Band to 12 cents a share. From new york, alix steel with guy johnson, welcome. We are excited about the cpi and i have to say that did not change anything for me. I do not know if that move the needle for me. Guy it is the second month where the numbers are coming through. We have a claims number that looks like it is signaling that we have a very strong labor market. All of this points to the fact that there is more work to be done. Over the last few days the fed has abdicated responsibility for bringing inflation down to target and saying that the market is doing the work for it and may be the fed needs to step up and do more. Alix and then you see the eight to nine basis point move, the more that moves and maybe the less the fed has to do as this kind of yield filters through. Guy the fed is talking more about the long end but the front end signaling that the fed needs to do more. It is interesting, you look at the Inflation Trajectory in europe and the u. K. , both point downwards and continue to. In the United States we have been going down and now wet have aick and now we have a tick which is a cause for concern. Nothing in markets tends to be a Straight Line and we might have to expect a lot of oscillation with a lot in the rent and energy market. How long will it take to get back down to 2 inflation . Mike mckee and Liz Mccormick joins us, how far away is 2 . Liz i am not avoiding this question, but i would say that powell says they do not know either. I think the dot says 2025. With this data there is a core of people saying that the next leg down will be tough. We might stay at 3 or 4 but this just embolden the case that they are talking about longer rates helping them you cannot write off that the fed does not have to do more to gin up the Church Rectory downwards the trajectory downwards. I do not anyone thinks that this mike will happen next year. I do not need to say anything, liz said it all. The fed does not think we will get to 2 on pes on pce until 2026. They are not anticipating a smooth lie down either. The numbers were disappointed disappointing, so the 2 handle that we had on a shorterterm trajectory has gone away. And that has to concern the fed, but not enough yet. That will be a key question. It will be a closer decision when we get to november 1 and the markets are pricing. They probably do not do it but let us wait and see as retail sales and bank of america out with its weekly spending report saying that americans are not slowing down. Maybe they do need to do more, they will wait until the last minute to try and figure that out. Guy a lot of people have been talking about cuts, but do we need to talk about hikes . Mike i would not say we need to talk about hikes next year but that leaves out the possibility of all the things going wrong in the world going wronger. It is the cuts that the fed would disagree with. They will argue that they have no plans for cuts and they will leave rates up as long as they need to. And so whether it is the 5. 25 or 5. 27 five, that is where you will have rates through most of next year unless this slow grind from 3 to 2 for cpi and pce, at least until that continues to pick up we see some real progress. Alix this confuses me, in the cpi number monthly shelter and inflation accelerated. I do not see how that goes away. If the fed continues to hike or hold rates and that crashes the Housing Market then you have a rental market that is hot. I am confused about how this does not stay sticky. Mike that is liz that is what people have said. Maybe the fed does not have much direct control or maybe the housing, i have a lot of mccormick kids renting and none of those have been going down like you said. I think that is going to be difficult to bring down and that poses a problem. Like mike said, the market pushback maybe a month where cuts are starting next year, but they seem like further off in horizon. When i have any doubts i already i always read anna wong. She said the data today makes does not make the fed feel like it is sufficiently restrictive. Even though she is calling for no change it is not an insecure insignificant risk that we get a hike. I think it leaves everything and play and we do see markets pricing of Inflation Expectations and breakevens pick up. It is the difference between cpi and pce. They are still showing a 2 average that they did pick up a little bit. But the market has it on its radar. Guy do you think that current 10 year is pricing a 2 world or a world above 2 . Liz i do not think it is pricing 2 , i think it is pricing a higher rate or longer, inflation above 2 , and i hate to use this word, but people are saying that we want more compensation, fiscal deficits and you name it, supplied. And ben bernanke called the term premium something that we cannot explain. So call it fear and uncertainty. I heard one investors saying i do not think the two year should be where it is now. I do not know how to make that across the yield curve. Alix ikea is lowering its prices because demand is falling over and they are not spending as much money. I am wondering if we are going to see that on a company by company basis or is that just ikea . Guy there is also an interesting story on the cost of housing. If you are having to spend more a day on the cost of housing you cannot spend as much time filling the housing with staff. It is interesting that ikea is seeing that. What i would thought that ikea is a trade down story, that you go to ikea if you need to save money. It is an interesting dynamic that if ikea are doing this they will see an opportunity or a threat. Alix were you put all the bookshelves together on your own because you are not moving. That is interesting. Thank you a lot. Always wonderful to get both of you. Coming up, more insight into the question of the day, how long will it take. And the evercore chairman emeritus joins us next. This is bloomberg. A lot depends on the debt. U. S. Cpi data. We have had three months of good news on inflation. We have seen market progress. Inflationary pressures are abating. 2 inflation is closer than i might have imagined six months or so ago. Inflation is not anywhere close to 2 . We are not going back to what we used to call the new normal. The risk to argue is that inflationary pressures of return, and that can be a function of geopolitics. If we do not see inflation moving down in the economy standing the fed could be back in the picture. They are fighting inflation which is already clearly coming down. You will see measure disinflation. The last mile on inflation will be the hardest. Guy it feels pretty hard right now and it feels like we are in the last mile. Some of our guests over the last few hours talking about what is happening with inflation in america which takes us back to the question of the day, how long does it take to get back to 2 inflation, back to target and where we are meant to be, the evercore chairman emeritus joins us now on set. One of the Perfect People to talk to about this. Very nice to see you. Inflation feels sticky. It feels like a tough road. How tough do you think it will be . Ralph i think we underestimate how hard it will be to go from four to two. Relatively easy to go from eight or nine to four, the last 1. 5 2 is going to be more difficult because of the disruption globally that we see, which will , inevitably, affect supply chain somewhat and partly because it is just really hard to ring out the last part of that. Alix it is good to see you. We miss you here. Guy every once in a while he is able to visit us here. Alix we all know who you like better. So to that point, i wonder if it is going to be hard to bring inflation down and it will take a long time, are we living with permanently higher rates. We are talking about a term premium but inflation rates are moving up again. I wonder if we have to build that into the forecast. Ralph yes, i think honestly the market has been successively focused on how high and we should be focused on how long. How high, we have gone from zero to 5. 5 , whether we stop here and go from 5. 5 to five point 75, i think in history is going to be relevant. Guy do you think we have hold of that consul that consult concept. At the moment it does not feel like we are accepting that rates will stay up to sigh and at some point something magical will happen in the fed will ride to our rescue again . Ralph ralph if you look at the two year, fed funds are at 5. 5 and we will clearly not have a cut in six months because the economy has a certain momentum to it. What the market, the two year is discounting is that rates will average under five, 4. 524. 7 4. 7 psi 4. 75. That would suggest we have a modest recession and they will have to cut. The equity market is discounting a soft landing. One of those is wrong. Alix so that feels somewhat binary, what do you do with that as an investor . What do you do with your money . Ralph the challenge as i have said is while this is a scary time in terms of world events in terms of the horrible Terrorists Attack terrorist attack, in terms of Economic Uncertainty this is the highest period that i can recall in my 40 plus year, not the scariest, that was 2008 and also covid. But the direction of the economy , how soft or hard is the landing, what happens in china how does europe fare, i do not think there is a clear answer to any of the questions sitting here today. Guy the normal reaction to that and we hear it every day on this program and across the network is diversified. The problem is that at the moment equity and bond markets are moving in the same direction. How does one diversified and deal with the uncertainty if the big Asset Classes are not more correlated than they normally are . Ralph there is this very attractive thing out there called cash that pays 5. 25 and 5. 5 . In a world that is highly uncertain with highly correlated performance and among most of the Asset Classes it does not look too bad. Guy the last time we spoke you were talking about money into private credit added to cash. Are you still on that trajectory . Ralph i do not want to presume to be an Investment Advisor but those are two areas i think that are relatively attractive. Alix put on your Investment Banking hat again, we had a bunch of ipos that did not go well. But they are trading below the price so youre looking at instacart or birkenstock. M a started to hate to heat up and we had that big job with exxon and pioneer. Do you think the Investment Banking world will be happy or not. Is the window going to stay open . Ralph if you look back 40 some years to 1980 and you look at m a activity and Equity Capital markets activity. They are secular growth businesses and they tend to correlate to the gdp and aggregate equity values so they go up over the long turn long term. They are cyclical businesses generally characterized by three to seven year up cycles and two to three year down cycles. We are at the end of the second year down cycle and we are certainly seeing at evercore a lot of green shoots, they are not quite out of the ground. I believe that the Equity Capital markets will come back earlier than m a will because m a to get closed tends to get to be a longer cycle business. I would honestly expect activity to pick up in the early part of next year and i would expect 24 to be a better year than 23 and 25 better than 24. Alix this is a very silly question but why . What gives you that confidence . Ralph ultimately, the big enemy of m a and Capital Markets activity is uncertainty. And as i said a moment ago, we are in about as uncertain a period of time as what happens in the real economy as i have seen. That tends to make people very reluctant investors and to commit capital to ipos. It makes ceos reluctant to commit to buying other peoples businesses. Guy let us talk about another area of uncertainty, geopolitics. I think it was paul tudor talking about this yesterday using the words geopolitical environment that he has seen in decades. Now we should probably just sort of talk about the fact that you have to be married to the u. S. Ambassador to the court of st. James so i will put that out there. Ralph we just have our 40th anniversary. Guy congratulations. Alix is that diamond, what is that . Ralph that it turns out his ruby. And i did respond to that. So i will make it to 41 at least. Guy we will we have been presenting together for three years and i think our anniversary payment was paper or china . Alix china or leather. I do not know what it is because we are coming on four. Guy a long way to go to ruby. Ralph we will be old alix we will be old. Guy back onto more serious matters, what do you make of the geopolitical environment . These events have sent a shiver through the World Economy and the way that we view geopolitics right now. How do you think it changes what we are seeing . Ralph i have been shocked with the way that the markets reacted to the terrorist attack in israel. If you look at the equity markets it is actually like they are behaving like this is a nonevent or even a good event for the markets, which i have absolutely no understanding of, totally mystifying, and i agree with Paul Tudor Jones that this is as scary a Global Environment as you have right now. We have two wars underway in two different regions of the world. Alix i guess the question is what is the reason for that . Is that that we are focused on the macro centralbank story, is the transmission mechanism oil and that is calmer. Hedging geopolitical risks since brexit did not make you money and i wondering what the issue is. Ralph i think the markets, as we discussed a little bit earlier, have been so focused on how high that the fact that we are probably not going to go higher at all or much higher for sure is a relief. If you look at the stock market, the s p is about 16 on the year on essentially flat to down a little earnings. 100 of the movement in stocks have occurred by multiple expansion. So we need earnings to come through in a major way to justify the valuations. Guy do you think we are in a new paradigm . We have seen financial or asset Price Inflation and a period where we have seen low rates and a significant amount of money going into the system and then most of that has remained within the financial system. Do you think we are in a new paradigm where yields will be higher and the cost of money will be higher and we need to reassess how we value everything. We need to unwind the period in which we had not economic inflation but asset Price Inflation . Ralph not to be an old codger but literally almost my entire career in finance which started in 1980 has had the wind at its back of the climbing Interest Rates. A 40 year bull market in Interest Rates and that is over, truly over. And that necessitates a different discount rate for equity earnings and i do not think the equity market has caught up with that yet. Alix that fields hugely disruptive and i want to talk about the hardened value like harden equity or credit and sometimes you can make an argument that that is more destructive in terms of capital increase. Ralph certainly, if you think about and equity that is levered four or five times and the cost of the debt has gone up 500 basis points, that is a lot of xstrata. Guy give me what you think the order of magnitude you are thinking about. If you are out of the 40 year bull market and yields will no longer continue to go lower, wandas order what is the order of magnitude . Ralph we will not have a massive decline in equities. What we will have is a long period of sideways movement while earnings catch up with the new discount rate. So we will grow our way into it. Guy in a world with higher nominal inflation you are then you are falling behind. Ralph yes you are. Alix what do you do with that and how do you make money in that environment . Guy do you make money . Ralph i think if you are sitting in a let us just say that you are a chief Investment Officer or ahead of a pension plan and your actuarial assumptions where 7 or 8 . The good news is that bond rates are higher, so you are getting more help in that part of your portfolio, but, to assume that equities go up 7 or 8 and private equity will go up at a huge premium which it has historically and will continue to be a premium to the public markets, it is a little more nerveracking when you are flying in the face of not bond yields declining from 15 to 1. 5 but going from 1. 5 from t quoteo 4 . Guy congratulations to your wife for putting up 40 purse for putting up with your wife for 40 years. We checked to see when the second series of the diplomat is coming out. The anniversary present for four years is ripe fruit. Ralph not rotten. Guy great stuff. Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Its easy to get lost in investment research. Introducing j. P. Morgan personal advisors. Hey david. Connect with an advisor to create your personalized plan. Lets find the right investments for your goals okay, great. J. P. Morgan wealth management. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Youre probably not easily persuaded to switch mobile providers for your business. But what if we told you its possible that comcast business mobile can save you up to 75 a year on your wireless bill versus the big three carriers . Have we piqued your interest . You can get two unlimited lines for just 30 each a month. There are no Term Contracts or line activation fees. And you can bring your own device. Oh, and all on the most reliable 5g mobile network nationwide. Wireless that works for you. Its not just possible. Alix we are about an hour into a trading session. The equity Market Reaction is kind of meh. You are not seeing a lot of action. Abigail here is the nam here is the nonreaction reaction. This is a piece of why we have that small decline for the s p 500. Above average volume and here is more of the rea