Transcripts For BLOOMBERG Bloomberg Surveillance 20240712 :

Abramowicz. Tom bloomberg radio, bloomberg television. Good morning. Bloomberg surveillance. Jon took me off the ledge over tonight. Tsarsenal for and then sunday evening, a bombshell from the New York Times. Jonathan i never thought we would start an hour with english football, but we seem to do that now. I dont want this to be the story, but lets talk about whether it is real or not. I understand it is an important story. I understand it is sensitive for many people in america. But far too often, there has been a highlight reel of news anchors sitting there saying the word bombshell, and it has done nothing for the polling of the president of the United States. Are you convinced this will . Tom not at all, and Kevin Cirilli making clear it wouldnt have an effect on the very few, if any, undecided. The comment from the New York Times that there would be comments to come. In the markets, up, up. If we keep talking, we will be up 50 points on spx. Right now we are up 44 points. Jonathan a really strong bid to kick things off on monday. Starting with the u. S. Equity market, futures with a nice lift. A huge rally in frankfurt, germany. One of the biggest weekly losses we have seen for several months in germany, the dax bouncing back big time. The dax is up by 2. 86 . Risk appetite improves. You know the story. The dollar is weaker this morning against everything in g10. Eurodollar, 1. 16. 1. 35 40. 35 on wti crude. I think the broader story is the concerns of last week. Just because we are up this morning isnt mean those concerns have gone anywhere. They are still front and center. 10 correction level. On the economics, lincoln get into the fixed income market, forgetting about stimulus, which i think we can all agree has been pushed aside, the jobs report this friday, maybe we can get some information out of it. But i would suggest that claims on thursday is still a great mystery. Lisa claims data is becoming fuzzier and harder to read. Mike mckee has been good on how much noise there is around so much of these jobless reports. One of my main questions as we head towards november 3 is, given the uncertain, what is a defense of asset . We are not seeing a bid into treasuries we have seen in the past as people get risk off. If people go to cash, what makes the move out of that defense of asset move out of that . Defense of asset defensive assets, traditionally. Jonathan i heard you have been getting tons of inflows away from treasuries, tom. Tom she knows i am looking for an. Lets start for an entry point. Lets start the conversation. I want jon to bring in lale. What is so important here, amateurs look at the singlepoint yield, and pros spread andook at the the difference in yields across time and across credit to be as well. Jonathan lale wasnt available on friday and couldnt make the nano clock eastern choice, make the 9 00 eastern show, so this with third toys for lale. Third choice for lale. Lisa thanks a lot, jon. [laughter] jonathan youre looking at highyield spreads. 40 basis over the last week or so. When does it start to say buy again to you . [laughter] lale i was just going to pitch for toms triple levered cash funds over here. Jonathan is that what you are doing, cash . Lale no, we are keeping cash reserves. The reality is cash is king. Dont let anybody tell you anything else. Theres no such thing as cash on the sidelines, and liquidity in the markets are or, so for people to be opportunistic, to take advantage of dislocations, you have to have cash. Whether that is cash or sitting in treasuries, you need to have something that is immediately sellable. Unfortunately, credit is not one of those asset classes. The way we are looking at it is really, and our view, highyield still screams expensive, but the key theme in highyield is refinancing. Bbs and single bs that are in defensive, they are in the market to refinance. I think for us, that is the last hurrah in highyield to capture a little bit more income than investment rate before perhaps we turn even more bearish on highyield, subject to recovery. Jonathan what kind of spread are you looking for in highyield potentially at the moment . What kind of levels are you waiting for . Lale 540 is misleading. It has double bs that trade in the 200 and 300 range, and then you have the industries that are at the epicenter of recovery, leisure, entertainment, transportation, that trade multiples of that. Half of the highyield index is subject to recovery. You have to be really careful how you pick your spots in this. , thexample i will give you recovery theme last week widens 3x. So when you are entering at this point in time, knowing what you know, you have to be really care because the upside downside is just not justified. Fair value, highyield, believe it or not, i think it is still the 700s. Still in lisa the market is wondering what more the fed could do to backstop credit. Have we reached this point where any fed is big in, and any purchases will be peripheral and will make a material difference on spreads narrowing . Lale the market will respond to increment on news, so i think that the fed put is baked in. Be there to will backstop the market, but remember, they are predominantly backstopping Investment Grade. They are backstopping high yields very little through the highyield etfs and the fallen angels. That is a very different dynamic. Again, it opened the refinancing gates for higher quality. Theres very little nearterm maturity left for the highyield companies. Look at the headlines of the last few weeks. The Quality Companies are going for m a and strategic financing. Nobody works for the bondholders. Everybody works for the equity holders. I think that is the risk you take now on the higher qualities. Your focus is going to shift. Tom bloomberg has got lots of fancy stuff that lale is really good at. One is the horizon analysis chart. I just put a nothing ferro bought, and hes made 121 . Thats why hes looking at notting hill. Hes killed it with that austrian bond. Then rates will go the other way. Explain to our audience what happens if we actually get yield up, price down. What does that do to the horizon analysis . Lale that is the problem with the broader Investment Grade markets. The lower coupons meant every company was issuing longer and longer, and as a result, i think this is also one of lisas favorite charts, if you look at ag indices, the global indices, it is over eight and a half years. If you look at the spreads, divide them by two, it gives you your breakeven point. Historically it is around 12 points. That is your resistance point. Some of these Investment Grade companies, you are not getting paid for the credit risk. So increasingly, you are not only taking credit risk, but the rate risk. That can be very dangerous. Rates may never rise. That is entirely possible. But people have to walk into this trade eyes wide open. Jonathan just a final question for me. When you say 700 basis points fair value, is that what you just think fair value is, or where you think spreads are going . Lale always the tricky questions. I think that is where the spread should be going if economic recovery doesnt happen, vaccine doesnt turn out to be anything that is an immediate catalyst. Some of these industries i talked about in highyield, they are structurally and secularly challenged. They are either going to go out of business or run at 50 to 70 capacity, which means you have to start baking in capital impairment, which are not being baked in at this point in time. Jonathan great to catch up, as always. There of johcm. Ive got to say, if we were there at 700, the fed speak we are about to hear this week would be very different, i think, from the fed speak we will get. Tom again, the number yield at acre digits, at four digits,. 6692. This is a totally wacko market. These nominal yields arent normal. Theres no other way to put it. I mentioned the austrian piece you own just because it to 2118 or Something Like that. Jonathan never tell tom where you may or may not be living because he will disclose that. [laughter] lisa repeatedly. Tom you popped so much on that austrian piece, you made up for the debacle known as lift pop known as lyft. Jonathan i wish. I wouldnt be here. [laughter] that is my out. Tom this is serious. You cant make money in bonds. 11. To jonathan we advance 1. 4 . You know what this is. This is bloomberg surveillance. Ritika with the first word news, im ritika gupta. President trump is denouncing a blockbuster report on his taxes as fake news. According to the New York Times, the president paid just 2017 andncome taxes in 2018. The times analyzed at least two decades worth of the president s personal and business tax returns. Democrats are previewing the tactics they will use to oppose the confirmation of Supreme Court nominee amy coney barrett. They are zeroing in on the risk to American Health care coverage. The Supreme Court will hear a case in november that could lead to obamacare being ended. Regardless, parents regardless, barretts confirmation seems a sword because we public and have a majority in the senate. If federal judge has temporarily blocked President Trumps ban on new downloads of tiktok. Tiktok was do to be removed from u. S. App stores by midnight. Meanwhile, the judge refused to halt the number deadline for the sale of tiktoks u. S. Unit. The u. K. And European Union are starting a crucial week of brexit talks. Trust in british Prime Minister Boris Johnson because of his attempt to rewrite last years exit agreement. Still, they are holding out hope that a deal can be reached. A big victory for uber in the u. K. A london judge ruled that the ridehailing service is fit and proper to operate in the city. Last year, regulators revoked londonense to operate in over safety concerns, but the cars were allowed to continue to pick up writers under review pick up a riders while under review. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Most people that i know would do everything they can to not pay additional taxes. So i think we can have a debate about our progressive tax system , whether there are loopholes that need to be closed, and we can and should have the debate. We have it all the time. But i dont call it a moral. I dont call it immoral. Extrat want to pay an dollar of texas either of taxes either. Jonathan one hour and 12 minutes away from the opening bell. Alongside tom keene and lisa abramowicz, im jonathan ferro. Nicely, a bid up beneath the s p 500. Futures advancing about 40 points through the last few hours. Now session highs, up 46 and advancing about 1. 4 . Nice rally in europe as well. On the benchmark in frank at, germany, we bounce back after an ugly week of losses. The dax up by about 3 now. Eurodollar, 1. 1670. In the bond market, doing a whole lot of nothing. 0. 6 7 is your yield on the 10 year treasury. Is real persistency here the lift 20 points earlier, we have basically doubled that. Call it a 7 correction from the highs. Right now, from the Second District in arkansas, we love speaking to the vanderbilt economist french hill. He joins us from arkansas, from his place that is very much prothis president. I want to talk about the delta bank of arkansas. You are a banker at heart. What you do when somebody comes in with loan documents like what the New York Times is saying about the president . This is an odd financial statement, tuesday statement, to say the least. Just on a sheer doing business, have you ever done a business with someone like the president of the United States . Rep. Hill well, good morning. Thanks for having me. When you look at real estate investors, our tax code really encourages Real Estate Investment and treats it quite favorably. When you make real estate loans and review Financial Statements of somebody who is a real estate developer, youre going to be looking at cash flow and how cash is being used because there are very few reported profits in a lot of real estate companies, particularly that use partnerships or do a lot of upfront costs and a lot of ront of element every year Upfront Development every year. That causes a lot of tax offsets for the net profit. Tom would you expect to see the Vice President mr. Biden really be aggressive about this tomorrow night . Does he move this as a weapon or move onto the topics that matter nationally, and to your second Congressional District of arkansas . Rep. Hill i think Vice President biden will go on the attack and contrast strongly the things he disagrees with with the trump administration. I think he will probably stick to policy, but since he opened up yesterday in wilmington with the healthcare topic, i think that will be a principal topic because of the Supreme Court nomination, because of the efforts to change obamacare that we have made in congress over the last few years. But i dont put it past joe biden to not talk taxes. Lisa theres a question about what will happen after that date, and Mitch Mcconnell has come out and said there will be an orderly and full transition of power. What will you do, if you agree with Mitch Mcconnell, about that if President Trump does not concede or is unwilling to go along with a peaceful transfer of power . Rep. Hill all of our elections are controlled by our states. I think americans who were actively watching the president ial election watch that bushout in 2000 with gorby with gore v. Bush and the effort to recount ballots. So this will play out statebystate. I expect we will have a peaceful transfer of power, and the eggnog you and the inauguration of donald trump on the 20th of january. But this is going to have some challenges potentially in the states. We will just have to wait and see how that goes. There are lawyers on both sides to make sure every american vote counts. I would just urge americans to vote early so that there is no controversy that their vote will be counted if they are going to vote absentee. Lisa ok, but absent faith in the peaceful transfer, are you making any preparations in the case that there is not likely to be a peaceful transfer of power . Lisa not that im aware of because i dont think. Anybody expect that to be the e i think people expect dont think anybody expects that to be the case. I think people expect the votes to come in and be counted, and we will have a new president in january. Jerome powell suggests it is a disaster that we havent seen stimulus. What kind of stimulus would be most efficacious for whoever wins the presidency . What is needed right now . Rep. Hill when you see the functioning of the markets and the access to both large corporations and Public Finance entities to deal with tax cuts funding in the markets, it is really Small Business that operate in the realm that is still struggling, either they close down economy by state decision, or they are in a market that is still struggling. For me, the most important thing is to extend the paycheck protection program. 138 billion already. N that program not spent we have a discharge petition on the house floor this week to try to get that bill through the house and over to the senate, with 218 votes at least in the house. I think Small Business is where i would focus that stimulus, and also families. Weve only clawed back about 50 of the jobs back from the sharp decline in april, and therefore we need to have a compromise on both the on them and compensation issue and any other support for our families. Jonathan congressman, lucky to have you on the show this morning. Looking forward to having you back. Congressman french hill there on the fiscal side and that report from the New York Times. Thety futures up 48, as in futures up by about 1. 4 . We just keep adding a little more to the s p 500 as the session grows older. I think you nailed it on the fiscal debate. Still a huge gap between republicans and democrats downwash. Tom did you notice the word he used . Compromise. Jonathan nailed it. That word, compromise. Jonathan i thought you heard me say you nailed it. But where is the compromise in washington . Tom its not there. Its childish. Lisa season, and we are in lisa and i see it, and we are in new york. I think theres a desperation out there. It is really pretty grim. Jonathan let me be clear about it. Here in the United Kingdom, there is a huge worry about the job losses that will come about when that fiscal support evolves. Much more still to come on that. From new york and london, good morning to you all. Equity futures with a bid. The s p 500 rallying by about 1. 4 . This is bloomberg surveillance , live on bloomberg tv and radio. Jonathan counting you down to the opening bell in new york citys with equity futures getting a nice left, flying out of the gate in europe. A rally in frankfurt and a lift on the s p 500. Up 48 on the s p. In the fx market, eurodollar 1. 1670. That is a weaker dollar. Lets get to a chart of cable. Pound sterling has been all over the place and last week, trapped between brexit roulette in the latest covid restrictions. ,e had a 129 handle last week we have been as low as 1. 26 last week. Weve been all over the place on the back of covid restrictions. Not great for the economy. Happy talk into brexit negotiations, and a nice bit between sterling. Saw certainly last month we into the end of the third quarter, not more and more again. Economic data this week, coming up on the Unemployment Rate. Julia coronado writes research notes. Exquisite charts within her notes. Chartronado, you have a on the expansion of the fed Balance Sheet. Let me ask you the question i andd in 2008, 2012, 2016, 2020. What is the process for the New York Times<\/a>. Jonathan i never thought we would start an hour with english football, but we seem to do that now. I dont want this to be the story, but lets talk about whether it is real or not. I understand it is an important story. I understand it is sensitive for many people in america. But far too often, there has been a highlight reel of news anchors sitting there saying the word bombshell, and it has done nothing for the polling of the president of the United States<\/a>. Are you convinced this will . Tom not at all, and Kevin Cirilli<\/a> making clear it wouldnt have an effect on the very few, if any, undecided. The comment from the New York Times<\/a> that there would be comments to come. In the markets, up, up. If we keep talking, we will be up 50 points on spx. Right now we are up 44 points. Jonathan a really strong bid to kick things off on monday. Starting with the u. S. Equity market, futures with a nice lift. A huge rally in frankfurt, germany. One of the biggest weekly losses we have seen for several months in germany, the dax bouncing back big time. The dax is up by 2. 86 . Risk appetite improves. You know the story. The dollar is weaker this morning against everything in g10. Eurodollar, 1. 16. 1. 35 40. 35 on wti crude. I think the broader story is the concerns of last week. Just because we are up this morning isnt mean those concerns have gone anywhere. They are still front and center. 10 correction level. On the economics, lincoln get into the fixed income market, forgetting about stimulus, which i think we can all agree has been pushed aside, the jobs report this friday, maybe we can get some information out of it. But i would suggest that claims on thursday is still a great mystery. Lisa claims data is becoming fuzzier and harder to read. Mike mckee has been good on how much noise there is around so much of these jobless reports. One of my main questions as we head towards november 3 is, given the uncertain, what is a defense of asset . We are not seeing a bid into treasuries we have seen in the past as people get risk off. If people go to cash, what makes the move out of that defense of asset move out of that . Defense of asset defensive assets, traditionally. Jonathan i heard you have been getting tons of inflows away from treasuries, tom. Tom she knows i am looking for an. Lets start for an entry point. Lets start the conversation. I want jon to bring in lale. What is so important here, amateurs look at the singlepoint yield, and pros spread andook at the the difference in yields across time and across credit to be as well. Jonathan lale wasnt available on friday and couldnt make the nano clock eastern choice, make the 9 00 eastern show, so this with third toys for lale. Third choice for lale. Lisa thanks a lot, jon. [laughter] jonathan youre looking at highyield spreads. 40 basis over the last week or so. When does it start to say buy again to you . [laughter] lale i was just going to pitch for toms triple levered cash funds over here. Jonathan is that what you are doing, cash . Lale no, we are keeping cash reserves. The reality is cash is king. Dont let anybody tell you anything else. Theres no such thing as cash on the sidelines, and liquidity in the markets are or, so for people to be opportunistic, to take advantage of dislocations, you have to have cash. Whether that is cash or sitting in treasuries, you need to have something that is immediately sellable. Unfortunately, credit is not one of those asset classes. The way we are looking at it is really, and our view, highyield still screams expensive, but the key theme in highyield is refinancing. Bbs and single bs that are in defensive, they are in the market to refinance. I think for us, that is the last hurrah in highyield to capture a little bit more income than investment rate before perhaps we turn even more bearish on highyield, subject to recovery. Jonathan what kind of spread are you looking for in highyield potentially at the moment . What kind of levels are you waiting for . Lale 540 is misleading. It has double bs that trade in the 200 and 300 range, and then you have the industries that are at the epicenter of recovery, leisure, entertainment, transportation, that trade multiples of that. Half of the highyield index is subject to recovery. You have to be really careful how you pick your spots in this. , thexample i will give you recovery theme last week widens 3x. So when you are entering at this point in time, knowing what you know, you have to be really care because the upside downside is just not justified. Fair value, highyield, believe it or not, i think it is still the 700s. Still in lisa the market is wondering what more the fed could do to backstop credit. Have we reached this point where any fed is big in, and any purchases will be peripheral and will make a material difference on spreads narrowing . Lale the market will respond to increment on news, so i think that the fed put is baked in. Be there to will backstop the market, but remember, they are predominantly backstopping Investment Grade<\/a>. They are backstopping high yields very little through the highyield etfs and the fallen angels. That is a very different dynamic. Again, it opened the refinancing gates for higher quality. Theres very little nearterm maturity left for the highyield companies. Look at the headlines of the last few weeks. The Quality Companies<\/a> are going for m a and strategic financing. Nobody works for the bondholders. Everybody works for the equity holders. I think that is the risk you take now on the higher qualities. Your focus is going to shift. Tom bloomberg has got lots of fancy stuff that lale is really good at. One is the horizon analysis chart. I just put a nothing ferro bought, and hes made 121 . Thats why hes looking at notting hill. Hes killed it with that austrian bond. Then rates will go the other way. Explain to our audience what happens if we actually get yield up, price down. What does that do to the horizon analysis . Lale that is the problem with the broader Investment Grade<\/a> markets. The lower coupons meant every company was issuing longer and longer, and as a result, i think this is also one of lisas favorite charts, if you look at ag indices, the global indices, it is over eight and a half years. If you look at the spreads, divide them by two, it gives you your breakeven point. Historically it is around 12 points. That is your resistance point. Some of these Investment Grade<\/a> companies, you are not getting paid for the credit risk. So increasingly, you are not only taking credit risk, but the rate risk. That can be very dangerous. Rates may never rise. That is entirely possible. But people have to walk into this trade eyes wide open. Jonathan just a final question for me. When you say 700 basis points fair value, is that what you just think fair value is, or where you think spreads are going . Lale always the tricky questions. I think that is where the spread should be going if economic recovery doesnt happen, vaccine doesnt turn out to be anything that is an immediate catalyst. Some of these industries i talked about in highyield, they are structurally and secularly challenged. They are either going to go out of business or run at 50 to 70 capacity, which means you have to start baking in capital impairment, which are not being baked in at this point in time. Jonathan great to catch up, as always. There of johcm. Ive got to say, if we were there at 700, the fed speak we are about to hear this week would be very different, i think, from the fed speak we will get. Tom again, the number yield at acre digits, at four digits,. 6692. This is a totally wacko market. These nominal yields arent normal. Theres no other way to put it. I mentioned the austrian piece you own just because it to 2118 or Something Like<\/a> that. Jonathan never tell tom where you may or may not be living because he will disclose that. [laughter] lisa repeatedly. Tom you popped so much on that austrian piece, you made up for the debacle known as lift pop known as lyft. Jonathan i wish. I wouldnt be here. [laughter] that is my out. Tom this is serious. You cant make money in bonds. 11. To jonathan we advance 1. 4 . You know what this is. This is bloomberg surveillance. Ritika with the first word news, im ritika gupta. President trump is denouncing a blockbuster report on his taxes as fake news. According to the New York Times<\/a>, the president paid just 2017 andncome taxes in 2018. The times analyzed at least two decades worth of the president s personal and business tax returns. Democrats are previewing the tactics they will use to oppose the confirmation of Supreme Court<\/a> nominee amy coney barrett. They are zeroing in on the risk to American Health<\/a> care coverage. The Supreme Court<\/a> will hear a case in november that could lead to obamacare being ended. Regardless, parents regardless, barretts confirmation seems a sword because we public and have a majority in the senate. If federal judge has temporarily blocked President Trump<\/a>s ban on new downloads of tiktok. Tiktok was do to be removed from u. S. App stores by midnight. Meanwhile, the judge refused to halt the number deadline for the sale of tiktoks u. S. Unit. The u. K. And European Union<\/a> are starting a crucial week of brexit talks. Trust in british Prime Minister<\/a> Boris Johnson<\/a> because of his attempt to rewrite last years exit agreement. Still, they are holding out hope that a deal can be reached. A big victory for uber in the u. K. A london judge ruled that the ridehailing service is fit and proper to operate in the city. Last year, regulators revoked londonense to operate in over safety concerns, but the cars were allowed to continue to pick up writers under review pick up a riders while under review. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Most people that i know would do everything they can to not pay additional taxes. So i think we can have a debate about our progressive tax system , whether there are loopholes that need to be closed, and we can and should have the debate. We have it all the time. But i dont call it a moral. I dont call it immoral. Extrat want to pay an dollar of texas either of taxes either. Jonathan one hour and 12 minutes away from the opening bell. Alongside tom keene and lisa abramowicz, im jonathan ferro. Nicely, a bid up beneath the s p 500. Futures advancing about 40 points through the last few hours. Now session highs, up 46 and advancing about 1. 4 . Nice rally in europe as well. On the benchmark in frank at, germany, we bounce back after an ugly week of losses. The dax up by about 3 now. Eurodollar, 1. 1670. In the bond market, doing a whole lot of nothing. 0. 6 7 is your yield on the 10 year treasury. Is real persistency here the lift 20 points earlier, we have basically doubled that. Call it a 7 correction from the highs. Right now, from the Second District<\/a> in arkansas, we love speaking to the vanderbilt economist french hill. He joins us from arkansas, from his place that is very much prothis president. I want to talk about the delta bank of arkansas. You are a banker at heart. What you do when somebody comes in with loan documents like what the New York Times<\/a> is saying about the president . This is an odd financial statement, tuesday statement, to say the least. Just on a sheer doing business, have you ever done a business with someone like the president of the United States<\/a> . Rep. Hill well, good morning. Thanks for having me. When you look at real estate investors, our tax code really encourages Real Estate Investment<\/a> and treats it quite favorably. When you make real estate loans and review Financial Statements<\/a> of somebody who is a real estate developer, youre going to be looking at cash flow and how cash is being used because there are very few reported profits in a lot of real estate companies, particularly that use partnerships or do a lot of upfront costs and a lot of ront of element every year Upfront Development<\/a> every year. That causes a lot of tax offsets for the net profit. Tom would you expect to see the Vice President<\/a> mr. Biden really be aggressive about this tomorrow night . Does he move this as a weapon or move onto the topics that matter nationally, and to your second Congressional District<\/a> of arkansas . Rep. Hill i think Vice President<\/a> biden will go on the attack and contrast strongly the things he disagrees with with the trump administration. I think he will probably stick to policy, but since he opened up yesterday in wilmington with the healthcare topic, i think that will be a principal topic because of the Supreme Court<\/a> nomination, because of the efforts to change obamacare that we have made in congress over the last few years. But i dont put it past joe biden to not talk taxes. Lisa theres a question about what will happen after that date, and Mitch Mcconnell<\/a> has come out and said there will be an orderly and full transition of power. What will you do, if you agree with Mitch Mcconnell<\/a>, about that if President Trump<\/a> does not concede or is unwilling to go along with a peaceful transfer of power . Rep. Hill all of our elections are controlled by our states. I think americans who were actively watching the president ial election watch that bushout in 2000 with gorby with gore v. Bush and the effort to recount ballots. So this will play out statebystate. I expect we will have a peaceful transfer of power, and the eggnog you and the inauguration of donald trump on the 20th of january. But this is going to have some challenges potentially in the states. We will just have to wait and see how that goes. There are lawyers on both sides to make sure every american vote counts. I would just urge americans to vote early so that there is no controversy that their vote will be counted if they are going to vote absentee. Lisa ok, but absent faith in the peaceful transfer, are you making any preparations in the case that there is not likely to be a peaceful transfer of power . Lisa not that im aware of because i dont think. Anybody expect that to be the e i think people expect dont think anybody expects that to be the case. I think people expect the votes to come in and be counted, and we will have a new president in january. Jerome powell suggests it is a disaster that we havent seen stimulus. What kind of stimulus would be most efficacious for whoever wins the presidency . What is needed right now . Rep. Hill when you see the functioning of the markets and the access to both large corporations and Public Finance<\/a> entities to deal with tax cuts funding in the markets, it is really Small Business<\/a> that operate in the realm that is still struggling, either they close down economy by state decision, or they are in a market that is still struggling. For me, the most important thing is to extend the paycheck protection program. 138 billion already. N that program not spent we have a discharge petition on the house floor this week to try to get that bill through the house and over to the senate, with 218 votes at least in the house. I think Small Business<\/a> is where i would focus that stimulus, and also families. Weve only clawed back about 50 of the jobs back from the sharp decline in april, and therefore we need to have a compromise on both the on them and compensation issue and any other support for our families. Jonathan congressman, lucky to have you on the show this morning. Looking forward to having you back. Congressman french hill there on the fiscal side and that report from the New York Times<\/a>. Thety futures up 48, as in futures up by about 1. 4 . We just keep adding a little more to the s p 500 as the session grows older. I think you nailed it on the fiscal debate. Still a huge gap between republicans and democrats downwash. Tom did you notice the word he used . Compromise. Jonathan nailed it. That word, compromise. Jonathan i thought you heard me say you nailed it. But where is the compromise in washington . Tom its not there. Its childish. Lisa season, and we are in lisa and i see it, and we are in new york. I think theres a desperation out there. It is really pretty grim. Jonathan let me be clear about it. Here in the United Kingdom<\/a>, there is a huge worry about the job losses that will come about when that fiscal support evolves. Much more still to come on that. From new york and london, good morning to you all. Equity futures with a bid. The s p 500 rallying by about 1. 4 . This is bloomberg surveillance , live on bloomberg tv and radio. Jonathan counting you down to the opening bell in new york citys with equity futures getting a nice left, flying out of the gate in europe. A rally in frankfurt and a lift on the s p 500. Up 48 on the s p. In the fx market, eurodollar 1. 1670. That is a weaker dollar. Lets get to a chart of cable. Pound sterling has been all over the place and last week, trapped between brexit roulette in the latest covid restrictions. ,e had a 129 handle last week we have been as low as 1. 26 last week. Weve been all over the place on the back of covid restrictions. Not great for the economy. Happy talk into brexit negotiations, and a nice bit between sterling. Saw certainly last month we into the end of the third quarter, not more and more again. Economic data this week, coming up on the Unemployment Rate<\/a>. Julia coronado writes research notes. Exquisite charts within her notes. Chartronado, you have a on the expansion of the fed Balance Sheet<\/a>. Let me ask you the question i andd in 2008, 2012, 2016, 2020. What is the process for the Federal Reserve<\/a> system to bring their Balance Sheet<\/a> into order . Would have toou define what that means. I think the feds view of the Balance Sheet<\/a> has changed relative to the years you cited. It now recognizes the Balance Sheet<\/a> as one of its main tools of policy, not just something to use in case of emergency. When you hear jay powell in front of congress and he is asked about the future of the Balance Sheet<\/a>, he says we may not need to shrink it, we may need to stop expanding and let the economy grow into it. I think they are done with taper tantrums and shrinking the Balance Sheet<\/a>. I think when the economy is on a glide path and in a selfsustaining mode, it stays out of the purchases. Tom julia goes to the heart of the matter, the belief we will grow our way out of the natural disaster. What is your timeline to get back to normal . Policyi think the fiscal gyrations have delayed that. I am looking at 2022 before we are back to where we were. We have a difficult phase ahead of us depending on how the election unfolds. Package expect a fiscal before. In the previous segment, we have a wave of Small Business<\/a>es, restaurants, retail, we have the airlines. A lot of businesses where the support is running out in the recovery is still stalled for them. We can see another wave of layoffs or at a minimum the end of the rehiring we have enjoyed through the summer, and that could slow progress down. Policyspects for fiscal depend on the outcome of the election, and that may be contested or sometime in coming. Looking21 before we are at the possibility of meaningful fiscal support. We have tightened up a little bit. I wonder the distinction between the Federal Reserve<\/a> managing market functioning and massaging financial conditions. What does policy look like when they start to do the latter . Julia that is a great question because im not sure when you look at fed speakers, they are not on the same page when it comes to asset purchases. They are not sure how they work, they know they work, they are very effective in supporting financial conditions, but how do you transition from that emergency setting into an ongoing support . For now we are looking at them just holding the purchases at the current pace. We need clarity on the recovery and some sort of sense of a selfsustaining dynamic taking root before they contemplate, or as jay powell says, think about thinking about stepping away from the current pace of purchases. They have communicated that fuzzy because they all see it differently. Signaling, some see it as portfolio balance channels, and for me it is all of the above and they are not willing to mess with success. I do not think we will see them attempting to back away from where they are right now. We have a good idea what success looks like. Lets look at what failure looks like. I hate to ask the juvenile question, but if you look at markets, do you have levels in mind. If you start winding out to 150, is this enough to test this fed patients . Highyield spread of the moment, we had a 40 basis point move last week. Where do you think the fed would start to worry . Julia i think youre right. If we saw 150 basis points widening, and it is not just the level of the spread but the pace at which it is widening and the conditions around which that is knowning, of course we they have that facility up and running, the Corporate Credit<\/a> facility in the primary and secondary market is ready to step in at any time. That in and of itself keeps those spreads from widening tremendously. They have put this automatic stabilizer in place in the Corporate Credit<\/a> market. It serves as a discipline or lack of discipline mechanism depending on how youre looking at it. It has prevented that equity nervousness and volatility from spreading directly into Corporate Credit<\/a>. That facility is not going anywhere. If they need to step in they can just amplify those purchases etf and step up the primary purchases. That is there is a tool ready to go if they need to. There is a question if success is enough to sizing the credit function. I am looking at a Federal Reserve<\/a> Balance Sheet<\/a>, 7. 1 trillion. What is the feeling that in the near term . Julia the pace of that expansion has slowed down dramatically because in fact we plateaued in the last couple of months because the emergency liquidity facilities, the dollar swap line, the repo operations, the various liquidity facilities, they are all shrinking. They have shrunk by several hundred billion dollars, so that has offset the expansion. Now is will settle into a more gradual pace of expansion. I do not think there is a hard limit, and you use a good word. Anastasia anesthetizing. They are not nearly as sanguine as Market Conditions<\/a> would suggest investors are about the outlook. There worried about a second wave, turmoil around the election, another wave of layoffs. Until we get an accumulation of evidence we are in a selfsustaining recovery, i think we keep the pedal, not to the metal, but on steady expansion. Lisa to that point, when you said the second round of layoffs, is anything the fed is currently doing, is anything keeping jobs in the system or suppressing the jobless rate . Most direct transmission from the fed policy to jobs is through the housing market. We know low rates are stimulating demand for housing. That is an incredibly low bar. We have seen certain segments of the economy like the Home Improvement<\/a> stores hiring, and they are doing well. Transmission,rect and the fed is the first to recognize the bluntness at the inefficacy of a lot of its tools in creating jobs and has been begging for fiscal policy. They are extremely worried they will not be able to do their jobs, and are asking congress to do theres. Of course, they are not. Tom what is your working Unemployment Rate<\/a> . Julia for friday . Tom i mean all in . There is a huge mystery about claims in different programs getting counted. Are we really at 8. 2 . Julia no. I think the Household Survey<\/a> is clearly the lower bound of where we are. There is misclassification within that survey. Double know there is counting and fraudulent issues with claims. Squaring the circle, i come somewhere in between, which would put us around 12 to 15 unemployment. I think that is the reality on the ground. We really need to triangulate these numbers, and it is hard, but the official Unemployment Rate<\/a> is the lower bound. Tom every 42 minutes we have to say which see just every 42 minutes we have to say what she just said. I do not think it is said enough. 12 to 15 . Those were enormous numbers. Julia they are. Jonathan great to catch up. Julia coronado of macro policy perspectives. Payrolls friday just round the corner for the month of september. Here are the numbers so far. Our survey so far, the median estimate 850,000 on the headline number. Unemployment 8. 2 is the estimate at the moment. 4 is the previous read 8. 4 is the previous read. 8. 2 is what many economists think it will drop to. Tom i think it is a fiction. We will report it. It is good numbers. But i look at the Economic Policy<\/a> institute which has a Democratic Party<\/a> feel to it, but the team has done a great job trying to juxtapose all of these different government programs. Evenave Julia Coronado<\/a> worse. Jonathan you want to talk about a fiction . Unemployment in the u. K. Just north of 4 . Unemploymenthink in the United Kingdom<\/a> is just north of 4 . It will be ugly. They on employee the operators . I think that would be a start. Jonathan youve not talked about yet. You want to explain to our listeners that do not have a clue what youre talking about. Tom there are stupid things in american sports. Explain how they are ruining your game. Jonathan there is a video assisted referee in english football right now was making terrible decisions. In a game over the weekend afforded a penalty to newcastle seea handball he cannot because he had his back turned to the ball. Tom is unhappy. Tom how did that happen . Jonathan newcastle fans are happy. Markets go up. There is always someone on the other site of a trade. Remember that. Hotez of next, peter Baylor College<\/a>. Looking forward to that. This is bloomberg. A blockbuster new report says President Trump<\/a> pages 750 in u. S. Income taxes in 2016 and 2017. According to the New York Times<\/a>, the president reported losing millions of dollars on his golf courses and reportedly has hundreds of millions of dollars in debts that will come new. The president called the report fake news but did not offer any specific Spirit Senate<\/a> republicans have single thorough senateonfirmation republicans have signaled there will be a quick confirmation for amy coney barrett. Almost 200,000 people in Northern California<\/a> had their power cut because of a threat of wildfires. Powers trying to keep its lines from starting new places. The company went bankrupt last year after its equipment ignited catastrophic fires. Fires have burned thousands of acres in the last months. 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. Am ritika gupta this is bloomberg. The order that i am signing today will guarantee restaurants operating they can operate at a minimum of 50 regardless of local rules, and if a local restricts between 50 and 100 , they have to provide the justification and identify what. He costs of doing that are pu e jonathan what is and what is not safe, the governor of florida on a 50 capacity floor. It has been very confusing, especially in the u. K. Not going for capacity restriction, but a time restriction, 10 00 p. M. Is the cutoff time. I do not know if you saw the pictures of what happens after 10 00 p. M. Many run to the local store and get alcohol to carry on partying outside. This could be a problem. Tom it is bizarre. I am glad we ran that tape of the governor of florida. He was out at 100 they have backed it to a 5050 agreement. This is a huge topic new york. I know you have diana amoa coming up. Tell us about that. Jonathan big calls coming out of several banks on emerging markets. Something pullback, some saying get in. Diana amoa has a more constructive view on em and im looking forward to catching up with her later this morning. Tom she is always razorsharp smart. Quite good. Right now we advance the dialogue on vaccines on the terrible pandemic. He was with us early in february, way out in front. Peter hotez of Baylor College<\/a> International School<\/a> of medicine. Thank you for joining us again. I want to go right into the nittygritty of what you do, which is you get a milliondollar grant from the people at titos vodka, put it together with a bunch of other donations, get a guy from india to come in as well, and you take bakers yeast, which is used in the hepatitis vaccine, to come up with Traditional Medicine<\/a> vaccines. Hows that process going of using truly Traditional Vaccine Development<\/a> to get a cure for this terrible pandemic . Peter thanks for that question. There is a lot to unpack. Drink, your a vodka definitely want to specify titos vodka. Beyond that, we signed a Licensing Agreement<\/a> to Baylor College<\/a> of medicine with an amazing vaccine producer called biological e. Not a household term in the u. S. And europe yet but they are one of the big producers, and they are working to scale up one billion doses of the backseat we developed at texas childrens and Baylor College<\/a> of medicine. That is truly exciting. We have never made a billion of anything before. Yeast, quite acres it is not quite bakers yeast, it is a different type. The hope is a could be like the hepatitis b vaccine, would you can make for two dollars a dose all over the world. It is made in brazil, cuba, india, indonesia. The hope is this will be the first lowcost global health. Tom how do you respond to the different sciences of modern vaccines, virology, the ones that are complex, the ones that are new, the ones improving as you take a more traditional route . Dr. Hortez i like the innovation and i like the mixture of the innovation and the traditional, especially if youre trying to work quickly and get a vaccine out as fast as you can. By trying different technologies, you do not know what wind up working best in people in terms of a protective immune response, safety, so by trying the different technologies you get multiple shots on goal it increases your likelihood of success. It spans the gamut from cuttingedge technologies like the mra vaccine where the dna vaccine approach to oldschool stuff we are doing like recombinant proteins in yeast or activated virus vaccines. The hope is we will get multiple vaccines that work and are safe. If you want to vaccinate the world, we have to move quickly. Tomthan Tom Keene Lisa<\/a> keene will ask you about yeast and creating the vaccine, and i wonder when we will get back to normal. China is giving an unproven vaccine to thousands of individuals. What is the potential consequence of doing this and should we do it if the consequences are not that bad . Dr. Hortez the consequences of getting it wrong are substantial. If you want up putting a vaccine out there that turns out not to be safe or does not work as well as you thought, that undermines vaccine confidence. We sought happened last year in the philippines where there was a loss of confidence because of andw vaccine introduced, parents wound up stopping vaccinating their kids against measles and there was a catastrophic measles epidemic that led to thousands of deaths of kids. Vaccines are a special type of pharmaceutical and that the system is very fragile and it does not take much to undermine confidence, even if it is a good vaccine, it could still get voted off the island. We have seen that happen in with the lyme disease vaccine. Because of Public Perception<\/a> it tanked, that was true of one of the rota virus vaccines as well. History is littered with good vaccines that are never used because of Public Perception<\/a>. Lisa over the next three months a lot of people are expecting a second and third wave of the virus. What will that look like . Dr. Hortez im very worried about this fall. We are starting to see an uptick in the northern part of the midwest, in wisconsin, in the dakotas. Im wondering if this is the beginning of the search everyone is predicting. It has two consequences. In the northern states where people have endorsed a lot of worry. Also there is new data coming out over the summer that says for reasons we do not understand the severity of the illness goes up in cold weather. Not just a numbers, but the quality. April,york and march and that may be more than just the learning curve. There might be something about the cold giving hot air virus we do not understand it, so that is something to look out for. I want you to address people that should be giving flu shots, pneumonia shots, to their kids, to their loved ones as well. Address the efficacy and safety of these common shots. Dr. Hortez they are lifesaving. Remember the measles epidemic you had in 2019. That landed 50 in the hospital, including 18 in the intensive care unit. We do not make vaccine slightly. We do it because there are serious pathogens and serious illnesses, the same with influenza, which until covid19 was one of the single largest killers of people with infectious diseases. You want to take those illnesses off the table. The problem is there is an aggressive Antivaccine Movement<\/a> that started in the u. K. But was amplified like only americans can come and was revved up in the United States<\/a> it causing a lot of damage. It is hard to download anything but misinformation. You have to be careful. Tom we have to leave it there. Peter hotez, one of our leaders in this pandemic of Baylor College<\/a> of medicine. Futures up. If we keep going, we will get over 50. We are not there. Lisa it is unclear how longlasting this will be. Volatility. 48, dow futures up 382. With david westin, the former governor of massachusetts. Jonathan from new york and london per audience worldwide, good morning, good morning. This is the countdown to the open. Equity futures up 1. 4 . We advance 47 points. President trump and joe biden taking the stage in cleveland facing up for the first time ahead of the november election. A lot of things will come up in the debate. His son did not have a job, he had something difficulties and all of a sudden he is making millions of dollars as soon as his father becomes Vice President<\/a>. I think that will come up. I do not think joe can answer it. The American People<\/a> understand the urgency of this moment. They are already boating in droves. They know there already voting in droves because they know their health care hangs in the balance. 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