Dan ives warns its a pr disaster. But our analyst calls it a super fun summer friday. He sees 30 upside from here. He joins us to make his case. One big name investors own, our guest is not following this, and says you shouldnt either. A special three bails and a buy is coming your way. But first, lets start with the markets. We kind of have a turn around. Its been a momentum shift. It hasnt been dramatic, but we are maybe near the highs of the session. So that point, i want to give you an ideawhere the range is. The dow is up 23 points, just about flat on the session. It may not seem like a lot. The s p 500 down six points or 0. 2 of 1 at 4363. But here is the thing. At the lows of the session, we were down 35 points. We were up two at the highs. So were a little bit more towards that upper end of the trading range so far today. Trying at least to recover a little bit from the steeper losses we saw yesterday in the s p and nasdaq. The nasdaq composite speaking of 13,262, down 53 points or one half of 1 . Thats the current state of play. One place to keep a close eye on amid that bond carnage that we have seen on the treasury side of things, pushing prices down and yields higher is whats been happening to many of the Regional Banks. Remember the ones during the crisis earlier this year, we had some problems with some of the losses in asset values that have led to distress in some of these banks. If you look at the rising rates and falling prices, theyre having that similar effect on some of these regional lenders. Coamerica, similar decline. So watch that Regional Bank trade, just something to keep a close eye on. One other place has been in shares of tesla, which is down another 2 after a drop yesterday alongside the broader market. 215 a share right now, on a sixday losing streak, that has seen us drop from the highs earlier this year. Roughly 28 below those levels. Keep an eye on tesla, amid a new round of price cuts. Competitors may be losing ground there. The entire ev market, Morgan Stanley says there could be an Interesting Development with regard to the dynamic with regard to supply and demand for evs. Back over to you. All very interesting. Dom, thank you very much. Investors are facing a big chicken or the egg question in the bond market, asking whether the surge in yields is growth given or massive treasury supply. The yield hovering near its highest level since 2007, just before the great financial crisis hit. So should we expect yields to stay high now or not . And what exactly is moving the bond market . Steve liesman joins us now. Hi, steve. Kelly, the recent sharp increase in bond yields, most people think its the fitch downgrade august 1 and huge supply from the treasury. But ive spoke on the several managers. They say its not clear the move is over yet, as well. Meaning more potential pressure could be coming on stocks. This is what we call the bond b boyage. Better Economic Data and some strains on the demand side from chinese and japanese flows. Shortterm issues, like lousy august liquidity and investors being off size in their positioning when we had those surprise announcements of all the supply. But Central Banks and foreigners are not as big in the market as they have been. He says rick reeder from black rock says its just hard to go in and buy the long end of the treasury with all that risk, when the short end is paying 5 and higher, saying all that said, one bigtime bond investor i spoke with said 425 tenyear makes fundamental sense. A 2 yield is only high if you are under the impression were going back to those 2 , 3 yields, and kelly, he says were well beyond that now. A lot of people think that. Steve, stay with us. My next guest says the rising bond yields are increasing the likelihood of a recession, but warns the worst thing the fed can do is stimulate further. Lets bring in nancy. Welcome. Hi. Thank you for having me. I want to jump ahead, but i like that little tease there. So talk about what is the higher risk from bond yields. Gdp is going to be 13 this quarter or whatever the number is. Pretty high. I just think you have leading indicators. The fed has tightened very aggressively, and bond yields are increasing. You have the biggest increase in the tenyear yield on a threeyear basis since the 80s. So weve had a very significant increase in the yield. But because the economy hasnt hit a wall yet, there is a general perception that it wont slow. But we do a lot of modeling. We just look at a lot of data. The bottom line is, the lag effect of the fed raising rates dramatically, and Mortgage Rates, yields increasing significantly again, they will further slow economic activity. We have already seen a slowdown in the economy. Why has the pmi dropped below 50 . Why have employment gains slowed . Why has gdp slowed . Because the fed timing cycle is creeping into the economy. And our work tells us, the bullseye will be the fourth quart e, and or into the First Quarter of 2024. For now, were speaking with the Fourth Quarter as far as when the recession will start. We have to add to that. Banks are tightening lending standards very aggressively. The leading indicators, theres a few, it hasnt hit the economy yet, and therefore it wont. Opposed to therefore it will. Not that youre in the business of giving investment advice, nancy, but under your quite plausible scenario here, this doesnt feel like a scenario day by day which yields would be pushing to new highs. What do you think thats all about . Well, steve i was surprised you didnt mention some of these huge wage increases we have been seeing out of many, many of the unions we are getting, from the airlines, starting back when the rail workers last fall, the Airline Industry that were on the cuff of very tough negotiations with the uaw. Theyre asking for a 40 increase over four years. I started in the business when you were finally obviously killing inflation in the early 80s. Ive never seen a wage increase as much as we have seen. And theres like a contagion. Federal express pilots rejected a 30 pay increase over four years, because of the American Airline wage settlements. So sticky inflation is not appreciated as also another reason why bond yields have moved higher. Now Mortgage Rates are over 7 . Its almost like we should have you guys predict the misery index. We have rising unemployment and rising inflation, which is not a very pretty scenario. So theres these three or four plausible different paths people can lay out here. Her points about wages are well taken. The wage data is probably the most closely followed data set as people figure out what this will settle out to be. Yeah, nancys idea here im sorry, nancys idea here is the scenario that really incorporates the idea of lags to the economy, which is that we havent seen the effects yet. I will say there is another side to this, which has suggested that the lags in the economy are less now than they used to be. We have seen a lot of it already. There are guys on the fed who believe that, like governor chris wallace, who say its in the market, its in the economy already. I will sort of counter that and side a little more with nancy. As these rates rise and pervade the economy, it feels more and more like theres less place to hide. It was one thing when you had like a 6 , 7 mortgage rate, or 5 or 6 . But now that theyre 7 , you cant find anotherb bank and fid another lower rate. I will say on the other side, we had very low unemployment. There will be an effect on the Unemployment Rate. I just dont think that in this world where theres such a premium on labor, which is what is driving those wage gains, that youre going to see tremendous increases in unemployment and a recession. Nancy . Its not unusual. I went back and looked at the data. We have a lot of models. I looked at the Unemployment Rate. On average, it takes roughly two years from the beginning of a fed tightening cycle to un Unemployment Rate increasing. We are not out of the woods with an increase in the Unemployment Rate. We think it starts in the Fourth Quarter, and frankly, these wage increases are going to put even more and more pressure on profit margins, and that snow balls into weaker employment. So were not out of the woods. We have to go back and look carefully, which we did. And its also a process for the fed tightening cycle to work its way through the system. Corporate revenues, nominal revenues have already slowed. A lot of these revenues are bolstered by price increases. As the fed is successful in squeezing out inflation, revenues are starting to deteriorate. And it takes roughly a year after revenues for companies to go, i really have to take costcutting measures, and we start to reduce employment. The only thing there is everything youre laying out to me is a world that inflation is going down. Theres no way in a year or two we will face the same thing, and as things soften like you are describing. I agree. The word im using is sticky. We dont think core cpi accelerating from here, we think its sticky and sticky because of these wage increases. But i agree 1,000 . We think we need a recession. Ie, we need an increase in the Unemployment Rate to see a shift down in inflation. And the forecast is, were going to get it. 60 odds by qforce. Final word, steve . Yeah. I just add that if you read what powell said last year and read whats in the minutes last year, in jackson hole, it was just in the minutes this week. The fed believes that you need a period of below trend growth in order to vanquish inflation. Just to correct you, quarter, it was 5 on the i thought i saw six something, i dont know. Maybe i missed something. Just projecting how it felt. As you know from my work, this far out it is overly optimistic by around two program points. In any event, this is one of the Big Questions for i will be asking next week in jackson hole, how satisfied is the fed with an economy that is running at or above potential, and is that enough to bring down inflation . If they adhere to their own projection of what needs to happen. 5. 8 is what they have in q3. Steve, nancy, great to have you on. A very big week coming. Steve, rest up. Next week is going to be a very busy one. Steve will be in jackson hole interviewing Patrick Harker and others. Now lets shift to china, where the countrys central bank has been stepping up support for its currency this week. Some are fearing a lehman moment in the countrys financial system. The fundamentals looked worse and worse. The country announced a second rate cut in three months, and chinese evergrande files for bankruptcy protection last night. My next guest says, take a deep breath, the concerns are all a bit overstated. All right, nicholas, welcome. Give me some context here, what is your reaction when you see china head into a possible lehman moment here . I think its a bit overdone. They had 6. 3 growth in the second quarter. And i think the economy is doing reasonably well. They have some difficulties coming out of the covid recession, but there are a lot of positives here. Imports are growing stronger than they were a year ago, which suggests underlying demand is bigger than a lot of people are saying. People are talking about inflation, but if you strip out food prices, Consumer Price inflation in july was up at a substantially higher rate than in june. So a lot of the things that people are pointing to could develop, but i think at the moment, its premature to think that a lehman moment is around the corner. You know, the Bank Property company, they started defaulting on their bonds two years ago. This is old news. Its nothing new. Theyve had a significant property correction for more than two years now that has slowed down the economy. But i dont think its going to collapse the financials. I always feel like the currency is a bit of an objective judge of this situation. Certainly in countries like russia and argentina, thats been true lately. But if we can show chinas currency chart over the last 15 years, what we are seeing today looks like an important move towards that trend. So 7. 3, so were not quite to where we were in the mid 2000s. But were starting to break out of this range, and flip this around. They have to intervene there. They seem to be stepping up. If everything is better as you are describing, wouldnt the currency be a little more calm right now . Well, i think we need to get away at the rate against the dollar. If you look at it against a last of kurcurrenccurrencies, the r changed much. So the chinese currency is not weakening. If its not weakening on a trade weighted basis, is the argument that in six months well look at this and say the deflation wasnt as bad as we feared, the currency was magnified by u. S. Dollar strength, and those who last hour were saying they wanted to buy alibaba, because they think a major stimulus relief package is coming. Based on what you are arguing, we shouldnt expect anything like that to come down the pike. I think a major stimulus is very unlikely. Weve had a couple of modest Interest Rate cuts. China is sticking to their plan of 2017, and that is the try to slow the growth of debt. As debt and gdp from this corporate and private sector was closing in on 300 , that was not a model that could be sustained. And they have slowed down the growth of credit quite substantially. Since then, some of it has led to the property correction. I think they have taken substantial steps to reduce Financial Risks in the system. Finally then, because it relates back to some of the Major Holdings people have in companies, do you think the governments crack dourn on those firms is largely over . And what do you think the plans are in terms of supporting tacitly or express italy their growth and their sort of earnings hopes for the next coc couple of years . They have normalized regulatory environment, that was the original normal. Were now seeing substantial recovery of earnings in those companies, well into double digits. I think thats likely to continue. I dont think theyre going to return to the high level of profitability that they had in the precovid period. But i think they will strengthen. Theyre already substantially stepping up their hiring. I think their investment plans will stabilize and increase, and that will be an eventual source of growth going forward. Nicholas, glass half full, we appreciate your time today. Thank you, kelly. Coming up, the case for tbill and chill. Why buy stocks when you can get 5 risk free. Thats next. Plus, would you bet against these three . Our trader has three calls based on their latest callings. We have that contrarian take coming down. As we get to break, the dow is fluttering between dwaynes and losses. The nasdaq is down 1 2 a percent. The russell is now positive. And the tenyear note, below 424 at the moment. Back after this. What if you could make analyzing a big banks data. No big deal . Go on. Well, what if you partner with ibm and red hat, use a hybrid Cloud Solution to connect data across clouds, then analyze all that data with watson. Okay, but this needs to meet our. Security standards . 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Get way more into what youre into when you stream on the xfinity 10g network. Welcome back to the exchange. The tenyear yield making headlines this weekend as it hit 4. 3 , making it the first time in 14 years that you can get a yield that high. The sixmonth yield, 5. 5 . Why bother with stocks when you can pick up 5 risk free . My next guest is ben kirby. Before we get your answer, lets bring in bob. Stocks are actually way outperforming bonds so far this year. Yeah, its not even close right now. The s p is handily beating bonds this year, even though with twoyear treasury battlefields near 5 , ten year is near 4 at this point. So really, not even close. But theres a fascinating study published recently that looks at the global stock market returns. Ive never seen a study this big. They look at 64,000 stocks in a 30year period, from 1990 to 2020. And its quite amazing conchooses. Number one, very few Companies Account for the majority of the gains that are out there. So this is an amazing number. Five Companies Account for 10 for all the global stock market welt in the last 30 years. Meaning market capitalization. Apple microsoft, google and ten cent, a chinese company. 44 of u. S. Stocks, there were 17,000 stocks stud yesterday. 44 of them outperformed u. S. Treasury bills. So the majority did not outperform treasury bills. So a couple things to conclude here. Number one, very few investors possess the ability to pick stocks over long periods. And number two, the key to the success in owning stocks is owning a broadly diversified portfolio. They recommend the best way is using index funds. The final thing is, they studied 17,000 stocks. There arent 17,000 u. S. Stocks in the market, most of them fail over a 30year period or bought out. So the s p looks like it goes up 10 a year. It does on average, including dividends. But its a biased index. They keep the winners in and throw the losers out. And the market capitalization means the bigger winners have more influence over the smaller companies. So yes, the stock market indexes tend to go up. But the average stock is a very tough time of it. Fascinating. I didnt expect ten cent to be on that list. Ben, so all of this said, peo