, point economist and strategist. And a big takeover for big oil. Shale giant Pioneer Natural Resources being taken over by exxon in a 60 billion tied up. Im alix steel with my cohost guy johnson, welcome to Bloomberg Markets. This is a way to end the week. Guy we always talk about the payroll number being an important number, it just proved how important it can be. Is the number bigger for you for payrolls or exxon and pioneer . Alix this is a humongous deal with big implications for dcm policy, but we will get to that. Guy it could bp per, and that is the question we should be asking. Are we at peak rates . Todays number, alix, pushes back on that idea. Bond prices pushing lower and equities down sharply that was an incredible number and the revisions, the breadth, everything about this that convinces us this is a solid number. I wonder what this market would look like if we got a solid cpi print next week as well . Alix the wage number came back a little bit matt evans is the only one who nailed this number. He was like if you add up manufacturing, adp, and claims, put the numbers together, you get an analysis and got this number. Maybe that works . Guy but people are pushing back a little more firmly maybe today on the adp print and questioning the value it has. You laid it out pretty well at the top what landing . This is an economy that feels like it is going from strength to strength to strength, but yields continue to climb. In europe, we dont have the benefit of the strong labor market. Lets talk about where we go from here. Are we seeing a landing in the u. S. Economy . Mike mckee joins us and anita nichola joins us from new york. What landing . We have a good chance of a soft landing, and data is changing things for the fed. If we look at higher for longer and the prints today, we can see what is priced into the swaps today. Its a really big difference. Also, the other side of this is financial conditions. They have been moving at a very fast pace and numerous fed officials have been talking that this has been doing the feds job. Stocks and bonds have been selling off, and at goldman sachs, it was the tightest in a year. That adds another piece to the pie and even though today their reaction is very negative, some of it, is coming down. There are a lot of catalysts that can help us with funding. Alix you heard mary daly talk about that yesterday. Mike, if this was my only question, my question would be dude, where is my landing . So where is my landing . Guy that is why we dont know how to set up the question. [laughter] michael after the show, when we can speak and not get the fcc involved, i will tell you what my question would have been. Landing . I dont know. Im struggling to come up with a good metaphor for what we saw today. Job creation was so strong, particularly in the service industries, yet average Hourly Earnings started to slow down or continued to slow down, especially for service industries, up only 1. 7 . No real wage pressure coming from this enormous jobs number. Thats good news for the fed. I expect what will really be important is the cpi now. If cpi comes in as forecast, about half the level as it was on a month by month basis the prior month, we will see the fed maybe stay on hold because they dont have to fight inflation and they can have this Strong Economy. Mary daly yesterday told bloomberg, essentially, the markets have already priced in a move for the fed. I am not as sure as some people are that this will lead to a Market Reaction or fed reaction, rather, and force them to raise rates. Guy lets put the rate rise to one side and talk about the higher for a longer bit, though. This is an economy that doesnt in any way, shape or form feel like it needs rate cuts right now. Isnt that where the debate should be . Yes, maybe we get 25 in november, maybe we dont, but this is not an economy that is slowing down sufficiently. Banks cannot justify any kind of a rate cut. Michael on a historic basis you would be absolutely right, but this is not the economy or the Monetary Policy we have seen in the past. It is hard to figure all out. If you were just looking at the Economic Data at this point, you would be saying, the fed might have to do something because the economy is running very hot. But with inflation coming down, that story doesnt really hang together. Then you throw in the idea of real rates as inflation falls getting even tighter, and therefore, the fed may be does want to bring rates down because they want to keep the same amount of pressure on the economy, but do not want it to get tighter than it is. It will be hard to figure this out and im glad i dont trade fed funds futures. Alix put those two together. If we get a hot cpi print next week and a 10 year that feels reluctant to get to 5 , but it kind of wants to, then the market backs off, do we get there next week if there is a hot cpi . Denitsa good types of Economic News have been very bad for markets, and we have seen some of those reactions be very sharp. How far can we go . That is a question that has been here for a while. People are saying, we can go much higher than this. But today, in the last few days, we saw some of the losses really retracting, yields falling earlier in the week. Will we see the same increase in yields . Maybe risk assets wont be as reactive as they were in the last few weeks after that big shock in yields. Alix the u. S. Guy the u. S. Economy is clearly strong right now, if you judge it by the labor market. In europe, it feels like a different picture. The u. K. And european economy is struggling look at what is happening in germany. You can apply this to the dollar, but rates as well our rate, your problem. Our dollar, your problem. The rest of the world is looking at this with this mouth on the floor, wondering what is coming next. Alix the narrative is that the u. S. Economy is superstrong and yields are higher, and that is ok, we can make peace with that. Then you get this jobs number, so it gets confusing on that. Denitsa, you just moved here and are residing in the u. K. Are our rates everybody elses problem . Denitsa they are our problem, for sure, and you can see the reaction of every small Economic Data print tricking down to other rates as well. We are seeing a big disparity between what banks are doing at the moment and different paths over there, but the data prince year prints here are important for everyone and things are changing a lot in terms of what we are seeing for rates this year. Last year, we were pricing in nearly 100 basis points, and that has fallen so sharply. Ebix is on a difference for everyone. That makes a ton of difference for everyone. Guy todays number is such a big blow out number, you have to look back to the rate at which we are changing and how are we going to change. Mary daly talked about the fact that there are maybe 25 basis points of hikes effectively that have been done by the market, but is the fed comfortable with what we are seeing here . At what point, do we see more fed speak coming out trying to slow things down . Will there be an effort to slow things down at the moment . Its probably comfortable now, but when does the fed become uncomfortable . Michael if you see wages start to rise significantly, yes, the fed would become more uncomfortable. Guy what about the yield story . With what is happening in the bond market, when would the fed become uncomfortable . Michael thats a tough question to answer. At this point, the markets are catching up to where the fed is. If you go beyond that and get 5 into tens, for example, the fed might be uncomfortable with that. But the fed is just saying, they are doing what we wanted them to do six to eight months ago and they are finally catching up. Wesee attendances the we see a tentativeness to breach the 5 level. Going back to the cpi report next week with wage growth slowing, there does not have to be a big rise in the market from here if they are fairly price. Alix where we came to yesterday was disorderly, and it feels like we are not still there yet. Many thanks to our guests. Up next, more insight to the question of the day dude, where is my landing . Rebecca patterson, former bridgewater chief investment strategist, joins us next. This is bloomberg. Good night hey corporate types. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. This is very unusual, but there is a reason why this is so unusual, and thats because the characterization of the economy has changed in my mind. What we see here, jon, is a massive reaction to not rates going higher that was last year. This year is about high rates staying there for longer. That is a fundamental change of how you think about the yield curve, and that is what we see playing out in the markets. Alix that was Bloomberg Opinion columnist all mohamed elerian. That brings us to the question of the day what landing . Joining us now is rebecca patterson, to former chief investment strategist at bridgewater. That is our starting point, but as the economy going to land . Rebecca i think we will see a mild recession going into mid, maybe first half of next year. And the fed has been trying to get the market to believe for a year, and now they believe it, that they will have to hold rates higher for longer. This will feed through to the economy, consumers and businesses. I think there is also a super important feedback loop that you touched on on the previous segment. I am jealous, because i wanted to use that line our bonds, your problem. They are so interconnected today, they are feeding through to other countries getting hit a lot harder to higher Interest Rates. Their economies slow further. Germany is in a recession, europe probably going into a recession, and when their Interest Rates are high, their central bank cannot bail them out. That will likely make us avoid a soft landing next year. That is not a super High Conviction view, but that is my base case. Guy its tough to have a High Conviction on anything at the moment, isnt it, rebecca . If you are looking at the move weve got currently underway and how much longer it has to go, are we had a point where the markets are in line with the fed in terms of the 10 year yield . Are we going beyond where the fed is . How much higher can yields rise from here . Rebecca i believe if you look at the fed funds futures, what the market is discounting for shortterm rates in the next couple of years, we are probably close to what seems right, in my opinion. Now we have to focus more on the consumer in the labor market. And the labor market. If we have better data next week, inflation coming out if that is softer, people might say ok, we are good, take a deep breath. If the cpi print is in line or slightly higher, that will keep the nervousness going. What we have seen with the 10 year and bonds in general, a big part of the recent rise in yields is the risk premium, the term premium, which is a bit distressing because that is a lot of factors. It could be worries about our fiscal situation, the dysfunctional government i do not know if they go away anytime soon. Bond yields can stay up here and maybe not rise a lot more but a breakthrough 5 for the 10 year is not far away. Anyone who says oh, we are going to see 5 big deal. The problem is if it is disorderly. If it is a fast move that is unsettling for other markets. Alix we discussed cost of capital permanently higher for reasons that do not have to do with the business cycle, but inflation. Rebecca i love torsten, so i take anything he says seriously. I think we settle higher on inflation and Interest Rates. The question is, how much higher, and how does that feed through to not just our economy but also the Global Economy . I cant imagine the fed will let the inflation settle much about its target because that worries about credibility. When it reviews its policy, we are in a whole different conversation. Guy so what do you do right now . You look at Asset Classes and have to eager out where you need to allocate money. Am i safe to dip my toe in the water and by duration at this point . Has the fed moved through sufficiently into equities and are we seeing cracks in the bond market . What do you see in front of you in terms of what is priced correctly and what isnt . Rebecca when you can get 5 on cash effectively, having dry powder there to me makes a lot of sense because the coming 6, 12 months will be pretty uncertain. I would like to have some dry powder. In the equity market, we had a nice run for cyclical stocks going through july for a recent period. I prefer having more defensive sectors in my portfolio, things like health care. Defense is also interesting right now. We are focusing on the budget and what we can cut, but that is one area with bipartisan agreement, no cuts are coming. The government money, regardless of the cycle, will keep going into the space not just in the u. S. , but globally. As far as the bonds question, i would be tiptoeing in. We could break five or get a little above five, but the risk of loss in my mind is smaller than the risk of gain if we are taking a sixmonth to twelvemonth view. If we have a slowdown in the economy, it is likely that longerterm bonds will find a ceiling and the yields will start coming down. Even if they dont come a lot, you will still be gaining from that. Alix so does that mean that a 6040 portfolio is toast . How would you be allocating from that perspective. Rebecca i dont think its toast. I think a lot of investors out there are saying you need to rethink it and have a bigger allocation to all these returns. Having some bonds in your portfolio still makes sense. The relationships it is not the correlation. Bonds and stocks sold off together last year. It is not the correlation you want to focus on, but the causation. What caused bond yields to rise last year and do you think that will happen over the coming years . Maybe in the shortterm, but in the next two to three years, i dont think bond yields will keep going straight up. They might settle at slightly higher levels, but if they settle, you will be making money off bonds. Alix thats a good point, the why and how as it relates to how you beat the stock market. Rebecca patterson, we love seeing you. Thank you for coming in. Former chief investment strategist at bridgewater associates. Tesla is cutting prices again, trying to juice up the demand for evs. We will break it all down, next. This is bloomberg. when the day that lies ahead of me seems impossible to face a lovely day lovely day lovely day lovely day a bank that knows your business grows your business. Bmo. An everchanging landscape comes with challenges. From our vantage point, we see opportunities. As a topten real estate manager, we harness the power of a 360 perspective, delivering local insights and global expertise across public and private equity and debt. Our experienced team and vast network uncover compelling opportunities giving our clients an exclusive advantage. Principal asset management. Actively invested. Alix it is 23 past 7 00 on the west coast as we cover the top tech stories from the bay area and beyond. Silicon valley starts its morning. Joining us now is Bloomberg Technology cohost caroline hyde. Tesla is cutting prices again . Caroline again. Rinse and repeating. In this fight versus inflation and against a consumer that we are concerned about slowing down purchases, elon musk shows he is not worried about taking profitability down to keep sales being buoyed. They have had to slow down production in the Third Quarter, only pumping out 435,000 cars, and they have managed to dull down the price and are now seeing 1250 knocked off of the cheaper cars, 2250 on some of the more expensive ones. Guy i wondering if this is concurrent with the increase in the cost of financing . Caroline musk is not afraid to go out there and say, if you keep hiking up rates, this will be a Significant Impact on corporate america. Maybe that is him signaling that he does not have to keep taking down the price point. We see a competitor in china in that she was in can terms of cars they are producing who is neck and neck in terms of cars they are producing. He has to show, i can beat you when it comes to the amount i produce and the amount of profit i am able to siphon off of it. It is also interesting, because elon musk will come out and say the way i prop up Going Forward is when i get your Software Upgrades out. I can charge you more for that. Alix on first blush, ooh, it is a demand problem, but he can do it. He can undercut the competitors. He can also change the price on monday and raise prices. But the idea that i make these cars cheaper and deliver them, therefore, this is the new model. Caroline and such an incremental manner. It feels like only a couple of days ago, he cut down the price point on the new extended range model y. He does it on a daily whim, as you say. Guy so any people are talking to me now about the fact that ai will announce dynamic pricing, and you wonder if this is effectively dynamic pricing. Demand comes up, we raise the price i wonder how dynamic this model could get . Caroline i now frustrated it could get people who just got the car. Youve got to see how it impacts some of the loyal followings he is convinced to purchase. Alix and i want to add, what does it do to the autoworkers . Look at the strike. This is a great example of fighting for pay. Caroline he doesnt have that problem. Guy for now. We will see if they get a good deal. Maybe that changes. They are changing in london as well. If the guy before me in london get the cheaper beer than me, i will be annoyed as well. jennifer the reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. When i tell people how easy it was for me to lose weight on golo, they dont believe me. They dont believe i can eat real food and lose this much weight. The release supplement makes losing weight easy. Release sets you up for successful weight loss because it supports your blood sugar levels between meals so you arent hungry or fatigued. After i started taking release, the weight just started falling off. Since starting golo and taking release, ive gone from a size 12 to a 4. Before golo, i was hungry all the time