Galveston in 1865, or maybe tulsa this weekend the president. The bolton papers a distraction in washington. Around that, we continue to look at economics, finance, and investment. We have a terrific guest in a moment. To frame all of this is the Interest Rate market. I loved what you said in our previous hour about the continued confusion. I am also trading this june 19 like it is the end of the have, june 30. Jonathan it has been really confusing over what is happening with the United States and china, especially when you throw what is happened with trade. We need to see it in the data. That is my point of view at the moment. Lets see if it comes through in the data. Phase i actually looks like we achieve something. Of delete august mood, course, just the amount of business being done in equities. Lisa abramowicz, you see that in the bond market. What is the distinction you see in the quiet and full faith and credit . Lisa this has been the story for the year, suppressing the borrowing cost for both themselves, the nation, as well as for companies. This has led to the risk on feel. I am trying to get a handle on how much this is contributing to the glass half empty sentiment that jon was talking about. The fact that we are seeing pacescounts pick up and like texas, and arizona, and the market shrugs it off and look forward. At theam going to look glass halffull. We just spoke to the lieutenant governor, opening in new york on monday. Baseball cant do it. American football cant do it. You and i will observe the tots playing a team from up north this afternoon. Lets go jerry and the pacemakers. Theres a small liverpool game coming up as well. Tom, im so impressed. Our next guest is so excited about this that he would rather talk about his beloved liverpool then he would the bond market. That is the state of affairs at the moment at jp morgan. Tom it is, absolutely. But spring in bob michele. This is somewhat lets bring in bob michele. This is someone we know so well on the real yield. Look for that coming up on bloomberg television. [laughter] bob michele, when do i get a real yield back . Bob i know. It just seems to have been another one of these casualties of the crisis. I guess we will know things are further returning to normal when it comes back because by then, all the value will have been squeezed out of the bond market. Jonathan you sound like youve become more constructive in the last couple of weeks. Can you walk us through whether you have, and why . Bob for sure, we have. When you look at the over woman response by policymakers, both monetary and on the fiscal side, it has been dramatic. It has not just been a handful of developed markets. It has been in the emerging markets. In the last couple of days, you had rate cuts out of indonesia, a rate cut out of brazil. You had a rate cut out of russia. I look at where Brazil Central Bank rates are. They are 2. 25 . That is where the u. S. Was a year ago. So the policymakers have no interest in watching the pandemic continue to shut down the global economy. They are doing everything they can. Jonathan is this a case of there is no alternative, and the assets that used to get a return arent there anymore . Or is this something more constructive than that . Bob it is a combination of both. I love torsten. I was a little disappointed that in his list of zombies, he didnt list the bond market because that is where we are headed. Central banks are going to control the level of funding across the system, and it is not just front rates, with yield curve control and unlimited amounts of quantitative ease. They can go across the curve and control the funding rate to their government, and then with purchases of credit, they are controlling the funding rate to the corporate world as well, and in the u. S. , you are also seeing it with households through talk programs and other things. There is a commitment to bring rates down ultralow across the system until we close the output gap, and that is years away. Lisa what is the playbook for investing in a zombie world, both bonds as well as households and companies . Bob i think last time i was on, i said i am sure tom has his samuelson lying around, and im sure one of the laws in their was dont fight the fed. I am not fighting the Central Banks or policymakers in aggregate. Rates are coming down. They have come down a lot. They are going to stay low for a while. We arent going to see acceleration in growth, but until that acceleration materially closes the output gap and you start to see any inflationary pressure, you are not going to see any talk of raising rates. I think what you do is you continue to extend out into credit, and you find companies and borrowers that can operate in a world and in an economy that is running at a fraction of what used to. Tom this is critically important. ,ou mentioned Paul Samuelson 1948. It was a different economy. It was a different america. The belief out there is your world is gains to the elite. How do we have our finance system give us gains that Paul Samuelson saw through the 1950s and into the 1960s for the good of society . Is one of the effects of the overwhelming monetary response. The initial reaction is to inflate asset prices, and of course, the holders of assets are in the Upper Echelon of the economy. It could widen the gap between the haves and the havenots. I dont know that monetary officials could or should have done anything better. As i said in the past, i think they should start shifting the narrative. You are seeing that out of Christine Lagarde and the ecb, which is, what do you want us to do . We are not the first policy response. We are the second policy response. The first policy response was for government officials to shut down the economy. We responded by lowering rates and creating liquidity and funding for the system. So we now have brought rates down to a level where public and private borrowers can do something with it as they recover. Lets see what they do with it. Focus your attention there. Our companys going to borrow and buy back shares and raise dividends and make acquisitions . Or are they going to invest in capex . How about on the government side . Are we going to pileup the deficit, or are we going to actually invest in health care and infrastructure . So i think the narrative needs to change a bit here. Lisa perhaps the narrative needs to also change around the expected returns profile at a time when youve got a lot of pensions still shooting for that 7 bogey. What is an appropriate bogey right now, given the Interest Rate environment, given the strategy you were just talking companies thatg can maneuver in a low growth world . Bob you are right, there are Pension Funds and Insurance Companies that have long dated liabilities they have to match. What has been interesting to me is the fed support of the curve has been in the front end, somewhat in the intermediate part of the curve, but they are dialing back their purchases in the long and. So we are seeing three curves evolve, and the long end looks as if it is being left to Pension Funds and Insurance Companies to negotiate the raid with some of the borrowers in the market, so long credit. I dont know that you will get 7. 5 there. I think you are going to be lucky to be able to book in the time. A for an ongoing i think that forces you to accept that everyone is committed to a recovery. Other markets will continue to appreciate, and this isnt the proper environment to derisk in. So continue to hold the things that have a bit more upside, whether it is equities or privates or alternatives, and of course, that means an implicit faith that policymakers will continue to get it right. Jonathan lets end with the important stuff. 60 seconds left. Can we get a score this weekend for liverpool . Bob do you realize that premier League Football has shut down, but the bond market has continued to operate . Now, i am a buyer of both of those markets. [laughter] the anticipation has been mouthwatering for me. I am expecting 30 liverpool. Jonathan bob michele, always appreciate it. Liverpool, the energy comes up a bit . Tom i got tearyeyed. Nil means zero, like shut out. [laughter] jonathan i think most people understand that, tom, to be honest with you. Bob michele of jp morgan, always fantastic to catch up with you. This is going to go on for the next couple of months. From new york city this morning, good morning to you all. Onity futures up 39 points the s p. Ive established a technique with tom keene. He talks, and you just keep talking past him. Up next, the mayor of london, sadiq khan. Tom what are you, my fourth wife . Ritika with the first word news, im ritika gupta. Pompeory of state mike is denouncing former National Security as a traitor who has damaged america. He says he has not read the tellall book that was sharply critical of president trump, but says from the excerpts he has seen published, bolton is spreading lies and halftruths. Debate on are opening a recovery program. The eu plan would be financed by joint debt issuance. That is seen as acing for can step towards economic integration. Be onery country wants to the hook for spending another countries. Senator Amy Klobuchar has taken herself out of the race to be joe bidens running mate. She says the democratic nominee should select a woman of color. A tough on record as crime prosecutor in minneapolis has stirred controversy. On austin,roing in texas as its second location for a u. S. Factory. Tesla says wherever it is built, the factory will eventually employ 5000 workers. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. People still are trying to figure out what to do with the second half of the year, let alone make big shifts that will affect multiyear horizons. I will expect people to continue to ride the risk wave a little bit. Jonathan kate moore of blackrock on writing the risk wave. Alongside tom keene, im Jonathan Ferro, together with Lisa Abramowicz. We are live on bloomberg tv and bloomberg radio. This is bloomberg surveillance. In your equity market, positive and the s p 500 come up by a little more than 1 . The headlines out of europe getting some attention. This coming from the eu leaders summit. It ends without consensus on a recovery plan. That is not going to surprise anybody, including this fx market. No big moves on the single currency off the back of this headline. Tom what does that signify to you . Jonathan i just think the negotiations continue. I did not expect anything to happen today either. This was really the formal start have a conversation about getting the socalled frugal four to come together with the rest and do more. I have to be honest with you, it is going to be really difficult. Wherever there is compromise, there is often suboptimal outcomes, and europe has shown often that that is what it is vulnerable to doing. Tom absolutely. No question about that. This is the way it works. You put out a book, and then you get blurbs. Ive done blurbs, and theres other blurbs, but one of the hardest blurbs to earn is the good dr. Wolf, martin wolf of the financial times. It is another short, concise book on china, and that is by our tom orlik, chief economist at bloomberg, with decades of experience on china. To work off what martin wolf says about your important book, it goes on and on because of leverage. How leveraged is china as they confront president trumps washington . Tom o china took on a huge amount of debt in its response to the financial crisis, and that ran to strong for too long. That has left them with debt that is a huge burden, huge risk , especially facing the covid crisis, the trade war. The big thesis in my book is, yes, the risk is there, but chinas policymakers have unrecognized resources which they can use to manage it. Jonathan what is the tradeoff here, as they secure that shortterm stability . What are they sacrificing in the longterm . Tom o the difference between china and most other governments in the world is that china is uniquely prepared to put the government Balance Sheet to work to support corporates, to support markets, ultimately to support financial stability. What that means is that a bet on china fundamentally is a bet on chinas government ability to step in. A lot of people think that chinas government might run out of steam, might run out of bullets in the next year or two. Trade war, covid. Theres a lot of stress they face. My view is that chinas Development Story still has a long way to run. Yes, Government Intervention creates distortions, but that is not going to knock over the apple card. The apple cart. Jonathan some people might be listening lisa some people might be listening to this and say, how is china any different with the thumb on the scales and leverage increasing on the system . Tom o i think that is complete rewrite. I dont want to sound too pollyanna about what is going on in china. Clearly, there are huge distortions in the market the come from Government Intervention come about as the u. S. , europe, japan increasingly find that in these waves of crises, the central bank, the ministry of finance needs to wade in to prevent systemic risk, to keep growth going, what is happening now is not china moving close to the western model of free markets. In some senses, it is the rest of the world moving closer to chinas model of extreme and sustained intervention. Jonathan that is what i wanted to come to you on. There was a belief that the system in china needed to evolve. Do you just see it as a well oiled machine now that everyone else tries to replicate . Tom o i think we need to distinguish between the politics and the finance and economics. On the politics, clearly the progress which many one to do see towards a more western, more democrat system just isnt there. On some aspects of the economy, for example, state ownership, there hasnt been the progress many people think is necessary. But on the finance, on the markets, actually the pboc keeps the dial pointed towards reform. So we now have Interest Rates which are liberalized. We have an Exchange Rate which is liberalized. We have a more open capital account. These things, because of the way the finance and liberalization drivesfinancial system gains in deficiency everywhere else, these games are really important for sustaining chinas mediumterm prospects. Tom k tom orlik, i think our viewers and listeners in this simulcast have a good understanding of different figures. The president , the secretary of state, perhaps the secretary of treasury. But i think to too many, mr. Lighthizer is an enigma. How do the chinese perceive the leader of our trade initiative . Tom o i think that is a really great question, tom. I think one of the striking things about the last three or four years is the way in which Robert Lighthizer has transitioned from this kind of voice crying out in the wilderness, this guy who refused or sit china shouldnt come into the wto back in 2001, to a really central figure whose view is really shaping u. S. China relations, shaping views on how the wto should be operating, so i am sure the chinese see lighthizer is a very tough negotiator. I am sure they see someone who is kind of master of the procedures, but i think they also see someone who is really reshaping the perception of global trade and u. S. China trade in a way which isnt very helpful for beijing. Jonathan highly respected and highly regarded, as well. Quickly, lets pretend we are not on air. This is a really bold title for a book. What is it about the title that makes you just a little bit nervous . What is the one thing that makes this theory slightly vulnerable . China, theook is bubble that never pops. When i was a younger man, i used to Smoke Cigarettes and catch buses. I always knew if a lit if i lit a cigarette, the bus was guaranteed to arrive before i smoked it. I am slightly concerned the bubble is going to pop before i see any royalties. Fingers crossed, that is not going to happen. I know surveillance listeners are rushing out to buy it right now. Jonathan im sure they are. Good luck to tom orlik, the author of the new book, china, the bubble that never pops. From new york this morning, good morning to you worldwide. Alongside tom keene, im Jonathan Ferro, together with Lisa Abramowicz. Elevated, up by more than 1 this morning. We advance as we look to add some weight to our weekly gain on u. S. Equities. From new york, this is bloomberg surveillance. Jonathan from new york city, this is bloomberg surveillance. We are live on bloomberg tv and bloomberg radio. Keene, imom Jonathan Ferro together with Lisa Abramowicz. Equity futures elevated, just off session highs. In your bond market, a quick process at check. 10year treasury yields higher, her steeper, up two basis points. In foreignexchange, keep an eye on the euro. Europe advancing. 2 even as the eu leader summit ends without consensus on the recovery plan. The message clear we will see you in person in july. I want to look at crude because i know you are looking at this. Barrel, through 40 a up 3. 3 on the session. Tom i will defer to the experts , mr. Curry at goldman sachs, mr. Morse at citigroup. That is extremely constructive to correlate that. Here is the dirty secret. We do this as we migrate through our friday morning. Lisa abramowicz had it temper tantrum and said we need to do more on credit. Jonathan ferro climbed on board the bandwagon and said we have to do more on credit because i miss the real yield so much. We have done a lot on credit. We finished strong with gershon distenfeld. We are thrilled he can join us on the credit. I look at the institutional perspective you have and it comes down to something simple. Are you clipping coupons . Is there any total return, or even as this all about not losing money . What does it forward for the next year . Gershon it is important to remember when it comes down to it at the end of the day, credit is about clipping coupons. Over the long term, if you put the coupon and you get your money bac