Transcripts For BLOOMBERG Bloomberg 20240704

It is in the athletic, for our reporting has reached an agreement. Tom this is a big deal. How does a franchise pick it up . This is a seismic deal for english football. Explain for our audience in america that doesnt understand. Jonathan accepted a 100 million euro offer. Lets see if he accepts that. He wants to win trophies and it looks like he has to buy munich to do it. I think he is Something Like 51 goals behind a phenomenal goalscorer to become the top scoring stryker of premier League History and he is going to leave potentially before he reaches that. Tom one quick question. Explain Bayern Munich compared to ac milan compared to paris. Jonathan delete. Delete. Elite. Tottenham does not come close to that. Tom i will call you back. Bye. Lisa i am surprised it was not a bigger reaction. Jonathan i thought it would be, too. Lisa you said you are going to break something. I knew that henry kane must have left. Jonathan let me try that again. From new york city, good morning. This is bloomberg surveillance on tv and radio. I am Jonathan Ferro. It is cpi thursday. Equity futures on the s p 500, positive by 0. 5 . Tom the summary of the data to get to jackson hole and the fed, may be all of the other economic data, you have to look at core inflation because topline inflation is going to be affected. You got the pop in gas prices. It is about core inflation. Jonathan onto the next meeting, are they going to open the door to the pause . They seem to be open to that. Lisa the greatest part about the cpi report is everyone expected to confirm it will be a soft landing, confirm disinflation, confirm to the same thats you will see in the market. The disagreement comes on what is next and how much do you dismiss this as a head fake. That is what were going to hear from person after person. Jonathan what is the biggest risk . Backing away too soon or staying on too long . Tom for the central bankers of the world, the threat is backing way too soon. The right word is it haunts them. Tom jonathan the 1970s haunts them . Tom even the 2000s. They are really concerned about making the faux pas. Youre going to make a faux pas and it is that is when you listen to citigroup and say at some point it is going to turn. Lisa i have to disagree. The tide has shifted and the fed feels they are more worried about disrupting you labor market and the possibility of a soft landing that the holy grail out there that we are going to achieve this time and go down in history as the ones who do this. They are more concerned about that then the hunting of the 70s. Tom i did a fancy math study this morning on core inflation to get back to 2. 0 , spring of 2026. That is how far away their babel is. Jonathan your equity market on this appeal looks like this. Equity markets are positive by. 55 the yield change around 4 at the close. That is where we stayed, we are going nowhere. Lisa the euro went to 1. 10. The expectation is a for both headline and court. Very thirsty see what counts as a soft landing. Right now it feels like people do believe the fed is done. They want to hold, they would excuse us start moving away. I 00 p. M. , this is the key moment. The u. S. Is selling 30 year bonds. This comes after any option of 10year note yesterday that was fine. It was not awesome your seals it was not awesome. Fed speakers lineup today. They lent a fed president , we have been hearing a lot from him, and Philadelphia Fed president. Jonathan senior Portfolio Manager of joins us now. Lets talk about what youre are looking at seeing later this morning. Margie we think we will see inflation first going down a little we dont think we will get any break that will say we think the fed has clergy there has clarity there. Tom s dividend and Dividend Growth a yield equivalent for a constructive use of yield or do you have to go to a higher yield in fixed income right now . Margie if you can find companies that have good growth, that is a good strategy rather than going for big dividend payers because that has not been successful strategy. In a fixed income market, high yield looks like the best place to be. You can say 7 to 8. 5 . For fixed income investors, that is not bad. Tom i am fascinated by what cfos do. If you have a legitimate real yield, do they listen issuance lessen issuance or not . Margie they have been optimistic about lengthening money over the last decade, i think they are going to see more of the same. We have had a drop in the amount of issuance from corporations. Reflecting the fact that they need they dont need a money at all and rates have picked up from a year or two ago. Corporations really dont seem to be stressed in general. They dont need to money in order to operate so that is good for the economy. Lisa there is a feeling the fed is quick to move away from stricter policies well in advance of security. How much is that your base case and how much will todays cpi report underscore that . Margie i dont think the maturity wall is quick to be an issue because of the liquidity companies have. They space on maturities, a lot of companies have tremendous the quiddity assets liquidity assets. We have seen the maturity wall story come up over the years and companies have always gone through it. It want be an issue this time either. Lisa how much does that idea hinge on the idea of a soft landing cutting rates for the next year even if we dont see an employment rate pickup the Unemployment Rate pickup . Margie you look at the history books in previous cycles and you think about what is going to happen, that is why people keep coming up with the wrong answer. They dont look at the changes we have had, a decade of new zero writz. It is near zero rates. Companies dont need to borrow money. The banks have been restricted a number of times. It is hard to see where this recession is going to come from. The economy has been impervious to the feds increase in rates. Jonathan can we talk about pricing. . The Walt Disney Company came out after the close yesterday, they are putting prices up. Can you speak to Pricing Power across america right now . How strong is it . Margie i think it is going to continue to be strong. Disney thought they had room to raise prices and i think they will be successful in retaining price increases. That is why we see corporate margins maintain themselves. A lot of people but we have seen urchins give a good squeeze but companies have able to pass on price increases. Tom in a blended portfolio, to provide balance, is a 60 40 portfolio balanced now . Margie no. I think you be looking more on the equity side. The reason being is i dont think youre going to see much total return out of the bond side. Rates and treasuries are going to stay relatively high compared to inflation simply because of the tremendous supply. Jonathan wen yu tom when you look at big tech, our share buybacks a yield equivalent for you are share buybacks a yield equivalent for you . Margie you could say that but some of the texts are trading at high levels. There is a risk if we see Companies Report lower earnings, and it does look like some of those are rolling over in terms of price, we could see a big price correction because they have gotten ahead of their longterm growth rate. Jonathan wonderful to get your perspective. Here is the set going into the inflation data. Your equity market is positive by 0. 5 . Cpi a little bit later. Plenty of fun and games with this stock. Novo nordisk in denmark is trading lower. The good news is basically they have beaten a race, every sign of the outlook after this blockbuster of medicine. Lisa they cannot get it to the u. S. As quickly as they need it in a time when it not only is it shanghai results, but you pointed to the study about reducing Heart Disease. You said basically this is obvious. If you lose weight, you reduce your Heart Disease potential remove occasions. Potential Heart Disease ramifications. Tom first thing yesterday was a b database as well. What are the health risks with this stuff . Do we know . How much weight do we lose with this . Lisa it is an injection. I was in big is definitely an injection. That is why the injector companies are going gangbusters. Tom how much weight do i lose . Lisa a lot. Tom like a pound or two . Jonathan you want us to sit here on tv and tell you how much weight you are going to lose . Tom this is a free lunch truck. That is all there is to it. Medically there is no free lunch. If i am losing weight like that, there has to be a side effect. Jonathan exercise, tk. Tom i know. Lisa [laughter] jonathan every time we bring up this story, lisa has done some research and regression burn. Lisa everyone is looking for a new story. A i fizzled yesterday. People are like, we have overblown this. Now everyone is jumping on the weightloss train. If you can offer everyone a free lunch, that is going to catch on. Jonathan there is a huge obesity epidemic in this country. During the pandemic, we talked about it, after the pandemic, we hardly talked about. Tom the peterson, i am like why are you lecturing my kids on weight . He says if i forget to lecture all kids, i will forget to lecture them. Lisa you are right to point at the pandemic, people staying at home and not exercising. Jonathan the amount of deaths tied to obesity and the risk factor of people in the group. Yet, it hardly got discussed. I would have expected after that to be some attempt. This is a big deal. The first time you connected your godaddy website and your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com pres. Biden where is it written that america cannot lead the world again in manufacturing . We are going to do just that. The plan is to invest in america. We are transforming our country by rebuilding americas infrastructure. I am not here to declare a victory on the economy, there is a lot more work to do. We have a plan. Lets turn things around. Bidenomics is a way of saying restoring the mckendree. Jonathan President Biden speaking in new mexico on a tour. The equity market on the s p 500 is 500. Yields unchanged, 4 on a 10 year. The yields below 4 at the auction on a tenure maturity. Later, you get a 30 year auction. That is coming shortly after the cpi report later this morning. That report, two hours 13 minutes away. The fx market, reclaiming 1. 10. Tom for global wall street, euroyen today is important. Trying to the triangle is of euro, dollar, and we are back easily 10 or 12 years. The euroyen feels like that is a 145 or 146. There is a word at the department of treasury that is taken seriously among those that provide leadership in washington, d. C. , an Alexander Hansen Alexander Hamilton ward. Kim, thrilled to have you on. Explain how the culture wars link into your day to day grind in washington. For all of our viewers, it is a battlefield. Maybe it is a minefield, a better way to put it. How are the culture wars going to play out as we move towards the primaries . Kim it picks up on what you were talking about previously, how much of a free lunch can americans expect to get from macroEconomic Policy . Tom there are two different divisions in bidenomics and trumpenomics. Fitch got in the way, there was some noise. Is that kind of debt concern finally legitimate . Kim it has been legitimate for decades, just now we dont have any space to pretend it is not there. He macroeconomic challenge in washington is twofold. First it is to address the country and citizens from moving from zero bound rates to more restrictive policy. Secondly, rebalancing the fiscal books. We are adding about 20,000 beneficiaries per month to medicare. That cannot continue unless you are going to raise revenues above the 18 50 year average which we seem to be stuck at. You either have to trim your holidays your outlays through medicare or increase revenues to account for what has never been accounted for in the u. S. Lisa there is a question about how much this is being accelerated at the time for they are increasing geopolitical fractures. In particular, the u. S. And china moving further and further away. How much is that the concern . That International Buyers cannot fee obvious buyers of choice for treasuries in the same kind of way they have been . Kim i dont detect there is a lot of concern about that yet i detect there is concern that the u. S. Is not investing in itself in a way that 10 or 20 years from now treasuries will be as attractive as they are today. That is the big concern that from an Economic Policy standpoint, we are behind and it is going to take a while to catch up. You see that from the executive order yesterday which is a message to investors restricting their ability to invest directly. Not poor for you investment, direct investment. Artificial intelligence technologies and some of kentuckys and semi conductors in which china was to leapfrog the world. Prepare your netting at home, invest in your people, build in terms of infrastructure, invest in semi and manufacturing base, and make sure that investment flows strategically benefit a clear competitor. Lisa a lot of people would argue the argument from President Biden is a watereddown missive versus what people were calling for which was a ban on investments towards china and their Artificial Intelligence technologies. Isnt that essentially what we are looking for, something that will not go into effect until next year . Something that is nearly targeted and still subject to change . Kim the complete is understandable but it ignores the lift necessary in its policy. The president has recognized going back to his sixth month in office when his National Security council and Economic Council issued a word on supply chains a report on supply chains. The core of the report is that the u. S. Is behind on investing in itself and behind in paying attention to china and other competitors who have lucked out Green Technology and other technologies necessary for the future. When you are the reserve currency of the world, you have to step lightly but in this case the president has chosen to step firmly. It is going to be a bumpy path. They dont want to disrupt the world economy. It is a necessary move. Tom you are one of the rare beasts with some International Credit in terms of inside the beltway policymaking. I guess we are having m a factoring records i guess we are having a manufacturing renaissance. Do we have belabored labor to fill the factories . How do you respond to the serotype we dont have manufacturing in ohio that can compete with manufacturing 40 miles outside of hong kong . Kim if we had been doing these policies 20 years ago, this would not be a debate. You have to start at some point. There are parties interested in this but with the president leaving, they want to invest in hardware and mine ware. You have to start at some point. If you dont start, you are not going to catch up. Jonathan wonderful to get you on the show. Thank you very much. One of those debates when are those debates . About two weeks ago two weeks away . Tom yeah. I looked at the schedule, they dont do darbies in munich . How do i watch removable fish watch german watch german football . Jonathan it will be on espn. I think it might be. I will confirm minimum it. Tom we have a way to cope here a way to go here. Yesterday was historic. The disney struggle is a huge deal. As patel said, can they raise prices . Im sitting there, all i am thinking is is Jonathan Ferro going to pay the new movie . Jonathan live tv through hulu and disney plus plus espn is in the 80s. A month. Lisa they increased it by what, 27 . Jonathan pretty 7 . 27 . Lisa to reduce the hulu revenue numbers. I dont know why that headline is apple going to buy disney . He did not push back aggressively. Tom that is the smartest thing i have heard. Jonathan that is the smartest thing i have heard on this show in 25 minutes. Tom it was a high bar. Jonathan Bruce Cassidy is going to improve on things out of jp morgan. The inflation data later from new york, this is bloomberg. How can you sleep on such a firm setting . Gab, mine is almost the same as yours. Almost is just another word for not as good as mine. Save 50 on the sleep Number Limited Edition smart bed. Plus, 36 month financing on select smart beds. Shop now only at sleep number. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. When people come, they say theyve tried lots of diets, nothings worked or theyve lost the same 10, 20, 50 pounds over and over again. They need a real solution. Ive always fought with 510 pounds all the time. Eating all these Different Things and nothings ever working. Ive done the diets, all the diets. Before golo, i was barely eating but the weight wasnt going anywhere. The secret to losing weight and keeping it off is managing insulin and glucose. Golo takes a systematic approach to eating that focuses on optimizing insulin levels. We tackle the cause of weight gain, not just the symptom. When you have good metabolic health, weight loss is easy. I always thought it would be so difficult to lose weight, but with golo, it wasnt. The weight just fell off. I have people come up to me all the time and ask me, does it really work . And all i have to say is, here i am. It works. My advice for everyone is to go with golo. It will release your fat and it will release you. Jonathan cpi thursday, i am told, and this is what the market looks like. On the equity market, s p, positive. The nasdaq up. When i started to radio, you had to get up every morning and write down the name of the the dash, because when you get up early you dont know. This is bloomberg. In the bond market, twoyear, 10 year, 30 year. Tender yesterday, no problem. 30 year supply coming out later. Attend your dancing in at around 4 the 10 year 4 . If you compare where we are now to where cpi last came out, july 12, equity markets put much debt flat. Bond market at the front end, have not done anything. We are talking about disinflation, this equity market is pretty much flat between the last cpi print and the one we are getting later this morning. Lisa knows where the euro is, it is at 110. That is where it has been the past couple of weeks between 109 and 110. Under surveillance, u. S. Cpi data in about two hours. This is looking for further signs of disinflation ahead of the Federal Reserves september meeting. We get inflation this morning, inflation again on september 13. Two reads before the next fed meeting. Tom we could talk to Bruce Cassidy about this, but you take the three month series and you annualize it and that is what i want to be. The vector is there. You need the United Kingdom of to come in. There has been some damage. Some gentle disinflation. Maybe we get a curved outwards. Gut check curved outwards a curve downwards. Jonathan disney earnings coming out with numbers, revenue and subscriber growth specifically. Subscriptions came in light. Costcutting looks better because of these strikes in hollywood. You have lighter subs, yet theyre putting prices up in some places by 27 . The stock likes it that there is a lot not to like. Lisa Michael Nathanson yesterday nailed this. He said his company lives and dies off of its parks and that is what earnings showed. It showed a deemphasis on streaming, and openness to spend on Different Things. Espn had a problem with respect to not getting the rights to the cricket matches and they lost a bunch of subscribers. Weather is hulu plus, i forget which platform, this idea that their group to raise prices and crackdown on subscriber information sharing is basically saying we dont care if we grow were not. Jonathan you think that is what that is . Lisa it is think we need to raise revenues and we are not going to lean into spending. We are going to cut cost and then figure out what to do later. Tom it is bigger to me, is strategic. Streaming has been this absolutely. Idea they dont have scale. You mentioned apple. I dont have the numbers in front of me. Netflix, youtube, disney is wait up here. Jonathan netflix is making money. Subs coming in light and raising prices is a curious one. Lisa how else can you read it other than they are not going to focus on growing it as much as making it pretty so they can sell to somebody else . Tom they have the parks, anaheim and orlando. I dont know what is going on there. Lisa he is an expert. Jonathan do i look like a distant land guy . Tom it is a busted model. Jonathan theme parks or streaming . Tom streaming. How can you make a 150 million movie and not open at the theater . Jonathan it has been a big year for movies. Apparently a bust elsewhere. Lisa broken model. [laughter] jonathan reaching wildfires destroying the historic time Historic Town in maui. They are being fanned by strong winds. People spent the night in four emergency shelters. If you look at the before and after pictures of this town since it has been destroyed, it is shocking the damage that has been done. Tom you take for example the big island which is kona come coffee, drive. To the east you have hilo which is like a jungle. All of these islands are pretty much the same and western maui is dry. I have been to lahaina and you look at where those fires were, you are in a desert. It is dry. Jonathan i have done some hiking in the heine as well. Tom lisa it is devastating. The idea of people jumping into the ocean and having to be rescued to escape, devastating. Jonathan we will keep you up to speed on that story. Tom the latest there and we will have more to the day. Right now on inflation, there is no other topic. The chief economist at jp morgan, dr. Bruce cassidy joins us this morning. Do guys like you and Jonathan Ferro take 90 days of data and then figure out a trend . Is that how we should look at the report . Bruce to some degree but in inflation data it is often that a three year run rate is moving a volatile way. The first three months of this year we had high court inflation. It looks like junes and julys report is going to give a square inflation. We are clearly coming off where we were last year. It looks to me like we are going down into the threes. I think the number were are going to get today which is suggesting something in the low tos is understating where the trend is. There are a lot of volatile components that want to be helping us a few months down the road. Tom the trends, the first derivative, the slope of disinflation, does it cause in patients at the fed or are they comfortable with the trend . Bruce i think theyre getting more comfortable with it. There is a long way to go before we see where we are going to settle but i think they are feeling better about what they see in the efficient news. They are feeling better but not that confident that theyre getting a labor market that is coolingoff. They are okay with any economy that is growing in that environment although now it feels like the economy is doing more than they would be comfortable with in terms of getting this thing to stabilize. Lisa the more comfortable the fed gets, the more uncomfortable people in markets are getting, in particular with longerterm inflation. Do you by this, the idea that the fed is looking for a soft landing and laying into that leads to higher inflation for longer as it is being priced into the market . Bruce i think it is appropriate for the fed to take a pause here. And of us to do this for a living have to be humble in our ability to understand where the inflation process is taking us. There is a pretty good chance that the pause here does not mean the fed is actually done. Markets are still tight, psychology has shifted. There are a lot of temporary forces, auto presses, Health Insurance pushing down inflation. I am of the view that it makes sense to take a pause but it is more likely than not we look at inflation next year, it will have a three in front of us and the fed is not going to be thrilled. Lisa i am looking at Market Pricing and it is calling for the last rate hike at the last meeting, little chance of a rate hike month with the month after. Then cut start of next year. Do you think that is possible given some of the momentum, given the idea we are going to see real incomes continue to increase as inflation comes down . Bruce to get the fed to cut in the next six months, you need a recession. The idea of the fed cutting requires us to have a decent amount of time to get comfortable that inflation is moving below 3 on a sustained basis. They will also need some rise in the Unemployment Rate. That is not my view of where we are going to be. It is possible but it is not going to happen quickly unless the economy breaks down. Lisa we are looking at the various components, used auto car prices, housing prices, rents, what is the key component of inflation you think is the most important to keep watching . Bruce can i answer that question with yes . Lisa no. [laughter] bruce there are a few volatiles we want to look through, the used car prices, airfare, Health Insurance. The shelter stuff is important. We want to look at what the underlying moves are which have been elevated here and have not meaningful downward trajectory. Tom i am going to rip up the script with a great work you have done on asia. I am looking at euroyen at a Tipping Point. Take out the dollar, have strong euro, the oddity of a week yen. I cant imagine going 16016 did you. 160 or 16 did you 162. How close are we to it tokyo Tipping Point . Bruce i think we want to keep with pieces of that cross in mind. I dont think were quite there in terms of thinking about him more significant move from the boj, but the pressures bring. We should be mindful that as we turn to next year, if the japanese economy continues to deliver high inflation, we should expect surprises from the boj. The other side of this is the strength of the euro against the backdrop of the euro area looking like the weakest link in the global economy. That is the part of the world that troubles us. It is not the u. S. , not japan, not even china. Euro data has been weak and doesnt make sense to me that it is as strong as it is. Jonathan you are not alone. Bruce, thank you. Bruce kasman from jp morgan. Two things, but his leg is available on yes p. M. Plus. Tom but it costs me 99. Jonathan dan of wedbush weighing in on what the severn moritz has to say, whether the parts of this article to stale the price of this are up for sale. Apple will not buy disney given it would not fit in apples ecosystem. We believe that if they decided to sell espn, this would be a highly attractive asset for apple. In a moment, we will catch up with jessica of bank of america on the disney her next. What has changed . The fact that he has not pushed up against it has stood up to his and others. Tom i agree. Away from the minutia, and having jessica on today with her experience, these are mckinseylike. These are like the guys in the patagonia shirts on a sudden valley. This is the conversation iger has to have. Whatever is. The answer is, that is the kind of conversation iger is having. He is not worried about the price of a ticket in disney world. I have never been. Jonathan i have never been either. I went to disneyland paris once. Tom how was it . Jonathan not good. Lisa i went once when i was five to disney world. Jonathan any time the family went anywhere but italy, it did not work out. It was a disappointment. It is a very ferro thing to write a letter and complain about something. [laughter] if youre trying to get a view of the whole organizational Financial Health and youre trying to do that through multiple systems, that makes it very, very cumbersome. Its not just tech, its not just people. Its how they Work Together to provide that experience to the customer. As a finance organization that is what you want to do. I think we are in the beginning of a transition of disneys assets. Disney can work their way out of it by focusing on parks and streaming. You look at the value of resort assets, where they moved to, disneys stock, you can think about it as a Different Company led by resorts and parks. Jonathan michael nailed it. Research analyst, he got into the disney earnings, better than expected. The revenue was not in between, it was about costcutting. Part of that party due to the strikes in hollywood. They are to push up prices of subscriptions. They are doing that even with subs coming in light. Tom i think you are 100 right about the bold nature of the subs coming in light. It was International Subs and also u. S. Subscriptions coming in light. This is a joy after michael it is in yesterday and talking to rich greenfield, to speak to jessica a senior media editor. It is an honor on this important day for disney. I dont want to talk numbers today, i dont want to talk ratios. Iger wakes up, he puts on his pants one leg at a time. He takes breakfast at someplace with avocado or a glass of water, who does he speak to within disney about the urgency of a true restructure . Who is he talking to . Jessica that is a great question. Bringing back reportedly kevin bayer and even tom stabs should give bob iger someone with experience to bounce things off of to bounce things off of. Tom you live this, Gordon Crawford would shake as jessica was showing up to give him wisdom. There was a business model. You made for movies for 100 million and one of them hit big. That model has been destroyed. What is the streaming model that will provide cash and profit flow and profit . Jessica there is a 27 price increase for the subscription only tier at disney plus. Advertising tier is not being touched because the opera is higher. They are forcing consumers into the lowerpriced advertising. That should have the bottom line. That its a cost or have expectations so they will have more than 5. 5 billion in total cost being taken out of the company. A lot of that is streaming. His content and marketing, etc. They are on that. On the content side, they need to improve. Bob iger said this is his primary focus. Lisa primary focus to her deplatform or the order to prepare it for some spinoff for sale . Jessica in either case, whether it is keeping it internally or selling or spinning, they need to improve the content. The content on the platform needs to be improved. He said that they have been getting tired. Everyone is getting distracted. The one place where they have really missed is in film over the last couple of years. This is his primary focus. They have to fix the phone division. Lisa this ended like bob iger in retreat, not really aggressive and offensive, not planning some expensive plan, but not pushing back at this ejection of a sale to apple pushing back at the suggestion of a cell to apple. People are looking at the value beyond the parks. Q think it is valid to characterize this as disney in defense . Jessica they are clearly challenged promote people areas. They have secular challenges. There are also singular cyclical challenges. They have unique ip. They are dealing from a position a challenge position on one hand and a position of strength on the other. It does feel like there is some defensiveness because they have to fix what is wrong and there is a lot wrong that he is dealing with each piece of it. Whether he is leveraging the deal with penn or focusing on different parts of the business. The subs numbers, i know you mentioned they lost subs, but a lot are 50 cent in india 50 cent in india. Tom on a buy and sell basis, who is your winner out three years on the streaming morse . On the streaming wars . Jessica netflix is doing incredibly well and is in a great position. We think warner bros. Discovery is in a phenomenal position given their extensive they dont just have the biggest library, they probably have the best. You guys have been tough on disney this morning. If you add disney plus with hulu with espn plus, they are well over 200 million subs. They have a lot going on. There is a lot to fix. I agree with that. It looks like theyre taking many of the steps necessary to fix this platform. Jonathan we are being tough because our subs arent 50 cents. Tapestry, think coach, kate spade, jimmy choo, tapestry dubai canterbury for 57 a share in. Do we say capri or capri . Lisa i would say capri. Jonathan i assume they mean the island off of coast. Tom i think they may be womens pants. Jonathan capri pants. Right. Nice. [laughter] tom tapestry, which i hate, coach which invented the leather belt your sicko in america the leather belt in america years ago, capri is 6 the size of lvmh. This is able to on for lvmh and tapestry. Lisa because lvmh is so big, how do you compete with some of the giants that have really gained increasing prominence . All of that have been doing so well in part because of scale and scope. Jimmy choo intrapsychic am okay. Michael Kors Jimmy Choo and for sachi, okay. Jonathan lisa they are trying to if you talk about versache. Tom the answer is they are not altogether. There are three or four big winners carrying on six companies. You know better than me. There is a stratus of luxury and they are a train wreck. Capri has been attend your train wreck. Has been a 10 year train wreck. Jonathan a . 5 billion deal. Tapestry is down. Capri is rallying pretty hard. Absolutely sergeant. Lisa theyre getting bought out at a higher valuation than they were previously valued for. I wonder how important it is to have scale, to have the dominant put figure in an industry. 40 Luxury Brands, how much lvmh . How much have they benefited from their size during the push and pull of the pandemic . That is the key question underpinning this. Jonathan dont you think capri sounds better . Lisa no, capri. Tom you are right. Jonathan see if they want to come on the air and chat luxury. I doubt it based on what we just set about tapestry. Evan browning is coming up. No need to talk about china dropping some of the curves around International Travel and what it could mean for Chinese Tourists to u. S. This is bloomberg. Improved on sentiment but the data is not telling the same thing. The strong wage i think the economy starts to go into a mild recession. The microphones are hot. Good morning. This is bloomberg surveillance. Im Jonathan Ferro. Live. Inflation data in america 90 minutes away. Its the big story. For our audiences, theres a global audience looking at what this will do. Its a nation exhausted by inflation. Nothing like europe or the u. K. , but this is a nation exhausted by inflation of, say, 5 with wage growth of 2 or 3 . The question to me and Jerome Powell is when is this over . Jonathan thats an important question. Its a question we are asking about disney. Lisa hes in as subscription even as subscriber numbers come down. Are they pushing back or capitalizing on their fans . Theres a question of which areas can keep rising power and whether people will keep paying for it or whether this is a rolling wave of inflation they can keep accelerating. Headline risks switched to the upside in august and risks are growing of a sustained acceleration. Tom the Pricing Power thing is germane. People from different worlds said disney can pull this off. Does ups pull it off if they are going to pay jon ferro 170 thousand dollars to deliver boxes off a truck . Do they raise the prices . Of course they do. Jonathan i have a lot of people come up to me saying, where do i apply . 170,000 to be a driver. Tom inflation is about 2 . Who is going to pay for it . The answer is the is there will be less tomatoes in the can. Thats a cliche. Will be there less tomatoes . Jonathan tapestry to buy capri for 57 a share. I had to think about it. Tom this is luxury. Jonathan this is coach having a look. Tom im on madison avenue. Who is michael kors . Lisa hes on project runway. Tom we talk about lvmh. We talk about this, that and the other. Are these names in that same category . I dont thing they are. Jonathan they are not. Lisa whatever saatchi . What about for saatchi . Jonathan it is. Lisa yes. So some of them are. They are trying to get conglomeration. Jonathan anyway, tapestry is down by a little more than 4 . Capri is higher by Something Like 50 . Tom we are talking about something 30 times pe. Tapestry is 12 times pe. They are not comparable. Luxury for all of them. They are not. Jonathan we are talking premium high street. Can we call them that . Tom theres bond street. Bond and new bond. Jonathan high street in the u. K. Lets get to price action. S p positive by 0. 5 , yields lower on the 10 year by a single basis point. Lisa cpi thursday. The numbers dropped. Curious to see core, interpretations of the market response. That is the most important thing to me. Are people going to take us and run with soft landing narratives . The u. S. Is selling 30 year bonds. The auction yesterday went fine. The auction the day before went fine. 30 year is more key at a time when people are expecting the feds applause. Tom i the 10 year that by the 30 year at auction . Lisa some of them do. Theres a different audience. Here it is a different audience it is a different audience. Raphael bostic and patrick harker. Tom we make jokes about this but they have a mandate and this is the time of year where they have to go out and talk to people as part of the act. They dont have a speaking agency saying can you do des moines thursday . They have a formal mandate to speak to the Business Community. Rotary. Its taken seriously. Jonathan we take it seriously too. We talk about these speeches. Tom i think they are over communicating but at the same time they have this mandate to communicate. Jonathan a multiasset strategist joins us. Do you have any reason to believe the data between now and the next fed meeting will challenge the soft landing native this market has embraced over the last couple months . I dont think so. We are not only staying resilient in the u. S. Data about seeing a broadening out of the surprises across the board. The labor market still resilient, Consumer Confidence picking up. We know housing is in good shape, manufacturing hanging and in, and inflation is coming down and inflation is coming down. We are starting to see some progress on Core Services. I think the fed wants to pause here. I dont think we will see enough data to suggest a hike. Jonathan within your securities analysis, do companies have Pricing Power . We are seeing some moderation in wages. What is encouraging is, last week, we had that productivity pickup, which was strong, and you had labor costs coming in lowerthanexpected. That is a goldilocks situation where people can get paid and companies have decent margins. We dont have evidence that margins are compressing a great deal. What is the rate for companies and businesses, the nominal or some sort of inflationadjusted rate that matters for the spirit the drives the stock market . In the end, earnings are nominal. So that is the bottom line. That is what we have seen over the course of the last year, that even as inflation has been high, companies have been able to push that on to consumers, and we dont see much evidence that that will switch anytime soon. There is a question about whether the big tech have gotten overblown in terms of valuation, the promise of Artificial Intelligence into some of the other technologies. Are you in that camp, especially after what we saw yesterday, with a bit of coolingoff jitters around the Artificial Intelligence story . Its reasonable further to be some consolidation in this ai story and the mega cap areas of the world so that is why we want to focus our positioning on more cyclical areas of the market, you know, industrials, energy, financials. We see more upside there. We dont want to ignore that. How do we know how to price it exactly . We want to be overweight on other areas of the market. When you see a consolidation in the text fear, at what point do you find it in the tech sphere, at what point do you find it attractive again . Consolidation and a slowdown in appreciation. As long as the earnings or the earnings outlook are coming in ok, then eventually you will grow into those earnings. So lets see first this continued repricing of cyclicals higher and with some consolidation in type and price we might think about getting more involved. Can i get a question on the affects market on the fx market . Why isnt the euro weaker . I think its because they still have that problem. The ecb has to stay hawkish. Yes, European Growth has not been great. We know that. But in the end, it is rate differentials. Rate differentials are not moving aggressively in favor of the u. S. Because europe still has a core inflation problem. You are not seeing the same progress as in the u. S. And theres been a decent negative correlation between risk assets in europe assets and the euro. So the euro hangs and as long as Risk Appetite stays robust. Perhaps later this year we get a turn in manufacturing globally that could provide support. Even as it underperforms, china . I think that story is probably known and a lot of that bad news is priced in so, you know, the consumer getting even on the margin a little bit more confidence, the price action, luxury, i think some of that is the result of a reduction in travel restrictions in china, so these restrictions could help. Jonathan evan, thank you. China allowing group tours back to the u. S. And u. K. The u. S. Has been a soft spot for earnings for the likes of lvmh. You have seen that in the reports. Kennett turnaround on that can that turnaround on the back of this travel story out of china . Lisa there was a guy next to me with three cell phones taking orders on the phones. That is not the punchline. The punchline is 10 feet away theres another guy doing the same thing. That is whats missing. Jonathan and you are being ignored. Tom precisely. I was being ignored. But the point here is thats really what we are talking about, the commerce that comes from the tourism. Jonathan welcome to the program. It is cpi thursday. Your equity market positive by 0. 5 . Peter will be joining us later. We catch up with him in 47 minutes. I get ignored in those stores all the time. Tom kriti gupta had a note briefing me on all the products involved. She leads with these are Luxury Companies and im like, says who . I dont think they are. Lisa it scares me when you walk into a store and there are only three shirts on the rack. Jonathan what stores . Lisa you go into some sort of Clothing Store and they have just three shirts. Everything is sparsely populated. Its more like a showcase. Jonathan the stuff is out of the back. Lisa it scares me. Tom how you have to line up . Lisa that is ridiculous. Jonathan i refuse. Tom i go, is andrew here today . Good, i need a bow time. Jonathan make an appointment. Dont do that soho thing. I cant stand that thing. What is that about . Tom nixon was president the last time i was in soho. Jonathan we have gone for lunch there. What are you talking about . Tom that was soho . I thought it was tribeca. Jonathan tribeca is below canal. We were south of houston. Tom its houston. Jonathan i didnt know. This is going well. From new york, this is bloomberg. At the counter or on the go, save 20 with the lowest transaction fees and keep more of what you make. Start saving today at godaddy. Com the core of that report was the u. S. Is behind, behind in investing and paying attention to china and other competitors who have locked out green and other technologies necessary for the future, so when you are the reserve currency of the world, you have to step lightly, but in this case the president has chosen to step firmly in terms of strategy. Jonathan the head of washington policy research on the latest Outbound Investment restrictions coming out of the white house on china. Your equity market going into cpi. Futures positive on the s p by 0. 55 . We have a deal potentially between tapestry and capri holdings. Tom you have been all over this. Jonathan capri is up by 58 . The latest news. A deal. Tom this was rumored, i guess, and there it is. Can we agree that the sluggishness of most of luxury i mean, is michael kors popping it in china . It is not like the bigger Luxury Brands where they are truly international. Jonathan a 5 billion deal and potentially more to come based on the rationale for this one. Will others follow . Tom am i right that the others have had a nice pop off this travel loosening rumor in china . Jonathan they are not rumors. They are changes. There are changes around group travel abroad. They have been doing this in Group Countries over the last few months. The latest Group Includes the u. S. And u. K. We know domestically in china travel tourism is great, international not so great. We know that based on some of these restrictions being removed that travel has not snapped back. Lets see if tourism out of china into the u. S. Doesnt snap back as there are group calls to return. Lisa its part of a broader softening as they tried to shift their stance to encourage growth. It makes people feel like maybe they want to encourage more trade, more outreach in order to foster more momentum. Tom stunning silhouettes. Prepare for an exhilarating style journey that defies convention. Brace yourself for a captivating voyage where boundaries are shattered and personal expression reaches new heights. That will be 6,000. Lisa where is that . Tom its one of the fancy Luxury Companies preparing me for my journey with silhouettes. Jonathan so thats not a group tour . Thats not a travel option . Tom its real luxury. Jonathan what is the brand . Tom hermes. Stunning silhouettes from hermes. Find the perfect match. Jonathan lisa is done. Lisa i am done. Jonathan you want to say michael kors is not real luxury. Tom thats what im saying. Bloomberg intelligence is good on this. The media bundles them together. Henrietta treyz joins us. We talked to kim wallace earlier. You have Good International economics there. You have piercing domestic policy analysis. Excuse me. What to the democrats do on capitol hill to advance biden omics . I wish i had to rest better because i am beyond hermes. What are they doing to advance that . Youre seeing that canvassing across the country and watching to see who is coming out in the Republican Party on the Senate Candidate side and how they can run an economic agenda against them. It is turning out to be easy and they dont have to focus on it. As the votes in ohio showed, they can talk about abortion issues and they can turn out to be through the roof. They can run against kari lake in arizona, which is going to be a sort of trump versus biden. Bidenomics is something they are trying to get out there but they have not had to get. Tom getting pulsed up for the primaries, the debates, the election, the phrase, its the economy, stupid ive never agreed with. Isnt it, its the culture war, stupid . Henrietta it is abortion. Roe v. Wade and the Dobbs Decision the was the worst thing the republicans could have done. It is a turnout machine and they are losing hand over fist. I dont see any way thats going to change, especially if they keep poking the bear, so i think that is the message. Its not the economy. It is abortion. Jonathan that message on the National Stage is not going down well. What about the primaries . What do you expect to hear later this month . Henrietta the debates this month will obviously be all on the republican side. I think ron desantis is the one that every candidate will try to beat because trump may or may not show up. If he is not on the date is for those debates, you are going to see ron desantis get slammed by every candidate from nikki haley to tim scott to mike pence and chris christie. They will bring up trump occasionally but the person to be will be ron desantis. Hes already tanking in the polls, below 15 . That is a death spiral. Campaign shape up campaign shakeups, etc. I asked a friend if we were going to have a watch party between the desantisnewsom debate. The question was will he still be one of the front runners after these campaigns . Their position on abortion is as far to the right as you can get and they describe each other further, which alienates the entire general election base. Lisa if not ron desantis, who is the front runner . Will it be tim scott . Someone who has not even thrown their hat in the ring yet like Glenn Youngkin . Henrietta i think so. Theres a deadline of november 16 to get on the ballot in nevada. That is a key deadline. The money thats gone to ron desantis could start flowing to another candidate. I agree tim scott is the next most likely but he pulls at 3 . So Glenn Youngkin or any of the governors could step in. Id be interested to see whether he decides to change his mind in the wake of the four indictments against trip against trump. Jonathan theres been a belief construct that you have studied for years, going way back, that the United States of america will always grow itself out of its debt troubles. Is that shaken now . Is that foundational belief shaken . Henrietta i dont think so because the appetite globally for debt just keeps expanding. I dont think thats a u. S. Specific problem. To be more honest about my answer, i dont see any lawmakers sincerely putting in the effort to raise the deficit. So i dont think the debt is something they are going to look in the mirror and say maybe we shouldnt extend the 2017 tax cuts beyond 2026. They are going to. We saw that in 2010 and again in 2012. It is going to rack up the deficits substantially, to trillion dollars for those provisions. Jonathan i want to finish on china if we can. The Biden Administration have put out their Outbound Investment order. The president is signed. Heres the question for me. It is super narrow. China says we are disappointed. Im trying to work out if its just to say we are doing something and we are disappointed but nothing changes. Is this just for public consumption or is it meaningful . Henrietta interesting question. Last week, we were talking about the rate. Is the Business Community responding to what congress is doing, what the administration is doing on the debt. At what is interesting about this executive order order is the Business Community is you had a great chart yesterday on Venture Capital in china and how its declined since the covid era. Its a precipitous rise after 2019 an immediate fall. Thats on the venturecapital side with sequoia but you probably get the same data on the business side, where you have the russia sanctions, export control restrictions. To get to that question, the Business Community might not be afraid of congress and what its legislating and maybe not this executive order, but they are focused on the security and the treasury and the efforts of the irs to put sanctions and control restrictions. The entity list will be updated. Those are tangible things that businesses have to respond to. I think they are working, maybe just better than timing on anything else. Jonathan Henrietta Treyz there. Inflation data an hour away. He snores like an angry rhino. Youve never heard an angry rhino. Baby i hear one every night. Every night. Okay. Ill work on that. Save 50 on the sleep Number Limited Edition smart bed. Plus, 36 month financing on select smart beds. Shop now only at sleep number. To finally lose 80 pounds and keep it off with golo is amazing. Ive been maintaining. The weight is gone and its never coming back. With golo, ive not only kept off the weight but im happier, im healthier, and i have a new lease on life. Golo is the only thing that will let you lose weight and keep it off. Who loses 138 pounds in nine months . I did golos a lifestyle change and you make the change and it stays off. soft music xa today losing streak on the s p 500. Going down to the cpi. Equity futures positive hereby. 5 on the nasdaq. We are up by 0. 6 . On the bond market, the 10 year hasnt had a close before below 4 . That was august 10. Interneuron 4 on the 10 year. Yields going nowhere on the twoyear. For 7975. A 30 year rear lookout for supply little bit later. Some more 30 year bonds coming to market later on this afternoon. The 30 year yield. We look at the fx market. Lets look at the euro. Heres whats happening with g10. The dollar is weaker against the stronger euro. The euro against the dollar. 1. 15. Currency pair by 0. 4 6 . The euro to yen dynamics, they were Just Brilliant on this earlier. Any idea of you triangulate three currencies. Not a currency pair but a currency triangle. Take up the dollar and the euro to yen. The focus has been on the mystery of why the euro is at 1. 10 as opposed to 105, but the autumn line is, the screen, the terminal is telling me we are at a Tipping Point. The euro this morning. With the exception of the japanese yen. On surveillance this morning, cpi data is out at about now are for now, looking for further signs of disinflation ahead of the Federal Reserve september meeting. Can you get any disinflation in your city . Apartment hunters may be reading their limit. Brooklyn, queens hitting new highs in july, with leasing volumes declining. Renters may have had enough. I can tell you weve had enough a long time ago. The median rent in manhattan 4004. That is up from 2. 3 from june. Rents jumping 11 in brooklyn. 3950. Just amazing. I love how personal the story is free. Not that you are struggling with prices, but rather that this is where you gravitate towards, and you can start in. If i could only go back in time and login low Interest Rates and buy a home and be paid to buy a home. That would be really important, and this is where were at. At what point do you have pushed back for fewer leases, but at the same time, they are paying the prices. Prices still creeping higher. 4400. Apartment eric city. They do Jonathan Miller does a great job on this. But i wish, in the article, they equated that to how much money you have to make to buy that studio. The place i live in a six floor walkup. I live on a studio pop up at 4200 right now which is basically a closet with a window. The basic idea to me, as mentioned the other day, the economist Carrie Bradshaw, was an economist at llc. She the carry bradshaw indexes what is the median way. Ok. How can carry bradshaw up or that afford that apartment. With those shoes . Is a fantasy. She was a columnist for a random eric paper. She was good. She bought thousands of dollars of close every month. John,. She reified the studio apartment off of the enola blahniks. That is how she did it. She was a terrible human being. It is amazing people havent started to figure this out 20 years later. Tell us how you really feel . What is the most offensive thing she did . Work when her friend got married and she came out and put a postit note on top of her hand because she had a tough go of it with a new boyfriend. She wasnt happy for them. Dreadful. And hot take. Quick salty what i really think. Another time. Lets get to the story developing overnight. In ecuador, a president ial candidate was assassinated less than two weeks before the countries elections pretty was shot believing a rally. The government declared a 60 day state of emergency. This individual, you might be familiar with him. Well known for unveiling corruption in government and his country. Of course, Death Threats coming from various parts of the country, including the mafia. I was looking at some of the death rates across latin america. In ecuador, it is shocking how much that has gone up. They have more homicides per capita now than columbia, which traditionally had the serious cocaine problems and some of the cartels there. This candidate was a longtime journalist. He really said he was going to crack down on these cartels. Yes, you got Death Threats, but he said no. We need to repeat what some of the other latin american countries are doing where they really crackdown because the amount of the assembly of the Cocaine Cartel has been out of control. My amateur take is a quick read and i defer to shannon oneill, and others as i watched el salvador. It is interesting to see the hotspots within all of these troubled south american, el salvador, others. Whatever it is. In the solution and el salvador is basically like a hungry Eastern European solution. Lets get tough. Ask the president is the most popular in latin america rounding up cartels, and people say he is very authoritarian, but this is what people are looking or in the hardline you might see, the shift in ecuador in response to this. Ith have no right i have no idea where this comes from, but we are so biased by our childhoods of looking south across the caribbean to south america. I dont think clearly on this other than the tragedy of a journalist gunned down today in could or. We are all familiar with columbia and peru being close for cocaine production. Ecuador is sandwiched in between. That wasnt part of the conversation until recently. I was going to the story this morning, thanks to the overnight desk putting this together, the murder rate there are by more than 300 in the last five years. That is dangerous. Really quickly. Its really really serious. Will have full coverage on this through the day as well and into the weekend. As ecuador adjustment assassination. Joining us is megan robson, the head of credit strategy. That is a really interesting fixed income position because the and p has been outstanding over 20 years of a measured view of economic growth. How the markets would react to that. How do you dovetail the world and an inherent bnp caution into the fixed income market. How do you adapt to that. Thank you for having me. We expect growth to slow, and we are expecting we are in a growth the acceleration. We are heading toward cpi today. We expect that and will be good today for the fed to be on pause. Credit markets are pricing in only the positives around that. If you look at credit spreads, we hit new tights at the end of july. Credit is pricing and all of the benefits of lower inflation without the risks of how the process plays out or how the process takes longer to play out. For example, during Second Quarter, Revenue Growth typically tracks very quickly with cpi. We have seen Revenue Growth now hit one 23 . We have hit that level of Revenue Growth. This is the bnp parody about heritage. I will go to a great economist on this. Are we unemployed underwriting credit risk . Credit nuance in the middle of the Investment Grade area . I think Investment Grade, growth has surprise the upside. That is undoubtedly a positive, and i think we are seeing deterioration and broad fundamentals, but for Investment Grade, fundamentals are generally pretty healthy. As an example, a year ago, interest coverage was 13 times for the Investment Grade market. That has come down over the last year to about 11 times. Quite healthy. The places where we are more worried and where we have seen distress play out is in the most Interest Rate sensitive part of the market. Two examples where weve seen default start to rise one is small and Medium Business enterprises. Companies that dont necessarily have publicly traded credit but are public companies, private companies, very small. Those are sensitive to race. It is not surprising to see that bankruptcy filings have climbed higher there, and also in the leverage loan market. Obviously, floatingrate exposure over the last three months, and i know that you like to follow the threemonth statistic on an annualized basis. Nailed it. If you take the threemonth loan default rate and analyze that, you get 5. 5 or 6 . Thats the gloom we need. Is the Public Market yes less than it used to be . Is that a metric in the spread, less relevant to the reality on the ground for all of the big investment firms that are increasingly moving private . Thats a great session. I think private credit is definitely going to play a role in the cycle, and things will be different. He simple but relevant framework to identify problems in any cycle is to follow the debt growth. If you look at that growth and private markets, it has outsized that in Public Markets, and it should point to there being issues there. There has been growth in Public Markets as well, but not as extreme. I dont think private markets will be immune from this cycle, and we will see some problems in that area as well. Do you think it tolls the sort of tea leaf reputation that credit used to have that it was the canary in the coal mine . There is a huge buffer of debt that is in the shadows, that you cant really see and engage in real time, and that underpins the credit quality and the more established qualities that we trade publicly. Is that a leading indicator . Spreads are certainly not a leading indicator as we hit the tights and high yield spread spread we are trading for two basis points. The market would be telling you there is no problem i had, but i do think there are other areas of credit in the Public Market that are signaling a recession or a problem. If you look at the primary market, the very low share of triple c issuances telling you, and is in line with what you typically see in a downturn. Another example would be the rise and secured bond issuance in the highyield market. I think Public Markets are telling you signals, but it is not the typical sort of triple c, very gradual widening of the market. We become desensitized to news elsewhere, on a continuous basis, but should we be weighed about what is happening in china . China, we have seen stress in china over the last few years. I think from a demand perspective, it is going to impact our Growth Outlook and our growth trajectory. We are already in a d acceleration, so i think that following china will be important, and from the perspective of stimulus, how much liquidity is pumped into the system, it will be relevant for demand and liquidity outlook. Thank you. Bnp paragon. It seems that Property Developers are getting into a little bit more trouble over and china. The latest is being downgraded to triple c. By one of the rating agencies this morning. Cutting, cutting, cutting print they are in a 30 day grace. , but there will be evidently some sort of meeting being held by Property Developers to shore up something. What does that look like . I want to be clear to the audience that we dont equate this to what we see in new york or other major u. S. Cities. This is a uniquely china, Massive Development marketing kind of company like evergrande. It has been widely anticipated over the last couple of days. If youre just tuning in, welcome. S p is positive by 0. 5 . Counting you down to the cpi report. We have a clock. We do. Look at that. I thought that was harry keynes clock. Who cares . We have not had an official announcement. Know. I thought you put that up. Reporting coming out of the athletic. What does the sun do . The sun is on the field. How does that work . Hes going to be upset because hes missing harry. What are they done . I get all of these teams. I cannot keep up. You support a terrible team. I love that. Is at the red sox . Take the fit on that one. You supposed to say psg. Every answer is psg. Thats true. Yes. Did you say see . I think you meant sed. I dont know. You want to talk about that . You want to talk about terrorism . Lets talk about terrorism. Let me tell you. I called a hotel the other day, and they said you cant walk down the street. There are so many people. Where . Paris. Its narrow on the streets. Was he trying to get you not to come . I just looked at a trip to shanghai. Innate airways its almost 40,000 for taxes. What . Or zero. Thats what it costs to come out. For the whole plane . No just two people sitting in business class. Two tickets. 20,000 each. 29,000. Thats what he says. Thats insane. We think the markets fair value where we are right now. I think there is still risk in this market in the sense you will see a mild recession unfolding. Right now, everyone is just getting optimistic on both the equity market in the economy, and i dont think that is warranted because like i said, there are signs that what we are looking at still point towards a recession by the end of the year. That was larry adam on the equity market. He was on fire yesterday. Some important inflation data for later today. He is expected to show further signs of disinflation beneath the surface, going into the fed meeting at the end of september, just before the jackson hole symposium. Fed speakers, economists and people like us. S p 500 features just about positive by 0. 4 . The 10 year yield as a has been over the last couple of weeks, in and around 4 , basically unchanged on the day. A bit of dollar weakness out there against g10. The euros firm ahead by 8. 5 . 110. Are getting use to 4 . Im finally getting used to it. Two weeks of it, and im getting used to it. As a look back. How about 4. 20 . Thats where we are. We have a clock up at 42 minutes to the Inflation Report. It is important. Is it important for the banks . What do you think . I think they care. I think they care. Theyve responded negative to the downgrade. They have earlier this week. Small to mediumsized banks. They move pretty quickly. From the woes of spring. We are going to see if some of those issues come back read were looking at inflation. We are down to search over the weekend. Lisa was in charge of that lobster roll. It is out there somewhere, should up the shores of maine. Joining us to breathe brief us on inflation is short cassidy, the head of the u. S. Bank equity strategy rbc capital markets. Iconic with new england banking and across from c deciding she. From sea to shining sea. 50 lobster rolls. I will take you to port clyde youll get them for cheaper than that. I will be quick. We have lined up a bunch of questions. I was thunderstruck by the credit adjustment for m and t financial. Those were fighting words for the wonderful mr. Willens. Robert willens made a wonderful bank. Are you surprised that they were bundled in . We were. It is one of the strongest to your point when bob ran the bank. The underwriting credit culture is unsurpassed, but when you compare them to their peers, they were a notch above their peers in terms of that because they have the track record of showing everyone they do not low up in credit cycles. A stock a downgraded moodys. Talk about them. I funding costs, potential regulatory capital weaknesses, and rising risks tied to commercial real estate. Of those points, all wellknown, what is the number one issue to focus on . Im glad you say well known. That is a surprise with the moodys news. It was kind of late. If they did this back in november or december, you could understand it, but this was wellknown. If the fed reaches terminal rates and jackson hole, that is a less rate increase. The rising deposit issue they have identified goes away because the deposit costs about six month after the terminal rate is reached stop going up. The capital, if you are a creditor, having the banks carry more capital, that is a positive. Your third point is the one we have to watch. That is real estate. Things stabilize. Just in terms of what they have to pay up to attract deposits. Every friday, you might be familiar. They have the data that comes out from the fed, and if you look at the deposit levels for the Smaller Banks for the last eight to 10 weeks, it is been flat. Where the deposits are leaving are the bigger banks because of the qt. That is where we are seeing it. For the Smaller Banks, they are not having to chase deposit rates as much as they did after silicon valley. Brass is getting more difficult to pay for attracting deposits because they have a lot of competition. You are seeing increasing loan books on private debt coproduce companies. You are be more cautious. Do you think the downgrades turn up the volume to use johns language on some issues that have not gone away, even to the market has forgotten about them . I think you are right. Turned up the volume is a good turn it thank you. I think you are right that they did turn up the volume, but that being said, i was still point out that the credit quality for the industry is remarkably strong. If you look at the Second Quarter results, we did see some credit losses creep up. They are normalizing as jamie dimon and jp morgan would tell you. The credit card net charge is still below normal, and well below prayer prepandemic levels. Nonperforming assets for the top 20 banks were flat or down. Credit is still strong. Do you think the issues are not sufficient to justify some of these moves now . I would say that in certain cases, it is. That is why they were identified as the top 20 banks. They have the largest exposure to commercial real estate. Around 24 of total loans, but still, manageable. Most of our biggest banks are in the mid teens, and when it comes to Office Commercial real estate, that is the see nbs market. That is private shadow banking industry. Not the big banks. Is a thursday. We dont do golf gossip, so lets go there. You have decades of experience. How do they transfer leadership at these banks. We have james cormans story today about the churning at Morgan Stanley. All of the upset Goldman Sachs coming from Income America to goldman. And on and on. The uncertainties of what happens how do you monitor that quarter to quarter . It is challenging because we dont have very good insight into the innerworkings of those executive suites on what the politics are, and what the maneuvering is going on, plus two of the people youve identified, Morgan Stanley and jp morgans neil diamond, they have incredible success over the last 10 to 12 years. Filling those shoes is going to be very challenging for whoever those people are. Keane say the same thing about solomon . He has had a challenge. He is struggling. He is not had the success. Thats a new england understatement. Is getting tough, isnt it . Youve seen partners leave. Highprofile people on research leave. Jeff curry. I dont know whats behind that decision, but it starts to mount. You think were at the point where we are thing about new leadership . Certainly, the discussion we dont have inner knowledge of it, but you have to believe that that at the board level, there will be a discussion point in their meetings. Again, its a natural discussion point because of whats been happening. How badly have a been doing, relative to Morgan Stanley . Is it justified or is it noise that has overwhelmed the narrative and overwhelmed reality . As an interesting question because the Stock Performance, though has lagged, people have made money under solomon. His valuation is tangible book value per share growth. Has been impressive, but its not as good as Morgan Stanley. Morgan stanley had a big upgrade in valuation at the beginning of the pandemic rent goldman did not get that. My theme for this year, to thousand 23, 2023 is the regional or super regional with char cavity cassidy saying you have to be put out of its misery. So far, we are fortunate that after what happened in the spring, the wounded soldier that they just took off the battlefield was packed west. A unique dealbreaker sues next . I have to make some money. I think on the next on the downside, its hard to identify, in all seriousness. Its very hard to identify him. We are a wellcapitalized industry with low credit. In her old days, when you and i were young men at we when we were young men. You have three names for me. There was, indeed. That would certainly be stepping up. And Brian Moynihans bank. Bank of america. You always love that. I want to build on the question actually. Do you sense that this is personal when it comes to david solomon. The coverage of him. I dont know him personally but ive interview him and hes been very pleasant. Do you get a sense that this is personal when it comes to david solomon, the coverage he gets . It could be because his lifestyle is a little bit different than the other ceos, as you know. At the outset. There could be some of that there. Like you, i dont know him very well, but the times ive met him, ive been impressed. He is very engaging. I enjoy talking to them. Is a brilliant question, and the way i would put it, and i will give you a story with gerard cassidy, it is cultural. One day, on sympatric stay, we were with 1200 people at the bank of doing good or whatever, and he was such a rock star. He was reaching for bagels and donut rules at the stage. He was getting hit. Im back in the cheap seats because im not sure about your are cassidy, but it is cultural about the irish banks coming over and buying them. This is brian moynihan, way back when read bank of boston . Wheat . Before that. It is hugely cultural within the business breed that is underplayed by the media. You are right. Good to see you. Thank you very much. Thank you for being with us. Free lobster, next time. How much does the lobster roll cost . 160 dollars. What is ridiculous is the line is six blocks long. 1060. How many lobsters are in there . Its in maine. An amazing spending. My cpa told me i wouldnt qualify for the erc tax refund, so i called innovation refunds. Their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your Small Business qualifies. I need it cool at night. Take thyou trying to iceee if me out of the bed . Baby, only on game nights. You know you are retired right . Am i . Ya save 50 on the sleep Number Limited Edition smart bed. Plus, 36 month financing on select smart beds. Shop now only at sleep number. I dont want you to move. Im gonna miss you so much. You realize well have internet waiting for us at the new place, right . Oh, we know. We just like making a scene. Transferring your services has never been easier. Get connected on the day of your move with the xfinity app. Can i sleep over at your new place . Can katie sleep over tonight . Sure, honey this generation is so dramatic move with the xfinity 10g network. We think theres going to be some choppiness. We think we will see some pullback. You tend to have pulled three or four pullbacks in a year. I think its time to have one. I think we finish the year probably closer to 4 on headline cpi. The challenge will be if the fed does indeed remain higher for longer. This is bloomberg surveillance with Jonathan Ferro, tom keene and lisa abramowicz. Tom a countdown clock. To a statement on inflation in america. Jonathan we will be looking month over month for that expecting you to come in at Something Like 0. 2 in line for the previous month over month reading. Even those out there who believe inflation might accelerate in the back half of the year they dont think the coming information will challenge the soft landing narrative. That seems to be the view. The data between now and then all show the same as its shown. Tom its a granularity of inflation as well. A car dynamic as well, the food dynamic. Within all of the granularity theres the way the public feels ended separate from the bloomberg surveillance audience. Tom our America Jonathan our American Companies are American Companies losing Pricing Power . Tom, disney, lets see how this goes. Is there tolerance there in the American Economy the same way it was. Tom they make it very clear they dont see a problem. I dont buy it for a minute. I think this Inflation Report is simply a statement on what american corporations can do and there is this belief they can raise prices preyed im not sure im there. Lisa if people are using it to babysit their kids they can take an increase in costs and its probably a cheap babysitter. But if you dont and its a peripheral service. I am wondering where the bias is in markets. If we get an upside surprise how disruptive could that be. How much do we end up getting the big surprise in markets, a downside surprise in terms of price action if we can get some disinflation isnt happening. Tom the gas on revenues, you see it right now. Revenue flat up slightly, thats their revenue struggle. Jonathan stock is down in the premarket. I believe its an 8. 5 trillion dollar deal. Tapestry going after capri. Tapestry is down 4. 7 . Kate spade and coach going after michael coors. Tom the bottom line is tapestry buying michael kohrs. Ive never been on a tapestry store. Jonathan have you been to coach before . Tom i have been in coach. They did a whole line of stuff with a great iconic artist and i had to go in for that. Jonathan equity futures deck tom moving on. Jonathan stocks up higher. Tom im like a rolling hr risk. Jonathan , on. A couple of basis points. Love the jimmy ch you know that iraq at bergdorfs that you get dragged into. You know that iraq at bergdorf rack at bergdorfs that you get dragged to. 3. 9858 on the 10 year. Tom minutes away from the Inflation Report. They take a geopolitics view and folded into the investment view forward. This Inflation Report, how does it affect our investments in general. I think it will be a relatively minor influence in the shortterm on markets. The fed is waiting for a lot of data to come in. I think they change their outlook. Six months ago they were looking for any excuse to hike and they were being more cautious. Every little bit of data, i think weve set ourselves up to fade on a spike in inflation and people by that dip. Jonathan what price do you need on cpi to reduce the risk they go up again in september. I think the narrative doesnt care much about a 3 or 4 inflation. Five or six you can get momentum. I think at this level its kind of status quo. Lisa do you think it matters theyve increased a longer term inflation pricing in markets as we the fed gets comfortable with the idea of staying on hold . Our longerterm outlook has been we will be in this environment for the next three to five years. A lot of that is part of how American Companies will do business. They will change where they are producing at Xavier Becerras and. What sources of their supply chains look like. That will keep inflation above 2 but i think we can live in that especially if it really is around the security of your supply chain. Lisa is there a feeling the markets are getting comfortable with the idea the fed will let this sit for long period of time. That could be benign for a lot of Companies Reporting earnings. Is that basically what we are seeing . Peter thats the narrative developing. The new one beyond that is what does china do to combat this. Everyone was talking about the china reopening trade. Its just not happening. I never thought it was going to happen but china will no longer be this factory for the u. S. The Chinese Consumer is not the American Consumer and thats especially true with real estate. Our view is as we are doing this reshoring and figuring this out i think the next stage is china aggressively trying to sell their brands globally. I think ago after emerging markets countries. Weve never really seen china as a competitor selling their brands. They have phenomenal success with huawei. I think thats good to be the narrative for the next two to three years that u. S. Companies will have to do with competition from chinese brands. Tom you have an exceptional securities, you of amazing overlay. New Naval Affairs with drones, frightening whatever side anyone is on. Going after china now. Overlay the Geopolitical Uncertainty around your belief in china and how american investors should respond. Peter i think there will be ongoing friction with china. I think Chinese Companies might do well selling their products in emerging markets. Probably two years ago we were relatively early and they were thinking about on shoring or moving up in china. We talked about not going into southeast asia. That was the reaction before the russian invasion. They are sitting there seeing the chinese navy expand. They can project their power. We kept telling them not to build south island see and they kept building up those islands. The Solomon Islands have stopped at least one u. S. Coast guard ship and naval vessel from boarding. You see this projection of power and we will have to see the uss to concentrate on north and south america, develop better and strong relationships with south america. We have the geographic proximity. We have to figure out what to do with africa. We just wrote about this one. When there was a coup, the people didnt realize they were shouting longlived putin. Thats what we will have to show our global focus. Jonathan can we finish on the weakness within china. If you came up with a bearish thesis on china sounding Something Like this. It was piling up because they were trying to hit growth targets in central beijing and what youre seeing was a Property Market bubble forming and people say in the end they will have to deleverage. Developers will go bust and this economy will sink. We see Property Developers go down. To get gdp to where china would like it to be. We are just shrugging our shoulders. Isnt this the bearish thesis playing out before our eyes . Peter chinas reaction will be how do we sell their goods our goods into the rest of the world. Look at that projection of power. They set up these belt and road initiatives. They have big deficits to autocratic resource nations. Youve got this internal problem for two or three years thats failing or you can keep trying to fix what isnt fixable. Thats why theyre going to be aggressive players on the global scene. Politically outside of the country. Two or three years ago you never heard them doing much. They are the only ones really talking to both russia and ukraine. I think that will be the shift in how china tries to deal with this. They are not going to take this lying down i dont believe. Jonathan thank you, peter. Really thoughtful stuff seeing china at the epicenter of Foreign Policy stuff. Lisa it speaks for the desire for some sort of global influence and raises the question of what that does with u. S. Companies globally. Jonathan weve always given the policymaker in china the benefit of the doubt. We will see how it develops. Welcome to the program. The s p positive. 17 minutes away, of bond market rally just a touch here. We will bring you that report and then bring neil dutta to you. Tom really curious about his durability of a 4 statistic. Michael mckee was brilliant yesterday on how that is just a current number and will amend through the quarter. I wonder if his pathway from 4. 1 down to three point ask or two point 3. X percent. Jonathan housing still doing all right in certain parts. Are we starting to see the limits of a tolerance for higher prices in this country . Particularly in new york city . Even though prices are still climbing. Lisa the issue has been an inventory issue. If you Start Building them. Can i just say this has got to be the least important cpi report ever based on how people are talking about it. Am i wrong . Jonathan they expect further signs of disinflation. This extreme comfort that will continue in the summer. Lisa extreme comfort. Tom i didnt know who Carrie Bradshaw was. Twitters informing the who Carrie Bradshaw was. Jonathan got a lot of feedback about that. From new york, this is bloomberg. A great example as they felt they had the room to raise prices and i think they will be successful in those price increases. Thats one of the reasons weve seen corporate margins retain themselves. A lot of people thought they would see margins get squeezed but companies have been able to pass on price increases. Jonathan going into the cpi report which is 13 minutes away looking for further signs of disinflation. The price action shaping up as follows positive by 0. 6 big focus on the earnings as always. The earnings better than expected. I think thats gifting the stock a rally of one port 1. 4 . Prices going up for streaming tom i defer to Michael Nathanson, everybody else on this prayed they can tell me the ratios. Its a busted business play and mr. Iger knows that and has to fix it. Hes bringing in some guys to consult on that. Jonathan which marvel movie comes next. Things are getting solved. I think we know that. Things are getting sold. Lisa thats been the issue. That sort of the theme. Are we seeing its better to be bigger and if so maybe apple gets bigger. Its not disney because they dont have critical mass. Tom Michael Mckee on standby in new york. About 11 minutes away. We really wanted to talk about this iconic blue chip stock. Expert on disney and media. I was thunderstruck by the mckinsey like discussion yesterday. Are they talking security analysis or consultants to blow up the company. Its a little bit of both. We had bob iger saying all options are on the table when it comes to the beleaguered tv assets. You have this wonderful portfolio of assets. Some of them doing extremely well which will bring in 75 of profits this year. On the others of the equation we have tv which is obviously in secular decline. He has brought in tom stacks to look at how to go forward with that. Then you have espn stuck in the middle. I dont think they necessarily want to get rid of that. We saw them do that national deal. It makes sense to keep that as part of the broader streaming portfolio. Then you have the streaming business which is in transition. Tom the heart of this is craig moffett. He was years out on cable cutting. Thats what this is about is people are watching left less. Jonathan what if we ended up with, tons of different apps. Its ridiculous. Its a lot now. Its good to be a lot more. The ad free version of disney plus will cost 14 a month in october from 11 currently. Comedy people do you imagine will cancel their subscription based on that move . Disney is betting not many people will cancel it all so they already did a price increase just at the end of last year. They said the results of that were very encouraging to them. The whole streaming narrative is really changed. Initially when these Companies Made that pivot it was a volume story. Now it is a pricing story. Its all about growth, increasing that top line. We have seen netflix do that. Now disney is doing it. I would argue disney was substantially under earning when they introduced their ad free product it was seven dollars. Now they are making close to 14 which is on par with netflix. They were under earning so its time they narrow the gap. Lisa would you be happy if they sold their streaming business to apple . I dont know if that would even pass regulatory muster. I think the streaming business makes sense. They have the content engines, obviously the studios prayed it depends on how they divvy up the assets. Obviously the studios. It depends on how they divvy up the assets. It will be interesting to see how those get dvd up. Divvied up. Tom i have the clearest memory of being in hollywood three or four years ago and you go down the street and up on the light post they are selling paramount streaming. Their market share is like 2 . Maybe its 4 . This is 8 market share of streaming. This is not rational. This is not the way adults talk. They talk about market share our marketshare scale. Who was on the others of the espn transaction. What they are talking about right now, im sure thats what they are talking about. Lisa it seems like a bigger discussion over which parts of the business are the most important and the core at what we do. In the past was a broader suite of businesses. We hear soul emphasis on the parks. Theres a question about what they will do to rationalize. Thats relevant. Jonathan its so expensive now. Its ridiculous. Why would you do that. Espn needs english football. Thats what they need. Lisa a talk show. Jonathan before the games, that would be great. Tom they were just in my ear, the countdown clock, seven minutes. Jonathan mike mckee, how many minutes. I heard seven minutes somewhere. Im looking forward to streaming surveillance. Tom keene and roy keane. Wouldnt that be a great pairing. What is it about the microphone they put up like this. Lisa it gets written michael it gets rid of the background noise. Lisa all it tom they were all taking photos. What have we got here . Michael in theory an indication inflation continues to slow, headline inflation popped up a little bit because of Energy Prices but the core is expected to drop in the month over month increases are expected to be still small. Any difference would send the markets into a tizzy especially if they were higher. This a lot of talk these days have we gotten as far as we can go right now with the fed not doing more and will we see the economy reaccelerate and inflation reaccelerate. Jonathan do i ignore yearoveryear . Michael yes. Look at the month over month. As i described cpi yesterday this is the least consequential most important report but we have this month because its important and the markets will trade on it but we have two more Inflation Reports before the fed meets again. Its not a snooze fest. Lisa do you know why its not because its mikes birthday. He likes to celebrate with Inflation Reports. Michael that is true. Jonathan we will figure something out. You got mike a gift. Lisa thats a no. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. Jon the Inflation Report in america seconds away. Equity futures rallying up. In a bond market, the treasury in the bond market, treasuries rallying all morning. With the Inflation Report around the table, there is night mike mckee. Here is mike mckee. Michael you guys forecasting this hit this on the head. Cpi, 2 10 gain on the month. Pushes with the headlines yearoveryear. It drops the core yearoveryear to 4. 7 from 4. 8 so as the bond traders would say, this one was on this cruise. The screws. We are up to 248,000 and the prior week was 247,000. The continuing claims number was 164,000. It could be some strike activity in the initial jobless claims but we dont know for sure and we have to look into that but claims are not the good news. For you at home, you are still getting ahead of inflation, real average Hourly Earnings come in at 1. 1 . That is lower than 1. 3 in june but it means you are making more. Jon thank you very much. The equity market by up by a tenths of 1 by 8 10 of 1 . Further, extra dollar weakness, the euro raking up by three quarters of 1 . 1. 1060 on the euro. Further sign of disinflationary forces taking hold. Tom the answer is, i look at inflation adjusted Weekly Earnings and it is a quiet number off a revised 0. 7 inflation adjusted weekly increase down to 0. 2 percent, positive 0. 2 so that is the disinflationary tone and that makes everyone including the stock market feel good. Maybe the teamsters will make 167,000. Jon do you have a read on that . Michael i dont have a just yet but rent of shelter and rent of primary residence at oer, all those numbers come in at 0. 4 so that is about the same in line as it was the prior month so no way drop in overall no great drop in overall numbers but the owners equivalent rent comes in at up a tenth, tom your eyes are better than mine for my answer is, we have 1 , one point 1 move in the nasdaq 100. Market likes what it sees, what do you see in that data . Michael what you are seeing here is in most categories, a small increase in inflation. We are seeing a slowing down overall and food prices up to tenths 2 10. Energy prices contain, even though we saw wrestling prices going up, it was only a by 2 10 it was only up by 2 10. We are seeing an apparent flat. Inflation that is relatively tame. These are the numbers we used to get prior to the pandemic before we had the big inflation run up. This is not too bad. Jon like we saw in the payroll support report. Michael it is and we dont know if this is a prepandemic report or if this is just the way things are. That is the hard part to know. Jon does this change after the summer . Do we have the ingredients for it reacceleration inflation . Or reacceleration and great inflation for reacceleration inflation . Michael that there is an argument out there on that. Jon lets turn back to the equity markets, we are positive by 0. 6 which is basically where we were going into the number, looking at the bond market, yields were lower at the 10 year coming in at four basis point and lowered by a couple basis point. Lets call that for 75. Dollar is weaker against the euro. The euro moving at 0. 6 . Coming up is someone from like rock. One person knows a lot about the equity market. All of that still to come. Tom interesting to see brent crude coming in pushing against the disinflationary tennessee outside of core cpi is what were seeing in a gallon of gas stop neal dunn gas. She has nailed the better than good American Economy. I have to go to gdp and then i want to dive into this Inflation Report and the basic idea is that the atlanta gdp sees a sprightly our are at are you are you at a lesser one rate . It is early in the quarter and the atlanta fed tends to get that the estimate tends to get better over time as more data comes in but even if you assume a typical error turn, you would still talk about a buff trend of growth so it would be hard for me to see gdp coming in something below 2. 5 when the quarter is set in gunman is said and done. When you hold things like the level of Consumer Spending flat to where it was in june, you are talking about a build in for the Third Quarter from consumption of over 1 at the annual rate so i think that is primarily what is driving the gdp estimate. The economy is growing above trend. Your bloomberg consensus sees gdp barely up half a percent in the Third Quarter and negative in the fourth order. Quarter. That is highly unlikely and revisions will be skewed to the upside. Lisa what we are seeing abroad side relief in markets with tearing in the bonds where people are running out the fed and raising rates again and saying you are seeing the soft landing, the disinflation, immaculate or whatever else, that a lot of people were waking waiting for. What in this data can you point to to say they are wrong . Neil it is not much. You could make the argument that the downward movement in used cars will probably only build over the rest of the summer. Wholesale option prices continue to come down and we havent seen we have seen a modest decline in used car prices so there may be passed through their passthrough there. There may be disinflation in the pipeline. The reacceleration story for inflation is about the economy going is the economy growing above trend or not . I think it is and i dont think the fed has done enough and i think the fed is enamored with this soft landing you in there almost wish casting this outlook. There is a risk that the fed is patting itself on the back by the end of the year only to watch inflation potentially turn back up sometime next year. Home prices are rising, while the relationship between home prices and rents is tenuous in the short run, the asset market effect is what drives rent. Landlords want to extract more from tenants when the underlying value of the asset they are putting on the market is going on up in price and Commodity Prices oil is at year to date high, with everyone concerned with china and europe, i suspect these economies will get worse than they are now. That is my baseline expectation and there is more of them for oil to go up and that is going to have mechanical impacts on not just headline inflation for parts of core inflation as well. Lisa i have been looking at the pricing in markets and where people are settling out and they are pricing in cuts at the first couple months of next year and i am wondering from your vantage point, how disruptive it would be if some cash suddenly that market complacency is challenged by the if the idea of stickier inflation, reaccelerating inflation that would not cause another fed rate hike but would necessarily lead to the cuts. Neil if it is a stronger economy and stronger growth act expectation is that is making the market price out those cuts, that could be an environment where equity markets could potentially work. You see higher Interest Rates and that hurts but you expect earnings and earnings expectations to go up. That could be ok but i do think, to me, it comes down to something basic. The fed began hiking in march last year and since then, what do they have to show for . Jay powell talk about pain being necessary and we have seen the Unemployment Rate tick down. Gdp is going above trend. In all that number, when it was published, showed my Financial Markets being a headwind and now that has gone to zero. What have they done . It comes down to something basic , either you think the labor markets are a conduit for inflation or you dont. What we are seeing now is tight labor markets, i lived to real wages as and ultimately people will spend more money, booming household demand and i think that will keep prices in the aggregate stickier for longer. Tom thank you so much for the renaissance macro. The heart of the matter is the in aggregate and maybe there are two americans, there is one that is prospering and going to disney world and giving their left kidney to go to disney world and there is another flat on their back and neil has been brilliant on parsing that into the aggregate. Lisa you see that too, people being more discretionary about where they splurge. Tom standard is 500, lifts up 3 10 of a percent. Michael mckee is here doing the math and he doesnt have a hp12c on his calculator. He has us and old supercomputer under his desk. Michael Core Services, as housing is the powell indicator. There are different definitions of super court tom is inflation the summer camps of services . Michael i look i can tell you, as far as disney world goes, admissions to recreational places up 1. 3 , one of the higher things. You are right, lisa. You caught that cold that. The super court comes the super court number comes in at under. 2 for the month which is up, flat the prior month and a yearoveryear basis, we are looking at 4. 2 . I dont think it will worry the fed all that much but it is not going necessarily in the right direction. We will keep an eye on that. You budget jake your ticket to jackson hole, right, because they are down 1. 8 . Lisa where . [laughter] and if it is down form and it is down and it is down from what . Michael everyone looks at what they are paying at the checkout stand, they dont notice. Bacon was down 7 10, did i notice that . Lisa we have a postcpi clock which is now 16 minutes past the cpi print and nothing has changed. This is bloomberg surveillance. Tom farrell is off preparing for the nine hour and i do feel like this was not particularly exciting for markets. Tom if you dive into the data, they will be excitement. There always is in hundreds of data points. I dont care if it is up or down or vector. You mentioned this, it is the x axis. I think people have to learn there will not be drama and they would will stretch it out to the jackson hole or the next jackson hole or jackson hole 2005 2025. Lisa you can see stocks up marginally. The to year yield is 4. 77 , the 10 year now below 4 but not a lot of drama. The s p up for tenths of a percent and we have been talking about a couple stocks. We keep coming back to the luxury or almost luxury. The Retail Sector and consolidation and whether size matters so much more now that it is important to pay a premium. Tapestry shares down 3. 6 after saying they are going to buy capri holdings, the owner of michael kors as well as the saatchi for saatchi. As well as verse saatchi ve rsache. Tom these are not zombies. These are legitimate firms. The Stock Performance of both tapestry, i will call it mediocre as a general statement and capri is worse than that. Bloomberg intelligence will have terrific work on this in the next 12 hours. What i would really focus on is madison avenue and maybe it gives you scale through the real estate negotiation worldwide. Lisa i want to quickly mention because we are 40 minutes away from the opening bell, curious to see whether this gain in disney will hold given the concern about the longerterm trajectory of growth and i am watching at what point do people say, they cant make it quickly enough and that will be a boom. Tom we have a great viewer who says he has lost 51 pounds with the stuff u. S. Lisa he grew an extra arm . Tom whatever. There has to be a free lunch factor in here. Lisa it is still breakfast time for some people tom you said it is a shock. Lisa there is nausea and other types of physical issues that come along. We will investigate and do a deep dive into the potential ramifications. Tom there is someone who could probably use this stuff. I will mention euroyen 1. 5870. 1. 60, strong euroyen would be something to see overnight. We get clarity now on and they august thursday with david kelly. Yes been definitive over the decades on the holistic picture. I went to get to your stunning call on jobs but lets leave that aside. Do we have disinflation in america . David we are gathering disinflation in america. The numbers this morning were close to what we paused but it is nice to see the Core Services part of inflation coming down but i am interested in not actually the numbers but the forecasted numbers because when you try to forecast these numbers, you realize new car prices have been flashed or down since the start of the year and we are seeing huge increases in auto insurances and repair costs but that has to break. Shelter is 19 of cpi increase at this stage. But we know the rising vacancy rate for apartments. The promise that is why i am so convinced that inflation will get down to 2 on its own. With or without health from the fed help from the fed. Tom there is some statement, there is an underestimation of the excesses x axis. We are underplaying what will happen at jackson hole . Do we need to extend out our study a year or two years out to get to successful disinflation . David for investing, you always should because equity investing, most viewers are interested in the stock market. It shouldnt be about the next year anyway but physically this car time around, that is the case because we know with inflation, it is symmetric. Goes up and goes down in exactly that pattern. It takes a while it takes a while to come down. As we track this thing out, it is going to hit two on cpi and on core cpi by late next year and that is the track it is on. You have to wait for that to play out and then you realize, where does that leave us . It leaves us in a low inflation slow growth economy and i think the Federal Reserve cut Interest Rates faster. You have to look out beyond the volatility inflation in the last two years to realize we are headed to a place of slow growth which looks like a decade ago. It is a return to where we were 10 years ago. Lisa why when you take a look where markets are in a position they think inflation can get onboard unmoored if the fed gets less aggressive. I dont. David i think the bond market overall is better priced than it has been for many years and i think there is a onetime capital gain there as rates come down as people realize the Federal Reserve is going to have to cut rates. People will make a capital gain. There are better longer Capital Gains and eight the equity markers. With fixed income, i would be Long Duration and short credit. I dont you are getting paid for taking duration risks. Tom jason furman of harvard comes out with the mathematics on the annualized view, 12 month annualized 4. 7 core, six months , the view is 4. 1 , lesser disinflation. Three months, 3. 1 . David kelley, the one month annualized core cpi is 1. 9 . Can you go shorttermism and look at the one and three months statistics . Are they a value valuable tool to look at inflation . David what is really going on is you have these will categories in a owners equivalent rent, actual rents and Transportation Services and you have to track what that is going doing. Core Services Inflation and inflation in general is fading. I dont think it will be pushed out by wages. It is getting pulled down by competition and increased inventories. I agree the result with the resolve of the shortterm view is affected by the way the government measures these things. Tom david kelly with j. P. Morgan. I cant say enough that this is the debate into the weekend and jackson hole. You are looking at one year core cpi at 4. 7 , or as the professor says, you go shortterms and 90 days and you say this is a inflation trend and it is disinflation to a court api of 3. 1 core cpi of 3. 1 . Lisa if you look at the basic numbers, cpi posted the smallest backtoback game in two years gain in two years. You look beneath the headline, some of the most incredible increases in costs, nursing home and adult care, costs surging by the most on record. Housing coming for 90 for the jeep cpi gains. You look at medical costs that are increasing dramatically. Tom seasonally, medical always pops in the file fall. Lisa the costs people are feeling are climbing but you could say it is at a lower rate lower pace will stop there is more disinflation in the pipe tom i look at some people and they will say to me a disinflationary trend lasts 90 days is in place. Jerome powell cannot say that. Lisa we are coming from also the highest inflation in 30 years . Tom here we are, the equity markets left. This is bloomberg surveillance. Oh, booking. Com somewhere, anywhere. I just want to lie motionless in a chair booking. Com, booking. Yeah wow, you get to watch all your favorite stuff. Bookiits to die for. Yeah and its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. Jonathan no drama cpi report. No drama in that cpi report. This is bloomberg the open with Jonathan Ferro. Jonathan live from new york, the smallest