'Bloomberg Surveillance Simulcast' Full Show 9/27/2022

We have a government here that lacks economic policy credibility since the Brexit. But markets don’t like Brexit. It’s quite clear that banks do need to step up. Now what will stop the problem is not the Bank of England. The moves are extreme but they are unexplainable. The markets marking up be oh he is doing the UK economy is heading into Su Keenan already in a recession at this point of time. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz. In his turnaround Tuesday life in New York City front audience worldwide. Good morning.

Good morning. This is Bloomberg Surveillance on TV and radio alongside Tom Keene and Lisa Abramowicz. Some Jonathan Ferro features up 7 cents on the S&P and the Nasdaq up nine tenths of one percent. Take the close yesterday a new low for 2020 to get really ugly clothes. And you know as you say turnaround Tuesday John that does captured. By no means does it say or clear other CAC has really been following this nicely combining different asset classes and different kind ideas here in CAC says more to follow. We heard that from either Jeff you and

Nathan Hager on Bloomberg Radio. Same thing. More to follow. He said the range on Sterling some in the last couple of days. Yesterday on cable the low one of 350. The high what

nine thirty one. That’s quite an intraday range on a G10 currency. I’d never want to slow the showdown with math but guess what. Folks are pros now are really looking at this volatility. One idea to look at John is the real yield. You’re familiar with that this is where all the adults follow the inflation adjusted yield. And it’s real simple. John this is

stunning stunning stunning stunning. We’re 83 percent back from that negative one point 1 1 to the average before the great financial crisis of two point zero five percent. Most of that’s been done in the last three cups of coffee with Marmite a huge turnaround some without the Marmite. Not that we need that the last couple of days. The front end to the yield curve in the UK economy. What about at least 100 basis points or something close to that in the previous two days. It’s like you know 50 basis points every day. And Deutsche Bank

did a study showing that the five day rolling increase that you’ve seen in five year gilt yields has been the most on record going back to 1979. The reason why today’s reset today’s pause is interesting is because you’re seeing a buying of the dip not only in stocks and the risk assets but in bonds. And it feels stickier. John and we’re hearing from more investors that it starts to look attractive with real yields where they are. Goldman Sachs tried to coined the phrase terror. I saw that there is a reasonable alternative which I don’t know

if it’s going to stick. And it’s in the bond market. It’s not an equity. Exactly. When you say people get getting more constructive I know where you come with this. It’s in the bond market. It’s not its stocks. That’s exactly right. So this is the first step in finding a bottom right. It’s basically people saying OK maybe we can go into these yields here. However yesterday’s two year auction was actually really messy. So there is still some question about who’s gone. I was massive. I don’t understand. There wasn’t as much demand relative to what they

were offering as people had expected. So in other words what dealers had to take down was bigger. The individual investors were not taking down as big of a share. So that raised some concerns and actually spurred a bit higher leg upward of the yield. Yesterday we spent the morning talking about Tara. Tara Tara is going to catch on. No no. Where. My Tara not. No. No you’re not having it. Some you know John it’s historic times. I really want to emphasize this is a global condition. We’re not just focused on sterling although that’s where the

focus. That’s where it is. But guess what. There’s other currency zone. EMT asks why did they move on a percentage basis. Very much the same. E M is not giving it up. Tara can you talk about that a lot today. Just briefly I just want him up. Terry Tuesday futures up eight cents a one per cent on the S&P and the Nasdaq up about one full percentage point. You just said it’s down to the police sights on IBEX points 383 75 on a 10 year. It’s basically the last couple of days upside down. Eurodollar just

about holding on to ninety six eleven and crudely 77 755 on WTI. Yeah upside down but not necessarily with the same magnitude or convection. Perhaps we’ll get some conviction with some Fed speak. A lot of it. We get another of scroll of Fed’s bigger stay including Chicago Fed President Charlie Evans Fed Chair Jay Powell off in a Bank of France conversation with ECB as Christine Legarde and VIX head Augustin Carstens. And then of course Jim Bullard of the St. Louis Fed and the Minneapolis Fed President Neel Kashkari San Francisco Fed President Mary Daily. Or are

they all going to say that’s going to change the perception. We did hear a host of Facebook yesterday. Conclusions still the same. They see health in the market strength resilience in the balance sheets of consumers leading them to want to hike. John you were talking with us. Hugh Pell the chief economist for the Bank of England is going to be speaking around 930 a.m. Eastern time today. What may be the most interesting based on what we heard yesterday from the Bank of England and then the response where you saw a renewed like downward in the

pound as they realized that the Bank of England was not going to act in an emergency kind of measure. Just yesterday today we got a host of USA Today including USA FH F A House Price and S&P called S&P CoreLogic. House price data at nine. And then some home sales data today. Housing prices how much are they declining. Given the lack of volume given some of the concerns about mortgage prices and given just this feeling that perhaps people are not as willing to pay these prices in at 1:00 p.m. the auctions are actually matter. And

U.S. is planning to sell 44 billion ISE a five year notes. I didn’t mention yesterday’s auctions and I regret it because yesterday’s auction was actually important. Market moving. How much demand is there for five year yields near the highest levels going back to the last financial crisis at a time when people really don’t know how much further they could go John. I find this chart just to be absolutely amazing. They’re on radio their pursuit of valley through the valley of the pandemic at least and at the other side almost vertically through the valley of the

shadow of pandemic. You know we can talk about poems but I do wonder if we’re looking at something that is a five year Treasury yield or a Bitcoin. And people have talked about that. What does it mean when full faith and credit is moving like a party stock. Rameau. Thank you. Looking forward to the auctions a little bit later. Gasoline losses to global head of Affect Strategy had RTS our saga to catch up. We’re going to hear from the chief economist Sue Pell of the Bank of England a company leaks that got us involved in

PR. We speak and not just Fed speak. Now what you want to hear from the chief economist of Threadneedle Street. They are in a very tough spot as everyone says they are damned if they didn’t and if they don’t. If they look at the outlook for the moment he got rates pricing and cards next year. Households that are already going to be facing higher mortgage bills higher energy bills and then home mortgage bills potentially when they reset their mortgages in 2023. So I think it’s a very tricky situation. The Bank of England to find itself

in things and I’m sure they’re not going to be rushing to hike rates as lost losses. Everybody wanted them to in part because it’s not clear what the best path is. Also Hugh Pill is as American as you can get in academic economics. Oxford PPE and his Stanford degree speaks volumes about looking at the market. Does he represent the theory of the Bank of England right now or is there theory make it up as they go. I didn’t know that it’s making it up as they go along but they are in an unprecedented situation with

regards to the kind of regular G10 Central Bank policy making. Yeah. Yeah. But also I want to interrupt. This is so important. Ronald Reagan had Paul Volcker to raise hell. Does does does Andrew Bailey have the ability to straighten out the children. It’s as simple as that. Emma Chandra. They are so careful at this stage because of waivers. Before we had a summer of mistrust campaigning saying I want some things we should relook at the independence of the Bank of England. And I think the last thing the bank wants at the moment is to become

a political tool or get caught up in a political fight. So it really speaks more towards weight to letting the market force them rather than being proactively. I’ll see. We’re talking about a lower range for each for the pound versus the dollar. How low can it go before there is some sort of response. Politically if not from a monetary standpoint. The big psychological labels like Parity Oyster Count in people’s minds. Of course a lot of what we’ve seen in the last week has been dollar strength as well as studying weakness. Actually if you look at

euro sterling it’s not moved quite as much. And in trade weighted terms the pound is down about 5 percent year to date. So I don’t think that from the economic perspective we’ve really seen the pound materially cheapening up. And if that’s what we’re looking at. Morning. If the pound does not and it’s very hard to say. This has run its course and can go no further. Do you think that the Bank of England needs to validate current market pricing there because market pricing has adjusted and a humungous way in the last week or so. It

has absolutely. But at the same time it’s a reaction to both what’s going on domestically but also global bond breaches. You know Lisa was talking about the two year auction yesterday in the U.S. We’ve seen similar kind of movements across the world. So this isn’t something completely unique to the U.K. and the of does not that too that negates or can stand in the way of it. You know if the UK government is announcing unfunded fiscal expansion then markets as they have done. And they are so wonderful to catch up with you in London as

always ask telling us that if RTS on some wild moves in U.K. markets over the last couple of days I found the Bank of England statement to be pretty interesting to be honest with you and any one part of it was interesting to me. It was the second paragraph to second paragraph where they acknowledged what the government was done and at times said they welcomed it. So they said I welcome the government’s commitment to sustainable economic growth and to the role of the Office of Budget Responsibility and its assessment for prospects for the economy and

public finance. It’s just a peculiar effort not to go against the government too much in this. It was an interesting one from Governor Bailey yesterday. What matters is a bar chart. I’ve seen it from Bloomberg which is really good as seen in other media as well. And this is only one precedent. Back to think it was bomber in the 70s. I can’t remember the exact date right now John but they’re reacting to unprecedented action. Everybody whatever their politics going to agree on that of their economics John to give an idea of how extraordinary we are

living right now. The Bloomberg Financial Conditions Index for the United Kingdom is very very good man. It’s a set of ratios that sum together the dynamics of any given nation. The number to focus on is the accommodation are forced by the chancellor was 5.2 standard deviations. We’ve come in this morning to a still lofty in the stay unstable three point four standard deviations of accommodation. That’s what the governor has to deal with. That’s what he’ll pure pill has to deal with this morning. Looking forward to hearing from Hugh Pell a little bit later alongside all

of that Fed speak chairman pound later to Lisa just to clarify. That’s on digital currencies and not on the economy right now on Fed policy and monetary policy. Guess who’s not speaking. Is there anyone nuts. Is a few people not speaking. I would like to hear Chairman Power talk about monetary policy maybe another time. I don’t think that he’s going to be able to avoid it completely. With Christine Lagarde there too. I mean he said that they are discussing digital currency and stuff like that. I know but how can they not talk about the strength

of the dollar. How do they not talk about the currency. Well right now I didn’t say you know theoretically in 25 they’re going to be on the crypto show this afternoon. Hosted by Brammer. Guys what do you do. X is very fired up and they talk about where the dollar is going to be in 25 years. They have a really long time arising. It’s going to be digital. Why do we care. It’s going to be super super digital. My brain is going digital. Going to be fine. Features positive eight tenths of one per cent from

New York. This is blowing back. Keeping you up to date with news from around the world with the first word. I’m Lisa Matteo. Hurricane Ian is threatening to become the worst storm to hit Tampa in more than a century and has picked up strength and is now a powerful Category 3 storm. It made landfall in Cuba early today and could reach Florida as early as Wednesday with top winds of 140 miles per hour. More than 300000 people are expected to evacuate. The British pound is higher today after hitting a record low on Monday. Still traders

remained wary of the chance that Sterling could fall to parity with the dollar. Bank of England indicated it may not act before November to stem a rout in the currency. It’s the clearest signal yet that natural gas flows from Russia to Germany over North Stream won’t resume this winter. The pipelines operator says that it has sustained unprecedented damage. Leaks have been detected and markets will be watching for any indication of sabotage. At least one major investor thinks the worst global bond rout in decades is creating a buying opportunity. The co-founder of Double Line Capital Jeffrey

Gundlach tweeted that he has been a buyer of treasuries recently. It’s a potentially bold call. The Fed has delivered the steepest interest rate hikes in a generation and is pledging to keep rates higher. That’s proved a toxic combination for treasuries. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than 20 700 journalists and analysts and more than 120 countries. I’m Lisa Matteo. This is Bloomberg. Turning place on to 2 percent target will require further tightening of monetary policy as signalled in the recent FOMC projections. What will be important to

see clear and convincing signs that inflation is falling. Rinse and repeat. Susan Collins Federal Reserve Bank s Boston precedent. Now light from New York. Good morning to you. Futures up by nine tenths of 1 percent on the S&P on the NASDAQ 100 up by a little more than one full percentage point. Yields back down lower. Negative by about 10 basis points on a 10 year 382 13. We came very very close to looking at 4 percent on a U.S. 10 year. It is a turnaround this morning. Let’s see if it sticks. The euro just about

shelving some strength. Take your dollar a positive a tenth of 1 percent on that currency patch and 96 21. Right now what we’re doing this is a joy a joy joy joy. In this midterm election as we begin to look towards our coverage in Washington all that we’re going to do with Annmarie Horden. It is good to speak to someone with decades of experience who has an exceptional ability to go topic by topic. That’s James Lucey our senior political analyst at Capital Alpha Partners iconic at Prudential over the years. James thrilled to catch up with

you at this moment as well. I want to look at you know there’s a shutdown and there’s not going to be a shutdown and everything else every other networks talking about. But I want to know what the senator from West Virginia does if the Republicans take the majority. Does he switch over to the Republican Party. Well Tom Chris Whalen sends his greetings from dinner last night. There is not the most remote possibility of a shutdown at this point. I think Whalen. I think that McMansion is already telegraphing his right pathway to a graceful retreat. He

does not have the votes to pass this permitting bill. So they’ll simply vote for the continuing resolution when Schumer brings it up a second time either tonight or more likely tomorrow. But so what’s so important James is the guy is so powerful in a 50/50 ish Senate. Is it imaginable that on the first Wednesday of November he becomes a Republican to give them the majority. No it’s not remotely likely that he becomes a Republican because he is a truly committed Democrat. He is an LBJ Great Society Democrat. He remembers the Kennedy Democrats around the Appalachian

Regional Commission and brought so much money. He’s a traditional Bobby Byrd Democrat in many ways. He’s just not necessarily a you know a new wave progressive Democrat. He is not one of these conservative Democrats from Texas who are really little Ted Cruz’s in the making. He’s a dyed in the wool Democrat and will not switch. Now his problem though is that he has gone from an in almost unchallenged electoral position in West Virginia to one where he is currently polling behind Alex Mooney. No way Congress. Interesting. So he does not have a path to re-election.

I think he does not have a path to become the John Breaux of the Senate where he is the dealmaker and everything is really I think destroyed his relationships with both sides at this point. He’s the fiftieth vote. But but some of that swing voting credibility. Let’s talk about the path for President Biden heading toward this midterm election. We have seen gasoline prices bottom out start to tick higher. And yesterday we get this President Biden coming out and saying you know all of those big oil companies are making too much money. They need to cut

their profits. They need to continue to lower prices. How much is that really going to play. Well heading into the midterms as gasoline prices aren’t necessarily at the forefront in the same kind of way. Well you’ve got the bigger problem of economic chaos in the global markets showing up in terms of consumer confidence consumer consumer perceptions of the state of the economy the idea of the Fed clamping down the theory of a recession not now but next year. All of this undermines the sunny economic message which was really powering Biden forward from early August on.

I mean Biden really had a great month of August and he’s had a great September. But I fear that his timing was a little a little too early. And you know this combination of economic worry oil prices that are down now largely because of that action largely because of the fear of the recession. You know you still have people facing significant problems in their cost of living and their constituencies also that are very important to the Democrats like the working class Hispanics in Nevada. So yes I think that well this is really important especially given

the fact that President Biden spokesperson yesterday came out and said that they’re closely monitoring some of the market volatility. To your point. That was spurred or has been spurred from some of the Fed speak. Do you expect a more aggressive Elizabeth Warren type line from President Biden with respect to questioning this Federal Reserve in its actions heading into the midterms. Well. I’m not sure that the White House can challenge the Fed going into the midterms now it would really show that they’re worried about the economy. But the real worry the Biden crew has to have

is that we are in a recession. In the event that Biden does not win a solid Senate majority and at least to keep things close in the House I think the Senate could go either way. I do think the Democrats have a chance of getting a House majority if Democrats do well in this election. Biden saw the march better positioned than he would be if you have a recession imminent and Republicans controlling both chambers. You know we don’t need to worry about a government shutdown now but in future years as the US deficit increases and

Biden is so going into his reelection cycle I think next year is the time to worry about shutdowns. It’s a big change from what we were just six months ago maybe even three months ago. James fantastic to catch up with you sir. James Lucey of Capital Alpha Partners. They seek to explain this once to me. What does it mean when the White House says we’re watching markets carefully. What on earth does that mean. Fill up the NASDAQ. Beyond the Bell has never understood it down. Guys guys it’s good to see you guys. It means they

have a Bloomberg. Okay. I’ve seen the Bloomberg. They have. I asked. I have a business. I’ve been in and seen it. Lots of Bloomberg’s. There is there’s a point though underpinning what you’re saying which is is there an action that comes along with watching or is it hey we’re seeing that too. We saw something too. It was down. We’ve watched it. It only means something if you have the power or the willingness to do something. So when the Bank of England says something like yeah we’re watching it you get the feeling it means like we

might do something about it. When the White House says we’re watching done even know what that means. Although even the Bank of England basically people questioned what that meant as well. And they said well if you’re going to act why are you acting right now. Why are you just basically reaffirming that there might be some credence to this potential policy when ask or something on the schedule to do something about. Correct. I’m not sure whether the White House press secretary has got the same thing written into might be cut interest rates in the future at

some point. Any way you could explain this one to me as well. We’ve all woken up to headlines about how damaged Nord Stream 1 is and I have to say so I’m sort of scrambling around trying to work out where the damage is come from. The EU commission just said that they can’t determine the cause of the Nord Stream leaks just yet. It’s kind of bizarre this morning. The whole thing is such a strange story. Reading it you’re like are they telling us that some one actor sabotage this or do they just not know that

someone actor sabotage. No one did that. They’re saying we would condemn any act of sabotage if it happened. Theoretically it’s something happened. Futures up 1 per cent on the S&P. It’s a bounce off the lows yesterday which at the close were the lows of 20 22. From New York this is Bloomberg. In fact this Tuesday morning. Good morning. Here’s the money price action in the equity market. Futures up higher. Positive on the S&P by more than one full percentage point in the Nasdaq up by one point three nine on the S&P 500. New closing lows

yesterday for the year the lowest since December 2020. We turn around just a little bit. Let’s see if it sticks. And the bond markets similar story last couple of days last couple of months. Upside down yields lower by nine or 10 basis points on a two year to 424 24 38 after rising for 13 consecutive sessions while they remain to a 2007 high just off a 2010 high on a US 10 year. We retrace some of yesterday’s move. We’re down 11 basis points Tom 380 153. Just want to finish on foreign exchanges and have a

little look at Sterling which is back to a one away handle all over the place in the last 24 hours a high of 1 0 9 31 a low of 1 0 3 50. Hard to keep up with this one. Some front page of the paper today in the United Kingdom. Daddy Star kind of newspaper. You might enjoy some tabloid page through. Honey I shrunk the quotes. Yeah honey I shrunk the quotes is the quid is a quid a pound a quid is about pound. You like my banner yesterday on Pennies and Farthing and I

can’t stand it all that is very Dickensian. Is that what it was. Not a currency I ever got my hands on. All right. Now we are going to stop worldwide and have a conversation with a definitive expert on E. Arguably with Stanley Fischer he invented our concept of emerging markets. This is a guy or Damien Ceasar of Bloomberg hangs on every word. Mark Mobius was a communications major who got parchment from M.I.T. years ago and basically invented for Sir John Templeton. The emerging market business were honored that Mark Mobius joins us from Dubai this morning.

Mark just what a pleasure to have you with. Let me cut to the chase that every pro wants to know. How close are we to the instabilities of 1998 or 1992. I think we’re very close actually. We’re in really a strange situation because on the one hand you’ve seen this incredible increase in money supply. And my definition of inflation is devaluation of the currency. And if you increase money supply by 40 percent as we’ve seen in the U.S. then that’s what he devaluation of the money is going to be. And of course that’s where prices

are going to go. But we’re in a very strange situation now because we’ve got these crypto currencies. And here in Dubai I noticed that so many people transferring money in crypto currencies. And if you look at the emerging markets in particular places like Nigeria they do a tremendous amount of turnover in crypto currency model. What is money supply. That’s a big question mark right. I look Mark and you and I were on a stage at the Walter Four story I would say eight years ago. And you stick your neck out and said baloney that the

rules have changed for E. There’s this country. Can this conceit right now that E M is more financially solid E M as our act together unlike 1998 do they. It depends on the country. Yeah that’s a great thing about emerging markets you see such variety. You see some countries that are doing a terrific job. By the way Brazil which used to be a basket case has been doing a pretty good job in stabilizing the economy. And then you go to a place like Taiwan even Indonesia. They are doing a very good job in managing their

economies. So it really depends on where you’re going. Then you go to Turkey and then you have tremendous amount of devaluation of the Turkish lira and really a lot of instability financially. But there are even opportunities in Turkey. So Mark at this point you started by saying that there are some analogues to 1998 that were getting close to that. What’s the dividing line between now and then the trigger point that makes this devolve into something that needs to be immediately addressed rather than just a rapidly ball. A rapidly evolving ball of pain for debt investors.

The real situation now is that unlike what we had in the past during the Asian financial crisis is that the dollar debts are not as big as they were. Because a lot of these countries learned their lesson. It was not a good idea for them to get into that. So they realized that they didn’t do it except for a number of countries that had been involved in the belt and road projects that China’s been doing where they’ve lengthened off a lot of money in renminbi and dollars. These countries which they can’t pay. So here again

you have tremendous differences between countries and in some cases ISE. I say we’re close to these Asian financial crisis kinds of situations. Mark I’m glad that you brought that up. The Belt and Road Initiative of China which by some accounts has significantly soured. There was one report recently. It was published in The Wall Street Journal yesterday that nearly 60 percent of China’s overseas loans are now held by countries considered to be in financial distress up from 5 percent back in 2010. This really raises a concern for China which has acted more like a banker than

say the IMF when it comes to these types of loans. How does this develop. Mark how does this evolve into something that could potentially have contagion effects in markets. Are there countries that are going to just basically be flat on their backs unable to pay their bills that you’re looking at. There are a number of countries in that situation. I was in Sri Lanka six months ago and of course they are flat on their backs. They can’t pay and they owe the Chinese so much. And it was they all other donors. The problem is is

that nobody knows what the numbers really are because the Chinese signed agreements with these countries that they should not disclose. They cannot disclose what they owe and what the Chinese lent to them. So if we’re really in a dark spot and if you talk to IMF people they get really very unhappy about the situation. Mark you’ve got a fancy chart really fancy chart. It’s a very weak extrapolation of how we get to another Plaza Accord in the Naive Charters 2032. I don’t buy it for a minute with the rates of change first and second derivative

dynamics that we see right now. How close are you an idea having a beverage of our choice at the Plaza Hotel. Yeah this is a really interesting question because here you have the dollar so strong. Okay. And prices in America are not down backed by just about one month all over America and people are spending like crazy. And you have a London now that run to the pound has devalued against the dollar by what 30 percent. And you try to find a hotel a decent hotel in London or 300 or 400 euros 400 pounds. It’s

crazy. The whole situation. And that’s why I say I think we’re in a situation where nobody really knows what the money supply is. And I believe a lot of this is because of the crypto world. Mark you’ve got standards. I’m guessing you’re looking for a different kind of quality hotel compared to many of us. I mean you can’t do stuff like this in Japan anymore Mark. Times have changed. It’s not just inflation please. They are at the train hotels. And by the way in the U.S. I checked into a Marriott and they me that you

want maid service. I said what do you mean. So we don’t get maid service unless you ask for it. And suddenly every seven days every seven pharaoh’s house. Yeah. I’m not sure that would work for me. Mark I wanted to bring up Rafael Bostic of the Atlanta Fed on the U.K.. And Lisa what is your view on this. He was basically asked about what was happening in the U.K. at the moment and whether it adds to the odds of a global recession. And he turned around has said it doesn’t help. And I just wondered what

the rest of the world would like to say back to the Federal Reserve. So if people are worried about the U.K. not helping. I mean surely the Federal Reserve an aggressive rate hikes and a strong dollar is a bigger threat to the global economy than what has gone on in the U.K.. Well and that’s actually perfect Segway mark into what you’re looking for in terms of some of the distress that you’re tough up focused on for some sort of response from the Federal Reserve some sort of concerted effort like Tom was talking about basically. Is

there a cap on how much pain there can possibly be. Is there a trade that you’re looking at. I don’t think that that is going to care about the markets. They don’t care about inflation. That’s their first priority. And their playbook is to keep on raising rates until the rate is above. Which means you’re talking about 9 percent inflation now 8 percent. Now if you look at the UK to be fair they have been reducing money supply. Of course they raise that as much as the U.S. but the U.S. money supply still up is not

really going down that much. So I think we’re in a situation where the playbook for the Fed is going to continue and they’re going to continue raising rates and the markets is just going to have to live through it. And by the way let’s be reminded high rates don’t mean a bear market. I mean there may have been many cases in history where the rates were high but we had a good you know a good bull market. So we have to watch I think speaks carefully. My Mobius great to catch up to catch up to

a short notice to Mark Mobius. Thank you sir. A Mobius Capital Partners. I want to talk about this story this morning about why a Fed pause and whether that’s bullish or not should be should be questioned. And some the issue I have with this whole Fed pause thing right now is the only thing worse than the Fed hiking. And a recession is not cutting in a recession. If the Fed pauses we have to ask ourselves what the economy looks like in that environment. And if we are in a recession and the Fed just stops hiking

as opposed to what it traditionally does which is cut interest rates. I struggle to see how Tom with conviction that would be bullish. This is original territory led by a massive fiscal shock from a natural disaster. We’re still dealing with it. And John what you’re going to see and you heard it from the wonderful Charles Evans this morning and I’m sure we’ll hear from others as well is look for hedging October hedging November. They’re going to start hedging the words. The certitude of August is going to drift away. What I heard from Charles Evans this

morning Lisa was the hope that maybe unemployment only goes to 4.5 percent and that we don’t get a recession 4.5 percent. It’s still a pretty decent move from where we are on right now. It still means that thousands of people are losing their jobs. So it’s not a comfortable position for anyone to be in the hope. I think with the Fed pivot really comes down to the economic data cooperates that we actually get a massive deceleration in inflation from from crossover effects or whatever that case may be a normalization from that shock saved for that.

You’re right. An actual retracement would have to come on the heels of significant pain that some people argue Mike Wilson included has not yet been priced in. Drum roll Marcus CAC of J.P. Morgan. Now I’m not going to say he’s sort of to sink the bearish. It’s a sort of drum roll. I’ll give you the first paragraph and I’ll cite the second paragraph for later because this is a tease. That’s what status TV guys keep up is the quote rising risk of the Fed engineers recession by intent or accident. While we remain confident that a

softening in labor markets and core inflation is in the pipeline we’re becoming less confident. The central banks will pause. Find out if he’s bearish next. He’s not. He’s not. She’s up 1 percent on the S&P. From New York. This is Glenn Beck. Keeping you up to date with news from around the world with the first word. I’m Lisa Mateo. Hurricane Ian has now turned into a powerful Category 3 storm as it takes aim at Florida. It made landfall in Cuba early today. It’s now on track to become the worst storm to hit Tampa in more

than a century. Hurricane conditions could arrive in Florida Wednesday morning with winds of up to 140 miles an hour. A meeting today between Chancellor of the Exchequer quasi courting and top British financiers could be difficult since courting introduced his mini budget on Friday. The pound has plunged in shares in British banks and insurers have been battered. Those attending the meeting will want answers on how courting can restore investor confidence. President Biden is repeating his demands for oil companies to charge less. At a meeting of the White House Competition Council the president said that the price

of oil worldwide was down last month but quote We haven’t seen the lower prices reflected at the pump. Gasoline prices in the U.S. have fallen by more than a dollar since hitting a peak of more than five dollars a gallon in June. Goldman Sachs and BlackRock are turning more bearish on equities for the short term. Both warn that markets are yet to price in the risk of a global recession. Goldman cut equities to underweight in its global allocation over the next three months. BlackRock is advising investors to shun most stocks. Global news 24 hours a

day on air and on Bloomberg Quicktake powered by more than 20 700 journalists and analysts and more than 120 countries. I’m Lisa Matteo. This is Bloomberg. They expect to raise interest rates further over the next several meetings to dampen demand and guard against the risk of a persistent upward shift in inflation expectations. I cannot bring the price of gas down. I wish I could but I can’t. Maybe a good reform in the electricity price setting would help more. This is not for me to do. I wish I could. It’s a strong suggestion from Christine Lagarde

the ECB president from New York City. Good morning to you. How is the equity market a bounce back off the lows of a year on the S&P 500 positive by more than one full percentage point up 41 points. I follow the pharmacy the the second part of J.P. Morgan’s market clinic. Here’s the follow up. Fed hawkishness leaves stocks very oversold. Some preconditions for a market bottom falling into place. Stocks are looking increasingly cheap and approaching deep value outside of the U.S. and positioning is extremely depressed. Interesting actually in all seriousness in all seriousness how the

tone of some of these notes from the big bulls has changed on this night. Talk more about limited downside than they are about this massive move they’re expecting and see around what they’re waiting for is October 14th when the earnings season kicks in. And as somebody said yesterday I’m sorry Camp recited. It’s not about this coming Q3 and Q4. It’s about what happens early next year. There’s a fair amount of gloom out there about that. Going to keep my opinion out of it. Here’s my opinion though. Selected group. I remember Dell Deutsche Bank Hydrocarbons and

certainly Edward Morris at Citigroup absolutely nailed the 37 percent decline we’ve seen from a panic of 120 down to eighty dollars in West Texas Intermediate. Is it called the year. And I’m going to give that to preach misery. But it’s right up there. Stephen Schork lives this president of the short group and he is absolutely definitive on the micro data of your hydrocarbon market. Stephen Schork Cudmore says we’re going to wander down to this range. What are the ramifications for your world if oil continues to drive lower. Yeah absolutely. We’re still at a level Tom

looking at oil I mean mid to high 80s which is still an attractive level for the producer and both the consumer. So it is this sweet spot where prices are high enough to attract investment into bringing more beatings to the market. And it’s not so high that it’s going to choke off demand on the consumer. And our concern now is we’re now testing an area mid to high 70s. This is the low end of the limit of our mild recession scenario. So we’re down here. I’ve been in the cap for the past several months that

the United States economy global economy are in recession. And we are seeing that pullback in most commodity markets especially in the energy markets. Now the concern here is if Jay Powell succeeds in what he’s trying to do and that is halt inflation well he can certainly send the United States economy into his tailspin. And of course the global economy will follow what’s he is judged. That’s great. Steve you were right where I want to go. What’s the history of central bankers intruding into macro demand that affects the hydrocarbon market. I don’t see history where they’re

really worried about a gallon of gas now. They’re not there while they’re worried about a gallon of gas. Tom from the standpoint that it is a driver. The key driver in inflation now I’m going to take a kind of a shot up Legarde here in that previous clip in saying she wished she can control energy prices. Gee. Does she wish she can control food prices. Because that’s the other shoe that is going to drop on the economy’s neck here. It’s not energy energy. Gasoline prices are falling for 90 consecutive days a streak that just ended

about a week ago at the retail pump. So we are seeing that pullback in energy. What we’re not seeing and what we’re going to see is we’re not seeing any pullback in food costs. And because this harvest in the United States it’s going to be a poor harvest compounded by the lack of supply coming out of Ukraine. Food inflation is the next shoe that drops off the said economy. Inflation is going to continue to run away. The Fed has no choice but to choke off this demand and that therein is the risk that if we

do go in from a mild recession into a severe recession this this is too gloomy Lisa. Pick it up and say oh yes I’m going to make it super cherries. Let’s talk about this rolling inflation from one area to another. And this is one theory behind sticky inflation that has to happen where one area after another experiences a real pickup in pricing. So it really perpetuates itself. Does that leave some sort of scenario next year where you get some serious deceleration in inflation. Or does that mean that right now we’re looking at rates that are

going to have to stay high because inflation is going to be that much more persistent than people are really aware of. Well absolutely. I think on both sides of the aisle they’re playing whack a mole when it comes to inflation. Attacked in one area energy over the summer and they hit that mall down. And now that food mall has popped up. Now the problem going forward is the United States now is committed to buying back all those barrels that we withdrew from the Strategic Petroleum Reserve. Right. OK that’s great. Those barrels that a 40 year

low. But now U.S. producers have got into a deal with the government that they’re going to start supplying at attractive prices. Got oil back to the SPDR. So when it’s time for the government start buying back the SPRO they’re going to be competing against U.S. refiners because now U.S. producers are going to sell dry when they should be sold to the refiners. Inflation is here to stay. Higher rates are here to stay. Stephen when we take a look at the U.S. it pales in comparison to some of the energy problems in Europe which is the

reason why Christine Legarde is hoping and wishing she had more control over that situation. Are we properly priced for a winter in which no gas goes through Nord Stream line. No we’re not. We’re certainly we’ve seen where we can go a few weeks ago. Energy play. Natural gas prices in Europe went to nearly the equivalent of six hundred dollar a barrel oil. Now Legarde they want to have the reforms. Let’s talk about what the E.U. did two years ago when they cut off the supply of permits in the carbon market which drove carbon prices 600

percent higher which in turn drove natural gas prices 18 percent. Eighteen hundred percent higher. And this all proceeded whatever happening in the Ukraine. So we do have government manipulation in that market that did set the course for a runaway natural gas and hence electricity market in Europe. Now that’s being compounded by by the Ukraine. And what we’re seeing now with both Nord Stream water and of course the headlines of Nord Stream 2 is no we are not price. It’s going to be a very cold chilly winter in Europe. And I do not think they’re fully

priced in for say Michel. Many people agree with you assess they may shock that if they show a group as gas prices up again today Lisa and the bearish case the most bearish case you could make for Europe at the start of the year I think a lot of people would argue that it’s materialized in Europe. No extreme one can joke about the way this has been communicated. Today it’s down coming into Windsor. Have they managed to get storage to where they like it to be ahead of time. Yes. We’ve seen a lot of headlines

about that. But David Focus Lantos Deutsche Bank spoke to our team early this morning. And the point that he was making is an important one for all of us to realize the prospect of gas rationing in Germany. What it means for industry what we’re already starting to see shutdowns Lisa because they can’t afford to pay the bills. How much more of that we’re going to see in the next three months. How do you price in the ramifications of industrial status in the response to a lack of natural gas. It is hard to game out but

you’re right. If it’s the base case do people start getting ahead of that. We’ve already seen that on the periphery. The idea that we are seeing factories start to ground to a halt in certain peak out. John I just did this for the first time in the holiday season as the leaves brown across Central Park. I looked at the low for Berlin this week and it is a stunning 40 degrees Fahrenheit in two days. We need a meteorologist deal with that. Europe. We will. We will need that. Features positive 1 percent from New York. This

is blowing back. We have a government here that lacks economic policy credibility since the Brexit. But markets don’t like Brexit. It’s quite clear that banks do need to step up. Now what will stop the problem is not the Bank of England. The moves are extreme but they are unexplainable. The markets marking up to be oh he is doing UK economy is heading into if not already in a recession at this point of time. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz. And breathe life from New York City. Audience worldwide. Good morning.

Good morning. This is Bloomberg Surveillance Life on TV and radio alongside Tom Keene and Lisa Abramowicz. Some Jonathan Ferro futures bouncing back by more than 1 per cent to CAC yesterday upside down. A really historic day. Demian Ceasar who is absolutely brilliant at Bloomberg Intelligence Derived is just publishing on all this John. He really emphasizes the global nature of it. Yes there’s the idea. Soon soon. Crises of Istanbul Ankara of London the city. I get the job. But this is a global event. We’re seeing it all centers around the Fed speak today. The huge pills

speak today. And what we’ll hear from Jerome Powell in the coming. After quite a session yesterday Tom of the S&P 500 closing at new lows for the year since December 2020 and the 10 year closing at the high since 2010. It’s been quite a story over the last couple of months thinking about a Dow 36000 to 26000. Is that even feasible. And you know I thought The Wall Street Journal really on that. Well yesterday the VIX is only 31. John based on what you just said I would interpolate a 36 37 VIX. It’s not there.

Have we seen that cathartic moment. No. We’ve talked about that. Have we seen in Sterling. Maybe statement cannot be. Most says this this morning darkest before the dawn. Question mark. We think the low for sterling in this cycle is in. That’s from Steven Gallo just moments ago from BMO Tom. We see a high risk of that loping retested within one to three months before the cyclone. The dollar completely turns. But ultimately that’s the call from Steven Gallo this morning. His call for the bank giving that some 75 basis points to high risk of something close

to 100 hundred and twenty five. Well I’m not going to game that out. I think that makes sense based on everything I’ve read. But what I would say John is everyone’s publishing will bring everybody up to speed as best we can. And part of that is our guest conversation. Thrilled. Darrell Cronk joins in moments. Scott a new consensus Lacey you know what it is piling into cash turning against a dollar cash. Well that’s been the consensus for a while. And yet yesterday’s two year auction didn’t go as well as people had expected. So what counts

as cash. Is it just you know the shortest term U.S. dollar representatives in the instruments. Or is it something more along the curve. And what I find interesting is the consensus maybe is shifting to start buying 10 year treasuries a little just about just about 2010 highs. Yeah. Premise of T.D. moving in that direction just a little bit. Lisa had the same thing from Dani Burger. Yeah. And we heard that yesterday from Steve WHITING over at Citi. Basically this is the downside risk scenario. People expect there to be some sort of reassertion of the inverse

relationship between stocks and bonds and you’re getting actual yields. So we bring back Tara. You know there is a reasonable turn. I just wanted to go there. I think it’s beautiful. I think it’s a it. His Hera or Tara. It’s Tara. Tara David Carter stood up in a meeting. I said frankly I don’t give a damn. All right. I said Tara you don’t think David custom coined that some Dani Burger. No. You hold a team hostage to let somebody somewhere sit on the couch upstairs. We’re talking about 1939 the magical Wizard of Oz and Gone

With the Wind and Constance as a giant Gone with the Wind fan. I’m going to ask him about turning a pink of a message on the Glenn Beck in a moment. Futures right now looks cool up a little more than 1 percent on the Nasdaq 100 up by one point three percent. Yields back in lower by 11 basis points 381 twelve. We’ve talked about the weakness in the US dollar strength in sterling today. It’s a bounceback dollar to kind of bouncing back euro dollar positively. So two tenths of 1 percent 96 29 who coined Tina.

Right. There is no alternative. I don’t know. I mean I’m just wondering. Good question Tara who did you know anyway. This is what I’m looking at today is not necessarily Tara versus Tina but Facebook. Lots of it. Everyone almost everyone. Facebook includes Chicago Fed President Charlie Evans. Fed Chair Jay Powell. And a Bank of France meeting alongside Christine Lagarde. Maybe they’ll talk digital currencies. Hopefully they’ll also talk about some other issues that are relevant to the current market condition. James Bullard of St.. Lewis Fed. Neel Kashkari in Minneapolis Fed Mary Daly of the San Francisco

Fed and Hugh Pell of the Bank of England. This isn’t the Fed. This is the Bank of England is going to speak about 930 a.m. Eastern which will be interesting following some of the discussion yesterday of whether the Bank of England had come out with some sort of interim meeting intervention. They did not. Do we get more of a sense of what it would take for them to come in if we get some guidance from Hugh Pell. Today we get a whole host of U.S. data on the housing market including FHA FAA and S&P CoreLogic

data. And at home prices as well as new home sales. That’s at 9:00 a.m. and 10:00 a.m. respectively. How much do we get some retracement in pricing an actual decline as mortgage rates go up and as people are less willing to buy houses that are less affordable for them. And at 1:00 p.m. this is important. It is the Treasury auction. Forty four billion dollars a five year notes. Tom I know you’re excited. The reason why I care. Yesterday the terror auction was a bit messier than people had expected. How much demand is there for five

year yields. North of 4 percent is. This enough is this a reasonable alternative to going into stocks or a reasonable alternative to just going into the dollar and that will determine where people think perhaps some of the ceilings may be John. In some of these levels I think people are worried about the volatility as well. Lisa I mean two hours after you could buy into that it can have a 50 basis point move when you get it. Sure. Full faith and credit instruments moving so incredibly much in. You know in one session it does undermine

confidence. So how much do you get some sort of conviction straight away. Lisa thank you. Deborah Cronk joins us now CIO of Wells Fargo Wealth and Investment Management Darrow. We’re talking about it round the table round the desk this morning. This new consensus that new it’s been around for a while now just piling in to dollar cash. What’s the catalyst you want to see to get a sustainable break of this dollar surge we’ve witnessed through this year. Yeah I think you got to see a couple of things you really got to see peak Fed rate

hikes or somewhere at the terminal rate or you’ve got to see a turn in the economic data. Otherwise the U.S. dollar John is still going to continue to be strong. It’s still king dollar around the world as long as the rest of the world’s weaker money is still going to wash ashore and end up in U.S. dollars. So it’s it’s hard to make a case. You know what’s what’s interesting about this latest market move is so many times when you get these down moves in the market if it finds itself in things like the credit

markets credit spreads those tough things. This time is showing up in currency and again just the raise boom. You can even see a day like today where you’re finally getting a bid back in risk assets. Why. Because rates are not going higher and because the currency markets have settled down just a little bit. Daryl the religion is V Bodie and Boston University Finance. Simple. Your underlying math and the math is calculus and its first and second derivatives. We all know they’re out of whack when you see the rates of change of the U.S. 10 year

real yield. We’ve never seen this. It’s made back 83 percent of the move to the low to a two point zero five percent 2006 average. How do you interpret and use the rate of change of the real yield. I think real yields are exactly where it’s at. Tom you’re hitting on the exact right moment. The Fed and Chair Paul has been very clear. They want to see the entire yield curve from a real yield standpoint be in positive territory. And we’re just not close to that yet. If you use the P.C. deflator which is probably

gonna be four point eight percent of the correlated it this week you see the reading we’re not at four point eight percent or higher across the curve. In fact we’re not there at any moment in time in the curve whether you’re one year all the way up to 30 years. So real yields have to go tighter or higher. And the the issue isn’t it’s the combination of all of these tightening conditions its interest rate hikes its quantitative tightening. It’s the US dollar up 20 percent year over year. It’s the fiscal tightening from three trillion dollars

of budget deficit to one trillion. And it’s real yields going higher as well. All of that is tightening simultaneously. The Goldman Sachs Financial Conditions Index has gone up three hundred and forty five basis points this year. That’s an immense amount of tightening in financial conditions. It’s going to show itself where in risk assets. So what are you doing with that sterile. So you’ve got to stay defensive at this point Lisa. I know that’s that’s now where everybody’s at. We’ve been there since the first quarter of this year. We never kind of believed the bear market

rallies. We never believed that. Every time the Fed met there was a pivot moment coming. We think you still have to overweight fixed income. You stay short duration you stay up in credit quality. It’s not time to reach in high yield yet. And on the equity side you underweight equities and you stay in defensive sectors like health care staples utilities those places until things turn until you see the signs turn or until do so we reach a price where the risk reward dynamic changes. It’s not just on reflection. And just a final question. I think

we’ve played the Fed policy about five different times through the summer and into the fall. Deborah what did people get wrong then that’s going to help them identify when we actually get a sustainable pause from the Federal Reserve. So the interesting thing John is if you go back and read the prior Fed meetings with the exception of September the meeting in March May June and July. Every single one of those the market interpreted as a dovish pivot. And every single time they were wrong every single time we rallied off of them. We failed into resistance

on some of the technicals and we ended up at a lower point. So you’ve got to take the Fed at its face value right. Everybody’s trying to read between the lines and think that there’s this pivot coming or dovish pivot. We’re finally now getting religion where we’ve said OK soft landing is not possible. It will be a hard landing. You’ve had the two events of the Fed meeting where they really hammered home the hawkish tilt and then now the UK who’s basically trying to redo the 1970s and the U.S. into a soft landing with fiscal

stimulus even as inflation rips. We know that doesn’t work. We’ve seen that movie before. So there are things that you can do here but you’ve got to pay attention to what’s happening. Everybody’s looking for that moment in time where things turn and the Fed if it’s in or peak turmoil rates it’s just not there yet. Derrick Cronk of Wells Fargo Wealth and Investment Management. Darrel. Always good to catch out with you sir. Thank you. Doug CAC writes in Not about the Yankees tell. You’re gonna love this. It’s about Tata TI 88. Treasuries are the ultimate

holders John that Lisa gets like 15 times the social response we get. That’s because Lisa is a lot like we’re not even we’re not even here. Some this good reason for that. You know. You know why somebody called a tiara. And I said well you know Lisa puts her tiara back on about you know 10 0 5 in the morning. But you know I it’s just humbling John how we get crushed every day. Am very humbled you know queen of the Mass and queen. And they help us buy low. Sell high. Try to try to

clean this something. I’m I’m just dry night. Is it work. Is it one big walking H.R. violation. Every night I would say that’s Tracy Alloway slightly problematic features at 1 percent on the S&P Covid York. They see flowing back. Keeping you up to date with the news from around the world with the first word. I’m Lisa Mateo. Hurricane Dean is threatening to become the worst storm to hit Tampa in more than a century and has picked up strength and is now a powerful Category 3 storm. It made landfall in Cuba early today and could reach

Florida as early as Wednesday with top winds of 140 miles per hour. More than 300000 people are expected to evacuate. The British pound is higher today after hitting a record low on Monday. Still traders remained wary of the chance that Sterling could fall to parity with the dollar. The Bank of England indicated it may not act before November to stem a rout in the currency. It’s the clearest signal yet that natural gas flows from Russia to Germany over Nord Stream won’t resume this winter. The pipelines operator says it has sustained unprecedented damage. Leaks have been

detected and markets will be watching for any indication of sabotage. American steel plants are operating at the lowest rate in 20 months. Steel mill use dropped to 76 percent of U.S. capacity in the weekend its September 24th. That’s the lowest since January 2021 according to the American Iron and Steel Institute. Executives say Mills need to operate at 80 percent to support profits. And NASA spacecraft has successfully crashed into an asteroid about six point eight million miles from Earth. It was a test to determine if the impact can nudge that space rock slightly off course. The

U.S. space agency is in the early stages of the plan to protect the Earth from asteroids if measurements show the asteroid’s course was even slightly altered. NASA will consider the mission a success. Global news 24 hours a day on air and on Bloomberg Quicktake. I’m Lisa Mateo. This is Bloomberg. I think what we’ve seen in the reaction to the proposed plan is a real concern and a fair fear that the new access will add uncertainty into the economy. You know one of the things that I spend a lot of time thinking about is how do

we create more certainty for consumers. Rafat Plastic that the Atlanta Fed is kind of bizarre hearing Fed officials talk about the UK think of risk of causing or contributing to a global recession. When the Federal Reserve is doing what it’s doing. But maybe that’s a story for another day. Lapham New York City this morning good morning. Features positive by 1 percent on the S&P on the Nasdaq 100 up by one point three percent. It’s a bounce back. Yields heading lower negative 20 basis points on a 10 year. It’s set three point eight per cent now

in a 10 year coming very close to 4 percent in yesterday’s session. Dollar shed some weight after shoving a ton of strength. Euro dollar 96. Thirty two euro dollar positive two tenths of one per cent sterling looks a little something like this yesterday upside down. I talked about the range on Sterling from a one to three handle to a one of nine in a single day. Intraday is nuts for G 10 currency Capel 1 0 8 just south of that number right now. Just hearing from Chancellor Clarkson. Yes of course. Speaking to financiers and saying

we can have a credible plan to get debt to GDP falling. Some on the regulatory side saying the following regulators need to be more nimble. Sterling not moving on. I watch and look at them on the Bloomberg and Merlin RTS. Sure I see much there. As we’ve said within this crisis and yesterday was a crisis to have Mark Mobius with us earlier on AM as profound. And now for the city of London. Bob Diamond joins us to say he’s founding partner and CEO of Atlas Merchant Bank. Barely describes what he did for Barclays. Cut to

the chase because a time go back and look. Did Barclays get a bailout during the crisis. Bob Diamond thank you so much. Honored to have you here in our studios with Bloomberg today. I’m going to ask one question on the city because John really wants to focus on Sterling. There’s the city. There’s this comedy of Reaganomics redux as well. How does the city as an international venue. How does it move forward. How does it survive. Is the global institution. So this is a really important question time. And I think with all the debate around the

announcements that were made in the last couple of days there is much more support for the city. Something as simple as removing the bankers bonus caps which is you know was gamed by the banks and put the U.K. banks at a significant competitive disadvantage to the U.S. banks. Any support for the city right now is is important. But what else would you like to see from this government to bring that kind of enthusiasm back to the city that I think was lost for many people after the Brexit vote. You know I think right now credibility

is is the key. And you know Simon French said this morning that the only currency that Simon French from Panama. Gordon the only currency that really matters in the U.K. macro right now is credibility. And I think the the announcement earlier today which I saw in the Bloomberg headlines which is that the chancellor is going to spend time with the banks and the traders and distributors of the of the gilt market is important. So I think step one is is is credibility. Jonathan if you put this in context we had a you know 150 billion

debt financed energy policy without really preparing the gilt market for what was coming in terms of issuance. And I think people talk about the currency crisis. I think this is more crisis in the gold market than it was in the currency market. Oh can you talk a little bit more about what some of those moves in rates would mean for a big bank running a large mortgage book. We saw certain banks remove certain products in the last 24 hours. You of course had to oversee a large mortgage book cover at Barclays in your time running

that bank. What can you tell me what you’d have to do when you see rates move this quickly this fast and expectations for the Bank of England climb as quickly as they have done. Well if you put it in context Jonathan the two year gilt as recently as Argo as recently as August was about one and a half percent. You know right now it’s about four and a quarter. I think it touched four and a half in the last couple of days. So to your point that’s a sizable sizable move. That kind of volatility is

not necessarily bad for banks particularly banks with investment banking operations such as Barclays. But what it will do is it will really slow down the issuance of any new mortgages. So the mortgage books in terms of new issuance you know it’s going to be as you said there was the announcement that a number of banks are really kind of closed their mortgage insurance. It’s also good to slow down the economy dramatically. What are you expecting in terms of a downturn a potential response from England given that the fiscal tool is kind of being blown up

and the Bank of England. And it has to push back. So let’s keep it in context. I talked about you know I think the communications and the credibility around announcing 150 billion debt financed energy policy. We talked about those issues. But the other things that were announced there’s some good things in there I think I think the announcement around both corporate and personal taxes keeping corporate taxes at 19 percent or lowering them 19 percent rather than raising them to 25 percent puts the U.K. in a credible position amongst its peers. I think announcing some easing

of immigration to to ease the labor supply issues I think some of the things that were announced around kind of infrastructure or reducing the bureaucracy to be able to get to building around infrastructure and around housing. So keep in keeping it in context. There were some positive things that were announced within this. And I think because of the shock to the debt markets to the gilt markets we really have to find a way to hold the hands of the markets until late November when the budget is announced. And we really get to look at what

is meant here by the medium and long term fiscal program. And somehow we have to we have to manage our way through these markets. And I think the chancellor meeting with the banks today and over the next couple days is a positive step in that direction. Do you see some opportunities then. Absolutely. Where are they both within the gilt market within within sterling denominated assets more broadly. Take your pick. Well look Jonathan I want to put that in context as well. People have talked about the currency crisis. The move from 130 down to where the

currency is right now has really been about the dollar the dollar the dollar. So the the the U.K. currency is down maybe 25 or 30 percent. The dollar’s up 20 percent against every currency in the world. So we need to keep that in context. Bob Diamond of Atlas Merchants Capital also came very close to saying that he’d be fine starting again. Kind of backed away from it very quickly but it’s good to catch up some along the conversation next time. Coming up shortly Bill Dudley the former New York Fed president and Bloomberg opinion columnist. Futures

right now up about 46 on the S&P positive by one point eighty five percent on the NASDAQ up by one point for three percent. Tell me more constructive take on some of the things happening. CAC. We can have to wait for more complete picture of things because the reaction of course has been dominated by the way the market has reacted to this. I would suggest the banks are completely in every way data dependent including the Bank of England which is not only data data dependent but politician dependent as well. Dudley coming right up. It would

slow up by eleven basis points. Your tenure year 380 173 from New York. This is pulling back. I could eat positive a nice bounce. Will it stick. More than 1 percent on the S&P 500 on the Nasdaq 100 up by one point four percent on a rustle up 23 up by one point 3 8 percent. That’s the story in the equity market. You can guess the story in the bond market can’t yet. If stocks are up yields must be lower. They are the DAX 12th basis points. On a two year we had 13 consecutive days

of a two year yield climate. Now we’re back in a way to 422. But what a change has been in the 20s just a year ago and now four point two percent and some on a 10 year down about 11 basis points 382 yesterday the highest close since 2010 on a 10 year yield. Just unreal moves in this bond market and in this F X market to sterling all over the place from 1 to 358 back through 1 0 9. And cable looks a little something like this now at 1 0 8 10. That’s a

stronger pound a weaker dollar. That’s the story. It’s kind of yesterday upside down cable positive a little more than one per cent. But in Europe Lisa in Europe we are not out of the woods at all. No. And it has to do generally with what’s going on with gasoline gas prices natural gas and Nord Stream 1. But it also has to do with some legacy concerns about specific banks. One bank in particular Credit Suisse has been in a world of hurt. Those shares hitting a record low yesterday of four dollars. This comes as they talk

about possible asset sales and selling businesses rather than just a wholesale merger or being acquired. They’re kind of running out of options. We had a a 398 today tell a break off for a break of four on Credit Suisse. And to Lisa’s point there’s all kinds of speculation as to what we might hear from this bank. But we get a B strategic update I think next month. We need to be careful what we say or not in the business of talking about things with that kind of vector down ratio. I would say John what it

comes down to is regulators in the United States including our next guest who’s very familiar with this the regulators step in with a vengeance. Is that happening in Zurich. You know we need to catch up with some Mr. Harold and fast. Yeah I think we need to have that conversation within the next few weeks. Really tough call with a gentleman. He’s got to be patient. Yeah well patient may be a wrong maybe. The other word my good friend David Hero. Of course the only thing going for him is a Green Bay Packers are getting it

done to an extent. Futures up 45 and under VIX thirty one point zero three or more. Constructive day always constructive. The essays of the gentleman from Berkeley in the New York Fed William Dudley joins us now the former Fed president. He’s been of uncommon value before during and after Jackson Hole. Bill Dudley. Markets are moving the litmus paper of the system. The 10 year real yield has gone from the bottom 83 percent to the pre great financial crisis level of about a two point zero five. How do fancy people like you interpret where the real

yield is how far the real yield has come and how it nears what seems to be some form of historic normal. I think it tells you that the Fed is finally getting his arms around making monetary policy tight. The chairman all talked about how we need to see real yields positive throughout the yield curve. And the Fed is moving pretty quickly in that direction and 75 basis points last week and they’re promising another maybe a hundred 25 basis points before the year. Taking the federal funds rate well above 4 percent. So the Fed is catching

up. And I think the question at this point is will they stay the course until they’ve actually finished the job to get inflation back down to 2 percent. Paul says he’ll do that but whether the rest of the FTSE will come along with them I think it’s an open question at this point. You like Richard Clarett who joined us on Fed Day. Know the mathematics the physics of modern economics and then you discard it to real world application. You did that at Goldman Sachs for decades and then into effect. I want to talk about the

inertial force in this odd word overshoot. Is it a requirement or is it efficacious that a central bank overshoot a given target. Well ideally you don’t oversee you do just enough to achieve your objectives. But as you know monetary policy has a lot of well long lags in terms of its effects on the economy and it’s hard to judge those effects in real time. I think the Fed is probably going to be private ultimately overshoot a bit because they’ve said that they’re the risks are skewed. The risk of doing too little is much greater than

the risk of doing too much because if you do too little you end up in the 1970s with a more entrenched inflation problem and then you have to do even more later. So I think this is a consequence of the Fed being late. If you’re late you have to catch up catch up. You probably are going to overshoot your overshoot. You’re going to have a recession. I think where I would fault the Fed right now is I don’t think they’ve been realistic about the pain that they’re actually going to cause. If you look at their

forecast last week that implied rate climbs a little bit. It climbs up to four point four percent and then inflation melts away. I don’t think it can be quite as simple as that. There’s never been an example of the unemployment rate rising from three and a half percent to four point four percent point nine percentage point rise. If it rises more than a half a percentage point every every time that’s happened in the post-war period the US is end up in a full blown recession. And the smallest rise in the unemployment rate in those situations

is two percentage points. So I think the Fed is understating the pain involved. What worries me about that then is that people when the pain actually rise people will stop will start to pressure the Fed not to follow through. And this is the point of the column that you wrote today that there seemed to be some doubts in your mind and in markets minds right now. If the market had in mind that the Fed is going to stay the course. What do you think they have to do to come out and say they’re going to

stay the course. Or do you think they’re not going to that they’re going to pull back on some of the rate hikes say if unemployment rises above four and a half percent. I think Paul is committed to staying the course. I think he’s studied history and knows the consequences of not doing enough but whether it can bring the rest of the Federal Open Market Committee along with them later. Right now it’s easy to be tough right because everybody wants to get inflation down. The labor market still very strong. And so the pain hasn’t really materialized

yet. A year from now when the unemployment rates will quite considerably higher the economy slowed inflation’s come down a bit. Does that mean people are going to start to argue do we really need to push inflation all the way back to 2 percent. Or can we take a break now. And how much is it going to be a political pressure on the Fed. Well I think the Biden administration will be pretty good about guarding the Fed’s independence. Typically if an administration starts to pick on the Fed that just unnerves financial markets and makes the central

banks job even harder. So I would be surprised if the Biden administration started to attack the Fed. We already are hearing know cries from the left wing of the Democratic Party about how unfair this is that low income workers are being put out of work as if there’s some alternative. The problem here is that once you’re late you have to catch up once you’re late. The unemployment rate has to go up. There are no other alternatives. And so it’s not it’s not as if the Fed has a better path to achieve better outcomes. They need

to do it. They need to do to get inflation back down. It’s just gonna be difficult if we see services stabilize and maybe reduce if we see goods come down to the goods disinflation or deflation that we saw pre pandemic. I guess that means we come back towards John Taylor’s 2 percent. Are you wedded to two point zero percent. Or can Bill Dudley construct a new normal at two point eighty two point nine. Two point Adam Posen. Where do you stand on that Bill. Well I’m not sure if you’re talking about the real real interest

rate or inflation will go either way. I’ll let you make it up to me is just it’s a level that we’re aspiring to get to out there. I think there’s some view let’s say the Fed should raise their inflation target but I think that’s a bad approach right now because that’s like moving the goalpost because you can’t achieve your objective done. That is I think. No. I think that would undercut the Fed’s credibility. I think Paul has been very clear that this is pursuit of 2 percent. Inflation from his perspective is unconditional whether he can

bring the rest of the FOMC along with him when the job starts to become more difficult. The fundamental question right now markets basically believe Powell inflation expectations stay well anchored but the pain process that’s about to unfold is just begun. That’s the domestic paint the international pain for witnessing right now. BELL Well that Latin that’s happened already. Yes. What do you think they should respond to that if at all. Well you know the reality is they’re not going to respond to that because the end of the day monetary policy in the US is about what’s

best for the United States in terms of the Fed achieving its U.S. inflation and output and employment objectives. Obviously this creates a lot of pressure on the rest of the world. You know the stronger dollar holds down U.S. inflation a weaker foreign currency increases inflation. So it’s the flip side for other countries is much much tougher. Bill fantastic to catch our great pace as always sir. Oh don’t think that the former New York Fed president and flintlock opinion columnist will the Fed stay the course is the question that Bill is asking here and least of

when he talks about the pain we’re likely to see next year. And Chairman Pound has talked about that pain for me. The next stage of this market is is what happens when we realized that that pain is happening. And yet his Fed is not cutting rates. And for the first time we could be in what many people might describe as a recession where the Fed isn’t cutting. Sure they might pause but they’re not cutting rates they’re not doing QE. They’re not doing those things. They’re not responding to a market mass a contraction in the economy

in that way they traditionally would. This is different. Bill’s point is really really important because we’ve all talked about well is are some of the Fed projections fanciful in terms of what the unemployment rate will peak out at. Right. In order to achieve the inflation rates he’s saying that the fact that there isn’t more downside baked into what they’re putting out there gives the sense that they haven’t necessarily grappled with what they would do with rates. If it’s worse if there is more pain in the economy than what they’re putting out there. And that that’s

why it’s important for them to be transparent and honest about how much downside the release of this economy with rates where they are. Tell me Lisa asked about the political pushback. I think it’s pretty easy to imagine we’re going to see a lot more of that. It’s younger and yes early next year. No question about it. What I would say your Bill Dudley over Class Act is mentions Claudius some the great economist from Michigan and his note today. And you know you know some people say Claudia Sam I’m sure Senator Warren would say Claudia Sam

should be the next chair of the Fed because she’s hard wired to the dynamics of the job economy. And John the absolute absolute debate we’re having is between the late great Allan Meltzer UCLA Carnegie Mellon and David Blanchflower of Dartmouth. He went to the University of Cardiff. I think I can’t remember football club but. But anyways John the point here is Meltzer wants to aggregate the economy as we heard from Dr. Dudley and Blanchflower. And some are saying this is a much more nuanced labor economy and that’s what powers deal. I have no idea that

Blanchflower studied accountant football club so I thought he was on the club. He missed college. I think he skipped college and just you know a year into what he did was he. Welcome to Wrexham. John I look at last night I couldn’t find it very cool. I did. I honestly looked for it. You got hurling. I think it’s on effects which you can get on. I don’t think mate. Maybe Disney Classic and forgot how to get into England’s youth. He’s struggling to find that. That’s what the Yankees baseball has been on a different network every

other day. John I got I can’t keep up. I got a Zen of TV with rabbit ears. And I’m just trying to move the rabbit ears around signal keep trying. Features up one point three percent on the S&P. This is Glenn Beck. Keeping you up today with news from around the world with the first word. I’m Lisa Mateo. Well Hurricane Ian has now turned into a powerful Category 3 storm as it takes aim at Florida even made landfall in Cuba early today. It’s now on track to become the worst storm to hit Tampa in more

than a century. Hurricane conditions could arrive in Florida Wednesday morning with winds of up to 140 miles an hour. A meeting today between Chancellor of the Exchequer quasi courting and top British financiers could be difficult since Gauteng introduced his mini budget on Friday. The pound has plunged in shares and British banks and insurers have been battered. Those attending the meeting will want answers on how Gauteng can restore investor confidence. Senate Democrats have proposed a short term funding bill aimed at averting a government shutdown. Congress must pass the measure by midnight Friday but the package includes

a measure to speed up energy permits. That’s opposed by most Republicans and some Democrats. Leaders of both parties are anxious to avoid a shutdown. A little more than a month before midterm elections. Goldman Sachs has sharply lowered its oil price forecast. Still the firm says it remains bullish because of a tight market. Goldman predicts Brent crude will average one in three dollars a barrel in the last three months of the year. That’s higher than today’s price. But below its previous forecast of one hundred twenty five global news 24 hours a day on air and on

Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts in more than 120 countries. I’m Lisa Mateo. This is Bloomberg. Given it has been late in raising rates and in too small amounts so if one is to point one’s finger at an institution that perhaps could have performed better is the Bank of England. We’re thinking in terms of a recession that there will be deep and long. It’s the price we have to pay for financial stability and we’re getting on the right track. The next Bank of England decision November 3rd David Focus Line

said that Deutsche Bank chief economist life from New York this morning. Good morning. Features positive by little more than 1 percent on the S&P. Close to one point five percentage points higher yields. A lullaby let’s call it twelve basis points now three point eight per cent on a US 10 year. The euro a little stronger dollar a whole lot weaker. Euro dollar 96 47 and a big turnaround time in the last 24 hours on pound sterling. Something in and around. Want to wait. Yeah. You know bitter enemies 1 0 9 1 0 10. I’m not

sure we’re there yet but certainly the gloom of yesterday John is a bit bit removed. There’s no question about that. And it sums up and you see it even in an E with a little bit of you know a little bit of kind of sir can I suggest maybe started by Charles Evans this morning. You can suggest why if you’d like to suggest Tom I just missed. It’s a change on Sterling. Capel was one of 350 at the lows yesterday and and through 1 0 9 in the last 24 hours. John I remember you telling

me Ryanair 3 whatever on the Irish hour. Why do you said buy it. And it went three to 18. I mean that’s what Ryanair did. Did you buy it. No I did. OK. I mean it’s been down in pandemic and all that and somehow survives to move forward and does so with one of the most extraordinary chief executive officers Mr. Michael O’Leary who’s been medicated over the last three days and joins us this morning. Michael John and Lisa have some very important British questions. I want to ask you what matters to every viewer and ever

listener right now. And you own the high ground on this. If we don’t fly business class we won’t fly. This is new addiction to business class versus economy which you own the high ground on. Where are we in a couple years with our addiction to business class like New York to Paris. Eighteen thousand dollars. I mean it’s a good question but there’s two different markets here. Business class will continue along long whole island. It’s a different business model. The business class has disappeared on North American domestic and business class has disappeared on trans European as

well. You know people will not pay a ludicrous premium on one and two hour flights to be stock in some Holby airport that looks like resembles the black hole of Calcutta. As Heathrow step on an error and paraphrase God how much of this year. Happily the vast majority of European passes have switched sensibly to Ryanair. More times like this the lowest airfares and a brilliant and safe service. Time we speak every time we speak Michael there’s always a pitch. There’s always a sales pitch. Let’s talk about immigration Michael and this new government. You’ve complained about

it for so so long. We’ve got an opportunity to change what you want to see happen. Well you’re predicting me about the UK of Miami their latest version. OK. And you get nominated. Brexit has been the greatest economic foot shooting in the history of economic development since the Second World War. It is the stupidest dumbest economic activity known to mankind. It was led by Boris Johnson Michael Gove and a number of other legendary idiots who decided that the way forward for the UK economy was lead the biggest trading bloc in the world now. There’s no

point in arguing over Brexit. Brexit has happened but at least if you’re going to leave the European Union leave with the most intelligent free trade agreement in place that the European Union. Of course what these morons did was they left with the worst trade agreements in place and they have their remarkable situation that we are and we’re one of the biggest employers in the UK. We employ more than 8000 pilots and cabin crew in the UK this year. All of the airlines are struggling to recruit people because a lot of the English people don’t want

to work in a service industry like the airline industry. Despite our high pay we couldn’t get visas for Europeans. They would give us visas for non Europeans but not for Europeans because they want to take back control of their border. Now they don’t have much control because about a thousand refugees each day coming across in D from France apparently are fleeing persecution in France. Who know that France is such a terrible country for it is that the UK is currently a country that has no labour policy and the restrictions in the labour market are inhibiting

growth. Never mind the crazy budget they’ve just announced last week. MICHAEL BRISSENDEN It’s clear that you have some pretty strong feelings about this. I can say that and it’s nice that you can share them with us. Your perspective as one of the biggest employers in the United Kingdom how much as things are now at the labor policies currently in place. How much have wages gone up on average for you. And do you expect them to keep climbing with no change into the year of wages haven’t gone up. That much of it is clearly upward pressure

on wages because of pay inflation. But the challenge for a lot of industries in the UK whether it’s retail hospitality air transport is wages haven’t gone up because nobody wants to do the jobs even if you increase the pay. People still want to do the jobs. We’re bringing in people from Morocco and from Turkey and we can get visas for those guys to work in the UK but they won’t give us visas for our Portuguese Italians Germans and Polish people. It’s a crazy system but I’m pleased to say that lots of people are fleeing the

UK. All of them are flying with Ryanair and very low airfares to more than 200 destinations all over Europe and saving a fortune making a fortune taking off well-paid jobs all over Europe. Michael I don’t think less trust is calling you any time soon after this one we hope. But the revenue revenue at Bloomberg’s going to call further to have replacements. I want to squeeze in a foreign exchange question if we can. Can you just tell me as a CEO given the moves we’ve seen and pound sterling in the euro. Give us some of the

costs in US dollars. How have you hedged any of that. What have you done. Have you had to adjust to that story. I mean the UK certainly were reasonably insulated because we have we essentially balance our sterling our revenues with Sterling Costa said. We employ but 8000 people in the UK. We have a lot of airports and handling costs in the UK. We are short euros long dollar. Thankfully in Ryanair we’ve been very fortunate. We’ve hedged our dollar exposure and all of our CapEx. We’ve ordered more than 200 aircraft from Boeing out 326. We hedged

all that at 124 to a dollar dollar euro 124. So we are significant beneficiaries. That ain’t a real challenge for a lot of our competitors in Europe is not hedged on the dollar and therefore they’re paying about 25 percent more endeavour in terms of cost for their aircraft and their spares. Thankfully we’ve largely based on CapEx. Our IBEX is hedged out until the middle of 2020 3 which is largely oil and we hedge the oil as well. So we bought out to next April at about sixty four dollars a barrel. So we’ve been lucky unfortunate.

He’d be very well hedged but a lot of our competitors in Europe were buying US dollar assets and for the airline industry aircraft fuel and spares are all in dollars. It’s a very difficult time. Michael let’s spend some longer. Spend some more time next time a longer conversation about the mess that Europe is set. And you let me know if the prime minister gives you a call OK. Europe is growing strongly and Europe will look like Germany. That was done right now. Michael I’m sure other people may have a different view on that. Michael O’Leary

of Ryanair. Michael thank you sir as always. Do you think the chancellor is going to have McCall any time soon to make the China look. I don’t know yet. Sardinia to Dublin. Dublin to Sardinia. Why aren’t we doing this Jan. You want to run itself. I mean I’m looking at hundred and forty five dollars round trip through a ninety three dollars for the flexi plus it’s a steal fetches positive one point four percent. This is pulling back. We know what the Fed is looking at. They’re looking at the labor market. They’re looking at the end

user demand. It’s going to come at the expense of the labor market. We’re not going to have long term inflation. I don’t think they’re going to blink anytime soon. I look at the Fed’s economic projections. They seem almost fantastical to me. We haven’t seen really the economic impact of most of the tightening. This is Bloomberg Surveillance with Tom Keene Jonathan Ferro and Lisa Abramowicz. Good morning everyone. Jonathan Ferro Lisa Abramowicz and Tom Keene. On radio. On television. It’s a recovery Tuesday. We found a bull. She’ll join us here in a moment. John Bulled up as

well. The Chancellor of the Exchequer out with recent headlines. Pound doesn’t move. Yes. Speaking to financiers and talking of appearing in DAX GDP and that ratio lower. Tell Mr. Lots to play out here. Yes the U.K. we’ve got a Philip but yet in due course we’ll also hear from the Bank of England early November. Lisa talked about this in the last few hours. We’ll hear from the chief economist in about 90 minutes from now. So looking forward to that new poll of Pill Stanford University. It’ll be interesting to hear. And John what’s so important to

me is this Redoubt is not just about the United Kingdom comes right over to the United States comes right over to eat hungry moments ago moving that interest rate 13 percent versus an estimate of 12 and three quarters percent. John we’re going to see a lot of that. The chairman of the Federal Reserve just talked about the prospect of pain domestically. That pain is already playing out on a global stage. We’re seeing that across a range of currencies and a whole host of central banks has to respond to it. Tom can they respond to it.

Can I do anything about it. Because at the moment. Well today’s a different story. But the dollar has been so dominant for much of this year. Let’s cut to the tension John. Charles Evans beginning to frame what if. Bill Dudley on moments ago saying no stay the course and overshoot. I mean it’s as simple as that in the US. The bear case at a start I think is the best case now. That’s the best case that maybe unemployment gets to 4.5 percent and we don’t have a recession. That’s the Federal Reserve’s. Best case now Tom.

That just tells you how much things have changed in 10 months. For those who want a one let’s jump right to it right now. Lisa Abramowicz. So we do it with the rates of change in the bond market. El-Erian Out. Lisa saying bonds matter more than facts. And what’s so important here are the dynamics of how fast we’re moving in yield. What is spreads tell you. Well what’s happening right now when you talk about the United Kingdom for example is the biggest five day sell off ever in five year bonds over in the United Kingdom

in the spread like market in the corporate debt market. You are seeing some sort of wholesale crisis which is the reason why some people are saying this could last longer. And to Bill Dudley’s point the Fed is not going to blink. And if they were to put out a bit more dire projection of what to expect in the U.S. economy perhaps people would understand what happens in the arches. You know we make a joke about it folks. But actually you know I get the shtick. Lisa is serious about the auctions. They didn’t go well yesterday.

Why is that important. It’s important because there isn’t a screaming demand that came into play to buy two year bonds even as yields were rising even as people were getting income. And even as you hear a consensus across Wall Street go to the short end of the yield curve. This spurred the further leg upward in yields on the 10 year further downwards in price. How much do we have some conviction buying. That seems to be what’s driving a lot of the move today in risk assets. Suddenly people are coming back into bonds which gives perhaps

a floor but then goes back to this question of well then how does the Fed do its job. Let’s have conviction in our data check. John I’m going to go to the 10 year real yield from a negative one point 1 1 skyrockets up to a one point six 0 down right now one point 5 0. But John the speed of movement in the inflation adjusted yield infects all of the data just so fast. The nominal yield comes down 10 basis points today at 382 on a 10 year. Yesterday we closed at the highest level

since 2010. We break the losing streak hopefully on the S&P 500. If you are an equity market bull we bounced back from the lows that a year on the S&P were higher on futures by one point to 9 percent. Talked a lot about that dollar strength this dollar weakness with the 0 2 lower euro dollar 96 40 that currency power firm itself by 31 percent. Interesting to see. Let’s get right to an important conversation with the New York collective Globe. Victoria Fernandez says no chief market strategist across where she is in the trenches of what

do you actually do with money. Victoria you say no to cash. Why. Yeah I mean look Tom when we talked a couple of weeks ago we had increased our cash position a little bit because we felt like we would get some inflection point and that would be an opportunity to go in and ship the portfolio a little bit. And so that’s what we’re doing. We’re using up that cash we’re putting a little more beta a little more cyclicality into our portfolios. I’m not a raging bull at this point but I think you can take a

little defense out of your portfolio and start building it up again as we’re probably getting closer to a bottom. We haven’t had a lot of those metrics that people are looking for. We have a negative earnings yield. You typically don’t hit a bottom with the negative earnings yield but we’re also also not in there trying to time the bottom. Exactly. We think you some of the events like we’ve seen this week to start building more positions in your portfolio. Does that mean for the banks. So we’re not buying banks per say but we are buying

credit cards. We like Visa. We like American Express. We’re buying some of the energy names too. As you know we’ve been underweight energy for a while and we’ve been building that position. But we’ve added quite a bit. We’ve added to Philips 66 Exxon Mobil Valero. We’ve gone in and added a lot to those names and even more cyclical names like U.P.S.. I know a lot of people didn’t want to be in the space after the things that FedEx said. But we think that that was more idiosyncratic for FedEx. And we think there’s some opportunity in

the fourth quarter for a company like U.P.S. as well. What about Facebook Google Amazon. Yes. So that those high flying tech names those communications services names. I think that’s really where you’ve got to be careful. We have some exposure to those Fang names but it’s not an area that we’re adding to right now. I think you have to be very careful on those because there’s probably more downside as yields continue to go higher on those things. If you’re going to play in that space Apple is probably your safer bet at this point in time. They

just closed out their fiscal year end over the weekend. And from what we’re seeing from analysts they had a pretty strong year. So I know a lot of people are waiting for Apple to make the big turn to say we’ve hit the bottom. I’m not sure we see that in their earnings coming out after this quarter end. Victoria I understand your parameters. We’ve been talking a lot about the Fed pivot and whether that sort of underpinning some of the bullish sentiment that we hear on the fringes of Wall Street not necessarily mainstream. What’s underpinning your

conviction that we’re getting close to a bottom. Well I think a lot of it has to do with the momentum that we’ve seen. The trend lines that we’re watching there’s a lot of contrarian signals out there. You look at the bull bear ratio. You look at the put call spike ratio. I know that Tom was mentioning the VIX earlier this morning and we’re surprised the VIX isn’t higher than where it is. But we want to see the VIX continue to move higher and with a three handle. So I think you have to look at a

lot of these trends and say we’re getting close to where I think we need to be. Victoria Cross Moore’s clients like everywhere else are absolutely shell shocked with the news flow. All the nuances of it comes down to revenue and the dynamics of unit and price. How important is revenue into this earnings season. It’s extremely important because it’s going to tell us what the margins look like. I mean one of the themes that we just talked about last week in our investment committee for all of our strategies was quality. Quality of earnings and quality of

balance sheet. And so revenue was highly important. We know with prices being higher that top line will be there. It comes down to what are those margins look like. And look U.P.S. the expectations for this quarter have come down from north of 9 percent to right around north of 3 percent for the Dani Burger. But I still think there are gonna be strong enough to hold up the market until the Fed pushes us over. John Victoria’s next investment management committee happens to be in the great state of Alabama. It’s Texas and Alabama. Now that’s happened

in October. You think we could make it down. I’ve been wondering for a while across. Mark I want to come watch Bama play. I’m told it’s the closest thing to European Shery Ahn Fernandez. Come on. It works. It’s like we make that happen. Let’s go y’all. Come on down. John Micklethwait divided special tonight that some kind of feel like victory for their own just then. The fight in Texas. Fernandez across Michael Barr Investments. Love that. It’s gonna do that drama. Happy fun. Yeah. And actually y’all is a really good sort of gender neutral y’all. Yeah

well that’s good. It’s common on the Upper West Side. Yeah. Try to incorporate that into Bloomberg Surveillance. What we we’re gonna do. Yo yo yo. I’ll take a look. Those markets you’ll take a look at those markets right now. Does it sound right. I got him. I was. That wasn’t an accident. I wouldn’t even try one point two percent higher on S&P 500. Makes me wonder thematically this is something I’m going to focus on in the weeks and months to come. We’re talking about buying equities before credit is potentially blown out. Which is something that

Bob Michael Barr J.P. Morgan Asset Management pushing back against lasers were coming into a recession at a time when the Federal Reserve will not be cutting interest rates. And if we’ve blown up a decade’s worth of low interest rates reserve negative rates QE and all of the above I’d be asking a simple question where are the bankruptcies. When do they start to pick up in a material way. Some people say that there won’t be as many this time just because companies have termed out their debt but they can’t insulate everybody. And that only works until

the middle of next year when there starts to be a bit of a pressure point in terms of refinancing. So you’re right. And you know Tom asked me earlier about the spread market. I’m surprised there isn’t more of a sell off in high yield in investment grade as we’re seeing yields climb to the highest levels going back to 2009. All in because of the Treasury yield and the spread component in high yield. It’s not that extreme. And that to me raises some questions. So it’s through 500. And Bob Michael talked about what was it 750

17 and all in was it 20 percent something like that. The yield on high yield before he thinks about step in and he basically said be patient. Research is not here yet. Wait for it. And right now we’re looking at an all in yield of nine and a half percent for high yield which people think looks pretty good. But he’s saying it’s could he get better. So hold on. And a lot of people are on his side with that act. Wait for the pain. Some seems to be the message from some people. At least I

work then come. It’s not here yet. So it’s massively non-linear. And we’re at a point here at one point five zero 10 year real yield where you got massive non-linear impact as you go up to the two point zero five level that I calculated this morning. And John it’s unimaginable. If you get a 10 year real yield over two point zero five percent the effect on the zombie corporations of America it is turnaround Tuesday. Everybody at the moment at least anyway up by one point three percent. Thank goodness nothing. Nothing sticks Grandma. You know you

know the story here with the conviction took it to the opening bell at 930. And I honestly said it was. And she started down. No I said I’ve got no Alix Steel. When people say that every day seriously every day they play online. John on Twitter every day. Wednesday. Wednesday his conviction wins. This conviction Wednesday. His conviction about what. Some just conviction. And our belief. Just general deletion. Okay. We would still be convicted tomorrow. It s not anyway. This is Bloomberg Markets. Keeping you up today with news from around the world with the first word.

I’m Lisa Matteo. Hurricane Dean is threatening to become the worst storm to hit Tampa in more than a century. Dean has picked up strength and is now a powerful Category 3 storm. It made landfall in Cuba early today and could reach Florida as early as Wednesday with top winds of 140 miles per hour. More than hundred thousand people are expected to evacuate. The British pound is higher today after hitting a record low on Monday. Still traders remained wary of the chance that Sterling could fall to parity with the dollar. The Bank of England indicated it

may not act before November to stem a rout in the currency. Germany suspects sabotage is a reason for damage to the Nord Stream pipeline that carries Russian gas to Europe. Now a German security official told Bloomberg the evidence points to a violent act. The operator of the pipeline called the damage unprecedented. It’s the clearest signal yet that Europe will have to survive this winter without any significant Russian gas flows. Vladimir Putin’s mobilization is hitting Russia’s economy and its weak spots. Putin has called up three hundred thousand men to fight in his war in Ukraine. The

order takes about 1 percent of the country’s active workers from their jobs at a time where there are few candidates to replace them. Plus the move is likely to batter Russia’s fragile finances leaving some of the draftees families short of cash. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts. I’m Lisa Matteo. This is Bloomberg. The meeting RCP projection is for the federal funds rate to be in the range of four and a quarter to four and a half percent by the end

of this year. Though I would know almost as many FOMC participants wrote down for the fourth quarter percent for the end of year numbers. So must most think we’re looking at something like 100 to 100 25 basis points of rate increases. This calendar year. That’s the view on the Federal Reserve. Charles Evans the Chicago Fed president cut through the Fed forecast flight from New York City this morning. Good morning. Your market bouncing back on the S&P on the NASDAQ on the S&P up by one point four per cent on the NASDAQ 100 positive by one

point sixty five per cent lower by 12 basis points 380 on a 10 year after coming very very close to 4 per cent number on the U.S. 10 year yield some yields at the highest level since 2010. And yesterday’s close on a 10 year on a two year high since August 2007 at the close yesterday. We back away at the front end as well. Jan I’m glad you bring this up. The significance of a 4.0 0 on the tenure I’m not sure. It’s it’s not like the two year. I mean it’s not that big a

deal. Am I right. Tell me. Significant in the sense that many people thought we’d seen the high back on June 14th. Okay. We’ve added maybe 40 50 banks. Friedman 5. Are we frame and 5 percent. That was the question we were asking three months ago. About four. Yeah exactly. So yeah. Tom who knows. I think he got to be very humble about a mom. We’re in this market in this economy. We’re humble. We’re rooting for Conviction Wednesday which we’ll do tomorrow. One conviction we have is at Leland Miller on the high ground. And the analysis

of China his China Beige Book is absolutely definitive. We’re honored that he could join us this morning on the granularity of China. There is an article Leland Miller I featured in Foreign Affairs magazine. The Weakness of Xi Jinping and how hubris and paranoia threaten China’s future. It is a courageous article without question putting the author at risk. He talks in there about a schism. She talks in there about pedigree and reputation of family as the only driving force of leadership. Do we do we over estimate JI’s ability or is he just a part of the

machine that makes pedigree and reputation advance. I think that what she has been doing over the last five to 10 years has been making the machine part of him whether it’s putting sheep she thought into the party constitution replacing senior army officials or party officials with people who are loyal to him. So he is building the system around himself which of course helps him stay secure for a while. But the problem with this is as you go on and as the Chinese economy faces bigger challenges in the future she’s future. She’s seen as China. So

China’s economy is. She’s economy. And any downturns any problems are to be associated with she. So what it does is keep him secure in the short term but it could cause a lot of problems down the road. Tell us the prism you have of the party Congress that is upcoming. What is the nuance the distinction we need to study. I think that people are looking at this for signs of trouble for she and I think that’s the wrong way to look at it. You know there’s this idea that the party Congress is a pivot point.

It’s a pivot point for economic policy. It’s a pivot point for Covid zero policy. I think both of those are wrong. Maybe you see tweaks to to Covid 0. Maybe you see a little bit more stimulus the second half of the year. We have have entered a paradigm shift in China’s economy and China’s governance and China in terms of China’s stimulus playbook. This is this is the new China. And these are the challenges that she’s going to have to deal with. So I think more we’re looking at at what he does was with with the

official just under him. How was he laying the groundwork for world after Xi or is he not going to do that at all. Leland where does the currency sit in this new regime. Given that we’ve surpassed that 7 but 7 per dollar yuan unsure U.N. level and continued to go further. How much do they want to push back. How much will this administration allow a weakening in the onshore yuan at a time when they have to be concerned about inflation and they have to be concerned about growth. Yeah there’s a lot of concerns. Inflation is

one of them but not not the biggest. I think that any super strong dollar world there are limitations to what the PPACA can do. And so the the major focus right now is looking at the party Congress. I think that there is a preference by the PTO seem not to have 72 broken actually 7 1 8 broken because that was the low of a couple of years ago. If you break that then you’re signifying that maybe China under Covid 0 is worse than China under Covid which is not something that I think Xi Jinping wants

to signal to the world. But beyond that you know the 7 2 mark we’re looking at the dollar as the story and the PPACA will push back against this. They don’t want a big one off devaluation. They don’t want rapid depreciation. So they’ll hold the line as much they can. But there is a limit to this since could depend on how long the dollar is strong. We learned earlier this year you came on the show and you said we could see sub 2 percent growth in China. The rest of the market is coming your way.

They are seeing that as a more realistic type of assessment versus the 5 percent target that we heard earlier in the year. Where do you think we’ll end this year and where are we headed next year for Chinese growth. Well I think a lot of it depends on on what the narrative can be spelled around. Around Covid 0. Are they going to enter into big lockdowns this winter which is very possible considering you know the spread of the current variant. Look the reason we talked about sub 2 percent growth being a very strong possibility is

that there’s this idea that as soon as Covid 0 lockdowns in the spring were suppressed and that you’d have a bounce back in growth. But we’re not seeing any of that because when firms have been telling us we’re kind of tens of thousands of firms over the course of the past year they have been telling us that until the Covid zero nightmare is over they are not going to borrow they’re not going to invest they’re not going to hire. And indeed all of those metrics were worse in our recent Q3 data. Borrowing hit the lowest

level we’ve ever seen. Firms don’t want to plan for the future if they don’t know the future. And to know the future they need to get rid of Covid 0. So Leland to some extent this is the character of the characteristics some of the characteristics of a balance sheet recession and leave. And I wonder if that’s easily undone by just saying Covid zeros over. If that was all that was happening I think that yes and you probably will see about certainly markets will love it. The second that the party signals that Covid 0 ISE is

coming to an end sometime soon. But the reality is that you’ve also got a structural deceleration economy. Property has been taken out as a growth driver going forward. So you’re going to have much slower growth. Completely independent of anything that’s happening with with Paul Allen. There are not replacement growth drivers. So the challenges here as they’re trying to conduct a whole bunch of very big structural changes to the economy shift from investment to consumption. But they’re not putting in place the kinds of policies that would incentivize consumption arise. So you’ve got this very difficult situation

where you’re shifting away from the old levels of growth but you don’t have immediately obvious new growth drivers. So this is the challenge. You’re not going to see a gross spike up in the years to come. You’re going to see a new era of much slower growth. Leland thank you sir and congratulations as Lisa pointed out. And just a phenomenal call. Earlier this year Lila Miller of the China based book International. Lisa when people were talking about two and Leland was one maybe a break 80 percent GDP growth at the start of the year. Some

people thought it was nuts and now they are moving in his direction. Very much so. Yeah. What if they move in this direction with the next couple of years the next decade of various subdued growth in China. What does that look like for the world. Jihye Lee Credit Suisse is going to join us shortly. Looking forward to that conversation on the effects market. What a messy couple of weeks has been. Futures bouncing back up one point four per cent on the S&P. From New York. This is pulling back. New lows for 2022 at the close

yesterday on the S&P 500. We bounced right back off them on the S&P we bounced back by one point three percent on the Nasdaq 100 up by one point fifty five. Yields are lower than negative eleven basis points on a 10 year 380 173. The dollar’s weaker in line with that the euro stronger euro dollar ninety six thirty seven positive a third of one per cent sterling big turnaround one ISE 350 yesterday morning all time low on cable back to 1 0 7 94 and at one point through 1 0 9. That currency power positive

about 1 per cent this morning. Joyce Sarah Ellis of Deutsche Bank plays a fascinating work over the last week on this. This is what he said in his most recent know what is the clearing level of UK asset prices. Gilt specifically at which investors would be willing to fund the UK. He calls this the critical question and most people would agree with him. He said the market is itself already attempting to answer a record low in the exchange rate and a 2 per cent rate hike by early November at a 6 per cent terminal rate

from the Bank of England goes on to say if this is not delivered. It risks further currency weakening further imported inflation and further tightening a vicious cycle. And Tom it’s that vicious cycle. The credit come quite self-fulfilling. And that’s the woman in a circuit breaker for right now. Absolutely. And on trade weighted sterling back to the time of John Major in 1992 that gets your attention which is a good time to check in. Rishaad Salamat is chief foreign exchange rates strategist to Credit Suisse this morning. Schwab I want to go to where Mark Requirement go

over to the road up a great note after London desk yesterday. I know you’ve studied this as well which is a nation’s flows is signalled by the current account balance. And there there’s all this mumbo jumbo and facts mumbo jumbo and financial TV and radio and all that which ignores the obligations a nation has given flows. How naive is a trust administration the trust government on the state of the current account balances in the United Kingdom. I think their made assumptions that the market would like the policy mix that they’re putting forward that you could

argue really overlooked the underlying conditions for trade in the UK. We had a current account deficit that was already above 8 percent of GDP. Stunning. If you add to that an enormous fiscal expansion then clearly you’re looking at that going to double digits very difficult to sustain the capital inflows the country needs. If you have interest rates below the US for example you need a premium over the Romaine Bostick. We talked about this in America. It was my chart of the year two consecutive years in a row. The twin deficits of America’s Stephen Roach and

others have written this up over the decades. Is there an awareness in the United Kingdom that you observe in the city over the twin deficit state of the United Kingdom. I think overall this year an interesting feature has been a lack of focus on trade flows more generally not just in the UK. I think it’s a key reason why other currencies like the euro are weak as well as we’ve discussed in the past. But in the UK this is now a very pressing issue. I think the market clearly understands what’s happening. That’s why it’s requiring

these rate shifts from the Bank of England that so far aren’t being delivered. So Michael understands that. I don’t think the UK government has prepared the UK public for that. The messaging there is difference now. Maybe at some point we’re going to square the circle. I assume the UK government will have to come out with plans that involve some form of fiscal tightening in the medium term. Some areas of the economy will need to see tightness on that front. That might not be popular either. So we’ll have to see how that works out. But it’s

going to be a rough couple of months. I think for the sharp one thing we’ve said on this program is to really draw a distinction between an adjustment and market adjustment through a weaker pound sterling higher gilt yields to attract capital to fund deficit and something much much worse than that a negative south fulfilling downward spiral in the currency an upward spiral in guilt yield. Is it the former or the latter. Because I’m not sure many people are on board with the idea just yet that it is a crisis of the latter. And perhaps it’s

just the form that we’ve got to that clearing price. We needed a weaker pound much higher gilt Yeltsin. Here we are. Well I think the problem is really the Bank of England’s base rate is still not very high relative to what the market needs to see. And the problem is the Bank of England has consistently failed to meet what the market has priced in for where rates should be in the UK even before the government announced these latest fiscal measures. So the track record is not good there. And when you compare that to other central

banks for example let’s take the SNB where they’ve got well ahead of the game very quickly and even referenced yesterday. Matt Miller from the S&P specifically referenced what the markets have priced in for Swiss rates as something that they’re then noting and trying to keep up with. That’s a very different message to what we’ve had from the Bank of England which has been constantly to try to push against market pricing. And I think that that’s that’s a big problem in a world where you have choices in terms of where you invest. And it puts the

UK in a bad light. And that raises a really important question then. If there is a bigger credibility deficit right now is it in Westminster or in the city. I think the problem at the moment is both the Treasury and the government with its fiscal plans and the Bank of England with its lagging monetary policy both have a credibility problem in terms of where financial markets stand and they both have this problem. Certainly with respect to competitor nations that are also looking for capital. So trying to keep UK capital in the UK could become the

next problem let alone trying to attract foreign capital into the UK. So I think the Bank of England needs to signal very clearly that is prepared to take rates well above Fed funds rate. For example in the US that needs to come soon. I don’t think we have a lot of time to to wait for this to come through and waiting around till November is definitely a high risk game. So what’s your conviction level in terms of levels in terms of where the pound can weaken to before something steps in. That’s a little bit more

crisis like and a little bit less market discovery of new levels. Well I think somehow the Bank of England did buy time with its statement yesterday suggesting that it is prepared to act as needed. I still have my doubts about whether really we can wait till November 4 for the bank to act and November twenty third for the chancellor to come up with a medium term fiscal plan. I assume we’ll see in the weeks to come some form of early insights into what kind of plans the government has to reassure the city to reassure financial

markets. But I think the path of least resistance is a move back down to the record lows that we set yesterday. And unless something changes very quickly. And how much is this a UK story. How much is this a dollar story. And it’s an important question because a lot of people have been saying this is the final throes of the dollar ascendance and that we’re going to see some sort of wash out and then a bit of a retreat. When do you buy into that. I don’t think it’s just a dollar story because the pound

is weak against a whole range of currencies at the moment. Even against the euro the pound is weak. As Tom mentioned on a trade weighted basis sterling is doing poorly. So there’s clearly some important UK elements in what’s going on here. And I think that’s the the real problem here as far as the UK government’s concerned is very difficult to pin this down on just general dollar strength whereas the trade in the Pacific Rim right now is the opportunity to make a big figure move NLF Pacific Rim. We’re still looking for dollar gains against the

Chinese currency for example against them. And really we’re still a sovereign dollar. So it’s still 50. We’re looking for 725 as the next step in that currency per. We’ve been consistently bullish dollars against rumors that it is a destabilising for Beijing or is it a fiction where they really don’t care they don’t care about during Bush or anybody else. I think at the moment there’s a sense that because the Chinese economy is not doing so well because of the zero Covid policy and other issues as well and because the dollar is strong globally there’s a

tolerance for the Chinese really weakening without necessarily creating a sense of panic. SHARP Just quickly BMO Stephen Garneau said we’ve seen the love of the year potentially in cable 1 or 350. Do you think we have the low end. I think we can go lower than that to be honest with you. Unless something changes on policy I do believe that it is very very important now especially from the Bank of England’s perspective to come in and reassure markets that interest rates will go to where they need to be to make the overall metrics work out

in terms of the balance of payments and in terms of attracting net capital inflows into the UK. Unless that happens I do think we can go through the lows of November 3rd. The next scheduled meeting for the Bank of England was very precise with my words then for a reason. The next scheduled meeting for the Bank of India. Because Lisa some people think maybe they meet before that should have challenged that. Credit Suisse the chancellor met with asset management and insurance firms in the city of London today. Just got a tweet from the Treasury in

the UK. He met them and reiterated Lisa the government’s commitment to fiscal sustainability. Next month he will set out a package of regulatory reforms for the UK’s financial services sector to drive growth and incentivise investment. One thing that got lost in a lot of the conversation about what the UK government has done over the last couple of weeks and and rightfully so we focused on what’s happened in the markets but also prioritize in the city. In financial services in the UK is a very good reason. It makes up a large chunk of the UK economy

least and it’s something I think that we’re focusing on supporting that. And Bob Diamond was pretty pretty adamant about this that there’s some really good aspects to some of their growth plans that will support the sustain a bit of ability of the nation. It’s just do they have the time to wait to set out those proposals as pound falls out of bed. Had enough. And will the market cooperate more broadly to the bond market. So can I share my lineup with you for the next Dow Jones Joe Weisenthal rally up in power. Mike Wilson of

Morgan Stanley looking forward to that. The man has been right for much of this year will break down this equity market with him at 930 Eastern Time. Going into that we’re going to catch up. Judy Beale of Kayne Anderson Rudnick and Luke Hickman more of how do you say Aberdeen some room without the fouls. Did it get under Aberdeen Aberdeen Aberdeen. Anyway we’ll catch up with Luke if he still wants to join us. Twenty minutes now. He’s got to manage Lisa Sterling denominated assets. So that’s an important conversation. Well can I just bring this to

you. There is a story today on Bloomberg talking about how electric blankets at the sales of them are surging in the United Kingdom ahead of the winter. That’s no joke is it. It’s no joke. And that the prices are skyrocketing because people are preparing for less heat and saving money on those belts. We can joke about some of these moves but that is no joke. And Europe’s going to have a very difficult winter too when one thing we’ve also got to talk about as well Lisa is just the bear case becoming a base case in

Europe to see Nord Stream one down and no hope from some people that it comes back on line which is the reason why perhaps there isn’t necessarily conviction in a currency call because how do you have conviction and how this is going to play on the weather. I want John I want you to watch the room. Is that is that Bloomberg Surveillance without the vowel. Know it’s just harder. Mark did we ever get an explanation within Iraq. Why aren’t you adapting to that. Jeff about you know like hey kids how’s it going. Short banner’s in

the control room going. Thomas spelled it. No. It was our consultants. A marketing consultant said drop the bounce. Drop the bounce for GNC. It’s kind of insulting to GNC isn’t it. If you just drop the vows from everything you know it’s great marketing great marketing genius. A positive from New York. This is Bloomberg. Keeping you up to date with news from around the world with the first word. I’m Lisa Mateo. Hurricane Ian has now turned into a powerful Category 3 storm as it takes aim at Florida. It made landfall in Cuba early today and it’s

now on track to become the worst storm to hit Tampa in more than a century. Hurricane conditions could arrive in Florida Wednesday morning with winds of up to 140 miles an hour. Goldman Sachs has sharply lowered its oil price forecast. Still the firm says it remains bullish because of a tight market. Goldman predicts Brent crude average one hundred dollars a barrel in the last three months of the year. And that’s higher than today’s price but below its previous forecast of 125. Senate Democrats have proposed a short term funding bill aimed at averting a government shutdown.

Congress must pass a measure by midnight Friday but the package includes a measure to speed up energy permits. That’s opposed by most Republicans and some Democrats. Leaders of both parties are anxious to avoid a shutdown. And a little more than a month before midterm elections a thousand fast food workers at San Francisco International Airport have gone on strike for higher wages. And they’re telling travelers to bring their own food so they don’t have to cross a picket line. The head of the Unite Here Local 2 unions says most of the workers have not gotten a

raise in three years. The airport’s not commenting. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I’m Lisa Mateo. This is Bloomberg. So the FOMC is committed to using its tools to bring inflation back down to our long run golf 2 percent. Last week we took another decisive action to remove monetary policy accommodation. We raised the Fed funds rate by 75 basis points and we’re continuing the process of reducing assets off of our balance sheet which also reduces

accommodation. Someone I listen to carefully Loretta Mestre without question the mathematician of all of the Fed tell of the Cleveland Fed president is just exquisite. I really really listen to the dynamic she displays in her English prose Lisa Abramowicz and Tom Keene. And what we’re going to do here is a little different. We’re not doing like the weather doom and gloom. Although Lisa I mean Lisa come on. You in the big like the boots and the yellow rain thing standing in the surf of Florida. I think I could see it trying to send the DAX

ahead in Florida. I mean it’s a little different now. We do this with Brian K. Sullivan who owns the high ground on weather in business for Bloomberg. He has been dedicated for years. And following this what gets my attention. Ian Brian is 45 miles an hour and suddenly 125 Category 3. Can this game ever more momentum to Florida. Yes exactly. Intensive rapper. Rapper. Intensively ratifying it it’s going cross from the very flat part of Cuba right now and it’s going to hit into the Gulf of Mexico. Get some more water build up even stronger. And

I think in the next couple hours we could see a crack category for one of the things that Lisa mentioned this in the break here is every single guest on Bloomberg surveillance has bought something down in Florida. I mean they’re all on the coast. There are all these beautiful condos. Is there been any change over the years to the coastline real estate that is affected by these historic storms. They haven’t moved back from the shoreline have they. No they haven’t. And in this case that part of Florida doesn’t always get it. So there’s been a

lot of bomb you know kind of whistling in the dark and the idea that oh and never happened to us before. So it’s not going to happen now. I mean you have to go back probably to 1921 because a storm of this strength and this power coming into play when you’re serious. We have to go back to Humphrey Bogart and law. I think it was Lauren Bacall in that hurricane movie. Yeah. Yeah. Key West right off Key West. Are you kidding. Wow. Yeah. That’s that’s one big concern that people have as they watch the development

of Hurricane Ian and especially hitting some of these areas that have been built up. And Brian how much would the damage potentially be if they got a hurricane akin to what we saw in 1921 which some people think is the last analogue. No. Yes. Exactly right. You’re talking 60 to 70 billion dollars worth of damage throughout Tampa Bay. Wow. So at this point how do people kind of prepare for this and longer term what does it mean in terms of development in terms with recognition of whether this is going to become a more frequent event.

Is it. Well I think at this point you can do is get out of the way. I mean it’s you know it’s too late. But in terms of the long term conversation the entire United States has to have about what we build right along the waterfront and how much money you know we’re seeing this in Boston we’re seeing this in Miami. We’re seeing right up West Virginia. All right Brian Tampa is just one example of major shot at the Jeffrey Vinick ex Fidelity who did so much for Tampa along with others a boom economy. There’s

going to be a compare and contrast with the heartbreak of San Juan. I mean there’s no question about it. What is Tampa have to do to not have some of the sadnesses that were observed in San Juan in recent weeks. I think in some part the infrastructure on the mainland is a little more robust than infrastructure in Puerto Rico. So you know at that point you’re you’re dealing with the resources of the entire country and you know they should be going to Puerto Rico as well. But I think I think it’s mainly a question of

infrastructure and how quick you can bounce back. No you don’t get cred on the mainland. It’s a little more robust. The transportation system on the mainland is a little more robust. And it’s just easier to get materials into South Florida than it is to put them on a boat and so forth. Brian can you give us a sense of the trajectory for the rest of this season this hurricane season. Are there other forms brewing. Do you get the sense that this is going to be an exceptionally active one or just par for the course. Well

the forecast was for it to be above average and it was very quiet through August. But now it’s kind of picking up speed as we’re heading for September here. The other interesting thing is the western Pacific. But Vietnam is going to get hit today by a very strong storm. Japan has been hit by a few very strong storms. So you’re seeing that kind of two pockets starting to come into focus here. Brian thank you so much Brian. Cause Solomon with us on a storm that we’ve underplayed in the northeast but which is very serious. You

know I don’t make jokes about it Lisa. There’s some real hardship here. But for Brian to say we wander back to 1948 in Key Largo with Bogart. This is not funny that that movie caught the violence. That’s real. Well it comes at a time when a lot of people have moved to Florida. Florida has seen a huge amount of inward migration. It’s now called Wall Street South. And you have these financial centers. And there were stories about it today about how they’re all shutting down in preparation for the hurricane. How does weather deal with some

of the immigration that they have seen in the buildup that you’ve rightly pointed out Tom. Especially on the shorelines that’s going to have to be an increasing question and pressure although you know to date we haven’t really had to deal with it at least post pandemic. David Kotak who’s always a good friend of the program is living this in Florida. He mail he e-mails. It is too late for Tampa to do anything for Ian except evacuation. They have in the words of Mr. Kotak writing cryptically they’ve just simply avoided a lot of the efforts that

were required after what we saw with the hurricane of the century here. I think it was in nineteen ninety five. Lisa let’s go over the data to better tone today as we go to conviction Wednesday. Tomorrow I’m looking at the real yield one point 5 0 percent a little better than the fear of yesterday. Well the fear. Can we just talk about that fear just because I like to do that but also because we’re looking at a real yield on the 10 year Treasury that went up past one point six percent. This was a pain

point. I was speaking with a number of strategists that we’re told who were talking about how that would be kind of the breaking point for markets. Well we got there. And markets didn’t break. So what does that mean. Where’s the threshold at a time where people have gotten used to zero real yields for so many years on the Bloomberg terminal. Folks you can do the math. You can see the data in the data of 0 4 0 5 0 6 is some form of moving average of about two point zero five percent. Lisa I don’t

hear people really modeling out point 5 percent except Bill Dudley and a few other select. Exactly. And I speak with Michael Schumacher at Wells Fargo and he said to me you know I raised the point of what about 3 percent real like what we used to see. And he said OK that scares me. No that that’s impossible. One and a half percent is it. And he’s not alone. Most people agree with him. I’m going to get up from the surveillance and apple building kennel fee and we’re going to observe the auction. What am I looking

forward to this afternoon Lisa. How much commander is is it a successful orderly auction. Are people excited about the yield that they’re getting which is the highest going back more than a decade. It’s just like poetry folks. I mean never ever heard such an interesting nuanced discussion. Maybe I’ll sleep through at least that just as well. Well you know there’s a 46 Dow futures up to 79. The VIX thirty point nine five. Stay with us. This is Bloomberg.