I'M GLAD YOU BRING THIS UP, LISA, BECAUSE I HAVE A NOUGHTING ACQUAINTANCE THIS [01:04:55] Speaker 4: SUMMER WITH WEDNESDAY'S. WEDNESDAY'S. I HAVE A NOUGHTING ACQUAINTANCE WITH WEDNESDAY'S. I HAVE A NOUGHTING ACQUAINTANCE WITH THAT, TOO. WE HAVE A NOUGHTING ACROSS THE BOARD. I HAVE A NOUGHTING ACROSS THE BOARD. THAT'S WHAT WE HAVE TO DO. STILL SEES FREE CASH FLOW OF 215 MILLION BECAUSE OF [01:05:20] Speaker 6: AFTER THOUGHTS, ENDLESS ORDERS ON SEAMLESS. THERE IT IS. IT'S IN THE REPORT. I'M GOING TO SHOW YOU TO TALK ABOUT THE INFLATIONARY PRESSURES AND SHIFTING CONSUMER BEHAVIOR. DID YOU SEE THE BANK OF AMERICA DATA OUT YESTERDAY ON CREDIT CARD SPENDING ACTUALLY SLOWING DOWN IN JULY? WHICH REALLY SPEAKS TO WHAT WE HAVE BEEN TALKING ABOUT. RENTS GOING UP. OTHER COSTS THAT PEOPLE ARE [01:05:41] Speaker 4: FACING GOING UP. THAT MAY MEAN LESS DISCRETIONARY SPENDING. LISA, I'M GLAD KAILEY BRINGS THIS UP. LISA, THIS IS THE BACK AND FORTH, WHETHER IT'S SOMEBODY LOOKING FOR QUIESCENT NUMBERS OR SOMEBODY LOOKING FOR QUIESCENT NUMBERS. [01:05:56] Speaker 5: THAT WAS STUNNING THAT WE COULD SEE NUMBERS GO UP. [01:05:58] Speaker 4: HOW MUCH DOES THE FED RESPOND TO ONE PRINT, ESPECIALLY WHEN [01:06:01] Speaker 5: IT COULD GET REVISED? I DON'T KNOW. [01:06:04] Speaker 4: PART OF THE INTEREST HERE. WE WILL HAVE NON-FORWARD GUIDANCE LATER TODAY. WE WILL HAVE TO SEE. WE ARE GOING TO BE DOING THIS AND, OF COURSE, WE ARE BRINGING FULL MARKET COVERAGE AFTER 8:30 AS WELL. [01:06:16] Speaker ?: FUTURES RIGHT NOW SET UP 11. STAY WITH US. THIS IS BLOOMBERG. WELCOME ALL OF YOU. JONATHAN: [01:06:27] Speaker 4: BLOOMBERG SURVEILLANCE, WE WELCOME ALL OF YOU. JOHN FERRO OFF TODAY. KAILEY LIONES IN WITH LISA BRANWITZ. I'M TOM KEENE. COMING UP EXACTLY ON ONE HOUR TO AN EXTREMELY ANTICIPATED FORWARD. WE WILL GET TO THAT WITH MARILYN WANTSON OF BLACKROCK IN A MOMENT. SOME GOOD GUESTS. LOOKING FORWARD TO TALKING TO MICHAEL MCKEE AT ABOUT 8:15, 8:16 TO DIVE INTO ALL THE DATA AND ALL THE MYSTERIES HE IS LOOKING AT AS WELL. THE MYSTERY IN THE DATA FRONT IS SIMPLE. THERE IS A GRIND TO FURTHER CURVE INVERSION. NEGATIVE 48 BASIS POINTS IS EXTRAORDINARY ON A TWO YEAR YIELD HIGHER AT 3.27%. LET'S LEAVE IT AT THAT AND LOOK AT INDIVIDUAL SECURITIES. HERE IS LISA. TOM, WE ARE ABOUT 91% DONE WITH THE EARNINGS SO FAR FOR THE [01:07:27] Speaker 5: S&P 500 IN TERMS OF THE NUMBER OF COMPANIES AND INDIVIDUAL STORIES ARE FASCINATING. LET'S TAKE A LOOK AT SOME OF THEM. ROBLOX, WE WERE TALKING ABOUT THAT YESTERDAY, HOW PEOPLE WERE USING FEWER VIDEO GAMES AND PARTICULAR KIDS WHO ACTUALLY HAVE OTHER THINGS TO DO. YOU ARE SEEING THIS ACROSS THE BOARD WITH ALL VIDEO GAME PRODUCERS. YOU ARE SEEING THOSE SHARES DOWN 15%. THOSE SHARES ARE ALREADY DOWN MORE THAN 50% HEADING INTO THIS SESSION FOR THE YEAR. THIS IS BECAUSE OF A DISAPPOINTMENT IN THE USERSHIP BECAUSE OF THE TREND THAT WE ARE TALKING ABOUT. TESLA SHARES, INTERESTING TO SEE THEM POPPING ON THE HEELS OF THE REPORT THAT ELON MUSK SOLD NEARLY $7 BILLION OF HIS STOCK. SO WHY ARE THE SHARES UP 1.3%? BASICALLY HIS ARGUMENT WAS HE WANTS TO GET AHEAD OF SOME SORT OF FIRE SALE THAT HE WOULD BE FORCED TO DO SHOULD HE BE AHEAD OF THE SHARES THAT HE WANTS TO DO. THE SHARES ARE LOWER BY TWITTER AS THEY DEAL WITH THE CONTRACT NEGOTIATIONS THERE. COINBASE CAME IN WITH HIS APPOINTMENT ON THE HEELS OF THE CRYPTO ASSET MELTDOWN OF EARLIER THIS YEAR. THOSE SHARES LOWER BY 5%. IN OTHER STORIES THAT I KNOW, TOM, YOU ARE VERY KEYED INTO, THE RIGHTS TO BROADCAST THE BIG 10, THE FOOTBALL GAMES OF THE BIG COLLEGES. THAT IS WHAT WE ARE SEEING IN THE FOOTBALL GAMES. DISNEY REPORTS EARNINGS AFTER THE BELL, THOSE SHARES UP 9/10%. THEIR ESPN DROPPED THE RIGHTS TO STREAM BIG 10. PARAMOUNT, GLOBAL OR CBS PARTNERED WITH NBC TO PICK THOSE COMPANIES TO GAIN GIVEN THE CABLE DEPENDS SO MUCH ON SPORTS FOR THEIR SURVIVAL. I'M VERY CURIOUS FOR WHAT DISNEY SAYS ABOUT WHY THEY WERE OKAY DROPPING THAT IN THE EARNINGS CALL AFTER THE BELL. WENDY'S, WE WERE TALKING ABOUT DOWN 2.3% AFTER REPORTING REVENUES THAT DISAPPOINTED AS WELL AS SAME STORE SALES IN THE UNITED STATES ALSO DISAPPOINTED EVEN THOUGH ON AN ADJUSTED EPS STANDPOINT, THEY DID BEAT. TOM, REALLY HIGHLIGHTING HOW PEOPLE ARE LOOKING UNDER THE HOOD FOR LONGER-TERM RESILIENCE IN ORDER TO FIGURE OUT WHERE TO GO. [01:09:25] Speaker 4: THANKS SO MUCH. ON INFLATION, LESS THAN ONE HOUR AWAY TO THIS HISTORIC REPORT. MARILYN WATSON, HEAD OF GLOBAL FUNDAMENTAL FIXED INCOME STRATEGY AT BLACKROCK. SHE DID NOT STUDY WITH THOMAS MELTIS AND I DON'T EVEN THINK SHE STUDIED WITH ALFRED MARSHALL BUT ALONG THE WAY SHE FIGURED OUT THE DYNAMICS OF PRICE CHANGE WITHIN OUR ECONOMY. [01:09:54] Speaker 15: HOW DO YOU LOOK AT THIS INFLATION REPORT THIS MORNING? I THINK CERTAINLY LOOKING AT THIS INFLATION REPORT AND THE FOLLOWING ONE AS WELL BEFORE WE GET THE NEXT FED DECISION IN THE END OF SEPTEMBER I THINK WILL BE CRUCIAL. I THINK PARTICULARLY WITH THE MIDTERMS COMING UP AS WELL. WHEN YOU LOOK AT THE CORE CPI, WE EXPECT IT TO REMAIN PRETTY STRONG, NOT AS HIGH AS 0.7% MONTH FOR MONTH IN THE PREVIOUS MONTH BUT NEVERLESS WE THINK IT WILL REMAIN PRETTY HIGH, MAYBE 0.5. IT WILL BE RUNNING ANNUALIZED CASES AT OVER 6%. THAT IS INCREDIBLY HIGH. I THINK ALSO WHEN YOU LOOK AT THE DATA TODAY, WE COULD SEE IN TERMS OF THE HEADLINE DATA, IT COULD COME DOWN A LITTLE BIT IN TERMS OF A LITTLE BIT OF A DROP IN GASOLINE PRICES. BUT WHEN YOU LOOK AT THE OVERALL ECONOMY AND YOU LOOK AT THE ECONOMIC ACTIVITY, WE ARE STARTING TO SEE THE IMPACT OF INFLATION REALLY COMING THROUGH IN TERMS OF EXPENDITURE AND OTHER FORMS OF ECONOMIC ACTIVITY AS WELL. WE ARE SEEING A DECLINE AS WE SAW IN THE JOBS OPENING, WHICH STILL REMAINING ELEVATED. BUT YOU KNOW, EMPIRES DO HAVE FEWER VACANCIES OUT THERE AS WELL. SO I THINK IT HAS A MASSIVELY FUNDAMENTAL IMPACT ON THE ECONOMY WHEN YOU LOOK AT THE PROSPECT FOR THE FED, WHEN YOU LOOK AT THE AMOUNT OF MONEY THAT HOUSEHOLDS HAVE IN THEIR POCKETS, WHEN YOU LOOK AT BUSINESSES, YOU KNOW, INVESTMENT, I THINK ACROSS THE [01:11:12] Speaker 4: TREATMENT, IF YOU LOOK AT THE TIMELINE HERE, AND LET'S GO BEYOND THE HYSTERIA OF ONE REPORT THAT WE ARE GOING TO SEE HERE IN 50 MINUTES. IF YOU TAKE A BLACKROCK TIMELINE OUT INTO 2023, DO YOU JUST ASSUME PRICE DOWN, YIELD UP FOR FIXED INCOME IF INFLATION DOESN'T GET BACK TO A 2% LEVEL? [01:11:35] Speaker 15: SO WE CERTAINLY THINK THAT INFLATION WILL START TO DECLINE AND CERTAINLY WILL SOFTEN FROM HERE, GIVEN BASE EFFECTS AND A NUMBER OF OTHER ISSUES. HOWEVER, THERE ARE A NUMBER OF FACTORS IN PLAY THAT I THINK ARE KEY, AND THOSE ARE BOTH SUPPLY AND DEMAND. SO IF YOU LOOK AT ENERGY, YOU LOOK AT THE ONGOING ISSUES, OBVIOUSLY WITH RUSSIA INVADING UKRAINE, WITH THAT, IF YOU LOOK AT FOOD, IF YOU LOOK AT THE FRICTION STILL IN SOME SUPPLY OF GOODS, WHEN YOU LOOK AT MAYBE POTENTIALLY FURTHER LOCKDOWNS IN CHINA, THERE ARE A WHOLE RANGE OF ISSUES THAT MAY SERVE TO KEEP INFLATION MORE UNCERTAIN THAN LIKELY. AND I THINK ALSO THAT WILL BE ONE OF THE KEY THINGS THAT WE LOOK AT WHEN WE SEE JACKSON HOLE LATER THIS MONTH WILL BE TO SEE WHAT THE WORLD'S MAJOR CENTRAL BANKERS SAY. [01:12:18] Speaker 4: WHAT DOES IT DO? WHAT IS YOUR BET ON PRICE OF FIXED INCOME PAPER? I THINK IT IS A MAJOR, MAJOR MYSTERY HERE IF PRICE CAN GET A BID IN FIXED INCOME. [01:12:30] Speaker 15: YEAH, SO I THINK IN TERMS OF FIXED INCOME, THE MARKET HERE IS PRICING IN MUCH MORE OF A NEGATIVE OUTLOOK THAN THE EQUITY MARKET IS FOR SURE. AND THAT IS WHEN YOU SEE THE INVERSION IN THE CURVE THAT YOU CAN SEE AT THE MOMENT. THAT'S BEING PRICED IN. I THINK AT THE MOMENT WE EXPECT THE YIELDS TO REMAIN MAYBE IN A SORT OF RANGE GOING THROUGH TO SEPTEMBER. BUT I THINK GOING FORWARD THERE IS A BID FOR FIXED INCOME BECAUSE NOW WHEN YOU LOOK AT OTHER ASSET CLASSES LIKE FURTHER DOWN THE SPECTRUM, NOT ONLY IN INVESTMENT GRADE BUT IN HIGH YIELD, YOU CAN REALLY START TO SEE SOME INCREDIBLY ATTRACTIVE VALUATIONS IN FIXED INCOME. AND I THINK YOU ARE STARTING TO SEE A BID THERE FOR THOSE THAT YOU HAVEN'T SEEN FOR A VERY, VERY LONG TIME. I THINK IN TERMS OF PRICING, I THINK THE PRICES WILL REMAIN SUPPORTED BY END INVESTORS, BY PENSION FUNDS, INSURANCE COMPANIES, AND ANY INVESTORS WHO NEED THE YIELD. BUT WITH COGNIZANT THAT THERE IS A LOT OF UNCERTAINTY AROUND THE ECONOMY GOING FORWARD. [01:13:28] Speaker 5: MARILYN, HOW MUCH CONVICTION DO YOU HAVE? HOW MUCH CONVICTION DOES THE BLACKROCK OF YOU HAVE IN TERMS OF PILING IN ON TOP OF THE TRADE GIVEN THE SUPPORT YOU SEE FOR THESE PRICING? [01:13:38] Speaker 15: SO, I MEAN, WE ARE STILL RELATIVELY CAUTIOUS GIVEN THE ULTIMATE OUTLOOK AND TRAJECTORY FOR THE ECONOMY, BUT WE EXPECT IT TO REMAIN RELATIVELY ROBUST FOR THE REST OF THIS YEAR. WE ALSO EXPECT INFLATION TO SOFTEN, AS I MENTIONED, BUT STILL TO REMAIN ELEVATED AND FAR ABOVE THE 2% TARGET. WE DO HAVE A DECENT AMOUNT OF CONVICTION THAT IF YOU CAN FIND HIGH QUALITY ASSETS THAT DO HAVE A VERY ATTRACTIVE YIELD, AND WE ARE STARTING TO FIND MORE AND MORE OF THOSE, WHEN YOU CAN REALLY SEE THOSE ASSETS FROM A BOTTOM-UP PERSPECTIVE, THEN WE DO HAVE SOME PRETTY STRONG CONVICTION THAT WE ARE SEEING SOME VERY ATTRACTIVE ASSETS IN THE FIXED INCOME SPACE RIGHT NOW. I CAN IMAGINE BASED ON [01:14:18] Speaker 5: THE ABSOLUTE YIELDS BEING A LOT HIGHER, BUT WHAT ARE YOU LOOKING [01:14:22] Speaker 15: FOR, MARILYN, BEFORE YOU GO ALL IN? WE ARE LOOKING AT THE BALANCE SHEETS, WE ARE LOOKING AT CASH FLOW, WE ARE LOOKING AT HOW ROBUST DIFFERENT CORPORATES AND ISSUES ARE, PARTICULARLY AS WE DO SEE THE SLOWDOWN IN THE ECONOMY, I THINK THAT IS CRUCIALLY IMPORTANT. WE ARE ALSO LOOKING AT IN TERMS OF LEVERAGE, THINGS LIKE THAT, THOSE ARE IMPORTANT. I THINK ALSO LIQUIDITY IS INCREDIBLY IMPORTANT. FOR US TO INVEST IN BONDS, WE REALLY NEED TO DO A LOT OF ANALYSIS AND REALLY UNDERSTAND EXACTLY HOW LIQUID A BOND IS, THE PRICE WE GO IN AT, IF SOMETHING HAPPENS IN THE MARKET, IF THERE IS A SPIKE IN EITHER DIRECTION, IF YOU WANT TO CHANGE OUR POSITIONING QUICKLY, WHERE WILL THE LIQUIDITY BE THEN AND WHERE WILL THE PRICE BE THEN? I THINK THERE ARE A RANGE OF FACTORS THAT WE NEED TO TAKE INTO ACCOUNT, BUT I SAY WE DO HAVE A LOT MORE CONFIDENCE NOW IN TERMS OF THE DEPTH OF THE MARKET AND THE YIELD THAT WE CAN GET, AND IT IS REALLY NOW FOCUSING ON A BOTTOM-UP PERSPECTIVE ON THE QUALITY, THE LIQUIDITY, AND THE BALANCE SHEETS OF THE COMPANY. LISA: [01:15:22] Speaker 6: FINALLY, WE WERE SPEAKING WITH GREG PETERS OF PEGEM YESTERDAY WHO SAID SPREADS ARE NOT YET ATTRACTIVE ENOUGH IN CREDIT FOR ME TO BE INTERESTED. I'M JUST LOOKING AT HIGH YIELD RIGHT NOW, 432 BASIS POINTS NORTH OF TREASURIES. THEY HAVE COME IN SUBSTANTIALLY JUST IN THE LAST MONTH AND A HALF. HOW MUCH DO YOU THINK THOSE COULD ACTUALLY WIDEN OUT? [01:15:38] Speaker 15: YES, THEY HAVE COME IN CONSIDERABLY, AND I THINK WHEN YOU LOOK AT WHAT THE MARKET IS PRICING IN TERMS OF THE DEFAULT RATE AND OTHER ISSUES, THEN I THINK WE ARE IN A PRETTY BENIGN ENVIRONMENT RIGHT NOW. I THINK YOU COULD SEE SPREADS WIDEN A LITTLE BIT WHEN YOU DO START TO SEE A LITTLE BIT MORE DISPERSION. I THINK THE NEXT COUPLE OF MONTHS ARE TRICKY BECAUSE IT'S THE SUMMER TRADING MONTHS WITH AUGUST, THEN WE HAVE THE FED IN SEPTEMBER, AND WE WILL SEE A LOT MORE KEY DATA COMING THROUGH THAT WILL REALLY I THINK HELP US TO GIVE A MUCH STRONGER SIGNAL ON THE FURTHER TRAJECTORY OF INTEREST RATES, INFLATION, AND ALSO THE PATH OF GROWTH AND THE LABOR MARKET AS WELL. SO I THINK WHEN WE GET PAST THE SUMMER, WE COULD START TO SEE MORE VOLATILITY THEN AS WE REALLY START TO UNDERSTAND EXACTLY THE TRAJECTORY OF THE ECONOMY, AND FROM THERE WE COULD START TO SEE MAYBE SPREADS [01:16:30] Speaker 4: WIDENING A LITTLE BIT DEPENDING ON THE DATA SET. THAT IS A VERY EXCELLENT INSIGHT FOR MARYLAND THAT WE HAVE GOT TO GET PAST THE SUMMER. IN SERIES AFTER SERIES, LISA, THAT I BRING UP ON THE BLOOMBERG, WE HAVE TO REMIND OURSELVES IT HASN'T TURNED AROUND YET. THESE ARE VECTORS MOVING UPWARDS, AND THEY CONTINUE TO MOVE UPWARDS. [01:16:52] Speaker 5: THERE IS A QUESTION AS CHRIS VARONE SAID, PEAK INFLATION IS JUST MATH, BUT WE DON'T EVEN KNOW IF WE ARE GOING TO GET THAT. NO ONE IS PROJECTING FOR INFLATION TO INCREASE FROM 9.1%. BUT WHAT IF YOU GET AN INCREASE IN CORE INFLATION? WHAT IF YOU DON'T GET ANY DECLINE AT ALL? WHAT DOES THE MARKET DO WITH THAT? WE HAVEN'T SEEN IT TO YOUR POINT, TOM, AND I THINK THAT IS [01:17:11] Speaker 4: COMING LARGE OVER A VERY LIQUID AND UNCERTAIN SUMMER. IT'S GOING TO BE INTERESTING TO SEE. RIGHT NOW, A LITTLE BID TO THE EQUITY MARKETS, FEATURES UP 10, DOW FEATURES UP 62 AS WELL. KAILEY, AS I LOOK AT INFLATION, AGAIN, WE GO TO THE POLITICAL IMPERATIVE, BRIAN DEESE, I BELIEVE, WITH LISA IN THE 9:00 HOUR, WE WILL BRING THAT TO YOU ON RADIO AND TELEVISION. KAILEY, IT'S GOING TO BE INTERESTING TO SEE, AS WE ARE MYSTIFIED BY WHERE WE ARE, THE WHITE HOUSE HAS TO BE MYSTIFIED [01:17:38] Speaker 6: BY WHERE WE ARE. WE ARE NOT GOING TO BE MYSTIFIED BY WHERE WE ARE. SOMETHING TELLS ME, TOM, THAT THE PRESIDENT IS GOING TO POINT [01:17:46] Speaker 4: AMERICANS TO THE PRICE AT THE GAS PUMP AND SAY, LOOK, IT'S COMING DOWN. JULIAN LEE, WE WILL SPEAK TO HIM ABOUT OIL, GASOLINE, AND DR. LEE'S PETREL AS WELL. THEN WE WILL GET BACK ON THE INFLATION SCRIPT. MICHAEL MCKEE WITH A BRIEF BEFORE THAT REPORT IN 45 MINUTES. [01:18:07] Speaker 8: STAY WITH US. THIS IS BLOOMBERG. I'M RITIKA GUPTA. FORMER PRESIDENT TRUMP HAS LEGAL ISSUES ON TWO FRONTS. HE SAYS THAT TODAY HE WILL TESTIFY UNDER OATH IN A NEW YORK INVESTIGATION INVOLVING THE VALUE OF HIS REAL ESTATE HOLDINGS. THAT COMES TWO DAYS AFTER FEDERAL INVESTIGATORS SEARCHED THE FORMER PRESIDENT'S HOME IN FLORIDA. HE WAS POLITICALLY POLITICALLY MOTIVATED. THE LARGEST OIL REFINER IN HUNGARY SAYS IT HAS RESOLVED A DISPUTE THAT LED TO A HALT IN OIL FLOWS TO CENTRAL EUROPE. EUROPEAN SANCTIONS HAVE PREVENTED RUSSIA FROM PAYING A TRANSIT FEE TO UKRAINE TO LET THE OIL PASS THROUGH. NOW THE HUNGARIAN REFINER SAYS IT HAS PAID RUSSIA'S TRANSIT FEE AND OIL WILL RESUME FLOWING. SEVERAL OF EUROPE'S MAJOR RIVERS ARE RUNNING DRY, DISRUPTING $80 BILLION IN TRADE ROUTE. BLAME IT ON AN ARID SUMMER THAT HAS SET HEAT RECORDS ACROSS THE CONTINENT. THE RINE HAS DRIED UP TO THE POINT OF BECOMING VIRTUALLY IMPASSIBLE AT A KEY WAYPOINT. THAT IS SLOWING DOWN VAST FLOWS OF DIESEL AND COAL. SOFTBANK EXPECTS TO POST A GAIN OF MORE THAN $34 BILLION FROM SELLING DOWN ITS STAKE IN ALIBABA. THAT WILL REDUCE ITS STAKE IN CHINA'S E-COMMERCE LEADER FROM ALIBABA IS ONE OF THE MOST LUCRATIVE IN VENTURE CAPITAL HISTORY. AND THE MAKER OF THE WORLD'S IPHONES, TAIWAN'S HON HAI POSTED QUARTERLY PROFIT THAT BEAT ESTIMATES. DEMAND FOR THE COMPANY'S CLOUD PRODUCTS HELPED IT WEATHER SUPPLY CHAIN STYLES AND SLUGGISH SMELL PHONE DEMAND. HON HAI HAS BEEN NAVIGATING COMPONENT SHORTAGES, PATCHES OF WEAKNESS IN THE ECONOMY AND COVID-RELATED LOGISTICS BOTTLENECKS IN CHINA. GLOBAL NEWS 24 HOURS A DAY ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. DESPITE THE FACT THAT PRICE INFLATION IS SO ELEVATED, [01:19:58] Speaker ?: FINANCIAL CONDITIONS, WHAT HAVE THEY BEEN DOING OVER THE LAST COUPLE OF WEEKS? THEY'VE BEEN EASING. [01:20:06] Speaker 16: TO ME, THAT SUGGESTS THAT THE FED HAS A LOT MORE ROOM TO GO. I THINK THE DIE IS CAST NOW FOR A 75 BASIS POINT MOVE AT THE SEPTEMBER OFF-ON-C MEETING AND THEY NEED TO LEAVE IT ON THE TABLE FOR THE REMAINING TWO MEETINGS THIS YEAR. NEIL DUTTA GETTING OUT ON THE CALENDAR INTO THE FALL AND THE GREAT MYSTERY OF WHAT WE ARE GOING TO SEE IN INFLATION AND [01:20:32] Speaker 4: HOW IT FOLDS INTO OUR LIVES. LISA REALLY MENTIONING THIS MORNING THE EFFECT ON WAGES AND ALSO OF COURSE WHAT IT MEANS FOR CHAIRMAN POWELL. I SHOULD NOTE THAT WE WILL ATTEND JACKSON HOLE TO GIVE YOU PERSPECTIVE THERE FROM THE WORLD'S LEADING ACADEMICS ON ECONOMICS. JOHN FARRO IS OFF TODAY STUCK IN ROME. KAILEY LYNES WITH US. KAILEY, THANK YOU FOR JOINING US. LISA BRANWITZ AND TOM KEENE HERE, 45 MINUTES AWAY FROM AN IMPORTANT INFLATION REPORT. PART OF THAT INFLATION IS OIL. SOMETHING WE ARE ALL LIVING HERE. WE ARE NOT BACK TO VW RABBITS AND WHAT WE KNEW IN THE 1970s. THIS TIME IS DIFFERENT. BUT THEN MAYBE IT IS NOT. JULIAN LEE JOINS US NOW. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. [01:21:44] Speaker 17: THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. [01:22:27] Speaker 4: THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. THAT IS A LITTLE BIT OF OIL. [01:22:58] Speaker 17: 100% OF OUR LISTENERS AND VIEWERS SAY THAT IS ABSOLUTE BALONEY. GALLON OF GAS IS STILL $4 A GALLON. A GALLON OF GAS IS ABOUT $4. A MONTH AGO IT WAS OVER FIVE. IN SOME PLACES IT WAS PUSHING SIX. THAT IS A LITTLE BIT OF OIL. IT IS A LITTLE BIT OF OIL PRICE. YOU TRACK THE HISTORY OF WHETHER IT IS CRUDE OIL PRICES OR GASOLINE PRICES OVER THE LONG HISTORY. YOU CORRECT IT FOR INFLATION. YOU MAY SEE SOME UPWARD MOVEMENT. IN TIMES VERY STRONG UPWARD MOVEMENT. [01:23:40] Speaker 5: YOU ALSO SEE LENGTHY PERIODS OF DOWNWARD MOVEMENT. THAT IS WHAT YOU ARE GOING TO DO. I THINK THERE IS A LITTLE BIT OF OIL PRICES THAT ARE GOING TO HEAR FROM THE WHITE HOUSE AT 9:30 AND POTENTIALLY THEY WILL COME OUT AND SAY LOOK WE GOT OIL PRICES DOWN. LOOK AT HOW MUCH THEY HAVE DECLINED OVER 56 STRAIGHT SESSIONS. IS IT BECAUSE OF THE RELEASE FROM THE STRATEGIC PETROLEUM RESERVE? IS IT BECAUSE OF A DECLINE IN DEMAND? IS IT BECAUSE PEOPLE ARE JUST SPECULATING THERE WILL BE A DECLINE IN DEMAND IN THE FACE OF A WEAKENING ECONOMY? [01:24:03] Speaker 17: I THINK PROBABLY YES, YES, AND YES. ALL OF THOSE THINGS I THINK HAVE CONTRIBUTED. CERTAINLY THE RELEASE OF CRUDE FROM THE STRATEGIC PETROLEUM RESERVE HAS HAD AN IMPACT ON SUPPLIES GLOBALLY. WHAT WE HAVE DONE LOOKING FORWARD IS THAT IS GOING TO HAVE TO COME TO AN END PROBABLY IN OCTOBER UNLESS IT IS EXTENDED. AND DEMAND AT LEAST ON THE EIA FIGURES LOOKS PRETTY WEAK FOR GASOLINE THIS SUMMER COMPARED WITH LAST YEAR. AND I THINK THERE ARE EXPECTATIONS OF TOUGHER TIMES AHEAD. [01:24:39] Speaker 5: WELL, JULIAN, TO THAT POINT, HOW PERILOUS IS IT THAT YOU HAVE INVENTORIES AT SUCH LOW LEVELS FROM THE STRATEGIC PETROLEUM RESERVE AT A TIME WE ARE HEADING INTO A WINTER OF GREAT AMBIGUITY, BOTH WITH RESPECT TO THE EUROPEAN PICTURE AS WELL AS WHAT HAPPENS WITH ZERO COVID IN CHINA IF THAT COMES OFF AND YOU START TO GET MORE DEMAND. [01:25:01] Speaker 17: YOU KNOW, I THINK WE HAVE TO BEAR IN MIND WHAT THE STRATEGIC RESERVE WAS CREATED FOR AND WHAT THE SITUATION WAS LIKE WHEN IT WAS CREATED AND THROUGH MUCH OF ITS HISTORY. THIS WAS CREATED AT A TIME WHEN THE U.S. WAS HAPPENED IN THE U.S. THE U.S. WAS VERY HEAVILY DEPENDENT ON IMPORTED OIL, MUCH MORE SO PERHAPS THAN IT IS NOW. IT WAS CREATED TO DEAL WITH A DISRUPTION OF SUPPLIES FROM THE MIDDLE EAST. THE U.S. [01:25:41] Speaker ?: THE U.S. [01:25:41] Speaker 17: THE U.S. THE U.S. EXPERIENCES THAT WE ARE EXPERIENCING IN PARTS OF EUROPE WHERE SOME REFINERS AND DISTRIBUTORS ARE LIMITING THE SUPPLIES THAT THEY ARE MAKING AVAILABLE. AND WHAT IS HAPPENING IN THE U.S. WHERE OIL IS ABUNDANT. EXPORTS ARE AT OR VERY CLOSE TO RECORD HIGHS. THE STRATEGIC RESERVE FROM THAT PERSPECTIVE OF GUARANTEEING THE PHYSICAL AVAILABILITY OF OIL DOESN'T NEED TO BE ANYWHERE NEAR AS BIG AS IT WAS. [01:26:16] Speaker 6: THAT IS ALL ON THE SUPPLY SIDE. ON THE DEMAND SIDE, HAVE WE SEEN ANY REAL DESTRUCTION? [01:26:23] Speaker 17: IT IS ALWAYS VERY DIFFICULT TO SAY IN THE VERY NEAR PAST. IF YOU LOOK AT DEMAND ESTIMATES AND EVEN DEMAND HISTORY, IT IS FREQUENTLY REVISED NOT JUST WEEKS OR MONTHS INTO THE PAST BUT VERY OFTEN YEARS INTO THE PAST AS MORE DATA BECOME AVAILABLE. WHAT WE ARE SEEING IS THAT SOME MEASURES OF U.S. GASOLINE DEMAND, FOR EXAMPLE, SUGGEST THAT THAT HAS BEEN COMING DOWN OVER THE DRIVING SEASON RATHER THAN GOING UP. WE ARE TALKING ABOUT OIL DEMAND FORECAST. CERTAINLY SIGNIFICANTLY LOWER THAN IT WAS LAST YEAR, AT LEAST ACCORDING TO THE EIA'S WEEKLY FIGURES. WE ARE HAVING DOWNGRADES TO OIL DEMAND FORECAST. I WROTE ABOUT THIS IN OUR COMMODITIES NEWSLETTER YESTERDAY. WE ARE TALKING ABOUT THAT. WE ARE TALKING ABOUT OIL DEMAND FORECAST. [01:27:29] Speaker 4: I EXPECT THAT BOTH OF THOSE WILL REVISE DOWN THEIR DEMAND FORECAST FOR THIS YEAR AND NEXT. JONATHAN: JULIAN LEE, THANK YOU SO MUCH FOR THE BRIEF HERE ON OIL. LESA, I ALMOST TEARED UP WITH THE MICROECONOMIC DEMAND ELASTICITY QUESTION. I MEAN, IT IS LIKE POETRY. [01:27:51] Speaker 5: I HAD A GOOD TUTOR, TOM. I HONESTLY LOVE WHAT MAKES YOU EMOTIONAL. IT IS SOMETHING THAT IS VERY RELATABLE. I THINK IT IS A GOOD QUESTION, WHICH IS WHERE IS THE DEMAND? [01:28:11] Speaker 4: DO YOU HAVE ANY EVIDENCE THAT DEMAND IS INCREASED? GREAT. TAKE IT OR LEAVE IT. WE HAVE A LITTLE BIT OF THE COUNTRY. WE HAVE A LITTLE BIT OF THE COUNTRY. GAINING OUT THE RESPONSIVENESS OF AN ECONOMY TO THE PRICE OF OIL IS JUST BRUTAL. IT IS VERY TOUGH. RIGHT NOW, EQUITIES ADVANCE UP 9, UP 12 ON S&P FUTURES. [01:28:38] Speaker 2: 34 MINUTES FROM THIS INFLATION REPORT. STAY WITH US. I THINK IT IS QUITE THE OPPOSITE FOR THE NEXT FEW YEARS. I THINK IT IS QUITE THE OPPOSITE FOR THE NEXT FEW YEARS. THERE HAS BEEN A SIGNIFICANT MODERATION IN PRICES OVER THE PAST MONTH. [01:28:54] Speaker 16: CONSUMERS HAVE AN ENORMOUS ABILITY TO TAKE ON HIGHER PRICES. [01:28:57] Speaker 1: WE ARE STILL SEEING POSITIVE NEWS THAT PERHAPS EQUITIES CAN STILL GO HIGHER IN A TIGHTENING ENVIRONMENT. WE ARE ABSOLUTELY SEEING A VERY DISRUPTED ECONOMY BEGIN TO HEAL. [01:29:09] Speaker 3: THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. [01:29:17] Speaker 5: COUNTDOWN TO A PIVOTAL CPI REPORT. GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE. TOM KEENE, JOHN FERRO, LISA ABRAMOWICZ. THANK YOU SO MUCH. WE ARE ABOUT 30 MINUTES AWAY FROM AN ALL-IMPORTANT PRICE INFLATION INDEX. HOW MUCH DO WE GET A REACTION THAT IS BIFURCATED WITH A HEAVIER [01:29:36] Speaker 4: WEIGHT TO THE UPSIDE SURPRISE AND THE DOWNSIDE SURPRISE? I DON'T HAVE A CLUE ON THAT IMPORTANT QUESTION, LISA. WE ARE GOING TO PARSE HEADLINE IN CPI. MIKE MCKEE WILL BE WITH US IN 15 MINUTES TO GO INTO EVERYTHING HE HAS READ IN ON. TO ME, THE MOST INTERESTING POINT, WE HAVE TO GO INTO THE INFLATION. WE ARE GOING TO TAKE POWER, TAKE SERVICES, TAKE OUT ENERGY, [01:30:01] Speaker 5: AND TAKE OUT THIS NEW SHELTER INFLATION WE HAVE GOT, AND WHERE DO SERVICES STAND? LISA: THAT IS WHAT YOU HAVE BEEN TALKING ABOUT AS WELL. HOW MUCH IS THAT GOING TO BE THE SOURCE, WHICH IS WHAT PEOPLE ARE EXPECTING, THE PIVOT AWAY FROM GOODS TO SERVICES. HOW MUCH HAS THAT BEEN CURTAILED BY THE LACK OF CONFIDENCE? THAT SAID, HOW MUCH DOES THIS MOVE THE NEEDLE? PEOPLE ARE TALKING ABOUT A SUDDEN ABOUT-FACE FOR WHAT THE FED PROJECTION IS GOING TO BE. HOW MUCH ARE THEY GOING TO BE? HOW MUCH ARE THEY GOING TO BE? [01:30:24] Speaker 4: HOW MUCH ARE THEY GOING TO BE? HOW MUCH ARE THEY GOING TO BE? I AM GOING TO GO BACK TO THE GRANULARITY THAT WE SEE. WE HAVE TO REMEMBER THAT SO MANY OF THESE SERIES, LISA, STILL SHOW WHAT OUR LISTENERS AND VIEWERS FEEL, WHICH IS HIGHER [01:30:37] Speaker 5: AND HIGHER INFLATION. LET'S BE CLEAR. WE ARE GOING TO GO BACK TO THE GRANULARITY. WHAT ARE YOU MOST FOCUSED ON TO GIVE US A COMPASS FOR WHERE TO GO NEXT, HOW TO FRAME THE DATA AND HOW TO FRAME A FED RESPONSE? [01:30:51] Speaker 6: I THINK IT WILL BE ABOUT THE CORE METRIC, LISA, WHICH IS WHAT EVERYONE IS WATCHING. HOW STICKY THIS INFLATION IS. ON THE ONE HAND, YES, IT WOULD BE SIGNIFICANT IF WE DO SEE PRICE GROWTH MODERATING, IF IT IS NOT RISING AS FAST. WE HAVE TO TALK ABOUT HOW QUICKLY THEY CAN GET DOWN TOWARD THEIR TARGET AND WHAT RATE IT WILL TAKE FOR THEM TO GET THERE. IS IT FAIR TO CALL THE CPI WEDNESDAY? IT IS ABSOLUTELY CPI WEDNESDAY. [01:31:18] Speaker 4: AND THEN PPI THURSDAY AND UNIVERSITY OF MICHIGAN FRIDAY. [01:31:22] Speaker 5: WE ARE GOING TO CHECK THAT OUT. IT IS GOING TO BE REALLY FUN. THIS IS A BIG DEAL. WHAT WE ARE GOING TO SEE IN [01:31:28] Speaker 4: 27 MINUTES IS A BIG DEAL TODAY. [01:31:30] Speaker 5: WE ARE GOING TO HEAR FROM FED OFFICIALS AS WELL. RIGHT NOW, THE MARKETS ARE UP, BUT I HAVE TO SAY THE LACK OF CONVICTION IS NOTEWORTHY TO ME. THAT IS THE TAKEAWAY. NASDAQ FUTURES UP 50 BASIS, UP 0.5%, S&P UP 0.3%. A CHURN THERE AS YOU SEE YIELDS COME OFF A LITTLE BIT ON THEIR HIGHS. THAT YIELD CURVE INVERSION, WHICH YOU HAVE BEEN TALKING SO MUCH ABOUT, VERY MUCH FRONT AND CENTER, SENDING A PRETTY SEVERE MESSAGE. [01:31:57] Speaker 4: THE LAST DAY, RIGHT DOWN NEAR 50 BASIS POINTS, THIS IS A HIGHER THAN THE 10-YEAR YIELD BY HALF A PERCENTAGE POINT. WE ARE VERY CLOSE TO THAT RIGHT NOW. WHAT IS AMAZING, LISA, IS THE HOUSES SUGGESTING WE COULD SEE GREATER AND MORE RAPID CURVE INVERSION. THAT IS SOMETHING NEW THIS WEEK. [01:32:16] Speaker 5: WE ARE GOING TO SEE THE RAPID CURVE INVOLVED. WE ARE GOING TO SEE THE RAPID CURVE INVOLVED. WE ARE GOING TO SEE THE RAPID CURVE INVOLVED. WE ARE GOING TO SEE THE RAPID CURVE INVOLVED. WE ARE GOING TO SEE THE RAPID CURVE INVOLVED. WE ARE GOING TO SEE THE RAPID CURVE INVOLVED. WE ARE GOING TO SEE THE RAPID CURVE INVOLVED. WHAT DOES THE RAPID CURVE INVOLVED? [01:32:38] Speaker 18: WHAT DOES THE RAPID CURVE INVOLVED? WHAT DOES THE RAPID CURVE INVOLVED? I THINK THE BALANCE OF RISK WHEN YOU ACCOUNT FOR THE SEVERITY OF THE RESPONSE IS STILL TO THE UPSIDE. I THINK IF WE GET A HOTTER THAN EXPECTED CORE NUMBER, IF IT LOOKS LIKE RENT INFLATION IS NOT ONLY STAYING HIGH BUT ACCELERATING, THAT WILL MEAN THE FED IS EVEN MORE RELUCTANT TO TAKE ITS FOOT OFF THE BREAK. WE ALREADY GOT THAT HOT EMPLOYMENT REPORT LAST WEEK. I THINK WE WANT TO SEE CONFIRMATION THAT THE HEADLINE NUMBER IS SOFT AS EXPECTED BUT I THINK THE MARKET IS SORT OF LOOKING THROUGH THAT. WHILE THE MARKET DID SEE THE FED GETTING MORE HAWKISH AS OIL TOOK THE BATON AND RAN WITH IT AND LED INFLATION ON THE WAY UP, I DON'T THINK THE MARKET IS FALLING FOR THE SENSE THAT AS LONG AS OIL PRICES ARE IN DECLINE, THE FED IS GOING TO GET MORE DOVISH. I DON'T THINK THERE IS A SYMMETRY THERE AND I THINK PEOPLE HAVE CAUGHT ON TO THAT. [01:33:27] Speaker 5: I DON'T THINK PEOPLE ARE GOING TO MAKE SURE THAT THE MARKET HAS REACTED APPROPRIATELY TO 275 BACK-TO-BACK RATE HIKES AND THE PROSPECT OF A 75 BASIS POINT RATE HIKES AT THE NEXT MEETING, FOLLOWED BY 50 BASIS POINTS, FOLLOWED BY A LOT OF BALANCE SHEET UNWIND. HAVE MARKETS COME TO THIS REALIZATION OR PEOPLE LOOKING [01:33:48] Speaker 18: OVER THE POTENTIAL LAG EFFECTS OF THOSE KINDS OF MOVES? I DON'T THINK THE MARKETS ARE GOING TO MAKE SURE THAT I DON'T THINK IT'S GOING TO MAKE SURE THAT. IF I WAS AT THE FED, I WOULD PROBABLY SAY NO. THE FINANCIAL CONDITIONS INDEXES THAT WE ARE TRACKING HAVE ACTUALLY GOTTEN EASIER SINCE THE FED STARTED HIKING BY 75 BASIS POINTS AND SEEMS LIKELY TO DO SO AGAIN IN SEPTEMBER UNLESS THERE IS A MAJOR CHANGE IN THE DATA. THIS IS NOT WHAT I WOULD WANT TO SEE IF I WAS AT THE FEDERAL FEDERAL GOVERNMENT. I WOULDN'T WANT TO SEE IF NOT BECOME MORE HAWKISH AT LEAST SORT OF KEEP THE MESSAGE OUT THERE THAT THEY ARE WORRIED ABOUT CONTAINING INFLATION. I THINK A .5, EVEN A .6 PERCENT CORE INFLATION NUMBER THIS [01:34:22] Speaker 4: MORNING IS GOING TO GIVE THEM PLENTY OF FUEL TO DO THAT. I WANT TO GO TO THE PROFESSOR, KAILEY LIONS. SHE IS WORKING WITH DAVID BLANCHFLOWER UP AT DARTMOUTH. KAILEY LIONS IS ALL OVER DEMAND DESTRUCTION. [01:34:36] Speaker 18: DO YOU THINK THAT IS A LITTLE BIT TO LOWER INFLATION? IN SOME AREAS, YES. IF YOU LOOK AT THE LAST 12 MONTHS ENDING IN JUNE, WE HAD GASOLINE PRICES UP 50%, BUT GASOLINE CONSUMPTION WAS ONLY UP 40%. THERE IS SOME DEMAND DESTRUCTION IN GASOLINE. IT IS NOT LARGE COMPARED TO THE SIZE OF THE PRICE MOVE WE ARE SEEING. I THINK CONSUMERS THROUGHOUT THIS WHOLE PROCESS OVER THE LAST TWO AND A HALF YEARS, THIS STRANGE ECONOMY WE HAVE BEEN IN, HAVE BEEN REALLY GOOD AT ADAPTING, WE HAVE BEEN REALLY GOOD AT ADAPTING. INFLATION SHOCKS HAVE BEEN RISING, ROTATING INTO PLACES WHERE PRICES HAVE BEEN FALLING. THE OVERALL INFLATION SHOCK HASN'T BEEN AS SEVERE AS THE HEADLINE NUMBERS, BECAUSE THERE IS THE SUBSTITUTE ABILITY EFFECT. IF YOU ARE DRIVING LESS OUT OF NECESSITY, OR YOU ARE HAVING TO CUT BACK ON YOUR DISCRETIONARY SPENDING OUT OF NECESSITY TO PAY FOR NECESSITIES, THAT IS A MUCH DIFFERENT KIND OF FEELING. I THINK IT'S A LITTLE BIT OF INFLATION. IT'S A LITTLE BIT OF THE ECONOMY. [01:35:29] Speaker 6: IT'S A LITTLE BIT OF COURSE. IT'S A LITTLE BIT OF THE ECONOMY TO SEE THESE CONSUMER SENTIMENT READINGS AS POOR AS THEY HAVE BEEN. TO THAT POINT AS WELL, WHAT WE HAVE HEARD FROM THE CHIPMAKERS TALKING ABOUT A SLOWDOWN IN DEMAND, THEY MAKE CHIPS FOR SMARTPHONES AND PCs. IT'S A LITTLE BIT OF CURRENTLY. I THINK IT'S A LITTLE BIT OF ELECTRONIC DEVICES IN THE FACE OF INFLATION. OBVIOUSLY, THE PRINT TODAY IS GOING TO HAVE IMPLICATIONS FOR THE ECONOMY AND FOR THE FEDERAL RESERVE. WHAT IS THE READ THROUGH REALISTICALLY TO CORPORATE [01:35:54] Speaker 18: EARNINGS, ESPECIALLY LOOKING FORWARD? THE SECOND QUARTER HASN'T BEEN THAT AWFUL. NO, IT HASN'T. I THINK REVENUES HAVE BEEN THE KEY IN THE FIRST HALF OF THE YEAR. THE BIGGEST RISK TO CORPORATE EARNINGS IS NOT CONCERNED ABOUT COURPORATE EARNINGS. IT SEEMS LIKE THEY HAVE DEALT PRETTY WELL WITH THE HIGHER ENERGY INCREASE COSTS AND THE HIGHER WAGE COSTS. IF REVENUE DRIES UP, THERE'S NOT GOING TO BE ANY PLACE FOR THESE COMPANIES TO TURN. I THINK THAT'S THE KEY. YOU TALKED ABOUT REAL WAGES A LITTLE BIT EARLIER. THAT IS THE KEY. WE NEED TO GET REAL WAGES BACK UP BEFORE NOMINAL WAGES COLLAPSE UNDER THE WEIGHT OF A SLOWING ECONOMY. THAT'S THE RACE THAT THE FED IS FIGHTING ITSELF IN. [01:36:34] Speaker 6: HOW MUCH DO YOU THINK THE FED IS GOING TO BE SUCCESSFUL? WE ARE TALKING ABOUT THREADING -- THE NEEDLE THEY HAVE TO THREAD IS VERY DIFFICULT. WE ALL TALK ABOUT HOW NARROW THE RUNWAY IS TO A SOFT LANDING. WHERE DO YOU PUT THE ODDS ON THIS WORKING OUT FOR THEM? [01:36:50] Speaker 18: NOT AS HIGH AS THEY WERE THREE MONTHS AGO BECAUSE WE HAVE GOTTEN THIS HIGH INFLATION DATA AND WE HAVE GOTTEN HIGHER THAN EXPECTED RATE INCREASES. I THINK THE MARKET NOTION THAT THEY ARE GOING TO BE PIVOTING AND CUTTING BY MARCH OR APRIL OF NEXT YEAR I THINK IS PROBABLY TOO MUCH TO HOPE FOR AT THIS POINT UNLESS WE ARE IN A MORE SEVERE RECESSION IN WHICH CASE THEY ARE GOING TO BE CUTTING FOR NEGATIVE REASONS. I THINK NARROW PATH IS THE WAY I WOULD DESCRIBE IT FOR SURE. I DON'T THINK MARKETS ARE CURRENTLY PRICING IN A SEVERE RECESSION OUTCOME. WE THINK THERE IS SOME MAYBE IN BETWEEN THAT SOFT LANDING DISINFLATION SCENARIO AND THE SEVERE RECESSION. THAT SEEMS TO BE WHAT WE ARE AT. THAT IS THE WAY THAT WE ARE AT. [01:37:36] Speaker 4: I THINK THAT IS THE MIDDLE GROUND OF THE MARKETS ARE BETTING. AS WE GO TO MICHAEL MCKEY IN OUR NEXT SEGMENT, WE NEED TO REVISIT A PREGNANT ISSUE AND THAT IS WE ARE AT INFLATION AND THAT IS SOMETHING THAT WE ARE AT. [01:38:05] Speaker 18: HOW LONG WILL WE GET BACK TO SOME FORM OF NORMAL? HOW LONG IS IT BACK TO NOT 2% BUT JUST A NIRVANA OF NORMAL INFLATION? I WOULD SETTLE FOR THE RECESSION. I THINK IT WILL BE ABLE TO BE ABLE TO BE ABLE TO DO INFLATION. THE END OF 2023 I THINK IS STILL GOING TO FEEL ABNORMAL. AS CRAZY AS THE LAST TWO YEARS HAVE FELT BUT I THINK 2024 IS WHERE WE WANT TO START SEEING THREE HANDLE, TWO HANDLE ON INFLATION AND BACK TO A GDP GROWTH RATE THAT FEELS NOT [01:38:32] Speaker 4: SPECTACULAR BUT NOT TERRIBLE. JONATHAN: BRIAN NICK, THANK YOU FOR FRAMING THAT TIMELINE. BRIAN NICK IS WITH NOVINE AND WE GREATLY APPRECIATE HIS ABILITY. LISA, NICK SURVIVED ECONOMICS AT DARTMOUTH WITH BLANCH FLOWER. I WONDER WHAT DANNY WOULD THINK OF HIS COMMENTS. [01:38:48] Speaker 5: HE REALLY WAS PRETTY STRONG. DANNY HAS HAD A STRONG VIEW ON THERE BEING MORE SLACK IN THE LABOR MARKET AND HOW THE FED IS GOING TO MOVE TOO QUICKLY, SORT OF GOING AGAINST THE GRAIN CARE POLITICALLY AS WELL AS FROM THE SENTIMENT. I HAD THE PRIVILEGE OF [01:39:00] Speaker 4: LECTURING TO A PACKED LECTURE HALL WITH PROFESSOR BLANCH FLOWER AT DARTMOUTH. I WILL TELL YOU, IT IS A LITTLE BIT INTIMIDATING WHEN DOUGLAS IRWIN, THE GIANT ON TRADE WARS AND INTERNATIONAL TRADE IS SITTING IN THE FRONT ROW. THE ELASTICITY OF TANG. ALL THESE PEOPLE ARE WAY BETTER AT ELASTICITY AND PARTIAL DIFFERENTIALS THAN I WILL EVER BE. THESE PEOPLE ARE LOOKING AT THE HISTORY. THAT IS THE MOMENT WE ARE IN HERE, 19 MINUTES AWAY. [01:39:40] Speaker 5: THIS IS HISTORY THAT WE ARE LIVING RIGHT NOW. [01:39:43] Speaker 4: WHAT IS THE HISTORICAL ANALOGUE? IS IT THE 70s OR 1940s? DON'T GET ME GOING. IS THAT WHAT YOU ARE BASICALLY SAYING? IT IS NOT BOB SEAGER. I DON'T WANT TO RELIVE BOB SEAGER [01:39:55] Speaker 5: FROM FIVE OR SIX. WE HAVE MORE RESPONSE FROM ROBERT [01:39:58] Speaker 4: SEAGER IN THE 70s THAN ANYTHING ELSE WE HAVE DONE. WE ARE GOING TO DO A DUET HERE ON HOLLYWOOD NIGHTS. FUTURES ADVANCED UP 17. MICHAEL MCKEEN NEXT. [01:40:11] Speaker ?: THIS IS BLOOMBERG. [01:40:16] Speaker 8: KEEPING YOU UP TO DATE WITH NEWS FROM AROUND THE WORLD, WITH THE FIRST WORD, I'M RITIKA GUPTA. A FEW MINUTES FROM NOW, WE WILL GET WHAT HAS BEEN CALLED THE MOST SCRUTINIZED ECONOMIC REPORT IN THE WORLD. IT WILL TELL US WHERE THE U.S. FIGHT AGAINST INFLATION STANDS. ACCORDING TO A BLOOMBERG SURVEY, THE CONSUMER PRICE INDEX ROSE AT AN ANNUALIZED RATE OF 8.7% IN JULY, THAT IS DOWN FROM JUNE'S FIGURE, BUT STILL WAY ABOVE THE FED'S 2% TARGET. THE CPI IS OUT AT 8:30 A.M. NEW YORK TIME. IN NEW YORK, FORMER PRESIDENT TRUMP SAYS HE WILL BE QUESTIONED TODAY UNDER OATH ABOUT HIS DEALINGS AS A REAL ESTATE MOGUL. THE INVESTIGATION INVOLVES CLAIMS THAT THE TRUMP ORGANIZATION MISSTATED THE VALUE OF ITS PRIZED ASSETS FOR TAX REASONS. THAT COMES JUST TWO DAYS AFTER FEDERAL INVESTIGATORS SEARCHED THE FORMER PRESIDENT'S HOME IN FLORIDA. REPUBLICANS ECHOED THE ASSERTION THAT THE SEARCH WAS POLITICALLY MOTIVATED. CHINA HAS ENDED THOSE UNPRECEDENTED MILITARY EXERCISES NEAR TAIWAN. BUT IT SAYS IT PLANS TO CONDUCT REGULAR PATROLS IN THE REGION. THE CHINESE BEGAN THE DRILLS LAST WEEK AFTER U.S. HOUSE SPEAKER NANCY PELOSI VISITED TAIWAN. MEANWHILE, THE U.K.'S FOREIGN OFFICE HAS SUMMONED THE CHINESE AMBASSADOR TO DISCUSS WHAT IT CALLS BEIJING'S AGGRESSIVE AND WIDE-RANGING ESCALATION AGAINST TAIWAN. ELON MUSK HAS SOLD $6.9 BILLION OF STOCK IN TESLAS, HIS BIGGEST SALE EVER. HE SAYS HE WANTS TO AVOID A LAST-MINUTE SELL-OFF OF THE CARMAKER'S SHARES IN CASE HE IS FORCED TO GO AHEAD WITH HIS DEAL TO BUY TWITTER. MUSK SAYS HE WILL BUY TESLAS SHARES AGAIN IF THE DEAL DOESN'T CLOSE. GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICK TAKE POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA, THIS IS BLOOMBERG. [01:42:02] Speaker ?: THE MARKETS ARE ENTIRELY TOO COMFORTABLE WITH THIS NOTION WHERE IT'S JUST GOING TO BE A STRAIGHT LINE DOWN, SMOOTH AND EASY, RIGHT TO THE FED 2%. I STILL THINK THERE'S LOTS OF [01:42:15] Speaker 19: ROOM FOR VOLATILITY, ROOM FOR RATES TO MOVE HIGHER AND LOWER, AND CREDIT SPREADS TO BE MUCH MORE VOLATILITY. GREG PETERS WITH AN IMPORTANT COMMENT THERE YESTERDAY ON WHAT'S [01:42:39] Speaker 4: GOING TO HAPPEN HERE. HE WAS TILTING TOWARDS PRICE DOWN, YIELD UP IN THE FIXED INCOME SPACE AS WELL. WE'RE GOING TO GET TO IT NOW, 11 MINUTES AWAY FROM TRULY AN HISTORIC REPORT, AND WE'RE GOING TO BE BRIEFED BY THE GUY THAT KNOWS THIS BEST. MICHAEL MCKEE, YEAH, HE'S BLOOMBERG ECONOMICS AND POLICY CORRESPONDENT. BUT FARTHER MORE THAN THAT, BESIDES THE FACT HE'S CUT AND CHISELLED, HE AND I HAVE LIVED OTHER INFLATION BOUTS. THIS IS NOT THE 70s, IS IT? MICHAEL MCKEE: [01:43:12] Speaker 20: NO, INFLATION DYNAMICS HAVE CHANGED A LOT, AND THE FIRST THING THAT COMES TO MIND IS THE ENERGY INTENSITY IN THE ECONOMY. THE MILEAGE ON CARS HAS GOTTEN MUCH BETTER, APPLIANCES HAVE GOTTEN MUCH BETTER, SO WE USE LESS ELECTRICITY, WE USE LESS GASOLINE, AND SO THAT HAS A MITIGATING EFFECT ON PRICES. IT'S HARD FOR PEOPLE WHO ARE AT THE GAS PUMP TO SEE, BUT WHEN YOU LOOK AT INFLATION ADJUSTED PRICES, THEY ARE LOWER. [01:43:41] Speaker 4: YOU GO THROUGH THE HEADLINE DATA BETTER THAN ANYBODY HAVE EVER SEEN, IF IT'S A PARTITION OF GOODS DISINFLATION, SURGING GOODS INFLATION, IT HAS ROLLED OVER, OR SERVICE SECTOR INFLATION, QUIESCENT TREND LINE, IT'S MOVED UP, BUT NOT ROLLED OVER, WHICH MATTERS TO YOU IN 10 MINUTES. [01:44:01] Speaker 20: WE'LL PROBABLY GET A LOOK AT SERVICES INFLATION, BECAUSE THAT IS THE LARGEST PART OF THE ECONOMY. IT'S ALSO WHAT WAS MISSING DURING THE PANDEMIC, AND NOW PEOPLE HAVE COME BACK AND STARTING TO TAKE ADVANTAGE OF SERVICES, TRAVEL, THINGS LIKE THAT. THE BIG IMPACT ON SERVICES IS LABOR COSTS. THE LARGEST PART OF THE COUNTRY IS A LARGEST PART OF THE COUNTRY. THE LABOR COST NUMBER RISE OVER 10%, ALMOST 11% YESTERDAY FOR THE SECOND QUARTER. HOW MUCH ARE SERVICES COMPANIES ABLE TO PASS THAT ALONG AND NEED TO PASS THAT ALONG? IT'S A LITTLE BIT OF A DIFFERENT CALCULATION THAN TRYING TO FIGURE OUT WHAT YOUR INPUT COSTS ARE AT A STEEL MILL. WE'LL TALK ABOUT IT. WE'LL TALK ABOUT IT IN THE [01:44:42] Speaker 5: COUNTRY AND WHAT WE'LL TALK ABOUT IS SERVICES PRICE INFLATION. A LOT OF PEOPLE POINTED OUT THAT BEFORE THE PREVIOUS 9.1% CPI PRINT, THE WHITE HOUSE BROUGHT OUT JANET YELLEN, THE TREASURY SECRETARY, TO TALK ABOUT WHY, YES, IT'S HIGH, YES, IT'S A PROBLEM, BUT THEY'RE GOING TO GET IT DOWN AND THEY'RE FIGHTING IT. THERE ARE ELEMENTS THAT ARE A LITTLE LESS SCARY. THIS TIME WE'VE HEARD NOTHING. SOME PEOPLE ARE TAKING SIGNAL FROM THE LACK OF DISCUSSION FROM THE WHITE HOUSE, TRYING TO TALK IT DOWN AHEAD OF TIME SAYING IT'S GOING TO BE A DOWNSIDE [01:45:10] Speaker 20: SURPRISE. IS THERE ANY CREDENCE TO THIS? I DON'T KNOW. THIS COULD BE A GREEN SPAN BRIEFCASE INDICATOR. THE WHITE HOUSE IS OBVIOUSLY HAS BEEN TRYING TO MANAGE THE PUBLIC'S EXPECTATIONS FOR ECONOMIC DATA, PARTICULARLY THE JOBS NUMBERS, AND THEY KNEW WE WERE GOING TO HAVE A BAD CPI JUST BECAUSE OF ENERGY PRICES LAST TIME. IT'S A BETTER HEADLINE NUMBER BECAUSE ENERGY PRICES HAVE COME DOWN. THAT DOESN'T MEAN OVERALL INFLATION IS GOING TO SLOW HUGELY. THAT MIGHT BE GETTING INTO THE AREA OF IT'S A LITTLE HARD TO EXPLAIN TO THE PUBLIC, SO WE'LL STAY AWAY FROM IT. IF IT'S A GOOD NUMBER, I WOULD IMAGINE YOU'LL HEAR FROM THE WHITE HOUSE. I'M STRUGGLING ALSO WITH [01:45:50] Speaker 5: REAL WAGES, AND I'VE BEEN TALKING ABOUT IT ALL MORNING. HOW DO YOU MESSAGE THAT YOU WANT WORKERS TO GAIN SHARE, THAT LABOR SHOULD BE A BIGGER SHARE OF THE OVERALL CORPORATE PROFITS, AT A TIME WHEN PEOPLE ARE WORRIED ABOUT BOTH RUNAWAY INFLATION, A WAGE SPIRAL, BUT ALSO A COST OF LIVING THAT IS GETTING OUT OF CONTROL FOR A LOT OF PEOPLE. WHAT IS THE CORRECT MESSAGE? I DON'T WANT TO SAY WE WANT YOU TO HAVE AN EFFECTIVELY [01:46:13] Speaker 20: LOWER PAYCHECK. THAT'S A VERY TOUGH MESSAGE TO SEND, AND THE FED IS STUCK WITH THAT DILEMMA IN TRYING TO SAY WE WANT TO BRING DOWN DEMAND SO THAT WAGE INCREASES MODERATE, BUT AT THE SAME TIME, JAY POWELL SAYS WE WANT PEOPLE TO CONTINUE TO GET HIGHER PAYCHECKS. HOW DO YOU DELINEATE WHAT IS THE PROPER AMOUNT? FROM AN ECONOMIC POINT OF VIEW YOU CAN LOOK AT MAYBE A 3% TO 3.5% INCREASE IN WAGES ON A YEAR-OVER-YEAR BASIS IS AN ACCEPTABLE LEVEL THAT GENERALLY ECONOMISTS THINK WON'T PRODUCE A LOT OF INFLATION, BUT AGAIN THAT BECOMES SOMETHING THAT'S REALLY HARD FOR THE PUBLIC TO UNDERSTAND IN THIS DYNAMIC, AND I DON'T EVEN MENTION HOW HARD IT IS FOR THE ADMINISTRATION TO TALK ABOUT THAT. [01:46:57] Speaker 6: ON THE FEDERAL RESERVE AND HOW THEY'RE GOING TO READ THIS DATA, MIKE, OBVIOUSLY IT'S GOING TO BE IMPORTANT. THAT'S WHY WE HAVE BEEN TALKING ABOUT IT FOR THE LAST TWO AND A HALF HOURS, AND YET WE'RE GETTING IT HERE ON AUGUST 10TH, WHICH IS YOUR BIRTHDAY, HAPPY BIRTHDAY, BY THE WAY, WELL BEFORE THE SEPTEMBER 21st MEETING. WE GET ANOTHER CPI PRINT BEFORE THAT. SO HOW MUCH IS THIS REALLY GOING TO INFLUENCE WHETHER THE MOVE IS 75 BASIS POINTS IN SEPTEMBER? [01:47:20] Speaker 20: THAT WILL DEPEND ON THE MAKEUP OF IT. THE HEADLINE NUMBERS WON'T MATTER AS MUCH, PARTICULARLY THE HEADLINE NUMBER, BECAUSE IT IS SO HEAVILY INFLUENCE BY ENERGY AND FOOD AND THERE ARE SIGNS THAT BOTH OF THEM ARE GOING TO START TO COME DOWN. BUT THEY WILL LOOK AT THE CORE AND TAKE THAT APART AND THEY WILL WANT TO SEE WHETHER WE ARE SEEING BROAD BASED PRICE INCREASES. ARE THOSE HIGH UNIT LABOR COSTS BEING PASSED ON THROUGH A LOT OF DIFFERENT INDUSTRIES? IF THAT IS THE CASE, THEY MIGHT BE LEANING TOWARD 75. WE HAVE ANOTHER INDICATOR -- WE HAVE TWO BECAUSE WE HAVE A PCE AT THE END OF AUGUST AND THEN WE HAVE THE CPI IN SEPTEMBER. IF THERE IS A TREND, WE MAY GET ANOTHER VIEW OF HOW THAT TREND IS PLAYING OUT. PARTICULARLY INTERESTING IS THE CASE. THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE [01:48:20] Speaker 4: CASE. THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE CASE. [01:48:36] Speaker 20: THE CASE IS NOT GOING TO BE THE CASE. THE CASE IS NOT GOING TO BE THE CASE. I THINK THAT IS ONLY FAIR. THEY DID NOT DO CAILEY ANY FAVORS ON HER BIRTHDAY YESTERDAY BY LOSING IN THE [01:48:49] Speaker 4: 11TH INNING. THEY CAME CLOSE. HAPPY BIRTHDAY. YOU WILL CONTINUE WITH US HERE WITH IMPORTANT COVERAGE OF WHAT WE SEE ON PRICE CHANGE IN AMERICA. LISA, WE HAVE TO REMEMBER THIS IS NOT A BUNCH OF MATHEMATICAL MUMBO-JUMBO. [01:49:03] Speaker 5: THIS IS A HUGE PART OF AMERICA FLAT ON THEIR BACK. THIS IS A HUGE PART OF AMERICA FLAT. THAT IS A HUGE PART OF AMERICA FLAT ON THEIR LAST YEARS WHERE IT IS EATING UP A BIGGER AND BIGGER PROPORTION OF DISPOSABLE INCOME. YOU HAVE PEOPLE MAKING THE DECISION BETWEEN FILLING UP THEIR GAS TANKS AND BUYING AN EXTRA SWEATER OR AN EXTRA PAIR OF PANTS. HOW MUCH DO WE SEE THAT CONTINUE TO PRESSURE MARGINS, PART OF AMERICA FLAT ON THEIR HANDS? THAT IS A HUGE PART OF AMERICA FLAT ON THEIR HANDS. [01:49:28] Speaker 4: THAT IS A HUGE PART OF AMERICA FLAT ON THEIR HANDS. THAT IS A HUGE PART OF AMERICA FLAT ON THEIR HANDS. THAT IS A HUGE PART OF AMERICA FLAT ON THEIR HANDS. THAT IS A HUGE PART OF AMERICA FLAT ON THEIR HANDS. [01:49:42] Speaker 6: I HEAR THAT PERCOLATING IN DIFFERENT REPORTS AS A STUDY FOR THE END OF THE YEAR. I'M SURE THAT WILL BE A POINT THAT THE ADMINISTRATION IS TRYING TO MAKE, BECAUSE WHEN WE LOOK AT THAT INFLATION REDUCTION ACT, WE KNOW THAT SOME HEALTH CARE PRICING, DRUG PRICING IS INCLUDED IN THAT. NOT SO SURE ECONOMISTS AGREE THAT IT IS GOING TO HAVE A REAL AT LEAST NEAR-TERM IMPACT ON THE INFLATION THE AMERICAN PEOPLE ARE FACING, HOWEVER. [01:50:00] Speaker 4: WE WELCOME ALL OF YOU TO THIS HISTORIC REPORT ON THE INFLATION WITH FUTURES UP 13. STAY WITH US WITH MICHAEL MCKEE, THIS IS BLOOMBERG. BLOOMBERG SURVEILLANCE, WE WELCOME ALL OF YOU. JOHN FARROH OUT TODAY, KAILEY LINES IN WITH LISA BRAMINS AND TOM KEENE HERE, MOMENTS AWAY FROM AN INFLATION REPORT WAITING FOR THE FUTURE OF THE BLOOMBERG TERMINAL AND MICHAEL MCKEE WILL GIVE US A VIEW TO MAYBE WHAT WILL BE A CONSTRUCTIVE [01:50:39] Speaker 20: REPORT. IT COMES IN BETTER THAN EXPECTED WITH CPI ON A MONTH-OVER-MONTH BASIS FLAT, NO CHANGE AT ALL. THAT IS DOWN FROM 1.3% IN THE MONTH OF JUNE, SO A MAJOR DROP IN THE HEADLINE NUMBER. THE CORE GOES UP BY 3/10 OF A PERCENT. THE BUSINESS WERE HIGHER. THE CORE GOES UP BY 5.5% AND IN JUNE IT WAS 7/10. THAT IS AN UNEXPECTEDLY BETTER THAN FORECAST REPORT. ON A YEAR-OVER-YEAR BASIS, CPI IS AT 8.5%. WE EXPECTED A DROP TO 8.7 FROM THE 9.1 LAST MONTH. THE EXPECTATION WAS IT WOULD GO HIGHER. 5.9 WAS THE SAME NUMBER AS IN JUNE. THE EXPECTATION WAS IT WOULD GO HIGHER TO 6.1% BECAUSE PRESSURES WERE SPREADING. THIS IS THE KIND OF NEWS THAT WILL MAKE THE FOLKS AT THE BUREAU OF LABOR STATISTICS AND AT THE WHITE HOUSE AND AT THE [01:51:37] Speaker 4: FED SMILE A LITTLE BIT. IT IS A LITTLE BIT. IT IS A LITTLE BIT TO THE MARKET, FEATURES UP 1.38%, 57 S&P POINTS, DOW OUT OVER 33,000 IS REMARKABLE, 356 POINTS AND A [01:51:57] Speaker 5: SOLID 2% MOVE IN THE NASDAQ 100. LISA, DESCRIBE THE 2/10 SPREAD WITH A LAUNCH TO A LESSER INVERSION. LISA: I THINK THAT IS THE TAKEAWAY HERE. YOU SEE THE TWO-YEAR YIELD PLUNGE ON THE HEELS OF THE RIGHT BASIS POINTS. HOW MUCH DOES THIS MOVE THE NEEDLE WHEN YOU ARE STILL TALKING ABOUT CORE CPI AT 5.9%? [01:52:19] Speaker 4: THAT WILL BE THE KEY MESSAGE FROM A LOT OF FED OFFICIALS. A STEP AT A TIME, THE DOLLAR COMES IN WEAKER WITH FINALLY A 103 PRINT ON EURO AS WELL. MICHAEL, THE LEVEL OF SURPRISE HERE ON A FAN DISTRIBUTION OF ALL THE EXPERTS YOU REVIEWED, WHERE ARE WE ON THAT FAN DISTRIBUTION? [01:52:35] Speaker 20: THIS HAS GOT TO BE RIGHT AT THE EDGE OF GREAT NEWS? WE ARE GOING TO BE AT 8.2% OR 8.3% IN 30 DAYS. [01:52:45] Speaker 4: THE PRESIDENT IS GOING TO COME OUT AND SAY WE HAVE LAUNCHED FROM 9.1% DOWN TO 8.5%. CAN THE PRESIDENT EXTRAPOLATE [01:52:57] Speaker 20: OUT AND SAY WE ARE GOING TO BE AT 8.2% OR 8.3% IN 30 DAYS? MY GUESS LOOKING AT THIS IS THAT MAYBE HE CAN. WE ARE GOING TO COME OUT AND WE ARE GOING TO GO OUT OF THE COUNTRY AND WE ARE GOING TO GO OUT OF THE COUNTRY. AT THIS POINT GASOLINE WAS DOWN 7.7% IN THE MONTH. IN JUNE IT ROSE 11.2%. DO WE GET THE SAME KIND OF PERCENTAGE DROP? THAT IS HARD TO SAY. FOOD PRICES WENT UP. FOOD AT HOME 1.3% HIGHER. IT WAS 1% IN JUNE. WE HAVE SEEN AGRICULTURAL INFLATION. WE HAVE SEEN AGRICULTURAL INFLATION. ALSO FOOD PRICES DEPEND A LOT ON THE WEATHER. YOU CAN'T SAY FOR SURE THESE THINGS ARE GOING TO HAPPEN. BUT WE FINALLY SEE A DROP IN USED CAR PRICES. BEEN WAITING FOR THAT FOR A LONG TIME. DOWN 4/10%. THEY ROSE 1.6% LAST MONTH. APPAREL PRICES. THIS IS ONE TO WATCH. DOWN 1/10 AFTER RISING 8/10 THE MONTH BEFORE. REMEMBER, ALL THE EARNINGS REPORTS THAT WE HAVE HAD ON RETAILERS, THEY ARE ALL TALKING ABOUT LARGE INVENTORIES THAT THEY ARE GOING TO HAVE TO MARK DOWN TO GET RID OF. THEY ARE TALKING ABOUT LARGE INVENTORIES. [01:54:22] Speaker 4: THEY ARE GOING TO THE STORES IN TIME FOR THE RIGHT SEASON. THERE ARE DISCOUNT STORES THAT ARE GOING TO BE PUTTING THOSE THINGS ON SALE. THAT IS GOING TO BE PUTTING THROUGH. THE MARKET IS UP 2.6%. LISA, I JUST EXTRAPOLATED OUT A 1, 2, 3, 4 POINT CORE CPI TREND. THIS IS BOGUS MATHEMATICS, BUT IT GETS YOU BACK TO A 2% CORE CPI IN THE VICINITY OF THE [01:54:48] Speaker 5: END OF 2024. LISA: WHAT EVERYBODY NEEDS ON A WEDNESDAY MORNING. YOU ARE SO RIGHT TO BE LOOKING AT THE NASDAQ AND THE S&P PUTTING THROUGH THE FED. THE FED IS GOING TO BE TALKING ABOUT THE FED. HOW MUCH ARE FED OFFICIALS GOING TO PUSH BACK AGAINST THE BELIEF IN A READ DUBBLING DOWN ON THE FED PIVOT ON THE HEELS OF THIS DATA? [01:55:12] Speaker 20: THEY WILL PUSH BACK ON IT BECAUSE THIS IS ONE REPORT. THERE ARE SEVERAL MORE BEFORE THE NEXT TIME THEY HAVE TO MAKE A DECISION. YOU LOOK AT SOME OF THE OTHER SHELTER CATEGORIES IN THIS. IT STILL HAS SOME WORRIESOME NEWS. WE ARE LOOKING AT RENT OF SHELTER UP HALF A PERCENT AFTER 6/10 LAST MONTH. RENT OF PRIMARY RESIDENTS UP 7/10. THE OWNER'S EQUIVALENT RENT, WHICH IS THE MEASURE THAT THEY LOOK AT TO SEE WHAT HOUSE PRICES ARE DOING, UP 6/10 AFTER 7/10 LAST MONTH. IT IS STILL IN THE SHELTER CATEGORY AND THE RENT STILL GOING UP AT A FAIRLY STRONG PACE AND THAT IS GOING TO BE A PROBLEM GOING FORWARD BECAUSE IT TAKES A LONG TIME TO GET THAT [01:55:55] Speaker 4: THROUGH THE SYSTEM. OUR ADVANTAGES WILL DIVE INTO THE PAGES AND PAGES OF DATA THAT WE SEE IN THIS INFLATION REPORT FOR AMERICA. TO SUMMARIZE AGAIN A CONSTRUCTIVE INFLATION REPORT, BRIAN DEESE WITH LISA BRAMOWITZ AND THE 9:00 HOUR ON RADIO AND TELEVISION WITH A DEMOCRATIC THING. THE FUTURE IS UP 67. [01:56:20] Speaker 20: HERE IS THE WORST NEWS FOR YOU. YOU PROBABLY ALREADY KNEW THIS. [01:56:26] Speaker 4: DISTILLED SPIRITS AT HOME UP 7/10 IN THE LAST MONTH AFTER 1/10 IN JUNE. A BIG RISE THERE. I HEARD ABOUT THAT FROM MICHAEL POND BEFORE YOU BROUGHT IT UP. A GLOBAL INFLATION-LINKED RESEARCH INFLATION HAS BEEN A LITTLE BIT. I THINK EVERYBODY WANTED TO TALK TO YOU BECAUSE INFLATION WAS BORING. INFLATION IS NOW LESS THAN [01:56:47] Speaker 21: BORING. WHEN DO WE GET BACK TO BORING INFLATION? FIRST OF ALL, THIS WAS A GOOD REPORT. WE COULD STOP THERE. BUT WE ARE NOT GOING TO. THIS IS A NECESSARY PRINT FOR THE FED BUT IT IS NOT SUFFICIENT. WE NEED TO SEE A LOT MORE. YOU CAN THINK ABOUT THIS PRINT AS SORT OF LIKE THE WEATHER. IT IS BETTER TODAY THAN IT HAS BEEN OVER THE PAST FEW DAYS. IT IS NOT GREAT. IT IS IN THE RIGHT DIRECTION. [01:57:14] Speaker 4: BUT WE ARE CERTAINLY NOT THERE YET. WHAT WILL BE THE BOND RESPONSE TO THIS? YOU ARE EXPERT AT THE ANALYSIS ACROSS FULL FAITH AND CREDIT. WHAT IS YOUR GOVERNMENT BOND THEME OFF A BETTER INFLATION [01:57:25] Speaker 21: REPORT FOR AMERICA? I THINK IT MEANS FOR THE FED. WHAT WE THINK IT MEANS FOR THE FED IS IT MAKES MORE LIKELY THAT OUR CALL WILL BE RIGHT FOR THE SEPTEMBER FOMC HIKE OF 50 BASIS POINTS. IF WE HAD GOTTEN ANOTHER STRONG READING, EVEN ON CONSENSUS READING GOING INTO IT, THAT INCREASED THE CHANCE OF 75. FOR NOW, WE FEEL PRETTY LESS THAN WHAT WAS PRICED IN. IT'S NOT SURPRISING THAT WE ARE SEEING A RALLY HERE WITH A BIT OF A STEEPENING IN THE CURVE. [01:57:55] Speaker 5: HOW ABOUT THAT BOGUS MATHEMATICS THAT TOM KEENE WAS DOING, TRYING TO EXTRAPOLATE OUT THE PACE OF DECLINES? CAN WE DO THAT? IS THERE ANY LINEAR EXTRAPOLATION THAT YOU ARE LOOKING AT TO DETERMINE HOW QUICKLY WE GO BACK TO A RATE THAT IS MUCH MORE PALATABLE TO BOTH CONSUMERS AS WELL AS OFFICIALS? [01:58:11] Speaker 21: SURE. AS MIKE WAS SAYING, THE DETAILS MATTER. ONE OF THE KEY DETAILS OF TODAY'S REPORT WAS THAT THE SHELTER COMPONENT, WHICH MAKES UP 40% OF CORE, IS STILL RISING AT A STRONG RATE. IMPORTANTLY, THAT TENDS TO TREND. SO IF THE DOWNSIDE SURPRISE WAS BECAUSE OF A COUPLE OUTLIERS THAT AREN'T EXPECTED TO CONTINUE, THEN THAT'S GOING TO NOT GIVE THE FED ANY COMPLACENCY HERE. THEY'RE GOING TO CONTINUE TO WEIGH ON THE FACTORS WITHIN CPI THAT TREND. SO THE FACT THAT SHELTER COMPONENT CONTINUES TO BE STRONG, YOU CAN'T JUST LINEARLY TODAY'S PRINT, INTO EVEN THE AUGUST PRINT, WHICH WE [01:58:47] Speaker 5: STILL EXPECT TO BE RELATIVELY STRONG. LISA: HOW CONCERNING IS IT TO YOU, MICHAEL, THAT THE KNEE-JERK REACTION IS WHAT WE'RE SEEING IN EQUITY MARKETS RIGHT NOW, A STRONG RALLY. JUST OVER, LIKE IN ONE MINUTE, JUST BAM, THERE YOU GO. PEOPLE ARE GOING FULL RISK ON. HOW MUCH WOULD YOU FAID THAT VERSUS LEAN INTO THAT ON THE DECELERATION? WHAT DO YOU THINK ABOUT THE DECELERATION THAT, YES, WE ARE SEEING A DECELERATION AND, [01:59:08] Speaker 21: YES, WE HAVE BEEN PAST PEAK INFLATION? FIRST OF ALL, IT'S NOT SURPRISING. THESE DAYS, WHEN DATA COMES OUT, THE MARKET'S REACTION, PARTICULARLY RISK ON ASSETS, TEND TO BE GOOD NEWS IS BAD NEWS. WE SAW THAT IN THE EMPLOYMENT RISK ON ASSETS. WE HAVE A REPORT TODAY THAT LEADS TO A LITTLE BIT MORE LESS HAWKISH FED, I WON'T SAY DOVISH, AND THEREFORE IT'S GOOD FOR RISK ASSETS TODAY. [01:59:38] Speaker 4: MICHAEL MCKEY WITH US AS WELL. MICHAEL PONDA BARCLAY IS WITH US IF YOU'RE JUST JOINING US ON RADIO AND TELEVISION. A TERRIFIC INFLATION REPORT, A JOY FOR THE WHITE HOUSE, NO QUESTION ABOUT THAT. AND MARKETS CELEBRATE UP 68 S&P POINTS, 1.7%, NASDAQ UP 2.3%, EVEN UP MORE A BIT AGO. MICHAEL MCKEY IS AT A FEW MINUTES HERE TO DIVE FURTHER INTO THE REPORT. YOU WERE MAKING A JOKE ABOUT SPIRITS AT HOME. THAT'S THE DEGREE OF GRANULARITY YOU CAN GO TO. WHAT'S ANOTHER GRANULAR ITEM THAT STICKS OUT? ONE THING I WAS INTERESTED IN [02:00:13] Speaker 20: WAS WHAT HAPPENED WITH MEDICAL CARE BECAUSE WE'VE JUST HAD THIS NEW LEGISLATION THAT WOULD BE PASSED. THESE DRUGS WERE UP 3/10 OF A PERCENT AFTER A 1/10 GAIN. THAT'S A FAIRLY HIGH MOVE FOR PRESCRIPTION DRUGS. THAT'S SOMETHING THAT COULD BE AFFECTED IF THE ADMINISTRATION IS ABLE TO GET SOMETHING IN PLACE TO NEGOTIATE FOR MEDICARE. AND IF THE COMPANIES DON'T RAISE THE PRICE ON PEOPLE WHO DON'T GET MEDICARE, NON-PRESCRIPTION DRUGS UP 1.3%. IF YOU'RE TAKING TYLENOL BECAUSE YOU HAD TOO MUCH OF THE DISTILLED SPIRITS, TOM, YOU'RE PAYING MORE FOR THAT. YOU'RE NOT GOING TO BE PAYING MORE FOR THE COMPANIES. YOU'RE NOT GOING TO BE PAYING MORE. WE'RE NOT GOING TO BE PAYING MORE FOR THE COMPANIES. WE'RE NOT GOING TO BE PAYING MORE FOR THE COMPANIES. [02:01:08] Speaker 4: IF YOU'RE JUST JOINING US ON RADIO AND ON TELEVISION TO THE BLOOMBERG WORLD, MICHAEL MCKEY IS WITH US AND MICHAEL POND AS WELL OF BARCLAYS AND OF COURSE BLOOMBERG AFTER AN HISTORIC INFLATION REPORT. CALENDAR ITEM, BRIAN DEESE IN CONVERSATION WITH OUR LISA ABRAMOWITZ HERE WITHIN THE HOUR. WE'VE SEEN MARKETS SURGE AND CONTINUE TO SURGE. S&P 500, A 1.7% MOVE. CRITICALLY, THE VIX COMES IN A WHOLE STICK. WE'RE GOING TO BE TALKING ABOUT THAT. [02:01:40] Speaker 6: WE'RE GOING TO BE CONTINUE TO A MORE CONSTRUCTIVE MARKET OF 20.69. KAYLEIGH? I'M LOOKING AT BREAK-EVEN RATES AS WELL, NOT JUST NOMINAL YIELDS. ON THE TWO-YEAR, WE'RE DOWN 11 BASIS POINTS ON THE DAY, 2.78%. SO, MICHAEL POND, DOES THAT SEEM CORRECT TO YOU, THAT TWO YEARS OUT FROM NOW, WE'RE REALISTICALLY GOING TO HAVE [02:01:58] Speaker 21: INFLATION THAT MUCH CLOSER TO THE FED'S TARGET? WE THINK SO. THE MARKET IS PRICED FOR A DECENT AMOUNT OF DISINFLATION. SO LOWER INFLATION THAN WHAT THE MARKET IS PRICED IN. THE MARKET IS PRICED FOR ALMOST 3% INFLATION, NOT JUST NEXT YEAR, BUT TWO YEARS FROM NOW, THE ONE-YEAR RATE IMPLIED BY BREAK-EVENS IS ALMOST AT 3%. SO, THE MARKET IS NOT BELIEVING THAT THE FED HAS YET DONE ENOUGH TO BRING INFLATION DOWN ANYTIME SOON. IF WE LOOK FURTHER OUT, SAY, FIVE-YEAR, FIVE-YEAR, IMPLIED BY THE MARKET, THAT IS PRICED MORE CONSISTENT WITH THE FED'S TARGET OF 2%. SO, THE MARKET THINKS THAT OVER TIME THE FED WILL GET IT RIGHT, BUT IT WILL TAKE SEVERAL YEARS, NOT JUST A COUPLE QUARTERS. [02:02:40] Speaker 4: MICHAEL PONZ, STAY WITH US WITH BARCLES AND MICHAEL MCKEE WITH US. WE ARE ONLY DOING MICHAEL'S TODAY ON THE INFLATION SHOW. KAYLEIGH DEMANDED THAT. MICHAEL GAPIN JOINS US NOW, HEAD OF U.S. ECONOMICS AT BANK OF AMERICA GLOBAL RESEARCH. THIS IS AN INCREDIBLY IMPORTANT ADD ON TO OUR COVERAGE. THE B OF A HAS A REALLY CAUTIOUS CALL ON THE EQUITY MARKETS AND ON THE BOND SPACE AS WELL. MICHAEL, YOU HAVE MY BEST CHART I HAVE SEEN IN THREE DAYS, WHICH IS THE DURATION OF PAINFUL INFLATION. DOES IT REALLY SUSTAIN OUT IN THE NEXT YEAR AND EVEN INTO 2024? WE THINK IT DOES IN THE SENSE THAT IT WILL TAKE A FEW YEARS [02:03:19] Speaker 22: FOR INFLATION TO GET BACK DOWN TO THE FED'S TARGET AND RESTORING PRICE STABILITY. WE THINK THEY WILL BE STICKING THIS PRIMARILY IN THE AREA OF SOME OF THESE SERVICES PRICES. AIRLINES GAVE US A BIT OF A RELIEF TODAY, BUT THERE WILL LIKELY BE SOME ONGOING STICKINESS ON THE SERVICES SIDE. OBVIOUSLY, THE VERY GOOD NEWS IN THIS REPORT IS WHAT WE SAW WITH USED CARS. WE HAVE ALL BEEN WAITING FOR SOME OF THESE DURABLE PRICES TO COME DOWN. THAT WOULD BE THE NEXT SHOE TO DROP AFTER GASOLINE PRICES COME DOWN. A LOT OF GOOD NEWS IN THIS REPORT. NO QUESTIONS AT ALL, BUT I THINK WE ARE LOOKING FOR SOME STICKINESS IN SERVICES TO PERSIST. [02:04:00] Speaker 4: MICHAEL, LET ME STILL THE THUNDER THEN FROM KAILEY LINE. SHE WAS DISCUSSING DEMAND DESTRUCTION. DO WE SEE DEMAND DESTRUCTION IN THIS REPORT AWAY FROM USED [02:04:09] Speaker ?: CARS? [02:04:10] Speaker 22: NOT IN THIS ONE PARTICULAR REPORT. NO, WE SEE SOME RELEASE HERE. PARADOXICALLY, THE WEAKER THE REST OF THE WORLD GETS, SOMETIMES IT HELPS OUT THE U.S. AND IN THIS CASE, THE DECLINE IN ENERGY PRICES AND HOW QUICKLY THAT FEEDS THROUGH TO GASOLINE PRICES. AGAIN, IF THIS IS THE FIRST OF SUCCESSIVE REPORTS WHERE WE COULD SEE SOME REVERSALS AND DURABLE PRICES, THAT WILL HELP OUT THE U.S. CONSUMER. [02:04:37] Speaker 6: OBVIOUSLY, MICHAEL, THE FED'S GOAL IS TO GET DEMAND DOWN. THEY ALSO WOULD LIKE TO SEE FINANCIAL CONDITIONS GETTING MORE RESTRICTIVE. YET, WHAT WE SEE WITH THE MORE THAN 2% RALLY ON THE NASDAQ 100 FUTURES RIGHT NOW IS FINANCIAL CONDITIONS ACTUALLY GETTING EASIER. IS A GOOD NEWS REPORT ON THE INFLATION FRONT STILL A BAD NEWS REPORT FOR THE FEDERAL RESERVE IF THAT IS THE OUTCOME? [02:04:58] Speaker 22: NO, I THINK THE WAY THAT I WOULD LOOK AT IT IS OBVIOUSLY THE LABOR MARKET IS EXTREMELY STRONG AND DEMAND CONDITIONS ARE STRONG. AND AS YOUR PREVIOUS GUEST, MICHAEL PONN MENTIONED, GOOD NEWS THERE IS BAD NEWS IN TERMS OF WHAT IT MEANS FOR THE FED. THE FED'S SOFT LANDING OUTLOOK IS SOFT LANDING OUTLOOK, THE FED'S SOFT LANDING OUTLOOK, THE MORE THE FED CAN ACCEPT GOOD NEWS ON THE OTHER SIDE OF THE DATA FRONT. THEY NEED THESE TYPES OF REPORTS IN ORDER TO IMPROVE THE LIKELIHOOD OF SOFT LANDING. [02:05:31] Speaker 4: WHAT IS THE CALENDAR ITEM ON THAT, MICHAEL MCKEE? I BELIEVE WE ARE IN AUGUST 10-ISH. [02:05:39] Speaker 20: WE ARE GOING TO GET TO SEPTEMBER 10-ISH. [02:05:43] Speaker 4: THERE IS GOING TO BE ANOTHER REPORT, RIGHT? I BELIEVE IT IS SEPTEMBER 13. I CAN DOUBLE CHECK THAT VERY QUICKLY. THAT IS FINE. IF WE GET TWO MONTHS LIKE THIS, HOW DOES THAT CHANGE THE DIALOGUE FOR CHAIRMAN POWELL? DOES HE TAKE A VICTORY LAP? [02:05:55] Speaker 20: HE MAKES SURE THAT EVERYBODY KNOWS THAT THE FED IS STILL FOCUSED ON THIS, BECAUSE IT IS GOING TO TAKE -- JUST MATHEMATICALLY, AND MICHAEL GAPIN CAN PROBABLY GIVE YOU A BETTER OFF THE TOP OF HIS HEAD HINT THAN ME, IT IS GOING TO TAKE A LONG TIME TO GET DOWN TO WHERE THE FED WILL FEEL COMFORTABLE IN MOVING RATES. THEY HAVE SAID THEY ARE GOING TO GET TO NEUTRAL OR ABOVE NEUTRAL AND STAY THERE EVEN AS INFLATION DECLINES. SO THEY ARE GOING TO HAVE TO GET DOWN TO 3% OR SO, IS WHAT THEY ARE HINTING, BEFORE THEY DO ANY KIND OF MOVE. HOW LONG DOES THAT TAKE? [02:06:31] Speaker 4: WE SEE AN ADVANCED DOW FUTURES NOW UP 433,152 ON THE DOW. SPX UP 71 POINTS AND 2.4% MOVE ON NASDAQ 100, REALLY [02:06:41] Speaker 6: SOMETHING. KAILEY? LET'S BRING MICHAEL PON BACK INTO THE CONVERSATION AS WELL. WE HAVE NOW HAD A FEW MINUTES TO DIGEST THIS REPORT, YET THE MOVES ARE STICKING IN THE BOND [02:06:50] Speaker 21: MARKET. CAN THEY STICK PAST TODAY? WE ARE GOING TO TAKE A LOOK AT THIS POINT. I WOULD LIKE TO SHOW YOU THAT THE INFLATION OUTLOOK IS NOW MUCH MORE BALANCED THAN IT HAD BEEN. A FEW MONTHS AGO, EVERYTHING WAS POINTING IN THE SAME DIRECTION OF RISK TO INFLATION BEING TO THE UPSIDE. WHETHER WE LOOK AT COMMODITIES, SHIPPING COSTS, THE DOLLAR, WAGE GROWTH, ET CETERA. THEY ARE ALL IN THE SAME EXACT DIRECTION. NOW IT IS A MUCH MORE BALANCED OUTLOOK. THAT IS A LITTLE BALANCED OUTLOOK. THE LABOR MARKET IS VERY TIGHT AND THAT IS COMING THROUGH IN THE WAGE REPORT WE GOT ON FRIDAY AND AVERAGE EARNINGS AS WELL. BUT ON THE FLIP SIDE, COMMODITIES HAVE ROLLED OVER. YOU LOOK AT COPPER, PALM OIL, CORN, COFFEE, COTTON. PICK ANY COMMODITY AND IT IS MORE BALANCED OUTLOOK AND THAT IS SOME OF WHAT WE GOT TODAY. BUT YOU REALLY NEED CONSISTENCY IN THESE REPORTS. [02:07:51] Speaker 6: ONE REPORT IS NOT ALL IT IS GOING TO TAKE. ONE REPORT IS NOT ALL WE ARE GETTING THIS WEEK. [02:07:58] Speaker 22: MICHAEL GAPIN, PPI IS TOMORROW. WHAT IS THE READ THROUGH? I THINK THE READ THROUGH THERE IS X ENERGY PRICES. WE NEED TO SEE, YOU KNOW, SOLID UNDERLYING PRICE PRESSURES IN THE DOMESTIC ECONOMY. SO 0.4, 0.5, WHICH IS KIND OF WHERE THE MARKET IS THINKING. LATER IN THE WEEK, I THINK WILL BE REALLY INTERESTING TO SEE IF IMPORT PRICES, X PETROLEAN, DECLINE AGAIN FOR THE SECOND STRAIGHT MONTH. THAT IS WHERE OUR HEAD IS AROUND. THAT IS WHERE CONSENSUS IS. AGAIN, THAT IS A MIKE PONS POINT. WE NEED TO SEE THESE TYPES OF THINGS COMING TRUE. WE NEED TO SEE THEM ON MORE THAN ONE REPORT. GETTING A STRONG DOLLAR TO GIVE US SOME PASS THROUGH INTO IMPORT PRICES IN THE CONTEXT OF LOWER TRADE COSTS WOULD BE VERY IMPORTANT. BUT I THINK WE SUSPECT A BLEND HERE. STRONG UNDERLYING PRICE PRESSURES, PRODUCER PRICES, BUT WE COULD GET SOME MORE RELIEF ON IMPORT PRICES. [02:08:52] Speaker 4: MICHAEL, WHAT IS THE NUMBER? MICHAEL, I HAVE FIVE MICHAELS WITH ME TODAY. WHO DID THIS? I HAVE NEVER HAD SO MANY MICHAELS AROUND ME IN MY LIFE. MICHAEL GAPEN OF BANK OF AMERICA, WHAT IS THE SINGLE ATTRIBUTE THAT DRIVES INFLATION LOWER FROM A 9% LEVEL? [02:09:10] Speaker 22: I DON'T THINK THAT THERE IS ONE. THIS IS THE POINT. YOU DON'T GET BAD OUTCOMES ON INFLATION LIKE THIS WITHOUT A MULTITUDE OF THINGS HAPPENING. I THINK WE NEED RELIEF ON ENERGY AND COMMODITY PRICES. WE ARE GETTING THAT. WE NEED PAYBACK ON CORE GOODS PRICES. SOME SIGNS WE ARE GETTING THAT AND THEN WE NEED MODERATION IN THE DOMESTIC ECONOMY. I DON'T THINK IT IS ONE THING. I THINK WE NEED TO HAVE ADVANCES ON MULTIPLE FRONTS. [02:09:37] Speaker 21: IF I CAN ADD ONE MORE TO THAT, INFLATION EXPECTATIONS. THE FED IN JUNE WAS PARTICULARLY CONCERNED ABOUT A SHARP JUMP IN THE INFLATION EXPECTATION COMPONENT OF THE MICHIGAN SURVEY. THAT IS BACK DOWN NOW AS IS THE INFLATION EXPECTATIONS COMPONENTS OF THE NEW YORK FED SURVEY AND BREAK EVEN AS WELL OFF THEIR HIGHS. THAT IS AN IMPORTANT FACTOR FOR THE FED IN THEIR OUTLOOK FOR [02:10:01] Speaker 4: INFLATION. MICHAEL GAPIN HAS TO LEAVE US AT BANK OF AMERICA. THANK YOU FOR DROPPING BY TODAY ON THIS HISTORIC MOMENT. MICHAEL MCKEY WITH US WITH BLOOMBERG ECONOMICS AND OF COURSE MICHAEL PONDA BARCLAYS CONTINUES WITH HIS TRUE EXPERTISE IN THE FIXED INCOME SPACE. KAILEY, WHY DON'T YOU BRING IN CAMERON CHRIST WHO IS SYNTHESIZING THIS. I WANT TO DO A MAJOR TALK ABOUT THIS. WE WILL TALK ABOUT THE FIRST TO MICHAEL NATHANSON. WE WERE GOING TO HAVE CRAIG MOFFETT ON BUT IT IS AN ALL MICHAEL SHOW UNTIL CHRIST SHOWED UP. WE HAVE NATHANSON ON TO TALK [02:10:37] Speaker 6: ABOUT THE MEDIA AND WE WILL DO THAT AGAIN SOON WITH A GIANT. WE WERE GOING TO DO THAT. WE ARE GOING TO DO THAT. WE ARE GOING TO DO THAT. CAMERON CHRIST WHO HAS A DIFFERENT NAME, THANK THE LORD, WHO IS ALSO PARSING THIS DATA. CAMERON, LOOKING AT THE MOVES WE ARE SEEING ON THE BACK OF THIS, YIELDS DRAMATICALLY LOWER, FUTURES DRAMATICALLY HIGHER, THE DOLLAR DRAMATICALLY WEAKER. [02:11:01] Speaker 23: DOESN'T HAVE A DIFFERENT NAME? WELL, I MEAN, ULTIMATELY WE ARE SORT OF UNWINDING A LOT OF WHAT WE PRICED AFTER THE PAYROLL FIGURE, RIGHT? NOW WE HAVE GONE BACK TO 50. SO I SUSPECT WE WILL CONTINUE TO PRICE 50 FOR SEPTEMBER. AND, YEAH, I WOULD THINK THAT CERTAINLY ON THE YIELD FRONT THESE MOVES WILL PROBABLY STICK BY AND LARGE. AS FOR EQUITIES, THAT KIND OF REMAINS SORT OF SUBJECT TO THE EBB AND FLOW NOT ONLY OF INFLATION AND MONETARY POLICY, BUT ALSO CLEARLY THERE IS A SENSITIVITY TO GROWTH NUMBERS AS WELL. SO IF WE SEE HENCESFORTH THAT SOME OF THE GROWTH FIGURES ARE LOOKING QUITE POOR, THEN ONE MIGHT POSIT THAT EQUITIES COULD IN TURN LOOK A LITTLE MORE VULNERABLE. [02:11:57] Speaker 6: AND, OF COURSE, WE COULD SEE A FRESH CATALYST FOR MARKETS ACROSS ASSET CLASSES LATER ON TODAY WHEN WE GET REACTION TO THESE NUMBERS FROM FEDERAL RESERVE OFFICIALS. MICHAEL MCKEY, WE ARE JUST ABOUT TWO HOURS AWAY FROM CHARLIE EVANS TALKING ABOUT THE ECONOMY. THEN A LITTLE LATER ON, NEIL KASHKARI WILL BE DISCUSSING INFLATION IN PARTICULAR. WHAT DO YOU EXPECT THEIR MESSAGING TO BE AFTER A PRINT LIKE THIS ONE? [02:12:17] Speaker 20: THEY COME FROM DIFFERENT PLACES A LITTLE BIT. CHARLIE EVANS A LITTLE MORE DOVISH THAN NEIL KASHKARI, BUT I THINK THEY ARE BOTH GOING TO DELIVER THE SAME BOTTOM LINE MESSAGE THAT THIS IS GOOD NEWS, BUT WE ARE GOING TO WAIT UNTIL WE GET MUCH CLOSER TO THE DECISION TO MAKE A DECISION ABOUT WHAT WE ARE GOING TO DO IN SEPTEMBER, BECAUSE, AS CAMERON WAS SAYING, THINGS CAN GO BACK AND FORTH. GREG PETERS WAS TALKING EARLIER ABOUT HOW VOLATILITY IS THE NAME OF THE GAME. THAT IS WHAT WE ARE GOING TO BE SEEING WITH ALL OF THESE NUMBERS FOR THE NEXT MONTH, BECAUSE NOBODY REALLY KNOWS WHERE WE ARE GOING WITH THIS. [02:12:50] Speaker 4: WHAT IS YOUR LEAD CONCEPT, AS YOU WRITE FOR BARCLAYS THIS [02:12:53] Speaker 21: MORNING? THE TAKE AWAY FROM THE FED PERSPECTIVE, YOU HAVE TO THINK OF THE FED AS A RISK MANAGER. AND A YEAR FROM NOW, IF THEY DIDN'T DO ENOUGH AND INFLATION IS STILL HIGH, THEY WILL HAVE BEEN SEEN AS MAKING A BIG MISTAKE. IF THEY DO TOO MUCH AND INFLATION COMES IN TOO LOW AND THE ECONOMY IS A LITTLE BIT SOFTER, THEY WILL CALL THAT A WIN. FROM A RISK MANAGEMENT PERSPECTIVE, THIS PRINT DOES NOT CHANGE THE OUTLOOK. THEY STILL NEED TO CONTINUE TO FOCUS ON BRINGING INFLATION DOWN EVEN THOUGH THIS IS GOOD NEWS. [02:13:26] Speaker 4: MICHAEL PONT, I WILL LET YOU GO BECAUSE I KNOW YOU HAVE DUTIES AT BARCLAYS AS WELL. WE WILL CONTINUE WITH MICHAEL MCKEY AND CAMERON CHRIST OF BLOOMBERG. THANK YOU SO MUCH FOR JOINING US TODAY. CAMERON, JUST ON A HUNCH, I DID A QUICK FIBONACI RETRACE OF THE DOW JONES INDUSTRIAL AVERAGE. IT WAS JUST A HUNCH. WE ARE EXACTLY AT A 50% RETRACEMENT FROM THE TOP TO THE BOTTOM AND MAKING IT BACK UP TO THE TOP AGAIN OF DOW 36,000. WHEN DO YOU KNOW THAT A BEAR MARKET RALLIES THE BEGINNING OF A BULL MARKET? [02:13:58] Speaker 23: IN HINDSIGHT IS THE ONLY REAL ANSWER, THE ONLY REAL ANSWER THERE. I MEAN, I THINK IT'S EASY TO FORGET. I MEAN, IF WE GO BACK AND LOOK AT HISTORICAL ANALOGUES. IN 2000, THE PEAK OF THE dot-COM BUBBLE, THE MARKET PEAKED IN MARCH, BUT ALMOST REACHED A NEW HIGH IN SEPTEMBER, IF YOU LOOK AT 8,500, EVEN THE NASDAQ 100 CAME WITHIN 13% OF ITS BUBBLE PEAK IN SEPTEMBER OF 2000. SO A RETEST OR A SUBSTANTIAL RALLY AFTER AN INITIAL DRAWDOWN IS COMPLETELY CONSISTENT WITH A LOT OF THE HISTORICAL PRICE ACTION. UNFORTUNATELY, YOU ONLY KNOW IF YOU'RE IN A NEW BULL MARKET KIND OF ONCE YOU MAKE A NEW HIGH, AND THAT OBVIOUSLY ONLY COMES WITH THE BENEFIT OF HINDSIGHT. [02:14:54] Speaker 6: WELL, CAMERON, WILL THE FEDERAL RESERVE BE HAPPY TO SEE NEW HIGHS IN THE EQUITY MARKET WHEN THEY WANT TIGHTER FINANCIAL CONDITIONS? AT WHAT POINT, WHAT LEVEL WOULD THEY STEP IN AND BE LIKE, GUYS, NO? [02:15:03] Speaker 23: YEAH, I MEAN, THAT'S THE QUESTION. I WOULD THINK, ECHOING SORT OF THE PREVIOUS SPEAKER, THAT, YEAH, THE BATTLE HASN'T BEEN WON YET IN TERMS OF INFLATION. THIS IS AN ENCOURAGING FIRST STEP ON THE PATH. BUT IT IS NOT THE END OF THE JOURNEY. IT'S THE BEGINNING OF THE JOURNEY. SO TO SEE FINANCIAL CONDITIONS LOOSE IN MARKETLY, THUS BOOSTING THE NOMINAL DEMAND AGAIN, IS SORT OF COUNTERPRODUCTIVE. SO, YEAH, I MEAN, I THINK THERE IS -- THIS ISN'T THE END OF THE TIGHTENING CYCLE. LET'S NOT FORGET IT. WE'VE STILL GOT ANOTHER PAYROLL NUMBER AND ANOTHER CPI FIGURE BEFORE THEY RENDER THEIR DECISION IN SEPTEMBER. SO EVERYTHING CAN STILL CHANGE. [02:15:51] Speaker 4: THANK YOU SO MUCH FOR JOINING US THIS MORNING, HEAD OF MACRO POLICY HERE AT MACRO RESEARCH, I SHOULD SAY, HERE AT BLOOMBERG. DROPPING IN BRIEFLY, KATHY JONES JOINS US, CHIEF FIXED INCOME STRATEGIST AT CHARLES SCHWAB. DO I BUY BONDS, BILLS AND NOTES? [02:16:09] Speaker 24: WELL, I THINK THIS IS AS ALL YOUR PREVIOUS SPEAKERS HAVE BEEN SAYING, IT'S A FIRST STEP. IT'S CERTAINLY NOT CONCLUSIVE THAT WE'VE GOT, YOU KNOW, PEAK INFLATION BEHIND US. BUT, YES, YOU KNOW, ALL ALONG WE HAVE THOUGHT THAT AS LONG AS THE FED IS DETERMINED TO GET INFLATION DOWN, THEN THE, YOU KNOW, YIELD CURVE WILL INVERT, THEY WILL TIGHTEN UNTIL THAT HAPPENS. ULTIMATELY, THAT IS GOOD NEWS FOR THE BOND MARKET. [02:16:38] Speaker 6: ON THAT CURVE INVERSION, OBVIOUSLY, IT IS LESS SO NOW AFTER THE REPORT, KATHY, NEGATIVE 42 BASIS POINTS. HAVE WE ALREADY SEEN THE DEPTHS IF THIS IS THE TREND? [02:16:48] Speaker 24: YOU KNOW, IF WE GET SOME MORE GOOD PRINTS LIKE THIS, AND SOME EASING UP IN THE LABOR MARKET DATA, I WOULD SAY THAT MAYBE THAT WAS IT. YOU KNOW, HISTORICALLY, IT'S BEEN HARD TO GO BELOW 40 OR 50 BASIS POINTS ON TWO TENS. SO WE DID IT IN THE EARLY 80s, BUT WE HAVEN'T REALLY DONE IT SINCE. SO MY GUESS IS THAT THAT COULD BE THE LOW IF WE ARE IN A PLACE WHERE, YOU KNOW, WHERE WE START TO SEE THESE TREND IN THE RIGHT DIRECTION. [02:17:17] Speaker 4: THANK YOU VERY MUCH. TO MOVE IT TO FED POLICY, MICHAEL MCKEY HAS HAD TO LEAVE HERE AS HE GETS READY FOR HIS CONTINUING COVERAGE FOR THE MORNING OF THIS HUGE NEWS. I DO WANT TO EMPHASIZE, FOLKS, WE'VE STILL GOT A BID TO THE MARKET. WE'RE NOT DOWN TO A 19 VIX, BUT WE'RE GETTING THERE RAPIDLY, 20.58 PEOPLE WANT TO EMPHASIZE, THEN WE'RE GOING TO EMPHASIZE, AND THEN WE'RE NOT GOING TO EMPHASIZE. [02:17:46] Speaker 24: IF YOU'RE NOT GOING TO EMPHASIZE OF THIS FED, IS TODAY A PROFOUND DAY OR ANOTHER DAY ALONG THE PATH? IT'S A HUGE SIGH OF RELIEF FOR THE FED. IT GIVES THEM SOME BREATHING ROOM AND IT COULD BE -- IT COULD MARK THE TURNING POINT. WE JUST NEED TO SEE MORE CONFIRMATION OF THAT WHERE WE START TO SEE THE NUMBERS EBB A BIT CONSISTENTLY AND THEN THE FED CAN SAY, YEAH, THIS WAS THE TURNING POINT. [02:18:10] Speaker 6: BUT, KATHY, A TURNING POINT IN THE PACE OF RATE HIKES OR A TURNING POINT IN TERMS OF THE ULTIMATE DESTINATION? [02:18:15] Speaker 24: THE PACE, MORE THAN THE DESTINATION. NOW, THE DESTINATION'S BEEN UP FOR GRABS ANYWAY. I THINK THERE'S BEEN A WIDE DISAGREEMENT AMONG ECONOMISTS, AMONG THE FED MEMBERS AND IN THE MARKET AS TO WHERE THE ULTIMATE DESTINATION IS. AND WE STILL DON'T KNOW. BUT THE PACE COULD EASE UP A BIT, WHICH WOULD BE GOOD NEWS. [02:18:36] Speaker 4: KATHY JONES, THANK YOU SO MUCH. GREATLY APPRECIATED. TWO SHORT NOTICE HERE AND WE'LL HAVE MUCH MORE WITH HER IN THE COMING DAY. SHE IS AT CHARLES SCHWAB AS WELL. THANK YOU SO MUCH. WE WERE THRILLED THAT HE COULD JOIN US YESTERDAY. HE GETS TO THE STORY OF NOW, WAGE GROWTH IS RUNNING RED-HOT. ABSENT A TURNAROUND IN PRODUCTIVITY, THIS WILL ULTIMATELY FUEL HIGHER PRICES. THERE IN A SINGLE SENTENCE, PRODUCTIVITY, WHICH WAGE GROWTH, AND THE IDEA OF HOW IT AFFECTS PRICE. THE ANSWER IS THIS IS TANGIBLE. [02:19:17] Speaker 6: IT IS GOING TO BE SOMETHING TO WATCH IN THE REPORTS GOING FORWARD. ULTIMATELY, WHAT WE HAVE HEARD FROM ALL OF OUR GUESTS IS, YES, THIS IS GOOD NEWS, BUT IT IS ONLY ONE DAY OF DATA. WE HAVE ANOTHER CPI REPORT COMING TO THE FED'S NEXT POLICY DECISION. [02:19:36] Speaker 4: IS THIS THE BEGINNINGS OF THE MAKING OF A TREND, OR IS THIS JUST A STANDOUT REPORT? TOM: I'M GOING TO BE MORE OPTIMISTIC ABOUT IT. AFTER THIS HUGELY CONSTRUCTIVE CPI REPORT, THERE IS A SEQUENCE HERE, BUT AS NEIL DUTTA SAYS, WHAT ABOUT THE NATION'S PRODUCTIVITY? PLEASE STAY WITH US. [02:19:57] Speaker ?: We'll see you next time.