Today about a labor picture. And the shift from a pandemic and furloughed over to a real question about job layoffs. Francine yeah. I think this is the time. In the u. K. , we had the many budget yesterday that gives a little more support to workers. If you look at most of the furlough schemes in the u. K. And what is happening in the u. S. , you can assume some of the money would run out by the end of the summer. This is the exact time to look at the permanent shift to the labor economy and what did come in two to three years. Tom we have a terrific our for you. We will talk to our guest about mr. Buffett, mergers, and acquisitions. We acquired the first word news in new york city. Ritika joe biden will call for a moderate approach toward reviving the u. S. Economy today. In his speech in pennsylvania, the democratic nominee will stay away from more ambitious proposals pushed by progressives. He plans covers several areas including a push to buy american and incentivize american jobs. The u. S. Has set another record for coronavirus cases according to the new york times. More than 59,000 cases were reported yesterday. California and texas accounted for 20,000 of them. The rates of positive tests in california has jumped to more than 7 . Gavin newsom warned it could spike into double digits. Sealed anresident has Unlikely Partnership with President Trump. In his visit to the white house, he offered for more north american trade integration and hail President Trump for his kindness and respect. It was a recordsetting first half of the year for hedge funds, and not in a good way according to hedge research. Any assetweighted basis. None of the four major strategies made money and driven funds for the worst performers. Global news, 24 hours a day, on air and on quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im ritika gupta. This is bloomberg. Francine thanks tom thank you so much. Equities, bonds, currencies, commodities. Flat right now. Nasdaq right now showing strength. It will be amazing to see where we are in two hours. Yield is not part of the story. Francine . Francine i wish we could spend a bit of time looking at the shanghai composite in general. There has been a lot going on in the last few days. Chinese equities outperforming. Buy signals of support but Strong Demand by traders. Gold, i know we talked about it yesterday, today, holding above 1800 per ounce. European stocks are snapping this losing streak. Tom right now, we would like to go to the system. The deepest part of the system is foreignexchange. Its where you measure the markets, gauge the correlations to other asset classes. Dmp, claimedhat at for their mathematical acuity, particularly in derivatives. We are thrilled that David Katzive can join us. What is the signal of stronger yuan and a relatively resilient u. S. Dollar . What is that signal, giving all of the stimulus out there . David good morning. I think thats a good question. The stronger yuan that you have been talking about, these are signals of vulnerability and they are starting to pileup. We saw a big move in lower in dollar rates, a collapse in u. S. Real rates this year this month, and to us, it seems like the dollar is on the brink of a potentially big adjustment lower versus the core currencies. Tom ive got to go right to the idea of making money here. How do you play a weaker dollar . Which pair is more advocate just . Advocatious . And usd. Llaryen at these been held levels, dollar has been strong or a couple years because rates have been high and there has been a willingness to hold dollar exposure. For dollarsons strength are beginning to evaporate or have evaporated. We think there is pretty big vulnerability in the main pairs. Francine good morning from london. What is the reader cross for gold . I dont know whether it is signaling something we should be looking at or if is symptomatic of it is symptomatic of what we are looking at. David i think it is signaling something, telling us the dollar vulnerability in gold will do well in an environment where rates are low, where there is uncertainty on geopolitical front, on the monetary growth front, all of these things people look at pointing them toward stronger gold. Gold also does well during periods of dollar weakness, so to us, it could be an indicator that the dollar the beginning of the adjustment a lot of us have been waiting for. G10 fx has been remarkably stable considering the adjustments in the Global Economy in the last six to 12 months. Seeing in some of these other places like gold that there are macro things appening, which could be signal Something Big will happen at the g10 fx as well. Francine i was going to ask you, as head of head of strategy, do you have to have david for us, a lot of the gold moves they have been looking for have already happened. That isconsistent consistent with our expectation. We think gold will come off a little bit in q4 as the dollar is beginning to weaken more steadily versus g10 currencies. Gold has kind of moved and fx needs to catch up. Old might lose ground versus some of the g10 currencies. Tom David Katzive, what is the actual mechanism or thing that will cause dollar weakness . Arshall differential basis on a parshall differential basis, there has to be one thing that forces the move partial differential basis, there has to be one thing that focuses the move. David to me, the main drivers of weaker dollar is already in place. We may be surprised that we see dollar weakness become a driver for other things. And fx, we are looking at rate differentials, commodities to tell us where fx will go. Begins a big adjustment lower, this will happen in the second half of the year, we may find other markets say why is my market moving . It is because of the dollar. Tom but this is critical, David Katzive. I understand what you said, but can you do it at the zero balance . Can you make a study of Interest Rate dynamics and bring it over to an eye fx call bring it over to any fx call with lower rates . David when nominal rates get movered and zero and dont around much, their explanatory power for fx collapses as well. Tom yeah. David we think the explanatory power of real rates can rise at that point. Nominal rates dont move but as Inflation Expectations go up in the u. S. , you can see u. S. Real rates come down quickly. That creates the dynamic where good news in the u. S. Seems excess at reflecting the economy. The dollar starts to get in this forws for the yor the u. S. Economy means bad news for the Global Economy. Francine what is going on offshore yuan . , its strongest since midmarch. How does that translate into your expectations are dollar . David i think it is consistent with the pattern abroad dollar weakness. There was a period a few months ago where it seemed u. S. China tensions might push dollar china sharply higher. People were talking about levels like 720 breaking. Itthat had happened, could have fed back into an adjustment higher in the dollar. People thought it was engineered weaker, and you could see pressure on the dollar broadly. That has not happens, and i think we see dollar be traded like more dollar payers. Tom that was beautifully explained. David katzive on real yield dynamics. We will continue with David Katzive. Looking forward to jon ferros conversation with Michael Wilson of Morgan Stanley i believe in the 9 00 hour. Morgan stanley has been lights out on market moves, negative, and very positive in the recent months. Stay with us. From london. This is bloomberg. Francine this is bloomberg surveillance comment francine from london and new york. We were talking about dollar. Lets get back to your exchange with David Katzive, head of fx strategy for known for america. Daniel, thank you for staying with us. When you look at euro, i dont know whether euro at the moment seems to be fairly valued but there is a lot of Political Risk, brexit, you dont know whether this Recovery Fund will get through because of the frugal countries, and it seems this could be a make or break point for europe again. David i think youre right. There is Political Risk with respect to the euro. The point we make from any fx perspective is that whatever europe does does not have to be it is not going to be perfect. They are probably not going to deliver a Recovery Plan that ticks everyones boxes and is conducive to the kind of framework a lot of people want to see. You just have to be good enough. You need to avoid systemic stress in europe. As long as you see peripheral bond spreads tightening, you dont see any concerns about ability to find at auction, things like that, the concerns we saw in 20102011. The longer those remain at bay, and it seems to us what europe will deliver will be sufficient for that, the dollar is the driver. Eurodollar can move up from what we think are pretty depressed levels. A few months ago, it seemed like systemic problems would keep the euro anchored. It now seems like europe will do a sufficient amount to keep the systemic concerns at bay. Francine where do you see the most value, depending on where it is now . I dont know if there is a currency that is particularly volatile or you think is not fairly valued at the moment. David in g10, it is euro, ust, and dollaryen was the biggest move usd, and dollaryen was the biggest move. Dollaryen in particular has been incredibly stable and has not moved, even during periods of big swings of equity markets has not moved nearly as much as we have gotten used to seeing it over historical times. To us, there is a big exposure that could be hedged, could create a momentum move lower in dollaryen. We watch that pair closely. It has not happened yet, but that is one if you see momentum build, it could be a Snowball Effect for dollaryen falling back to 100 quickly. Tom this has been the great miss call. To be clear, on dollar yen, if you go from 107 to 100, that is a stronger japanese yen. I get the idea that everyone is looking for stronger yen, but it has not happened. Watch will be the mechanism to make the big shift to a truly stronger yen . Even over four to five years to ¥95. How will that happen . David thats a great question. The main challenge to the weak dollar thesis, if it was going to happen, why has it not happened . It is hard to argue against that. It is observationally true. With dollaryen, the market was looking for the wrong catalyst for a long time. People were looking for risk aversion episode, a big move lower in equities, a spike in equity volatility to create the spark which leads dollaryen lower. Not i think that has not really worked out. The real route to a sustainably lower dollaryen is the dollar route. You could wind up in a period with u. S. Real yields falling, staying exposed to dollars us do dollars is too attractive. With rate differentials being tight, you can start to see this hedging process and the dollar begins to fall during periods where equities are going up. That would create this Snowball Effect. Tom David Katzive, is a weak dollar good for america . David yeah. I mean, i think the dollar is on the expensive side of the equilibrium. There should be some negative for u. S. Growth associated with that if you erased some of that. That. If you erased some of that, it would probably be net positive. The kind of moves we are looking for, likely in fx, are really not big enough to move the needle too much in terms of u. S. Growth. The u. S. Does not have a huge external sector, so unless you get a really big move in the dollar, and even bears like us are not looking for a really big move, it will probably not be something that moves the needle all that much. Francine what do you do with brexit and pound . David this is a huge month for brexit, as you know. We think the most likely scenario out of this month is that there will be some kind of deal which allows the pound to retain some of the gains it has made and extend some of the gains versus an otherwise strong euro. These scenario, in negotiations, if they are not successful, the pound could reverse the upside we have seen quickly. It is quite binary. It makes it very difficult for investors to manage risk. Overall, when you look at emerging markets, how difficult is it to make a difference because of structural reforms, or does it just depend on how they deal with the pandemic and covid19 . David i think the bigger challenge for emerging markets is that we are looking at a less globalized world, and when we come out of the pandemic, whenever that is, hopefully soon, the world will not go back to the same framework we saw over the past 30 to 40 years area we are him 3040 years. We are moving in a less , accelerated by these developments. A lot of these frameworks people have used in the past may not work as well. I think that is the big talents, that we have turned a corner from ag from a geopolitical standpoint and no one knows quite what the parameters will look like, regardless of what happens with the virus, regardless of who the next u. S. President is. We dont know what world we are heading into. Otherwise, valuations look attractive. Currencies are cheap, really you look slow, dollar looks vulnerable, liquidity out of the central banks, all of these things in the old world point you toward a big recovery in e. M. Tom dan, this has been outstanding. David katzive, thank you so much this morning. You can see the entire interview on bloomberg digital in a bit. Coming up, much more to talk about. I want to bring to your attention, a former dean of columbia business school, a in thegood discussion 12 00 hour with the gentleman from florida. This is bloomberg. Ritika this is bloomberg surveillance. Lets get the Bloomberg Business flash. Elon musk predicts tesla may crack the full autonomy puzzle this year. Electric car maker is close to developing self driving vehicles. Tesla is in a race with alphabets, gm, and others to develop the first 100 driverless car. Sales have started to recover at europes largest tech company. Betters sap reported than expected preliminary results for secondquarter revenue. 21 , cloud revenue jumped boosted by assumption of Software Deals in asia. U. S. Companies slashed dividends in the Second Quarter at the fastest pace since 2009, according to dow jones shareholders. The pace of the cuts appears to have slowed down. That is your Bloomberg Business flash. Francine thank you, riddick. Ritika gupta. First, we look at gold since the huge increase we saw the last couple of days. Also look at for nimby rename be. Havei think we betterthanexpected figures from sap that gave a boost to Technology Stocks in europe as well. Tom you see technology do better here as well. The nasdaq 100, green on the screen. Coming up, without question, your must listen conversation on mergers and acquisitions. William janeway will join us. This is bloomberg. Good morning. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Tom bloomberg surveillance from new york and london. We welcome all of you today. Without question, our conversation on the day of state of globalization in the state of all of that money out there and the state of all of that money out there. Call it mergers and acquisitions. William janeway is joining us. His book was definitive a number of years ago, but far more is his High Technology and innovation study across all of his career always associated with [inaudible] it has been way too long. Thank you for joining us. You have just written an essay on the death of globalization. How dead is globalization . William i called at the retreat from globalization because it is a working process. Work in process. Of it has, different rates speed. The impact of the financial crisis had a major impact with things that knew they were global in their business, finding out they were local in their need for support for their own national that was the first real extreme thent, but similarly, in impact of the pandemic, the multinational corporations developed extraordinarily extended supply chains, discovering they had to turn to local governments, National Governments for support, for bailouts, when the crisis disrupted those supply chains and ability to deliver goods and pay for them, and meet their obligations. Globalupside, what was on the upside turned out to be national on the downside what was global on the upside turned out to be national on the downside. You see mr. Buffett taking out the midstream pipelines of dominion the other day. Where is all of that money going to end up . What does apple do with their money . What does google and microsoft do with their money . What does Carlyle Group or any other server and all of them, where does all of that money and up . End up . Glenn the cash flow william the cash flow surplus did not begin with the pandemic. It was particularly from the was supposed which to stimulate investment in the fundamentals of economy. Instead, it financed and an and norma surge that was already goneif that funding had into national, individual, corporate investments, which mostly it did not, it would not have done the work that is truly u. S. Economy, not just Building Infrastructure that for the last 30 years has been crumbling away right across the country. But transforming that infrastructure into much lower basis, much lower green for Economic Growth in the future. This is a huge opportunity, and it is tragic. A friend of yours as well as mine wrote another project syndicate article that american