Florida. It is about the pandemic. The Market Reaction to that, as Jonathan Ferro mentioned earlier , we have seen remarkable stability in the pricing of the Global Financial system in the last three or four days. Mathematically brilliant, in the last 48 hours we have seen yields in. There is no question all of our conversations, including Mohamed Elerian and jim paulsen have to be about what the bond yield signal. Jonathan it is not a huge move, but it is a break. It has been so sticky for the last several weeks, and we break lower by several basis points. Yield, which real have moved aggressively lower. Treasuries on the one hand, on the other, dollaryen. Morning, 1. 06, they are not huge moves but we are starting to break down in a way that is maybe complementing the Risk Appetite elsewhere. Tom totally on the point of real yields yesterday. I do not think people understand there is the visible yield, and then there is the yield after you adjust for inflation. Business has trouble getting done with those low real yields. Jonathan you take the nominal and strip out Inflation Expectations and to get it deeply lower real yield in america. What does that mean . It means gold. The opportunity cost of holding gold with real yields where they are that story does not exist, which is why we see a real lift over the last several months. Up 10. In 1820 print this week. All this rebounds to the news of the corporate world, mr. Buffett with berkshire hathaway. You see awe assume building m a business . Lisa it depends how much confidence there is in the cfos tweet. This has been a perennial question. If companies have cash and can sustain the downturn, do they have the conviction to spend at a time you have such low bond yields and low Growth Prospects ahead . This conviction seems to be lacking in a lot of executive headquarters. This to me is something i am watching in sentiment. Tom we welcome all of you on Bloomberg Radio and Bloomberg Television across the nation. We are waiting for a Tropical Storm in new york, not a hurricane but dark clouds. Biblicalgs up the proportions of where we stand right now. , jim paulsen this is a student of melding economics into the history of our Financial Systems and the opportunities to take and the minefields. Jim paulsen joins us. ,he courage to be in the market the confidence of the cfo, how do you develop confidence to participate in anything except amazon and apple . Jim it seems like that on some days. Ways it is ame very unique situation we are in. There is no doubt about that. It is also very common to what it feels like at the start of other new expansions. There a a lot of doubt, lot of problems on main street, a lot of them seem like they will last for a long time and they probably will. That is the same kind of 1982tion that existed in or in 2009, when it first took off. There was a lot of doubt it seemed like it was disconnected from the reality that was going on main street in both of those, and against that wall of fear with massive policy support we have had in 1982 and we had in and, the market kept rising eventually Economic Conditions on main street also improved. It took a long time to get back to normal. We had elevated Unemployment Rates well into the late 1980s. We did not get back to the Unemployment Rate again until many years later. We have not of issues today. I still think we are in a new expansion and a new bull market. Jonathan i hear this argument a lot. I think you are close to the thoughts of Morgan Stanley that this is normal. The reopening, the recession playbook stands. People are pushing back. They are say there structural fears to how quickly we can normalize. It is not normal. What is your message . Jim there are certainly differences every time. I totally agree with that. We have not ever had a pandemic that i have studied before. It does have new characteristics. Therapy and unique characteristics in the past. Were starts and stops in the 2009 recovery. We had massive Brokerage Firms failures. Sometimes it looked a little better, sometimes it looked a little worse. In the early 1980s we had a depression in energy and agriculture in my home state of iowa. Commodity deflation, that was start and stop. I dont know if a specific thing is unique to the day, but in reality it is common to the past. Is you have to get back to normal before Security Prices move. They have already moved long before we are back to normal and probably continued to do that. If we could trend northward in terms of economics, i think that will be sufficient, even if it is slow and even if it is start and stop. Jonathan lets say it is slow. Lets stop about what you want to own. The rotation into cyclical areas worked for about five minutes and then stalled through the month of june. Week where the dominance of make a cap attack is back on top , how uncomfortable does it feel to pivot away from the story and back to value again, back to the cyclical areas of the market . Ii continue to own would continue to add exposure in the broader market, which to me is cyclical, small caps, and internationals. There is greater participation going on than advertised. A narrower market, but following the march 23 low, and thell 2000 index market cap waited s p 500 are all up, have risen 40 . There is greater participation still going on. It may not be every week, but i think now we have a fresh attitude toward the pandemic and reopening. That turns back to bullishness. We will see a pickup in the meantime. Your highgrowth equities will continue to do well. I do not see growth like a saw in 2000. Right now intact right now in tech, the forward multiple s p right now the relative pima multiple is 1. 1 times the s p. It is not because they are out over their skis with massive bullishness. It is because of defensiveness. They are buying those stocks like they used to buy utility stocks. Lisa this has been the argument. Basically big tech are the stalwarts and utilities going forward. If you take a look at who is buying, investors are looking for a great proportion of total volumes and equity market in the United States and saying any given day, there is 1 5 of activity that should be did to the retail that has been traditionally thought of as the do youney, you agree or think they are smarter than the institutions . Jim that is yet to be determined. The size of the magnitude is of a that is concerning like it might have been an earlier periods. There are think people who are looking and using defense. Wth stocks as whether that will be accurate, i do not know. It is not something we have done in the past. When we have had this concentrated run with these big in the past it has been a signal over bullishness. Jonathan the character of that sector has changed. Fantastic to catch up with you as always. Jim paulsen of luke called. It has been so tough to keep up with the rally of some of these names. To think the nasdaq 100 has liver the same games. Up around 20 has delivered the same games. Keeping up with what we have seen has been tough for the whole of the south side. Tom no question. Citigroup 350 on amazon. A note on the expansion of ecommerce. 5000 way down the road. Jonathan it has been a beautiful rally for the people have helped that name. 18 minutes away one hour 18 minutes away from the opening bell. 18 minutes away from catching up with Mohamed Elerian of Bloomberg Opinion. That is coming up later on the show. This is bloomberg. Coronavirus ise piling up in the u. S. With new cases climbing over 60,000 a day. California and florida all reported a Record Number of deaths. In new york city, large events that typically require a permit have been canceled. The coronavirus is likely to overshadow President Trump he heads to florida on a front razor and antidrug trafficking event. He will not be able to escape the pandemic surging in the state. More than 4000 floridians. Florida was amongst the most aggressive states when it came to easing restrictions. Joe biden has laid out the plan he says will make americas economy better than it was before the pandemic hit. The democratic president ial to boost vowed manufacturing and encourage innovation. Bigticketoiding proposals likely green new deal. The International Energy space posted its outlook for International Oil demand. Report, the iea said fuel consumption during the Second Quarter was not as bad as originally thought. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. They are more concerned about two low inflation about too low inflation. Prudent, andll be so for a while we will have a situation where saving exceeds investment. Victor gaspar of the International Monetary fund on the need for more fiscal stimulus. Europe and the United States very much and focus. From new york, good morning. Alongside tom keene and Lisa Abramowicz, im Jonathan Ferro. Equity futures a little lower, off. 6 , down 19 points. As tom touched on through the program and through bloomberg surveillance, treasury yields breaking lower. We are down another three basis on 30so 0. 58 on tens, down to 1. 26. A couple of bond options through the treasury that have gone well on tens and 30s as well. In the united in japan we had a jgb 30 year issue. Demand is still there for bonds this low. Tom no question about it. On this friday, we had Helene Bakker on, now we do it on housing. Micenko is definitive on the homebuilders. Thank you so much for joining bloomberg surveillance today. How are the homebuilders reacting . Hortons, howp, the are they reacting, how are they responding to the economic slowdown in the pandemic . Surprisesof the big in the first half of 2020 is the rebound in demands for housing. Going into february, the market was redhot. We spent a lot of time in the earlier months of the year looking at trends by all means the new Home Construction market was very strong. March andnt into late it was basically shut down for four, six, eight weeks. The surprises a lot of the demand has rebounded. You are seeing more and more firsttime buyers in the market. One of the things owners are doing is there building lowerpriced homes. If youre building lowerpriced homes, you are seeing a much better demand than if you are seeing higher priced homes. You talk about the Toll Brothers versus d. R. Horton. For se also seeing demand pec. Normally builders want to manage their spec inventory because it is hard to build a house to suit needs when you do not have a builder in mind. The first half of the year we ec, and whenon sp you put that together, i think the lack of supply on the existing side, resilient demand profile, demographic to deal with were a lot of these older millennials are moving into their first home. You have so much acceleration because rates are low and money is cheap. People want to get out of apartments because of the covid situation. That is where you have seen a lot of strength year to date. Ofnar, the first two weeks june for lennar, business was up 20 over june 2019. Not march or april, when the pandemic that is pretty pandemic. That is prepandemic. I was talking with a builder about this point and he said 85 of people are still working. If you focus on the 15 there is a real demand story out there , and i think the supply chiefs existing supply is gone down further, a lot of the existing supply on the entrylevel side has been mopped up by the single rental companies, so the needers are building the for that. Lisa and we definitely are seeing this and lumber futures, which have risen 85 since april 1. They are the highest since 2018. There is a question of this is pentup demand being unleashed in the market but will dry up. You see there are a lot of people still employed, but increasingly some of these larger companies, united air, wells fargo, are planning a job cuts going forward. How much could housing prices decline given the fact we are going to see this employment pressure continue . It all goes back to the supply demand. Right now, we are not looking for large nationwide declines in home prices at all because of this imbalance to the demand side. On the demand side, to your point, as we begin to see unemployment or Service Industry unemployment drifted to more whitecollar unemployment, one of the things we are looking at york, new jersey, connecticut, california, washington state, they went into lockdown earlier. They seem to have flatten the curve. What we are worried about is places like phoenix, san antonio, orlando. The per capita infection rate are not where they are in the coast, but they are building very quickly. That, you worry unemployment may be more centered on those locations. We are in a holding pattern. I do think there was a degree of pull forward. We had a pause period in the spring season. You definitely had some people andng out of rentals wanting to have a home and that sort of thing. It is hard to know how much that is. From highcost lowcost has been going on for a couple of years. That accelerates a little bit in this environment. I do think the june numbers we is seeing in the builders still a little bit overstated because of the pull forward. To your question, as long as supply remains in excess of runningand supply is 60 of what it was a year ago or even in the normalized supply and demand market. It will have to turn the other way where demand completely collapses for us to see home prices. We have to leave it there, unfortunately. Great to catch up and get your thoughts on the market. Jack micenko of susquehanna. We will catch up with Mohamed Elerian of Bloomberg Opinion. In the bond market, that is where the story is over the last couple of days. We break lower on 10year treasury yield. Down four basis points. From new york, this is bloomberg. Jonathan from new york city, this is bloomberg surveillance. We are live on bloomberg tv and radio alongside tom keene together with Lisa Abramowicz, im Jonathan Ferro. One hour away from the cash open. We are off. 6 on the s p 500. In the bond market, treasuries firmer, yields lower four basis points. Down six basis points on a 30 year yield, 1. 25 on a 30 year treasury. The options have been keen and tidy. Low,wide, yields might be but demand is still resilient. No question. All of the market indicators signal unusual times we are living in the great uncertainty of where we will be down the road. Someone has codified this with the phrase key decisions is our next guest. The idea of many key decisions we will make, black or white decisions we will make down the road in this society and in our families and our investments, it will be extraordinary what we will see in 2022 and indeed 2032. Jonathan fortunate to be joined by Mohamed Elerian, chief Economic Advisor to allianz and Bloomberg Opinion columnist. We have been following this crisis for the last several months and it feels like we are entering a new phase. There is a shift. What are your thoughts . Mohamed there is an it is happening in the economy in the u. S. That is the migration of layoffs from small and Mediumsized Companies to larger ones. That is consequential for what it says about the demand side, but also what it says about the supply side and that a lot of businesses are not buying into the v. They see a different destination regardless of the journey. Key Warren Buffett made a decision this week to invest in a distressed asset. What is missing in our analysis on a friday in july is how businesses, how executives will respond. Ceos,re the key decisions cfos, and big money will make over the next year . For most businesses it comes down to three issues. Is my Balance Sheets strong enough, what will demand and revenue look like, and what will cost structures look like . For the marketplace, there is an interesting aspect going on. The marketplace has to incorporate two things. One is the heavy hand of policy, and secondly on technicals that have proven strong, but that remain delicate. There is an interesting configuration we can be talking about for a long time going forward. The basic issue is there is much more fluidity economic and financial and healthwise than we have seen for a long time. Is it about the technicals you think are delicate right now . Mohamed what you have is the expansion of what has been the formal trade, the fear of missing out because Central Banks are our best friends, the pain of their is no alternative but certain stocks that have become defensive and growth at the same time. That has attracted a lot of interest from the retail side. The retail side has had quite an influence in last month or so. I think or retail participation is very important. Andrtant to the marketplace it mean society buys into the marketbased system even more. You do not want retail to be the victim of a head fake and that is what i worry about your lisa that is what i worry about. Lisa another way to say this is a bubble. Do you agree . Mohamed no issues of head fake. Two issues of a head fake. One is that Central Support does not go down to the folding companies. Defaults imply capital impairments and the experience of curves should be one that goes front and center of every retail investment. The second element that relates to whether or not there was a thinksen the marketplace in relative terms and a time when it thinks in absolute terms. Theyve strong Balance Sheets, positive cash flow, Good Management in numbers, positive sign in the covid journey and the other side of the covid journey. In actual terms look at their valuations. What i have learned in my experience in the market place is the market can be assessed with relative values for a very long time and then almost overnight that moment can be quite a jarring moment if you do not realize where you are in valuations. Youve done this with bill gross at pimco. You know he had his famous munro desk munro trader on his where youre going from relative to absolute and all we are worried about is price, price, price. How concerned are we in the bond market with where nominal yields and real yields are to you flipping from the yield analysis to a price analysis to protect capital . Mohamed a lot depends on which part of the bond market, and i think it is important to distinguish. The story thatth was also a pimco. A person comes home and says i 30,000, andfor his wife says are you crazy, and you and he answers get he answers yes, wait until we sell it for 40,000. There is a point where relative trades do not make sense. You will see it in certain sovereign emerging markets. You will not see it higher up in the capital structure because Central Banks will continue to influence those yields and those spreads. People have to be much more careful into how they treat the bond market. You have to be careful, otherwise people might think people at pimco bought 30,000 dogs. Maybe that was not the case. Mohamed they certainly did not. Pimco has always been a very fundamental driven shop. Freight vet 32,000 bill, i am sorry. Vet is why you call it a bill, because of the cost. Jonathan are you concerned about evaluations in emerging markets . I think people do not realize how tough it is for the typical emergingmarket. Phase one was dealing with the spillover with what was happening in china, what was happening in europe and the u. S. Which was lower exports, lower commodity prices, phase two is dealing with their own covid outbreaks. If you look at what is happening in latin america, it is tragic. If you look at africa, it is tragic. The demand on the resources and the need to divert more resources to the Health Care System is just going to go up. I think people do not realize there is a paradigm of nonpayment coming up for certain emergingmarket credit. A paradigm of nonpayment spirit the idea sovereign debt could get written down. We have seen son of that from the imf so far. We have seen some of that from the imf so far. How much you think the sovereign debt of developed markets could get written down . Mohamed we have seen with ecuador and argentina, that is marketbased solutions. We have seen the imf and the world bank work with the g20 on a debtbased initiative and made it clear they expect earn sharing. The issue is it is not easy to dictate burden sharing from a topdown perspective. That is where the imf and the world bank are struggling in finding private sector involvement. I think it will come. Immediateries go from emergencies assistance to longterm support, one of the requirements will be burden sharing. I do not think creditors were realize that will migrate from the lowest Income Countries to some of the middle in from emerging markets as well. Jonathan when people say burden sharing, we think of europe and the talks set to take place later this month. Youve pushed back over the last year. When people come on programs like this and talk about pivoting away from america and American Assets towards europe and the continent, what is the pushback now . Mohamed we are getting closer. I think we learned once again it is a crisis to move europe, and what youre seeing happening in europe is an important moment. I must say i am encouraged by what is going on in europe. It would be important to see how these negotiations proceed. Resistant,re still but on the whole i think they would get to a better place. The time will come to fade the u. S. In favor of europe, we are getting much closer to that. I would not fade the u. S. In favor emerging markets. Thanked the family for us. I know it is super early on the west coast and this is a disruption for the household. Fantastic to catch up with you. Mohamed of Bloomberg Opinion. That decision Mohamed Elerian of Bloomberg Opinion. That decision set one of the key discussions of the past week. Tom we could do another interview with Mohamed Elerian on this. 1992, andns back to he mentioned ecuador. I cannot convey enough how the formulas of International Distress 30 and 40 years ago are not true today. The financial structure of those countries is totally different than what we saw in the 1990s. As Mohamed Elerian alluded to, there will be a huge mystery for the workouts going from the most troubled to the lesser trouble. Imf andystery for the all of international banking. Mohamed a bit of up jonathan a bit of a bounce to the premarket. We turn positive briefly on the s p 500. Now we are down just. 1 . Treasuries for mark, yields lower through much of the morning. Up on the longe end of of the curve. Down justar yield now four or five basis points. From new york city, alongside Lisa Abramowicz and tom keene, im Jonathan Ferro. Bloomberg tving and listening to Bloomberg Radio. This is bloomberg surveillance. Ritika the coronavirus is on a rampage through the u. S. Sunbelt. Texas, california, and florida all reported Record Number of deaths. Houston hospitals fill up all of the icu beds. The number of new cases in the u. S. Whenever 60,000 in a day for the first time. President trumps former lawyer and fixer is back in prison. Refused then had test of home confinement. He is serving a three year sentence for campaignfinance violation and other crimes. He was released in may and allowed to return home for fear of catching coronavirus. A top military officer in the u. S. Has broken with President Trump over bases named for confederate generals. Told congress they should take a hard look at those bases. Threatenedrump has to veto legislation that would manage the name changes. Investors will bet 20 billion against a stock. Therding to Research Firm value of tesla shares is approaching that mark. Risen, and that has jenniferking fun lopez and Alex Rodriguez are amongst a Group Bidding to buy the new york mets. According to new york post, the group has offered 1. 7 billion 1. 7 billion for the team. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. The economic recovery clearly bottomed. The good news in our view is we bottomed less down in the United States in terms of the economy and it did not dip as much as we were fearing. It isning process not clear to us at all how the reopening process will go. Tom that was rob jonathan that was rob wallner on the reopening process. From new york city, alongside tom keene together with Lisa Abramowicz, im Jonathan Ferro. I will step away to get ready for the open as we count down to the opening bell. Looking forward to catching up with Lori Calvasina of rbc on this market as we get very defensive in the u. S. Tom absolutely. I am glad that conversation will happen. What we have seen overnight is a reaffirmation of many on the sell side who are those big tech companies. I wonder what Lori Calvasina will say between what you do between tech and moving the other way. Jason at citigroup and his team putting out a street hi 3550 on amazon. Really impressive to see that new price target. Right now we will switch to the litmus paper for the global system, and that is the Foreign Exchange market. Mark mccormick has been a great student of this and we are thrilled he joins us as years of working a bloomberg, his ownership of the bloomberg terminal back when he was out of school, now global head of fx for ge bank. The first chart i looked at this morning was euros sweezy, the euroswissie. Is it a tradable move in the swiss franc just more disinflationary noise . Of swiss,ink in terms euro swiss is probably not the appropriate play. I think the euro swiss has more upside potential the Downside Potential over the next six months for the next year. When youre thinking about the next trade, swiss yen is your appropriate benchmark. What the world is trying to figure out is in a world where there is demand for currency like golden swiss and yen, which is safe haven crosses are the most mispriced relative to the world. I think the swiss yen is an interesting trait because it has been mean reverting throughout covid, and our framework tells us the market is over positioned and swissie is overvalued in the swiss yen should be the one trade you are thinking about that could move lower, maybe 3 in the next month or so. Lisa it is interesting, a lot of people looking at these tom, go ahead. Get technical. Go towards the swissie. I know that is burning front and center on your mind. Tom to be honest i was distracted in new york by the sirens below is on fifth avenue. There is a zillion sirens. That is the nature of doing this from our homes in new york. Excuse me for that. Mark mccormick, i look at the idea of a week swiss and strong yen. Why should the yen be strong given the pandemic and the fragility . Why do you call strong yen . Yen is interesting because it defies every single economic argument he makes for currencies. It does everything it wants to do on its own because it is a function of flows as opposed to fundamentals. The biggest driver in japan is if you look at the balance of payments, the japanese have been able to push money out by japan into other currencies, and one of the biggest drivers you have to think about is the relative equity story, the sharp issue of Global Equities and whether or not we will see deteriorating sharp ratios with more uncertainty, and you also to look at credit markets. What we have seen as the japanese balance of payment has deteriorated from a portfolio perspective, but what upsets that is the income side of the current account. The yen is 15 undervalued. It is the cheapest currency we have because the japanese have been able to push money outside. The thing that is happening is the 10 year yield differential is now moving in japans favor, where the g9 average is only 40 basis points above the japanese 10year. You add to that story that japanese Pension Funds have been buying equities and foreign credits throughout this last cycle, if we start to see more volatility in u. S. Equities and see a change in u. S. Political leadership and a change in Foreign Policy and we see a shift in the sectors of what is driving the u. S. Equity market, that is going to shift the capital flow dynamic back towards japan. We might see u. S. And Foreign Investors buying more japanese based equities, which would drive the balance of payments to the portfolio flows in eight yen positive direction. A yenan lisa positive direction, are you possibly calling for more dollar weakness . Mark i would categorize it this way. We are trying to time the move theiately where our recovery and rebound people have been focused on, there is a bottom transition from that to global reflation. We are not expecting just because the rebound was betterthanexpected and data surprises are betterthanexpected, that will equate to a global reflation environment. In that backdrop, we start another 1 to 2 where the broad the u. S. Islidates, becoming the epicenter of the coronavirus pandemic. The flipside is if the dollar strengthens off that risk of potential, that is sowing the 5 to 10 the next big to 15 lower in the dollar over the coming year. I think a lot of it is the u. S. Has had cyclical and structural drivers. The structural drivers have always been dollar negative. It is the cyclical force of u. S. Equities, u. S. Growth and some on thehip on the race rates differential has allowed that to happen. It is hard to see how the dollar can rally with real Interest Rates remaining negative over the course of the coming years. Mark mccormick, brilliant. Thank you so much. Strong yen. Interested in the depth of flows to get you to a stronger japanese and. The markets interest a stronger japanese yen. The market is interesting. Remarkable to see yields came up and ppi disappointed with a more disinflationary ppi. Ian lincoln with a smart note. In ind note yields come the last 20 minutes with the new vengeance. ,. 1 369. Ear yield that is remarkable. Lisa it is clear Pricing Power has diminished, this edifies that idea with the idea of prices declining. Meat prices declined 27 in this reading. The unexpected weakness is driven by a decline in food prices. A lot behind us we will be parsing through throughout the day. Tom some of that is demand as well. Coffee off in the recent weeks on lower demand. All of that part of the pandemic. What we will do through the morning is keep you abreast of the markets and we will see if we continue the tech juggernaut that seems to be the theme of the week. One theme is the president in the air to florida, where he will give a fundraiser event. Interesting to see the comments we get from President Trump. Ian bremmer at the 12 00 noon hour. Stay with us. This is bloomberg. The best tv experience just got better because now you can watch all your favorite hulu shows and movies on xfinity. Youre only a voice command away from Award Winning shows like the handmaids tale, to new hits like little fires everywhere. And fx originals you can only watch on hulu. Thats just the beginning of what you can experience with hulu on xfinity. Tv made simple, easy, awesome. More voluminous hair instantly. All it takes is just one session at hairclub. Introducing xtrands. Xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. Theyre personalized to match your own natural hair color and texture, so theyll blend right in for a natural, effortless look. Call in the next five minutes and when you buy 500 strands, you get 500 strands free. Call right now. upbeat music jonathan from new york city, our audience worldwide, good morning, good morning. The countdown to the open starts right now. With 30 minutes until the opening round. Its friday morning. Good morning to you. We begin with the big issue. The reopening with america stumbling and markets adjusting accordingly. We continue to see challenges here around this reopening story. It is not clear to us at all how this reopening process will go. If we are still dealing with coronavirus outbreak any statistics in the u. S. Continues backpedaling on phased reopening. Some of the reopens people walk back. The delay in the reopening. Dy lema. We risk choppiness heading into the next couple quarters. Thats what could make investors start to move assets away from the dollar and look for better opportunity. Redefining what is safe. Large caps, sitting in treasuries,