September. What is interesting, with the this on the screen, unconventional transaction of tesla. Additional 5an billion of shares geared toward perhaps the nonmainstream, the nonwall street crowd. Tesla is interesting because people using bubble with stocks. 2 tesla. Tom a recent secondary, even with moonshot on the markets. This will not be publicly offered. It will be Equity Distribution and distributed by banks as tesla chooses. Somewhat akin to what we saw with lesser successes. Here,l be widely studied the why of this transaction as well as the need for 5 million they are looking for. Here andarkably up big still elevated from where they were. What else are you looking at . Ina the story today markets, aside from tesla, is the dollar and the question of whether people are going to say this is the end of dollar supremacy or if this is just an indication of the low yield, the negative real yield and this idea of global trade. It is the two sides of the story. Tom not only yields down in the last 20 minutes. Im not going to editorialize. On the bloomberg terminal, negative 1. 10. Lisa you think real yield could be affected by tesla stock . Tom no. What im looking at is a negative 1. 10 . For that to go down would be something economists and strategists will look at. Gabriela santos joins us, strategist at jp morgan. I want you to do your Foreign Exchange act now. Has disassociated itself or major currencies. What does it signal that we have seen persistent e. M. Weakness over the last number of weeks . Gabriela you are right to point out that the dollar weakness we have been seeing for the past few months has been more concentrated. I think that is a reflection about optimism about growth in europe, e. U. Recovery funds lowering. And less worries about the u. S. In emerging markets, you do have ofkets of concern in terms economic and fiscal situations, namely in countries that have had a harder time with covid, like latin america. You are truly expert at this. The solution for latin america and this pandemic, the distribution of the 45 or whatever is frightening. How does latin america solve this conundrum . Beenela it has heartbreaking to see it has been one of the major epicenters of new cases and fatalities. Part of it is not a surprise in countries like brazil or mexico, but part is a surprise in certain countries that reacted quickly, with strict lockdowns. Did. Did peru that is a reflection of issues like lessica has, hospital beds. It is not an easy solution for latin america. Solution is to provide as much support as possible while being able to Prioritize Health at the same time. Less tightca has fiscal space but it is about trying to have that balance between providing support and focusing on the health issue. It is not an easy solution. Lisa not an easy solution for the u. S. Either, even though they have the benefit of being the biggest economy in the world. A stock market that keeps hitting new highs. Do you see this as a disconnect or a logical extension . Gabriela there is much more rationality happening in the equity market when we look beneath the surface. Epicenter oft the travel, leisure. They are huge employers. They make up 20 of employment. That is why we have such a high unemployment rate. Up 6 of the s p 500. Makes sense you have that dissonance between economic pain and improvement in earnings expectations. Another way to see that is the sectors leading are the ones that see positive earnings growth, whereas the sectors lagging are those typically exposed sectors. There is rationality. Lisa zoom to the moon after reporting earnings yesterday showing strength. It continues to rally. Then tesla. Tom has been harping on this, this idea that shares gained 1000 in the past five months. They are going to do it in a different way, geared toward private sales that are reminiscent of what hurts did. Dont valuations seem heady at this point given the economy . Gabriela i would say two interesting things. Seeing a tremendous amount of equity, not just by tesla but over the past few months. We have seen an amount of credit , and that has been well exorbitant. Absorbed. The fed were able to open Capital Markets again. That is a sign things are functioning peering it is a sign we have a lot on the sidelines, had 1 trillion then we prepandemic. There is a lot of money that needs to be put to work. Absolute and on a relative everybodytember 1, has to dress up for q3 and justify their existence. What is the sweat for the high flyers . Gabriela there is not a concern about a bubble in most high flyers because they are justified by strong cash flow. There is a concern about position after they have increased so much. Positioning your positioning has gotten too high, so you want to bring that down a bit, may be rebalance with Certain Companies or sectors that have not shot to the moon as much. It is more about right sizing versus a concern about a bubble altogether. Tom i have to ask about brazil, the opportunity in latin america. When does it go . For latin america, especially big countries like muchl, there has not been growth over the past decade and we keep waiting for economic reform. Brazil is a prime candidate over the past year that has fizzled out a bit. Look at it less as a Growth Equity opportunity. More onto latin america the fixed income side. You still have a country like mexico offering one of the only positives in the world. Appreciate it today, a nice reset for september 1. Still the tech space is positive. Loveesla transaction, i with the team over at zero had to say. With the secondary, you have to answer questions. It is a public perspective and you have to go out not only to institutions but also through retail. You do not have to do that with Equity Distribution. This goes to the idea of a faithbased stock, of why people are buying tesla if it is not on any news. Or the prospect perhaps of the death of fossil fuels, which has not happened. Tom fascinating. It will be interesting to see others weigh in. Simulcast. On our two real experts to chat this up. We will look at the American Economy here and a mystery not q4down q2, up q3 but beyond and q1. A little bit of volatility today. The vix 25. 70 that is a remarkable statistic. Stay with us. Good morning. President trump suggests a man arrested for killing two protesters in kenosha, wisconsin was acting in selfdefense. At the same time, he criticized the killing of one of his supporters in portland, oregon. The president travels to kenosha today. Flipped the american slogan that no one is safe in joe bidens america. He says the president cannot stop the violence because he has fomented it. Jp morgan said markets should prepare for the chance that President Trump gets reelected. There could be a shift of up to 10 points from democrat to perception ofthe protests turns from peaceful to violent. Tons of red ink for chicago. Of 2 billionicit through 2021 includes 800 million from this year. Has impactedus chicagos revenue. Mayor Lori Lightfoot call for more federal aid. For the First Time Since 2016, Consumer Prices fell and the euro area. The inflation rate in august came in at minus. 2 . Economists had expected a slight increase. A recent rebound in Economic Activity has not upset the Pandemic Impact on demand. Product is being held up. Learned that apple anticipates shipment of the nextgeneration devices could hit 80 million in 2020. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in. Ore than 120 countries this is bloomberg. The u. S. Government abusing the role of the dollar, overusing sanctions to make it unattractive. That is where we start getting alternatives put forward. Tom good morning. We are following the tesla story. We will have two good guests. Atwill have those guests 8 30. To inform you about this original transaction. Really getting a firestorm of interest across twitter and the internet space as well. Posen didwhat adam yesterday, his conversation with the vice chairman. That set of headlines was illuminating. Talking about the yield curver control. The Aviation Industry may caught cut half a million jobs. And a structural shift where companies have fewer employees relative to their asset value are getting rewarded and equity markets. As we come up on labor day, as i always read a read a like chapter, it is not 1948. It is not 2008. There has been a change here. The whole battle over labor share is something that has been folded into fed policy more than purists would want. Amazon got approval to Start Testing drones. Lead to more jobs for engineers, for people who can create the trajectories of where these drones go. The actual driver goes from house to house, delivering that parcel, is not going to be as needed. It is a different type of labor force. What does the drone do at broadway and secondly second 72nd on the Upper Eastside . Lisa i was having images of drone wars, of drones crashing into each other. There clearly are issues, but this is the future as amazon sees it. Has been forthcoming about that, clear that they have a lot of work to do. We are going to spend a moment and get to tesla in a bit. Us. As costerg joins let me cut to the chase. What you see for q4 . Q4 is going to be difficult. We are seeing signs of recovery starting to plateau. Businesses, consumer facing businesses could struggle. We expect the gdp to be down since last year and unemployment be around 9 . Q3 ith the tom even with the q3 rebound, you are assuming we are not going to get back to the level or trajectory of february. Shaped this is not a v recovery and it will take until 2022 for gdp to recover the level of december 2019 before the coronavirus. , cuts that mayat not come back, talking a how the global Aviation Industry may cut nearly half a million jobs by year end. About these people losing their jobs who may not have jobs to come back to because the economy has changed, the world has moved on . The coronavirus has amplified trends that were preexisting. Are in this economy with less contact, less travel, less people going to restaurants and so on. There is a problem here. Right now, the good news in the u. S. Is you have fiscal stimulus. People are getting generous unemployment benefits. Incomes have been sustained. The problem is many people will feel what they felt was a temporary job loss is not becoming a permanent job loss and you could have income go down and Consumer Spending go down as well. Is the risk of a second round of job losses. We were speaking last week with moodys. If we do not get fiscal support from d. C. , we could see doubledigit unemployment through the end of next year. Do you agree . Thomas consequences could be severe. The saving rate in the u. S. Is high. Consumers are still growing savings. More physical support is needed soon. Pullingbet on congress itself together and voting something before the end of september. Tom housing is remarkable. Percent in this nation who cannot pay their rent at another percent of the nation trying to move up or move out or moved to the suburbs. How do you measure the real estate economy right now . The Housing Market is the bright spot in the u. S. Recovery. Of have a definite trend moving to the suburbs. That is going to be durable. Contrast, twice and now three times off the 505 level. It would be fascinating to see what has let is in an hour and five minutes. Lisa the idea that this is the most valuable carmaker when it has yet to prove itself in the likes of ford and gm. This is the conundrum. Will it be the future people are pricing in. Tom i do not have it in front of me right now, but rbc was off the split. Numbers are confusing. I do not want to confuse anybody. Nixedtreet heatedly tesla. Teslaind you again, looking for 5 billion. They will not do a secondary offering. They will offer it on their terms direct through the major banks to shareholders in an Equity Distribution. We will cover that next. This is bloomberg. Tom it is an eventful first day of september. Lisa abramowicz and tom keene. Jonathan ferro is leaving tuscany. Rumored to be somewhere on the continent. I am not sure where. He is out there somewhere. Lisa sing it. Tom i miss john so much. I go home and we talk soccer. Good morning. This is what the show is about. Where there is interesting news, we are able to call upon any number of legit experts. Joel livingston will join us in and the on the debt credit market ramped up against all of these tech stocks. Cameron crise joins us with bloomberg live. Read forlog is a must wall street. We are thrilled cameron can join us. Cameron, in the secondary offering, you and i tried out the hilton hotel. We have rubber chicken, moved some vegetables around a plate, of institutional guys asked questions about the management. Must wants to mr. Ask questions about that process . Asklon musk wants to questions about that process . Cameron he does enjoy the sound of his own voice. I tend to view this as a wind fall. In theve split the stock robinhood crowd do not seem to understand each share is worth less than it was two days ago. Found golden has eggs in his backyard and decided to monetize them. Look at the. Nconventional approach dan ives publishing at what bush has been a big bull. He solidifies his his price presprintt is 3500 presplit. They will move shares from time to time. Under an Equity Distribution, how they pull that trigger . Cameron i believe what they will do is they have this panel, and when they deem it an opportune time, they can go to move shares in a trade. They will be like a regular customer of a Brokerage Firm with stop to sell. Theyret here we are, not putting out a shopfront for sales time, which is what you typically get at an equity offering. It is very much more opportunistic and more like a trader or investment manager. Gold ifis is monetizing i am sitting on your lawn. It is smart for tesla to do. It improves their credit profile. From a broader macro perspective , is it a sign of a top . Cameron i would be leery of streetthat because the is littered with bulls who tried whoall the with fools tried to call the top of a parabolic price flow. It is probably necessary if not sufficient conditions for a top. They sell stocks to the market, more traditional offerings over the last few years, and that has not stopped the stock from continuing tort rally. I would say if we move on a more general basis, if we move to a world where u. S. Companies are net sellers of stock rather than net buyers, as they have been over the last decade, that would certainly be a significant change of circumstances that would make a longerterm market top more likely. Sure if we, i am not are there yet. , inre left with that stock particular, it is the old rule you do not talk about politics or religion at the dinner table. Tesla is more like a religion. Tom Cameron Crise, thank you for an equity view of this moment, not only for this crazy summer in the land of the stock split we are in, but the view forward. Joinsnow joel lovington us with bloomberg intelligence. He is quietly expert on credit default swaps and credit dynamics within the market. I loved your Research Note out an hour ago on this announcement by tesla. Give us your single and immediate observation. Joel certainly the deal enhances the companys liquidity and continues to put pressure on its views of risk. Iquidity is off the table and think the market gets it. They view tesla as a quasiinvestment Grade Company at this point, which is in stark contrast to the raiders, which have a three or four notches , whose bonds traded 100 basis points wider than tesla. Tom dan ives makes it clear this is time elon musk is out of the red ink. Can you actually look at this transaction and tesla and say they will see rating upgrades from the different rating agencies . Joel that is a great question and the answer is they will not despite the 5 million of additional financial flexibility. The raiders just upgraded the company two notches for s p in july and one for motors one for moodys. Be quites tend to slow, but they will still lag the market. Lisa tesla has about 11 billion of debt. People are expecting them to be paying down that debt. They could take some of the money from this 5 billion Stock Offering and significantly cut their debt. Are we going to see more of this , the idea of a Company Selling stopped to pay down debt in a reversal of what we have seen over the previous year, where they have sold debt to buy shares . Joel i think that is a possibility, but not at tesla. I do not think tesla will be paying deck. Any i talked to management they are focused on growth and paying down debt as it matures. A lot of the debt we have our convertibles that are well on the money. Ability to call in their 5. 3 note offerings last month, and they passed on it, which is true to the commitment and the work they have described before. I think this is more for growth and to build out the Infrastructure Network faster were to work on a finance company. This is more of a growth tool than a reduction catalyst. Based on your conversations with management, based on what they have proven about production, do you view this stock sale, as well as what they are likely to do with the money, to be a positive story from a credit fundamentals perspective . Joel 100 . Definitely a positive for credit. It is a company that is not looking to repurchase shares, but to build out its business. That business strengthens i think this is a good credit story. Tom one of the proxies i used is five your paper. 80,ne point it went 100 to with a yield enormous, now it is priced better than jp morgan. How does that happen . How does a bond go from 80 to 100 with a 2 current yield . Joel i think it is called the fed. The fed took risk off the table for a lot of companies. Then you have this phenomenon in the marketplace. I cannot recall a stock going up. 000 in a year it happens the other way quite often quite rapidly, but not going up. That includes toyota. It has been a tremendous rally for tesla risk. Tom we could go for an hour. Jonathan ferro just emailed and said you have joel, great. Lovington, an expert on this odd business