Yellen on China | Bloomberg Surveillance 07/17/23 | Full Show

>> WHAT ACHE -- WHAT IT COMES DOWN TO RIGHT NOW IS THE

INFLATION PICTURE.

>> WE ARE NOT GOING TO BE WORRIED ABOUT INFLATION.

>> WE SHOULD GET TO A POINT WHERE WE SEE ARE MILD AND

SHALLOW RECESSION TOWARDS THE END OF THE YEAR.

JON: GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE

ON TV AND RADIO ALONGSIDE TOM KEENE AND LISA ARE -- AND LISA

ABRAMOWICZ.

TOMORROW MORNING, U.S. RETAIL SALES, ONE TO WATCH THIS

MORNING, SECRETARY YELLEN, SITTING DOWN WITH BLOOMBERG'S

ANNMARIE HORDERN. TOM: INCREDIBLY WELL-TIMED JUST BEAT

TO THE TREASURE -- SECRETARY-TREASURER.

WE WILL GET TO THAT IN A MOMENT HERE BUT IT IS A TIME WHERE WE

HAVE FINANCED AN INVESTMENT DOVETAILING INTO EACH OTHER AND

THAT IS ATTENTION OF THE BULL MARKET A LOT OF BEARS ARE

GETTING USED TO. A LITTLE BIT OF POLITICS THERE.

ROMAINE: STARTING TO FEEL THAT --JON:

STARTING TO FEEL THAT IN JULY. LISA:

IT REALLY SHOWED -- A LOT OF CONSOLIDATION AROUND ANY NOT

TRUMP CANDIDATE. THE SANTOS -- RON DESANTIS

BURNING THROUGH THE CASH. HOW MUCH OXYGEN DO WE HAVE LEFT

FOR A CANDIDATE TO COME IN FOR EITHER SIDE? JON:

LET'S TALK ABOUT A MARKET THAT IS GETTING CROWDED, FOUR DATE

ANY STREAK ON THE S&P 500 -- FOR DAY WINNING STREAK ON THE

S&P 500.

WE ARE LOOKING AT EIGHT DAYS OF EURO STRENGTH ON THE U.S.

DOLLAR GOING ALL THE WAY BACK TO JULY 20 20, FOR JUNE 2020,

-- TOM: I WILL AGREE WITH YOU THAT YOU

HAVE TO GO TO THE EURO AS A LITMUS PAPER FOR THE EURO -- A

TOUCH BY THE EARNINGS STORY BUT AT 112 .41, WHEN WE ROUND THAT

OUT TO A 113 -- WHEN DO WE ROUND THAT OUT TO A 113?

JON: CHECK OUT THE PRICE ACTION, THIS MONDAY MORNING, FUTURES

ARE SOFTER ON THE S&P, NEGATIVE BY 0.1 PERCENT AND YIELDS ARE

DOWN. DOWN SIX BASIS POINTS, THE 10

YEAR 37 -- 3.7735. MOVE ON THE EURO, 1.1243 ON THE

EURO ON THE DOLLAR. ABIGAIL:

HOW MUCH OXYGEN DO WE HAVE LEFT AT THE TIME WHERE THE DOLLAR IS

CREATING EXISTENTIAL TALKS.

THIS TO ME COMES AFTER THAT CHINESE DATA THAT WAS SO

INTERESTING, HOW DO THEY DOVETAIL GROWTH VERSUS SOME

SORT OF REINING IN OF INFLATION. JANET YELLEN WILL BE SPEAKING

IN AN EXCLUSIVE WITH ANNMARIE HORDERN AND AT 8:15 A.M.

THIS MORNING, AND WHAT SHE SAYS ABOUT GLOBAL GROWTH AND CHINA

WILL BE KEY. 8:30 AM, WE GET JULY ANY

FRACTURING. -- JULY MANUFACTURING.

THE PERFECT MASKS THAT LED TO A LOT OF ENTHUSIASM AND TODAY,

THE REGIONAL BANK EARNINGS KICK OFF THIS COMES AHEAD OF MORGAN

STANLEY AND BANK OF AMERICA TOMORROW.

HAPPY -- HAVE -- FP FINANCIAL. WE ARE LOOKING TO SEE IF

LENDING HAS SLOWED, WHAT THEIR COST OF DEPOSITS IS AN THE

COMMERCIAL REAL ESTATE PORTFOLIO ON THEIR BALANCE

SHEETS. JON: MANY OF THOSE BANKS I HAVEN'T

HEARD OF. ABIGAIL: I CAN GIVE YOU MORE.

ABIGAIL: LISA: --LISA:

I CAN GIVELISA: YOU MORE.

JON: WHY ARE YOU STILL OVERWEIGHT

EQUITIES OVER THE TEAM AT UBS? JON: YOU MENTIONED THE IDEA THAT

THIS IS BECOMING A MORE SUBSCRIBED IDEA AND IT IS

BECOMING A MORE CROWDED POSITION AND IN EQUITIES, OUR

VIEW IS THAT THE PATH TO THE SOUTH LENDING HAS WIDENED SO

MUCH THAT IT CAN ACCOMMODATE THIS CROWD BETTER.

IT IS VERY IMPORTANT TO US THAT WE HAVE SEEN A PRETTY MARKET

DECELERATION IN CORE INFLATION AND SOME OF THE MORE UNDERLYING

SUPER COURT INFLATIONARY METRICS.

YOU CAN SAY IT IS JUST ONE PRINT BUT IN THE EYES OF

INVESTORS, YOU HAVE A LOT OF CONFIDENCE THAT WE SLAYED THE

INFLATION BOGEYMAN AND THE EURO RECESSION BOGEYMAN AT THE SAME

TIME AND THAT IS BECAUSE THEY ARE INTERLINKED AND THE

INFLATION PROBLEM WAS A DRAG ON INCOMES AND THROUGH THE

POTENTIAL FINANCIAL CONDITIONS CHANNEL, AND INFLATION WAS

SOMETHING THAT WAS CAUSING CENTRAL BANKS TO BE ON TRACK TO

KEEP POLICY TYPE FOR LONGER BUT INCREASINGLY TIGHTER FOR LONGER

AND IN OUR VIEW, THIS IS SOMETHING THIS RISK HAS RECEDED

SOMEWHAT. WE CAN MOVE FROM A WORLD WHICH

IN 2022 AND 20 21, WE WERE RELYING ON EXCESS TASTINGS --

EXCESS SAVINGS.

JON: WE HAVE --TOM:

THE KEY THING WITH THE SECTORS IS WE BROADENED OUT THE MARKET.

DOES UBS SEE EVIDENCE THAT WE ARE BROADENING OUT FROM THE OFF

THE BOTTOM OCTOBER BULL MARKET CONDITION? LUKE:

I WOULD THINK CERTAINLY AND EVEN WHEN THE U.S.

MARKET APPEARED NARROW THAT WAS STILL OCCURRING IN THE CONTEXT

OF EUROPEAN EQUITIES DOING WELL. THAT WAS OCCURRING IN THE

CONTEXT OF JAPAN BREAKING OUT TO 30 YEAR HIGHS.

IN OUR VIEW, WHAT HAS CHANGED AND WHY WE WANT TO BE SELECTIVE

ABOUT WHAT WE LIKE, WE LIKE THE MANY IN U.S.

STOCKS BECAUSE THAT IS WHERE THE RESILIENCE IN THE GLOBAL

ECONOMY IS AND I AM SURE WE MIGHT GET TO THE DISAPPOINTING

CHINESE DATA. YOU WOULDN'T NORMALLY THINK YOU

WOULD HAVE A LARGER SPREAD BETWEEN NASDAQ YOU JURORS AND

S&P 500 FUTURES AND YOU HAVE THAT COMING TO THE DAY AND THAT

IS A TESTAMENT TO THE EXPECTED EARNINGS RESILIENCE OF THE

MATTING AND EIGHT THE U.S. EQUITY MARKETS AND EVEN AS WE

HAVE A HIGHER BAR TO CLEAR, IT IS A BAR THAT LOOKS SIMILAR TO

A PRE-PANDEMIC ENVIRONMENT THAN IT DOES TO AN INFLATION SHOCK

ENVIRONMENT. LISA:

TO FOLLOW UP ON THE DATA OUT OF CHINA, ARE YOU SAYING IT IS NOT

GOING TO BE AS IMPACTFUL FOR A LOT OF THE U.S.

COMPANIES THAT ARE MULTINATIONALS THAT DO HAVE BIG

FOOTPRINTS IN CHINA OR ARE YOU SAYING THAT HAS BEEN DISCOUNTED

IN SURE RISES -- SHARE PRICES?

LUKE: IT IS LARGELY THE FORMER. CHINA HAS LOST A LOT OF

REOPENING MOMENTUM. THAT IS CLEAR ON THE DATA, THAT

THE MORE SUPPORT WILL BE NEEDED. THE GOOD NEWS IS THIS CYCLE, WE

HAVE NOT BEEN AS RELIANT ON THE EBBS AND FLOWS ON THE CHINESE

CREDIT IMPULSE, CHINESE POLICY FOR GLOBAL WEALTH AND GLOBAL

EARNINGS AS WE HAVE BEEN IN THE 15 YEARS PRIOR.

THAT DEVELOPMENT MEANS YOU ARE SEEING A LOT OF THE CLASSIC

CROSS ACID CORRELATION KICK IN

THIS MORNING WITH -- COMMODITIES DOING POORLY.

HOW INTERESTING IS IT THAT YOU HAVE THE DOLLAR FLAT ON A

PRETTY DISAPPOINTING CHINESE GROWTH DATA?

THAT SPEAKS TO THE IDEA THAT GLOBAL GROWTH CAN REMAIN IN A

POSITIVE, NOT GANGBUSTERS.

EVEN WHEN CHINA IS THAT HAVING ITS FOOT ON THE ACCELERATOR.

LISA: THIS MARKET SEEMS TO BE DRIVEN

BY THE NARRATIVE AND EVERYONE IS BACK IN AND WE ARE GETTING A

SOFT LANDING. NARRATIVE. WE ARE EXPECTING A 9% DROP OF

PROFITS FROM S&P COMPANY EARNINGS.

A LOT OF PEOPLE ARE SAYING THAT IS PRICE IN.

WHAT WOULD THAT TAKE FOR YOU TO SAY MAYBE THERE IS MORE

WEAKNESS UNDER THE HOOD THAT SOME PEOPLE ARE CONSIDERING.

-- AND SOME PEOPLE ARE CONSIDERING -- COULD THEN

--HOOD THAN SOME PEOPLE ARE CONSIDERING? LUKE:

ESTIMATES WEREN'T THAT MUCH ACCOUNTING TO THE SEASON

RELATIVE TO PREVIOUS ONES AND PRE-ANNOUNCEMENTS WERE

GENERALLY MORE POSITIVE THAN THEY HAVE BEEN AND IF THAT

GUIDANCE OUTPUT TAKES A TURN FOR THE -- FOR THE WORSE, WE

HAVE TO BE COGNIZANT OF THAT BECAUSE EVEN IF YOU HAVE IT

EXPENSIVE EQUITY MARKET, -- WE WOULD ARGUE THAT IS RELATIVELY

INEXPENSIVE BUT IF YOU ARE LOOKING AT THREE MONTHS, SIX

MONTHS, ONE YOUR PERFORMANCE, THE EXPANSIVENESS OF THE EQUITY

MARKET IS NOT AS IMPORTANT AS WHETHER EARNINGS ESTIMATES ARE

RISING OR NOT AND FOR US, THAT WILL BE THE KEY JUST TO MAKE

SURE THAT THIS NASCENT BETTER TREND WE HAVE SEEN OF THE

BOTTOM UP REFLECTING OUR MACRO VIEW OF THE WIDENING PATH OF A

SOFT LANDING, IF THAT WERE TO COME INTO QUESTION, THAT WOULD

GET US TO REEVALUATE. JON:

STRIPPED OUT THE MUSCLE OF THE DUMBNESS OF BIG TECH AND SHIFT

AWAY FROM MEGA CAP TECH, WHAT -- WHAT IS YOUR INTERNATIONAL

FIT INTO THAT? LUKE:

WE HAVE SOME CAPACITY FOR THE JAPANESE STORIES, IT IS VERY

STRONG AND WE ENJOYED THE IDEA THAT JAPANESE EQUITIES ARE

BENEFITING FROM IDIOSYNCRATIC CATALYST IN TERMS OF MASSIVE

CHANGE IN APTITUDE SPEED. EUROPEAN EQUITIES FROM THE

STANDPOINT OF HAVING GOTTEN, STILL DOING WELL BUT HAVING

SURPRISES BEING NEGATIVE, HOW THE EURO MADE A RUN, IF THEY

DEPRECIATES, THAT WILL BE A HEADWIND TO EUROPEAN EQUITIES

BUT THE IDEA THAT THE U.S. DOLLAR WILL BEGIN PERMANENTLY

-- WILL WEAKEN PERMANENTLY AND HE WAS HAVING THAT RELATIVE

GROWTH RESILIENCE AND A RELATIVE REAL WEIGHT ADVANTAGE,

THAT IS SOMETHING THAT CREATES A INTENSELY RANGE BROWN CRATES

IN THE DOLLAR AND DOES TAKE SOME OF THE NEGATIVES OUT OF

THE WAY OF THE INTERNATIONAL EQUITIES. . JON:

LUKE KAWA OF UBS ASSET MANAGEMENT LOOKING FOR THE

RELATIVE BUTTON OUT. THIS APPOINTMENT ON THE LUXURY

PLAYERS IN EUROPE, REACH MARK GETTING SLAMMED BY 9%, MS DOWN

BY 4%. WE ARE OFF THE HIGHEST OF THE

YEAR -- OFF THE HIGHS OF THE YEAR.

JUST SOFTER THAN EXPECTATION THAT LIT A FUSE.

-- BUT THAT LIT A FUSE. TOM:

WE SAY LUXURY BUT THEY PARTICIPANT -- PARTITION THAT

TO BE POLITE INTO THREE GROUPS AND THEY HAVE THE NAMES WE

QUOTE ALL THE TIME. THERE'S A MIDDLE PACKET AND

THERE IS A KIND OF LUXURY AND THEIR SUGGESTION IS WITH THE

CHINESE WORRIES, AT THE MINIMUM AND IT -- AFFECTS THEM MINUTE

-- MIDDLE GROUP AND THE LOWER GROUP. JON:

AND YOU RANK -- CAN YOU RANK? TOM: CARTIER?

I AM NOT -- VAN CLEAVE? JON:

IS THAT HIGH END LUXURY FOR YOU? TOM:

THE DOOR TO VAN CLEAVE IS SO LOW I HAVE TO DUCK INTO IT.

JON: TAKE A LISTEN TO THIS, THE REGION'S LIGHTING BACK INTO

DEFLATION, THE PROPERTY MARKET WILL LIKELY NEED A MORE

AGGRESSIVE POLICY SEE -- REPORT TO REBOUND SUSTAINABLY GIVEN

PAST THE X-AXIS -- PAST EXCESSES.

TOM: YOU MENTIONED THAT IN THE FIRST

SECTION THAT SENTENCE -- IN THE FIRST SENTENCE. JON:

NEXT HOUR, QUITE A START TO THE WEEK AND IT PICKS UP FROM

TOMORROW U.S. RETAIL SALES IN THE MORNING

TONS OF EARNINGS. THE BIGGER BANKS ON WALL STREET

RETURN TOMORROW WITH THE LIKES OF MORGAN STANLEY AND BANK OF

AMERICA AND INTO WEDNESDAY WITH GOLDMAN -- WITH GOLDMAN SACHS.

>> THE FED, SEVERAL TIMES IN

THE LAST SEVERAL DAYS -- YEARS, -- I THINK THIS COMMITTEE WILL

BE WARY OF DECLARING MISSION ACCOMPLISHED AND VICTORY.

A SAWFISH --SOF TISH LANDING IS WHAT THE FED IS

AIMING TO ACHIEVE. JON: ALWAYS GOOD TO HEAR FROM

RICHARD CLARIDA AND FORMER FED VICE CHAIR MENTIONING THAT HE

THINKS IT IS SENSIBLE TO PRICE IN A RATE CUT.

TK, I AM SURE YOU LOVE THAT COMMENTARY AROUND THE FEDERAL

RESERVE BUT THAT IS WHAT PEOPLE ARE LOOKING FOR, NO FED SPEAK

AND THAT IS THE GOOD NEWS FOR YOU, INTO THE QUIET PERIOD NEXT

WEEK, A FEDERAL RESERVE DECISION AND THE FED IS

ASSUMING THEY WILL HIKE INTEREST RATES.

THE UNKNOWN FOR JULY. SCARLET: TOM:

THE DATE OF MATTERS -- THE DATA MATTERS.

IT IS JULY 17, SO WE ARE DASHING TWO WEEKS AWAY FROM A

JULY REPORT, FROM ISM AND IN AUGUST AND THEY WILL WAIT FOR

MORE DATA. JON: TONS OF EARNINGS. TOM:

THE EARNINGS ARE NOT A SMALL MATTER, APPLE AUGUST 3. JON:

GET THAT ONE IN THE DIARY OR THE JENNER -- JOURNAL OR THE

CALENDAR. [LAUGHTER] IT IS IN THE CALENDAR.

TOM: LONG AGO AND FAR AWAY, GREAT

FOR BILLY --GREG VAVILLE -- NO ONE GOING ON CANOE, TO SEE

MENTION OF WEST VIRGINIA. HE JOINS US NOW, CHIEF U.S.

POLICY STRATEGIST AT ATF AND HE NEVER RECOVERED FROM THAT ROCK

FLOWING UP THE CLIFF. YOU KNOW NEW HAMPSHIRE LIKE

EVERYONE WE SPEAK TO, WHAT IS THE SYMBOLISM OF THE GENTLEMAN

OF WEST VIRGINIA IN THE GRANITE STATE -- STATE?

>> BUT I WAS A LITTLE KID, MY DAD TOOK ME TO SEE JOHN KENNEDY

BUT A LOT OF POLITICIANS MAKE THEIR BONES IN NEW HAMPSHIRE

AND JOE MANCHIN IS AWARE OF THAT SO THE BIG POLITICAL

STORY, THERE HAVE BEEN MANY, THE DISSENT'S COLLAPSE, THE

ROBERT KENNEDY GA FFE. THE BIGGEST STORY WILL BE JOE

MANCHIN GOING TO HAMPSHIRE WITH THIS GROUP TEASING A POSSIBLE

PRESIDENTIAL RUN. TOM: WHAT FORM OF MAVERICK IS HE?

I UNDERSTAND PROFESSOR CARTER IS THE LEFT OF BERNIE SANDERS.

WHAT IS JOE MANCHIN SIT OF THE PRESIDENT OF THE U.S.?

>> IN THE CENTER. HE FEELS THE BIDEN

ADMINISTRATION HAS BEEN TOO MUCH MONEY SO HE IS A CENTRIST.

HE FEELS THERE IS A ROAD THERE AND THERE MAY BE A PATH.

I AM NOT SURE HE WILL BE THE NOMINEE BUT HE WILL STIR THINGS

UP AND WE CAN UP FIGHTING -- WEAKEN UP BIDEN.

LISA: WHO WILL WEAKEN MORE? GREG: I WILL SAY JOE BIDEN.

IF MENTION GETS 20% -- IF JOE MANCHIN GETS 20%, THAT COULD

HURT JOE BIDEN A LITTLE BIT BUT AT THE SAME TIME, IF YOU REALLY

CAMPAIGNS AS A CENTRIST, AS A THIRD PARTY'S INTEREST, HE CAN

DO WELL, NOT WELL ENOUGH TO WIN BUT WELL ENOUGH TO HURT JOE

BIDEN. LISA: THERE SEEMS TO BE A DISCUSSION

ABOUT RON DESANTIS AND WHETHER HIS CAMPAIGN IS DOING

ESPECIALLY GIVEN HOW QUICKLY HAS -- HE HAS BURN THROUGH CASH

AND HIS LACK OF CONTRIBUTIONS. DO YOU THINK THERE IS A PATH

FOR RESURRECTION IN GETTING BACK HIS MOMENTUM? GREG:

I THINK HE IS GOING TO CAMPAIGN IN ALL 99 COUNTIES IN IOWA.

HE HAS TO TAKE IOWA MUCH MORE SERIOUSLY.

HE HAS INDICATED HE DID NOT WANT TO JOIN THE DEBATE.

HE HAS TO JOIN THE DEBATE.

I THINK RIGHT NOW, THE LEAD IS ABOUT 40 POINTS FOR TRUMP OVER

THE SANTOS --DESANTIS. LISA: SOMETHING THAT CAUGHT OUR

ATTENTION IS UPS AND THE STRIKES THAT ARE GOING FOR THE

WORKERS WHO HAVE DECLARED A STRIKE BUT ARE LOOKING TO THE

DEADLINE. UPS, THE WORKERS HAVE ASKED JOE

BIDEN'S ADMINISTRATION NOT TO INTERVENE IN THE WAY THEY DID

WITH THE RAIL STRIKES. WHY IS IT THAT WE ARE SEEING

SUCH A SLEW OF STRIKES AND UNION ACTIVISM OVER THE PAST

COUPLE MONTHS AND WHETHER THE -- WHAT ARE THE INDICATIONS --

IMPLICATIONS FOR THE U.S. ECONOMY? GREG:

A LOT OF WORKERS ARE FEELING THEIR SALARIES ARE NOT KEEPING

PACE WITH PRICES. I THINK THERE IS AN ECONOMIC

ARGUMENT FOR IT BUT IT IS NOT JUST HOLLYWOOD.

IT IS UPS, THE UNITED AUTOWORKERS WHO COULD GO ON

STRIKE. IT IS SOUTHERN CALIFORNIA.

HOUSEKEEPING AND HOTELS AND THE HOLLYWOOD STRIKE HAS HAD A

RIPPLE EFFECT ON SOUTHERN CALIFORNIA SO I THINK THIS WILL

BE A REAL SLEEPER TO SEE IF JOE BIDEN GETS INVOLVED. TOM:

MY SHOCK OF THE WEEKEND, I REALLY DON'T CARE ABOUT THE

POLITICAL DEBATE. THE PUBLIC SERVICE OF THE

FORMER VICE PRESIDENT OF THE

UNITED STATES, MR. PENCE OF INDIANA WAS NOTED.

I WAS STUNNED BY HIS INABILITY TO RAISE MONEY, WERE YOU

SURPRISED? GREG: ABSOLUTELY.

THERE ARE MANY CANDIDATES WHO COULD SAY I DID GREAT BUT THE

PERFORMANCE BY MIKE PENCE WAS A SURPRISE. JON:

THERE IS A DEBATE ON THE STAGE, THE FORMER PRESIDENT DONALD

TRUMP, THE FORMER GOVERNOR CHRIS CASEY -- CHRIS CHRISTIE

PUT OUT AN AD CALLING THE FORMER PRESIDENT CHICKEN.

DO YOU BELIEVE THE FORMER PRESIDENT WILL BE ON THE DEBATE

STAGE? GREG: I WOULD SAY YES.

I THINK HE COULD NOT RESIST GETTING INVOLVED IN THIS SO HE

WILL BE PERSUADED TO JOIN THE DEBATE. GREG:

RAY VALLIERE --JON:

GREG VALIERE JOINING US. TOM: LET'S MOVE ONTO THE SIX-DAY

BATTLE FOR THE ELECTION IN THE U.K.

IT IS RIDICULOUS BUT ALL OF A SUDDEN, IT BECAME MORE

INTERESTING WHEN THERE IS CHALLENGES THERE ABOUT

FUNDRAISING AND SIGNATURES.

WE RELY ON A GUY LIKE VALIEVA -- VALIERE TO DO THAT.

ROMAINE: --JON: YOU CAN SEE REASON WHY HE

WOULDN'T LET THEM FIGHT BETWEEN THEMSELVES. LISA:

HERE IS HIS RESPONSE.

HE SAID YOU ARE LEADING PEOPLE BY 50 AND 60 POINTS AND YOU

SAY, WHY WOULD YOU BE DOING A DEBATE? IT IS NOT FAIR.

WHY WOULD YOU LET SOMEONE ADD ZERO BE POPPING YOU WITH

QUESTIONS?

THAT IS INTEREST -- HIS RESPONSE TO THE CHICKEN

COMMENTS FROM CHRIS CHRISTIE. JON: WHY SHOULD HE GET HIM A

PLATFORM? LISA:

IT IS INCREDIBLE LUBRICITY -- LOVELY CITY AND HIS ABSENCE

COULD BE CONSTRUED DIFFERENTLY FROM WHAT HE WOULD LIKE AND

THIS IS A KEY QUESTION IF RISK IS -- IF CHRIS CHRISTIE WILL

HAVE A TALKED. HE IS RAISING RUNNING -- MONEY.

HIS ROLE IS TO PUT OUT THE STUFF MOCKING THE FORMER

PRESIDENT. TOM: IF SOMEONE SAID TO ME WHO IS

MOHAMMED ALERIAN? IT IS LIKE BUTCH CASSIDY, WHO

IS THIS GUY?

HE WROTE AN ESSAY WHICH ENCAPSULATES ILLYRIAN.

IT IS ABOUT GAME THEORY AND HOW WE PLAY IN THE TIME CONTINUUM.

THIS IS BRILLIANT AND AT THE MOMENT.

WE ARE PLAYING IN THE EQUITY MARKETS ALL BUT HASN'T HAPPENED.

-- IN THE EQUITY MARKETS ON WHAT HASN'T HAPPENED. JON:

YOU WANT TO -- WHEREVER YOU WHEN THAT PERSON CAME TO YOU?

JON: MONDAY MORNING, EQUITIES SOFTER, NEGATIVE AND OUT ON THE

S&P 500, FUTURES UP -- WITH A MUTED MOVE LOWER.

WE ARE NEGATIVE BY 0.03%. WEEKDAY CHINA, CUTS.

CITY --VICITI, CUTS. THIS CAN ONLY BE ACHIEVABLE IF

THE GOVERNMENT CONTINUES TO STEP UP THESE MEASURES SO I

PERCENT, IT IS 5% AND ACCORDING TO SOCGEN, AND NEEDS STIMULUS.

-- IT NEEDS STIMULUS. TOM:

WE HAVE TO WATCH THE POLICY PRESCRIPTION OUT OF BEIJING,

SOMETHING THAT MAYBE ANNMARIE HORDERN WILL DISCUSS WITH

SECRETARY-GENERAL -- SECRETARY TREASURY JANET YELLEN.

HE SAID, THIS IS NOT THAT GOOD EXCEPT CHINA IS NOT CRUSHING

AND THERE IS SOME PARALLELS TO WHERE AMERICA IS FALLING APART,

MAYBE WE WEREN'T AND THERE WAS A TINGE OF LOOM IN THE PANTHEON

NOTE. THIS IS NOT THE END OF THE WORLD.

JON: IT IS RELATIVE TO EXPECTATIONS.

WE WERE LOOKING TO THE SECOND -- HERE WE ARE SITTING IN THE

MIDDLE OF 2020 AND WE WERE TALKING ABOUT GOVERNMENT

SUPPORT, LAST YEAR, DOWN 20 BASIS POINTS AND 10 YEAR DOWN

20 BASIS POINTS AND REAL MOVE LOWER OFF THE BACK OF SOFTER

INFLATION DATA POINT AFTER SOFT INFLATION DATA POINT THROUGH

LAST WEEK. TOM:

JOHN AND LISA WERE TALKING MISSION IMPOSSIBLE AND I WAS

TALKING ABOUT WHERE THE WAS THE BOND MARKET AND THE BOND MARKET

ON A BLENDED BASIS, IT IS PRICED UP AND YIELD DOWN BUT AT

-- BUT IT HAS NOT BROKEN UP TO NEW TERRAIN. JON:

SOFT LANDING WAS MISSION IMPOSSIBLE SIX MONTH AGO.

[LAUGHTER] LISA: THAT WAS AMAZING. JON:

WITH THAT VIEW, DOLLAR WEAKNESS AT THE MOMENT AND LET'S PUSH IT

THROUGH FOREIGN EXCHANGE, THE EURO STRONGER AGAINST THE U.S.

DOLLAR FOR THE EIGHTH CONSECUTIVE SESSION, THIS WILL

BE THE LONGEST STREAK GOING BACK TO JUNE 2020. TOM:

EVERYTHING ON THE SCREEN THIS MORNING, THIS IS THE CONSTRAINT

MATHEMATICALLY AS EURO STREET -- BUTTRESS STOCK. JON:

THE FORMER VICE CHAIR RICHARD CLARIDA SAYING THE MARKET SHARE

MAKES SENSE.

KELSEY BERRO WRITING THIS --

TOM: JOINING US NOW, KELSEY BERRO,

FIXED INCOME PORTFOLIO MANAGER AND THAT BARELY DESCRIBES HER

DUTIES AT J.P. MORGAN ASSET MANAGEMENT.

I AM GLAD YOU ARE HERE.

HAVE YOU PEOPLE CHANGED DURATION, STABILITY, ALL THE

DIFFERENT METRICS YOU USE HAVE YOU CHANGE THE VIEW GIVEN THE

NEWS FLOW? KELSEY: THE BIGGEST DATA POINT

IMPACTING OUR VIEW HAS BEEN THE RECENT INFLATION DATA.

WHAT WE HAVE SEEN THERE IS INCREASED CONFIDENCE THAT

INFLATION IS COMING DOWN FASTER THAN THE FED PROJECTS.

THE FED HAS A FORECAST OF 3.9% OF CORE PCE BY THE END OF THE

YEAR WAS THAT WE THINK THEY WILL GET THERE AND THEY WILL GO

FURTHER.

THE FED IS GOING TO BE ABLE TO PAUSE AND IT WILL BE A FUNCTION

OF THIS INFLATION DATA COMING DOWN FASTER THAN THE FED

PROJECTS? TOM: I LOOK IN THIS AND SAY WHAT IS

THE TACTICAL RESPONSE? DO YOU BARBELL?

DO YOU LETTER --LADDER? WHAT IS THE DUE RIGHT NOW?

BOB IS WATCHING.

KELSEY: GREAT QUESTION AND I HAVE BEEN

HEARING YOU DEBATE SOFT LANDING OR HARD LANDING, DOES THAT MEAN

FOR FIXED INCOME? REGARDLESS OF A SOFT LANDING OR

A HARD LANDING, IF THE FED IS AT THE END OF THE CYCLE, BONDS

ARE GOING TO OUTPERFORM SO YOU LOOK AT THE LAST SEVEN RATE

HIKING CYCLES, IN ALL OF THOSE SCENARIOS OVER THE NEXT TWO

YEARS, BONDS OUTPERFORMED CASH

FOR THREE-MONTH T-BILLS BY AN AVERAGE WEIGHT -- RATE OF 3%.

WHAT WE CAN AGREE UPON IS GETTING AN ALLOCATION TO CORE

FIXED INCOME AT THE -- AT THIS TIME IS THE APPROPRIATE

POSITIONING AT AN END OF CYCLE TIME FOR THE EE -- THAT TO

PAUSE -- TIME FOR THE FED TO PAUSE. JON:

I KNOW THAT YOU AND THE TEAM ARE LOOKING AT 3% ACROSS THE

WHOLE CURVE. CAN YOU HELP PEOPLE LISTENING

TO THIS MAKE SENSE OF THAT? THE TWO-YEAR IS AT 4.72 AND YOU

THINK THERE IS POTENTIAL TO GET AT 3.0.

THE THIRTY-YEAR IS THAT 3.90. WALK US THROUGH HOW YOU THINK

ABOUT THAT. KELSEY: THERE ARE LIMITS TO THE SELLOFF

SO IF YOU LOOK AT THE 10-YEAR YIELD, HERE TODAY, IT HAS NOT

BEEN ABLE TO SUSTAINABLY TRADE ABOVE 4%.

WE HAD A PEEK AT 4.2 FIVE IN Q4 LAST YEAR AND WE TRIED TO

RETEST THE 4% LEVEL AT Q4 LAST YEAR IN THAT FIELD.

WE ARE SEEING THERE ARE LIMITS TO HOW HIGH LONGER DATED YIELDS

CAN TRADE AND THAT IS A SICKO THAT WE ARE LATER IN THE CYCLE,

THE FED DOES HAVE LIMITS TO HOW FAR THEY CAN GO AND THAT IS

REFLECTED IN THIS VERY HISTORIC YIELD CURVE INVERSION WE SEE.

JON: LATE CYCLE CONTINUING HEAD OF

CYCLE.

KELSEY: IT HAS BEEN A GRIND TIGHTER FOR

CREDIT IN GENERAL AND WE HAVE A LOOKING WITH OUR HIGH YIELD

ANALYSTS ABOUT WHAT IS GOING ON AND THERE IS CROSS CURRENTS.

YOU ARE HEARING DIFFERENT THINGS ACROSS EVERY SECTOR.

THEY ARE OPERATING IN THEIR OWN CYCLE.

YOU HEAR FROM CHEMICALS AND TECHNOLOGY AND HIDE YIELD, NOT

SO GREAT AND YOU HEAR FROM HOSPITALITY AND PEOPLE CANNOT

STOP TRAVELING. EVERYONE ON MY INSTAGRAM IS IN

EUROPE. JON: --TOM:MINE TOO.

KELSEY: IN THE ABSENCE OF MATERIAL

WEAKENING IN THAT LABOR MARKET, YOU SEE PEOPLE WANT TO GET THAT

SPREAD AND THEY WANT TO GET THAT YIELD AND ON TOP OF THAT,

WE HAVE VERY LITTLE ISSUANCE IN THE HIGH-YIELD MARKET SO THE

TECHNICALS ARE IN THAT GRIND TIGHTER.

HIGH-YIELD SPREADS DO NOT BLOWOUT UNTIL THE SESSION IS

ACTUALLY HERE SO THIS MOVE IS NOT REALLY THAT UNUSUAL BUT

THAT HAS BEEN A GRIND. LISA: DO YOU SEE A RECESSION?

IS INCOMPATIBLE TO SEE THE STRENGTH WE ARE SEEING THAT HIS

UNDERPINNING THE YOUTH -- THE EUPHORIA WE ARE SEEING AND THE

TIGHTER SPREADS JOHN WAS MENTIONING.

IS THAT INCOMPATIBLE -- COMPATIBLE WITH A STEADY GRIND

LOWER IN INFLATION? KELSEY: IT IS IMPORTANT TO UNDERSTAND

THE LABOR MARKET IS A LAGGING INDICATORS OF THE UNEMPLOYMENT

RATE BOTTOMS RIGHT AS THE RECESSION STARTS AND THE

UNEMPLOYMENT RATE DOESN'T PEAK UNTIL A RECESSION IS ENDING SO

WHAT WE ARE LOOKING AT IS THE LEADING INDICATORS OF THINGS

LIKE GROSS DOMESTIC INCOME WHICH IS OFTEN OVERLOAD THE

SURFACE, HOURS WORKED WITHIN THE LABOR REPORT WHICH IS

SOFTENING. THE 500 BASIS POINTS OF RATE

HIKES THAT HAVE OCCURRED, THEY ARE NOT BEHIND US AND STILL

IMPACTING THE ECONOMY. LISA: WE ARE SEEING SPREADS AT HIGHER

BONDS AT THE TIGHTEST LEVELS GOING BACK TO APRIL 2022.

IF CREDIT IS A LEADING INDICATOR AND THEY ARE SAYING

WE WILL GET A DEFAULT CYCLE AND ALL SYSTEMS ARE GO WHEN YOU

LOOK AT STOCKS. DO YOU RESET AND START TO

ALLOCATE MORE TOWARDS RICK SCOTT -- SKIER SECTORS OPPOSED

TO A COUPLE MONTHS AGO WHEN A LOT OF PEOPLE SAW A MORE

EMINENT RECESSION? KELSEY:

I WOULD DISAGREE THAT CREDIT IS A LEADING INDICATOR.

JUST BECAUSE RISK ASSETS ARE DOING WELL NOW DOESN'T MEAN A

RECESSION IS IN ON THE HORIZON --IS THAT ON THE HORIZON.

-- IS NOT ON THE HORIZON. THAT IS INVESTMENT GRADE OVER

HIGH-YIELD AND ANOTHER SECTOR WE LIKE RIGHT NOW IS AGENCY

MORTGAGE-BACKED SECURITIES. YOU CAN GET ATTRACTIVE

VALUATIONS THERE. TOM:

MOST PEOPLE -- IT IS MUCH BIGGER AND DEEPER BUT AT THE

MARGIN, BONDS CAN MOVE OFF EQUITY VALUATIONS.

OUR BONDS COMPETING WITH EQUITIES?

OUR PEOPLE BUYING CREDIT, CORPORATE QUALITY BONDS VERSUS

EQUITIES? KELSEY: WE DO OBSERVE THAT.

WHAT WE ARE SEEING IS THAT PEOPLE ARE TAKING THIS

OPPORTUNITY TO PICK UP THE YIELDS THAT ARE HISTORICALLY

ATTRACTIVE. IF YOU LOOK AT REAL YIELD, THEY

ARE AT THEIR HIGHEST LEVEL IN 15 OR 20 YEARS.

THIS IS NOT AN OPPORTUNITY THAT COMES ARE OFTEN PERFECTLY IN AN

AREA WHERE THE FED HAS TO -- HAS YOU GO TO THE ZERO BOUND

MULTIPLE TIMES THIS DECADE. TOM: WHAT THEY DO IS WHEN THEY ISSUE

BONDS, SOME FANCY COMPANY, THEY CALL FOUR PEOPLE AND ONE OF

THEM IS BOB MICHELE. ARE YOU GETTING PHONE CALLS

ABOUT BOND ISSUANCE? KELSEY:

WE ARE AND THERE IS A BIFURCATION BETWEEN THE MARKET

SO HIGH-YIELD HAS BEEN A MARKET THAT HAS NOT HAD VERY MUCH

ISSUANCE. YOU HAVE INVESTMENT GRADE

MARKET. IT IS FULLY OPEN. THERE IS ISSUANCE TAKING PLACE.

JON: KELSEY, OF IT. KELSEY BERRO, OF JP MORGAN

ASSET MANAGEMENT CALLS THAT SELL CONTROVERSIAL BECAUSE WE

ARE DIVIDED AROUND THE BOND MARKET. TOM:

TECHNICALLY, IT IS A PERFECT PENDANT.

I WON'T GO INTO IT RIGHT NOW BUT WE ARE STILL WAITING,

EVIDENCE OF WHICH WAY BONDS WILL CUT.

I LOVE THE IDEA OF THE EFFECT OF EUROPEAN GDP THAT SHUT DOWN

THE ACROPOLIS. THE ECONOMIC IMPACT OF

AMERICANS OVER -- IT IS LIKE GILLIGAN'S ISLAND, A THREE

ISLAND TOUR OVER ITALY. JON: IS IT A TRAVEL SEGMENT? LISA:

EVERY SECOND.

-- SECOND --SEGMENT. JON: THERE IS SIGNIFICANT GROWTH

AHEAD. THINGS ARE STILL OK.

I STRESS OK AND THEY WERE OVERLY ENTHUSIASTIC ABOUT THE

OUTLOOK BUT THINGS ARE OK AND THE LIKES OF -- THE DELTA

SAYING SIGNIFICANT GROWTH AHEAD. IT IS AN AUDIT CYCLE --ODD C

YCLE. YOU HAVE AN AIRLINE CEO SAYING

LET'S GO. TOM:

IT IS A POST-PANDEMIC -- IT IS A POST-PANDEMIC ORIGINAL CYCLE

AND I THINK ODD CYCLE CAPTURES IT. LISA:

YOU CANNOT FACTORED THE CHANGE IN BEHAVIOR AND HOW MUCH PEOPLE

HAVE CHANGE THEIR BEHAVIOR AFTER BEING LOCKED UP AFTER

HOWEVER LONG. THE FEELING OF YOU NEED TO

LIVE IN GET OUT THERE HAS NOT GONE AWAY.

IT IS A RELIC OF THE PANDEMIC AND HOW LONG WILL THAT LAST?

TO YOUR COMMENT ABOUT HOW DIVIDED THINGS ARE, LIZ YOUNG

SAID IN A STORY THAT WAS PUBLISHED IN DOW JONES, IT IS

RESEMBLING A POLITICAL LANDSCAPE WHICH -- WHERE EACH

SIDE LOOKS AT EACH OTHER WITH ANGER AND RECESSION UNABLE TO

FIND COMMON GROUND. JON: LAST WEEK WAS A GAME CHANGE FOR

SOME PEOPLE. EVEN FROM SOMEONE WHO WAS

OUTSPOKEN ABOUT THE FED, HE PUSHED BACK AGAINST THE DOOM

AND GLOOM AROUND THE ECONOMY THAT MAYBE WE CAN AVOID A

RECESSION DEPENDING UPON WHAT THE FEDERAL RESERVE WILL DO.

EVEN IF YOU BELIEVE WE WILL NOT GET A SOFT LANDING, COMMENTS

POINT ON FRIDAY WAS THE CURRENT NARRATIVE IS SO HARD TO FIGHT,

MAYBE YOU DON'T WANT TO FIGHT IT IN THE MARKET OFF THE BACK

OF THE DATA. TOM: THERE IS SHARP COVERING AND

THEN WHAT? WITH LISA'S LEADERSHIP, IT WILL

BE THE EARNINGS SEASON AND WHAT A HIGH HAVE SEEN -- WHAT I HAVE

SEEN WITH AND PASSION AND THE TERRIBLE EARNINGS WITH JP

MORGAN, I WAS CRUSHED AT THE NUMBER OF BILLIONS OF DOLLARS

-- JON: KELSEY IS RIGHT THERE. [LAUGHTER] TOM: I DON'T KNOW.

IT WAS TERRIBLE NUMBERS. JON:

GETTING A RAISE FROM WELLS FARGO AND CITI IS GETTING DONE.

TOM: KELSEY HAS HER OWN TABLE AT LEADER HOUSE.

OF LITTLE BAR WITH THE TV. JON:

EQUITIES RIGHT NOW AND AT THE S&P, -0.1%.

>> WHEN CHINESE GROWTH SLOWS, IT HAS AN IMPACT ON GROWTH IN

MANY COUNTRIES AND WE ARE SEEING THAT.

IT IS SOMETHING I DISCUSSED WITH CHINESE COUNTERPARTS,

DISCUSSED WITH PLANS THEY HAVE TO TAKE ACTIONS TO ADDRESS THE

WEAKNESS IN THEIR ECONOMY. JON:

90 MINUTES AWAY, JANET YELLEN SITTING DOWN WITH BLOOMBERG'S

ANNMARIE HORDERN. SPEAKING FROM INDIA.

WE ARE LOOKING FORWARD TO THAT CONVERSATION, A FEW WEEKS AFTER

JANET YELLEN SAT DOWN WITH GOVERNMENT OFFICIALS IN CHINA,

THE LATEST DATA IN CHINA THIS MORNING GETTING TONS OF

ATTENTION. MORGAN STANLEY DOING THE SAME

THING TOGETHER WITH JP MORGAN. NOW LOOKING AT 5% GDP GROWTH

FOR CHINA WHICH IS AROUND THE GOVERNMENT'S TARGET FOR 2023

BUT MOST PEOPLE STRESSING TO ACHIEVE THAT, IT WILL NEED

FURTHER GOVERNMENT SUPPORT. EQUITIES IS SOFTER ON THE S&P

500, WE ARE NEGATIVE BY 0.1%, NO REAL DRAMA. ANOTHER LETDOWN.

WE ARE DOWN SIX BASIS POINTS ON THE 10 YEAR, 3.77 AND IT IS A

BRUTAL GRIND FOR ANYONE WHO HAS THE U.S. DOLLAR ABOUT THE EURO.

-- ABOVE THE EURO. THIS IS DAY EIGHT.

TOM: IT IS DAY EIGHT OF THE EURO UP

AND IT IS THE FOLLOW ON TO WHAT WILL THE DATA BE, THE ECONOMIC

DATA. WE ARE HEADING TOWARDS A QUITE

PERIOD FOR THE FED BUT THIS EARNINGS ANNOUNCEMENT AND I

TAKE IT GLOBALLY, U.S. EARNINGS HAS A RAMIFICATION ON

THE CORRELATIONS OF THE GLOBAL MARKET. JON:

GIVEN THE OUTPERFORMANCE TO TECH, YOU HAVE TO BLEED THE

NEXT WEEK IS THE START OF THE REAL EARNINGS SEASON.

IF YOU TAKE ON THAT TECH POSITIONS, MICROSOFT REPORTING

AND ALPHABET AND META. THEN IT IS ONTO APPLE IN

AUGUST. SCARLET: WE HAVE TO --TOM:

IT IS CALLED DISAPPOINTMENT AFTER THE MEASURED PULLDOWN WE

HAVE SEEN OVER THE LAST 10 WEEKS.

WITHOUT QUESTION, THE BOOK OF THE YEAR ON CHINA IS BY A

PROFESSOR AT THE LONDON SCHOOL OF ECONOMICS, THIS ONE HAS

CREPT UP ON THE ZEITGEIST, THE NEW CHINA PLAYBOOK, BEYOND

SOCIALISM AND CAPITALISM. KEYU JIN, WHO HAS BEEN A

SUPPORTER OF THIS EFFORT, BLOOMBERG SURVEILLANCE, WE ARE

THRILLED THAT PROFESSOR KEYU JIN COULD JOIN US.

CONGRATULATIONS ON THE IMPACT OF THE BOOK.

WHAT IS BEYOND SOCIALISM AND CAPITALISM FOR CHINA? KEYU:

THESE LABELS NO LONGER ARE THAT RELEVANT IN DESCRIBING TODAY'S

WORLD, CHINA FEES OF MIX OF ITS OWN SOCIALISM AND THE MARKETS

WORK WELL AND IT HAS A NEW PLAYBOOK MORE ABOUT THE SOFTER

METRICS OF THE RELEVANT AND DEALING WITH GEOPOLITICAL

TENSIONS. JON:

--TOM:

SEPARATE FROM THAT, THE GOODS AND STATE OWNED ENTERPRISE

ECONOMY IS STRUGGLING. WHAT IS THE GOAL OF BEIJING AND

THE GOAL OF A TOTALITARIAN REGIME TO DRIVE THOSE TWO

TOGETHER TO PROSPERITY? I DON'T SEE THAT PLAN.

KEYU: CHINA DOESN'T WORK AS EFFECTIVELY AS IT DID IN 2009

AFTER THE GREAT RECESSION, YOU CAN CALL STATE BANKS AND THEY

WOULD BE FLUSH WITH LIQUIDITY AND THE STATE WOULD UNDERTAKE

LARGE PROJECTS AND THAT IS WHAT GOT CHINA BACK ON TRACK.

THAT IS NOT GOING TO HAPPEN NOW. THE RETURNS -- THE EFFECT OF

STIMULUS IS LOWER AND THERE IS NO APPETITE FOR A MASSIVE

STIMULUS IN CHINA. THE CHINESE GOVERNMENT IS GOING

TO DO ENOUGH SO THAT CHINA SAFELY PROGRESSES ITS ECONOMY

TOWARDS 23,000 PER CAPITA DONALD -- DOLLAR INCOME IN THE

NEXT 10 YEARS BUT NO APPETITE FOR MORE THAN THAT. LISA:

THERE IS A HUGE QUESTION ESPECIALLY AROUND THE

EMPLOYMENT PICTURE IN CHINA WITH A RECORD AMOUNT OF YOUTH

UNEMPLOYMENT AND CHALLENGING SOME OF THE SENTIMENT.

HOW DOES THAT PLAY INTO WHATEVER STIMULUS THEY DECIDE

TO DEGREE -- TO AGREE UPON? KEYU:

THE YOUTH IS THE KEY GROUP AND AUDIENCE THE GOVERNMENT WILL

PRIORITIZE BUT IT IS NOT LIKE THERE IS NO JOBS AROUND.

THERE IS 25 MILLION JOB CAP. THERE IS A 300,000 TELLING CAP

EVERY YEAR AND THE PROBLEM IS THE CHINESE ECONOMY EDUCATES --

PLACED AHEAD.

--RACED AHEAD.

CHINA, AS FAR AS TO BE A GIANT AND SMART GERMANY AS FAR AS A

POWER. WE ARE TALKING ABOUT AN ECONOMY

TRYING TO LEAN --WEAN OFF A ECONOMY.

THAT IS WHY WE ARE SEEING WE ARE SUCH A SLOW DOWN OR LACK OF

RECOVERY IN CHINA. LISA:

DO YOU TAKE ISSUE WITH PEOPLE SAYING PART OF THE PROBLEM IS

THAT MULTINATIONAL COMPANIES ARE INCREASINGLY MOVING OUT OF

CHINA AND TRYING TO DE-RISK SOME OF THE POLITICAL

CROSSCURRENTS BY SHIFTING TO VIETNAM AND INDIA?

JANET YELLEN HAS VISITED IN -- THREE TIMES IN THE PAST NINE

MONTHS. KEYU: VIETNAM IS THE SIZE OF A

PROVINCE AND MAY BE SMALLER SO I DON'T THINK ALL THE WORLDS'S

FACTORY CAN BE REALISTICALLY SHIFTED OUT TO SOUTHEAST ASIA

AND CHINA IS TRYING TO MOVE THE GLOBAL VALUE CHAIN SO IT IS

CONSISTENT WITH ITS ECONOMIC DEVELOPMENT BUT ALL IN ALL, IT

IS DEEPLY EMBEDDED IN THE GLOBAL SUPPLY CHAIN SYSTEM

WHICH IS ALSO WHY ZERO INFLATION RIGHT NOW IS ALSO --

IT ALSO MEANS IT WILL NOT ADD TO INFLATIONARY PRESSURE

GLOBALLY. TOM:

I LOOK WHERE WE ARE WITH ORVAL SCHELL WRITING ABOUT THE

CHALLENGES SHE FACES WITH CHINA. WHAT IS THE ECONOMIC

SOPHISTICATION AND KNOWLEDGE OF BEIJING TO ADDRESS THESE

DOMESTIC ISSUES? THERE IS A FEELING -- THE GREAT

WORK OF FOREIGN AFFAIRS MAC TO SEE -- MAGAZINE AND CFR, I WILL

MENTION OFF THIS, THERE IS A FEELING THAT THESE GUYS ARE NOT

THAT SOPHISTICATED AND WORKING WITHIN A COMMUNIST MANUFACTURED

-- CON -- COMMUNIST STRUCTURE THAT IS STATED. --DATED.

KEYU: THINK THE POLICYMAKERS ARE INCREDIBLY SOPHISTICATED.

THE QUESTION IS WHAT IS THE CENTRAL LEADERSHIP PRIORITY AND

IT IS NOT ABOUT -- JUST ABOUT ECONOMIC EFFICIENCY.

IT IS ABOUT SECURITY AND REALIZING THE CHINESE DREAM.

THAT GOES TO CHINESE SOCIALISM SO IT IS NOT JUST ABOUT

ECONOMIC EFFICIENCY BUT ON THE GOVERNMENT POLICY, I THINK

THERE IS AN INCREDIBLE AMOUNT OF THINKING BEHIND THAT AND

THERE IS POLICY -- TAKE THE LOCAL GOVERNMENT DEBT ISSUE.

A HUGE AMOUNT OF DEBT BUT THEY'RE COMING UP WITH A PLAN,

LOTS OF DIFFERENT WAYS WITH COMMERCIAL BANKS -- SETTING UP

NEW FUNDS AT THE LOCAL GOVERNMENT LEVEL TO INJECT

LIQUIDITY AND IT IS MORE OF A CHOICE RATHER THAN A LACK OF

EXPERTISE. JON: THANKS FOR JOINING US.

KEYU JIN OF THE LONDON SCHOOL OF ECONOMICS AND AUTHOR OF THE

NEW CHINA LAY BOOK -- PLAYBOOK.

WE HAD A STRING OF WORSE THAN EXPECTED ECONOMIC DATA THROUGH

CHINA OVER THE LAST SIX MONTHS.

THERE HAS BEEN GREAT DISAPPOINTMENT OVER WHAT HAS

NOT MATERIALIZED RELATIVE TO LOFTY EXPECTATIONS. TOM:

WE ARE WEDDED TO THREE CITIES OF THE PACIFIC RIM AND THERE'S

A WHOLE CHINA WEST INCLUDING THE RECORD HEAT AT 126 DEGREES

FAHRENHEIT AND THE ANSWER IS IN THE BROAD SPECTRUM OF CHINA,

THERE IS ONLY ONE MANDATE, EMPLOY PEOPLE.

LISA, YOU NAILED IT WITH THE QUESTION OF YOUTH 21%

UNEMPLOYMENT. LISA: THERE ARE QUESTIONS OF THE

TEARS WITH THE U.S. AND WHAT IT WOULD HAVE BEEN

WITH THE ASPECT OF THE INTERLOCKING WITH MULTINATIONAL

COMPANIES. ONE PERSON PUT OUT A THREAT OF

TWEETS OVER THE WEEKEND SAYING THAT TRADE HAS GONE DOWN,

IMPORTS TO THE U.S. WOULD HAVE BEEN SO MUCH HIGHER

FROM CHINA IF IT HAD NOT BEEN FOR THE

TARIFFS. THAT IS THE SUGGESTION FROM

SOME OF THE DATA SO YOU WONDER AROUND THE MARGINS HOW MUCH OF

THE GEOPOLITICAL LANDSCAPE IS ALSO AFFECTING WHAT WE ARE

SEEING ON THE GROUND IN CHINA. JON:

NOT A THREAD OF THREADS ON GRANT --THREADS.

BUT A STRING OF TWEETS ON TWITTER? LISA:

IT IS A LITTLE SLOW. TOM: THERE IS A BLISTERING NOTE THAT

A LOT OF YOU ARE QUITTING. IT IS NOT WORKING. LISA:

IT IS HARDER TO FIND PEOPLE AND HARDER TO CULTIVATE YOUR TWEET

STRING, YOUR THREAD NEEDLE. [LAUGHTER] TOM:

MY TWITTER FEED IS DRAMATICALLY WEAKER THAN IT WAS. JON:

THIS LASTED FOR TWO WEEKS, THIS CONVERSATION TURNS SO QUICKLY.

EQUITIES ARE SOFTER.

>>.

>> EVEN IF STORM CLOUDS DO MATERIALIZE WE THINK THAT IS

STILL A WAYS AWAY.

>> IT COMES DOWN TO THE INFLATION PICTURE.

>> WE ARE CONFIDENT THAT BY 2024 WE WILL NOT BE WORRIED

ABOUT INFLATION.

>> WE WILL SEE A MILD AND SHALLOW RECESSION TOWARDS THE

END OF THE YEAR.

>> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE,

JONATHAN FERRO, AND LISA ABRAMOWICZ. JONATHAN:

A WEEK OF QUIET CONFIDENCE FOLLOWING THE ECONOMIC DATA IN

AMERICA. THIS IS BLOOMBERG SURVEILLANCE

ON TV AND RADIO. I AM JONATHAN FERRO.

GETTING YOUR MONDAY MORNING STARTED WITH EQUITY FUTURES

SLIGHTLY NEGATIVE. ONE HOUR AND 15 MINUTES AWAY,

SECRETARY YELLEN CATCHING UP WITH BLOOMBERG'S ANNMARIE.

TOM: THE TRAVELS OF SECRETARY YELLEN, NOT ONLY THERE BUT TO

EUROPE. THIS IS THE NEAR NATIONAL

SECRETARY OF THE TREASURY THAT HAS TO COME HOME TO SERIOUS

DOMESTIC ISSUES. ONE IDEA IS THE ZEITGEIST OVER

THE WEEKEND OF THE AMPLE AMOUNT OF DEBT IN AMERICA, WHICH LEADS

US TO A LINKAGE WITH JAPAN AND ITALY FOR AMOUNT OF DEBT OUT

THERE. JONATHAN:

LOOKING FORWARD TO HER VIEW ON THAT TOPIC.

WE TALKED ABOUT A RANGE OF BANKS THAT HAVE COME OUT.

CITIGROUP AND MORGAN STANLEY AND JP MORGAN AND SOCGEN, TAKE

YOUR PICK, CUTTING EXPECTATIONS FOR GROWTH IN CHINA THIS YEAR.

TOM: WHAT DOES THAT MEAN FOR YOU --

LISA: WHAT DOES THAT MEAN FOR EUROPE

OR THE LUXURY SECTOR? WE HEARD OF SOME SORT OF

DECLINE WITH CONCERN AROUND CHINA SALES.

HOW MUCH HAS THE RECOVERY FUELED SOME OF THE WAGERS

OVERSEAS THAT PERHAPS MIGHT BE LOSING STEAM.

THIS IS SOME OF THE QUESTIONS PEOPLE HAVE. JONATHAN:

THERE ARE HOPES THIS RALLY WILL BROADEN OUT.

WE HAVE THE PERFECT GUESTS TO HAVE THIS CONVERSATION WITH.

ONE STOCK IS PARAMOUNT, -2.9%. BOX OFFICE NUMBERS FOR MISSION

IMPOSSIBLE SLIGHTLY DISAPPOINTING.

I WILL GIVE YOU MY REVIEW IF YOU WANTED IN ABOUT 28 MINUTES.

TOM: GIVE US THE REVIEW RIGHT NOW.

THE GUY DOES HIS OWN STUNTS. GRACE IS LOVELY.

THE PLOT IS DEEPLY THICK. IT IS A PREQUEL TO THE REAL

MOVIE? JONATHAN: IT IS TIMELY. IT IS ABOUT ARTIFICIAL

INTELLIGENCE. I ENJOYED THE BEGINNING BUT IT

FELT LIKE A WARM UP FOR PART TWO AND I DO NOT WANT MY MOVIES

TO FEEL LIKE A WARM UP, I WANT THEM TO BE SOMEWHAT CONCLUSIVE.

IT DID FEEL LIKE THAT IN THE THEATER.

I FELT LIKE I WAS SITTING AROUND FOR SOMETHING THAT COMES

OUT OF NINE MONTHS. LISA: CAN I JUST SAY YOU ARE LIKE I

WILL GIVE YOU MY REVIEW IN 26 MINUTES. JONATHAN:

THAT IS THE TEES. THE FULL REVIEW IS IN 27

MINUTES. TOM: MAYBE THEY COULD GO SEE THE

BARBIE MOVIE. LISA:

IT IS STILL -- JONATHAN: IT IS STILL A SOLID MOVIE.

IT IS GOOD TO SEE THE THEATER BEAT -- THE THEATER BUSINESS

DOING WHAT IT IS DOING RELATIVE TO A FEW YEARS AGO WHEN WE

THOUGHT IT WAS DEAD. TOM: I DID NOT KNOW THAT IN THE

MOVIE HE IS PART OF THE IMF. JONATHAN: IS THAT NEWS DO YOU?

ETHAN IS WORKING FOR THE DIRECTOR OF THE IMF.

EQUITIES SOFTWARE .5% ON THE S&P 500. SLIGHTLY NEGATIVE.

YIELDS ARE LOWER FIVE BASIS POINTS.

THIS RUN CONTINUES, THE EURO AGAINST THE DOLLAR.

SQUEEZING OUT IN EIGHTH DAY OF STRENGTH AGAINST THE U.S.

DOLLAR. WE ARE POSITIVE .03%.

THE CURRENCY PAIR IS 1.1231. LISA:

AN AMAZING MOVE OVER THE PAST COUPLE OF WEEKS.

TODAY WE WILL BE HEARING FROM JANET YELLEN WHO WILL BE IN A

CONVERSATION WITH ANNMARIE HORDERN AT 8:15 EASTERN AS

JANET YELLEN IS IN INDIA TODAY AND TOMORROW.

ALSO YESTERDAY AS SHE ATTENDS THIS G20 FINANCE MINISTERS AND

CENTRAL BANK GOVERNORS MEETING. CURIOUS TO HEAR ABOUT THE

BALANCE BETWEEN INFLATION CONCERNS AND GROWTH AT A TIME

THE U.S. ECONOMY WILL POSSIBLY FUELED

THE GLOBAL ECONOMY MUCH MORE THAN IT HAS IN THE PAST BECAUSE

OF CHINA. EIGHT: 30 AM JULY EMPIRE MANUFACTURING

SURVEY. HOW MUCH DO WE SEE A

RE-ACCELERATION IN A MANUFACTURING SECTOR THAT HAS

BEEN FLAT ON ITS BACK? WILL THAT MEET UP WITH SERVICES

OR WILL SERVICES COME DOWN TO MANUFACTURING?

TODAY REGIONAL BANK EARNING START ROLLING OUT AHEAD OF

MORGAN STANLEY AND BANK OF AMERICA.

ON WEDNESDAY WE HEAR FROM FB FINANCIAL, WHICH IN PARTICULAR

IS TRACKING. GUARANTEED BANK SHARES.

JONATHAN: ARE YOU EXCITED FOR THAT? TOM:

I AM EXCITED TO HEAR HOW BAD THIS IS FOR SMALL BANKS.

TO LISA'S BRIEF THIS IS NOT JP MORGAN. THESE GUYS HAVE OTHER

HEADACHES. JONATHAN: SOME BANKS WE HAVE NEVER HEARD

OF. IT IS LIKE WHAT WE DO MARCH MADNESS AND EVERYONE TALKS

ABOUT GONZAGA. I NEVER HEARD OF THEM.

IF YOU WENT TO GONZAGA, I AM SORRY. TOM:

GOOD MORNING, WASHINGTON STATE. [LAUGHTER] JONATHAN:

GOOD MORNING. YOU ARE ONE OF THOSE

INDIVIDUALS LOOKING FOR THIS MARKET TO BROADEN OUT.

CAN YOU TELL ME ABOUT THE FRAMEWORK? MICHAEL:

PEOPLE HAVE BEEN TOO NEGATIVE. I THINK THEY TALK THEMSELVES

INTO LOOKING FOR A RECESSION AND A LOT OF THE CYCLICAL

SECTORS HAVE NOT PARTICIPATED IN THIS RALLY.

THERE IS A LOT OF THE S&P STILL IN THE CYCLICAL PORTION.

WHERE IT WAS LAST DECEMBER. IF WE GET SOME SIGN FROM

MANAGEMENT THAT NOT ONLY HAVE EARNINGS HELD UP BUT THEY TOOK

THEIR GUIDANCE DOWN LAST QUARTER AND FEEL BETTER ABOUT

THINGS, I THINK THAT PORTION OF THE MARKET CAN PLAY CATCH UP.

JONATHAN: SAID THROUGH BANKS OR THROUGH

ENERGY? WHAT IS IT? MICHAEL:

I DO NOT THINK THE BANKS WILL SURPRISE PEOPLE.

I THINK WE WILL SEE THE BIG BANKS WILL OF BENEFITED FROM

THE SMALL BANKS LOSING DEPOSITS. I DO NOT THINK THAT IS SHOCKING.

ENERGY DOES STAND OUT AS A CHEAP SECTOR IF OIL IS STABLE.

THAT IS ONE TO LOOK FOR. EXXON TOOK EXPECTATIONS DOWN A

COUPLE OF WEEKS AGO AND WE WANT TO SEE WHETHER THEY ARE

ULTRACONSERVATIVE WHERE THERE HAS BEEN A PROBLEM IN THAT

SECTOR. THE DISCONNECT BETWEEN COMMODITY PRODUCERS AND

INDUSTRIAL EQUITIES IS UNUSUAL. INDUSTRIALS HAVE BEEN A

PARTICIPANT IN THIS RALLY AND A LOT OF THE COMMODITY PRODUCERS

HAVE BEEN TIED TO AND SOME HAVE NOT. TOM: -- LISA:

THE RECESSIONISTAS POINT TO MANUFACTURING.

THE SUB 50 ISM IN MANY MONTHS IN A LOW.

HOW DO YOU DOVETAIL THAT INTO THE SOFT LANDING WITH

PARTICIPATION FROM SOME OF THE MANUFACTURING SECTOR?

>> OUR THEORY IS WHAT YOU ARE SEEING IS A BROAD SLOWDOWN IN

MANUFACTURING RATHER THAN A DEEP SLOW DOWN.

ALL YOU GET FROM THE ISM IS MORE PEOPLE SAYING THINGS HAVE

GOTTEN SLIGHTLY WORSE AND MORE PEOPLE SAYING THINGS ARE

SLIGHTLY BETTER. IF IT IS LOT OF PEOPLE SAYING

THINGS WERE UNUSUALLY GOOD YEAR OR YEAR AND A HALF AGO, AND

THAT GIVES YOU A READING OF 47, IT IS NOT THE SAME AS AN EARLY

RECESSION READING OF 47.

PEOPLE DO NOT DISTINGUISH A RAPIDLY DETERIORATING

ENVIRONMENT AND AN ENVIRONMENT WHICH IS QUITE AS GOOD AS

PEOPLE EXPECTED IT TO BE.

LISA: THERE IS A TENSION AND IT WAS

PRESENT LAST WEEK.

I AM CONCERNED ABOUT THIS POLARIZATION OF THIS IDEA OF AN

OVERHEATING ECONOMY WITH THE STRENGTH TO FIRING ALL OF THE

RECESSIONISTAS WITH INFLATION COMING DOWN RAPIDLY AND THE

SENSE WE WILL SEE THAT PRESSURE. ARE THOSE IDEAS IN CONFLICT?

>> I THINK IT IS A COMPLICATED ECONOMY, AND PARTICULARLY

POST-COVID I AM OF THE VIEW THAT MONETARY POLICY HAS NOT

AFFECTED THAT MUCH OF THE ECONOMY.

ENERGY WAS A MASSIVE CONTRIBUTOR TO INFLATION ON THE

WAY UP AND HAS BEEN ON THE WAY DOWN.

I THINK THERE IS SOME PACT OF MONETARY POLICY ON HOUSING.

DEMAND FOR HOUSING HAS BEEN CRIMPED.

MONETARY POLICY HAS BEEN SO LAX -- WE'RE ADAPTED IS HAVING ANY

IMPACT ON AGGREGATE DEMAND. JONATHAN:

INFLATION DATA CAME OUT LAST WEEK.

IT WAS CELEBRATED, AND IT WAS GOOD NEWS.

I THINK TOO MANY PEOPLE RAN AWAY WITH THE IDEA AND SAID THE

FEDERAL RESERVE HAS BEEN SUCCESSFUL AND THEY CAN BACK

AWAY. ARE YOU SAYING IT IS BECAUSE

THIS ECONOMY IS MORE RESILIENT OR HAS NOT COME THROUGH THE

PIPELINE? MICHAEL:

IS MORE RESILIENT IN THE LONG END OF THE CURVE HAS NOT

COMPLETED MONETARY TIGHTENING.

IF YOU LOOK AT CREDIT YIELD, A BBB BORROWER IS PAYING MORE TO

ISSUE DEBT TO DATE THE NEXT YEAR. JONATHAN:'S

NEXT YEAR A BETTER YEAR BASED ON EVERYTHING YOU'VE JUST SAID?

MICHAEL: I DON'T KNOW IF IT IS A BETTER

YEAR FOR MARKETS BUT I THINK THE ECONOMY WILL SURPRISE

PEOPLE BY ITS RESILIENCE. JONATHAN:

MICHAEL, FANTASTIC TO CATCH UP WITH YOU.

NOT THE ONLY ONE I HAVE HEARD SAYING THIS ON THE INFLATION

DATA WE HAVE HAD SO FAR. WE NEED TO HAVE A BIGGER

CONVERSATION ABOUT THIS. INFLATION IS IMPROVING IN TERMS

OF WHERE WE WANT IT TO BE, BUT WHY, AND WHAT IS TAKING IT

THERE? LISA: FED POLICY HAS NOT TAKEN EFFECT

YET. IT IS NOT THEIR VICTORY. IT IS NOT BECAUSE OF THEIR

POLICIES. WHAT MICHAEL WAS SAYING ABOUT

LONGER-TERM RATES, THEY HAVE NOT BEEN RESTRICTIVE SINCE

SEPTEMBER BECAUSE OF THIS RALLY, THEN DOES THE FED NEVER

FULLY TRANSMIT ITS POLICY TO AN ECONOMY THAT KEEPS CHUGGING

ALONG AN DIS-INFLATED NATURALLY REGARDLESS OF WHAT THEY DID?

TOM: "THE DILUTION OF MANUFACTURING"

AND WHAT IS SO IMPORTANT WITH THE DILUTION OF MANUFACTURING

-- THE DELUSION OF MANUFACTURING IS WE ARE STILL A

SERVICE SECTOR ECONOMY. WE ARE A SERVICE SECTOR ECONOMY.

MAYBE THERE IS A NEW MANUFACTURING MIGHT. JONATHAN:

RICK RIEDER OF BLACKROCK MAKING THE SAME POINT TO OUR

COLLEAGUES IN BLOOMBERG NEWS. WELCOME TO THE PROGRAM. -.1%.

COMING UP IN ABOUT 48 MINUTES, LOOK OUT FOR THIS CONVERSATION.

WILL BE CATCHING UP WITH DAVID BALIN OF CITIGROUP GLOBAL

WEALTH. AND I BRING YOU THAT QUOTE.

"I THINK RECESSION IS GROSSLY OVERSTATED AS A PHENOMENON

WITHOUT SOME MASSIVE SHOCK TO THE SYSTEM."

WE THINK WE HAD THAT SHOCK IN MARCH AND APRIL.

WE QUICKLY LEFT BEHIND CONCERNS ABOUT THAT SECTOR.

LET'S SEE IF THEY RETURN. TOM: DAVID BALIN.

MICHAEL SCHILL WHILE, WHAT IS THE COMMON FEATURE?

YOU HAVE TO BE IN THE MARKET AND IF YOU ESTABLISH A MORE

LONG-TERM VIEW YOU HAVE TO PARTICIPATE IN ENTERPRISE AND

RIGHT NOW THE ENTERPRISE IS AN AMERICAN SYSTEM, AMERICAN

CORPORATIONS ADAPTING AND ADJUSTING.

TO RICK RIEDER'S POINT, WITHOUT A SHOCK HOW DO YOU GET TO A

TRUE RECESSION? WE DO NOT GIVE OUR OPINION BUT

ALL THREE OF US HAVE PUSHED AGAINST THAT. JONATHAN:

I SPOKE TO HIM ON FRIDAY. JAY PELOSKY AS WELL.

THEY POINTED OUT THERE IS A TON OF CASH IN MONEY MARKETS. TOM:

LARRY MCDONALD, HIS ESSAY IN THE SECOND QUARTER WAS THE

ESSAY OF THE QUARTER, WHICH IS THE FIRST ORDER CONDITION IS

THE MONEY OUT THERE THAT HAS TO FIND A PLACE. JONATHAN:

IF IT DOES, THAT IS ARGUMENT ONE.

ARGUMENT TWO IS WHERE IT GOES. THEY BELIEVE IT DOES NOT GO TO

TECH, MAYBE IT GOES ELSEWHERE. TOM:

THE CREDITS BED -- THE CREDIT SPREAD REALITIES OF HIGH-YIELD

ARE SCREAMING. JONATHAN:

>> TARIFFS WERE PUT IN PLACE BECAUSE WE HAD CONCERN WITH

UNFAIR TRADE PRACTICES ON CHINA'S SIDE.

OUR CONCERNS WITH THOSE PRACTICES REMAINED.

I WOULD SAY IT IS PREMATURE TO USE THIS AS AN AREA FOR

DE-ESCALATION AT THIS TIME.

JONATHAN: JANET YELLEN SPEAKING IN INDIA.

IN ABOUT OUR -- IN ABOUT AN HOUR SPEAKING TO THE TREASURY

SECRETARY ABOUT CHINA AND THINGS BEYOND THAT.

EQUITIES SLIGHTLY NEGATIVE, WE ARE DOWN .1% ON THE S&P 500.

ONCE AGAIN, WE HAVE A WEAKER DOLLAR AGAINST THE EURO.

1.1238 FOR THE EURO AGAINST THE DOLLAR AND YIELDS ARE LOWER,

DOWN FIVE BASIS POINTS. YOUR 10 YEAR 3.7794.

TOM: EURO BREAKOUT WOULD BE SOMETHING WE HAVE NOT SEEN YET.

IT IS A QUIET DAY BUT IT IS A ON THE WATCH QUIET DAY FOR WHAT

IS SUPPOSED TO BE QUIETER MONDAY. JONATHAN:

LOOKING OUT FOR THE ECB TO POTENTIALLY HIKE AGAIN AND THEN

WATCHED? RECESSION RIGHT NOW IN GERMANY.

TOM: WE COULD WASTE OUR TIME ON THAT

WITH ANNMARIE HORDERN. SHE IS THE EURO CORRESPONDENT

BUT THERE ARE MORE IMPORTANT THINGS TO TALK TO HER ABOUT

TODAY. THERE IS A CONVERSATION WITH

THE SECRETARY OF TREASURY.

ANNMARIE HORDERN, I AM CERTAIN THAT IN WASHINGTON WE HAVE

NEVER HAD A SECRETARY OF TREASURY WHO UNDERSTANDS THE

DYNAMICS OF OUR LABOR ECONOMY AS THIS SECTOR OF THE TREASURY.

DOES JANET YELLEN FEEL WE HAVE REACHED ESCAPE VELOCITY AWAY

FROM A RECESSION? ANNMARIE: IT IS A QUESTION WE COULD ASK

HER IN ABOUT AN HOUR. SHE HAS HINTED THEY ARE IN A

GOOD POSITION FOR THE SOFT LANDING.

I THINK SHE IS VERY PRUDENT AND THE FACT SHE WOULD NOT TAKE A

RECESSION OFF THE TABLE, ESPECIALLY THIS ADMINISTRATION

HAVING DEALT WITH COMING OUT AND CALLING VICTORY OR TRYING

TO SOCIALIZE, THAT THEY THOUGHT INFLATION WAS TRANSITORY.

I DO NOT THINK THEY WILL CLAIM VICTORY THAT THEY HAVE THE SOFT

LANDING, BUT GIVEN THE LATEST INFLATION DATA THAT IS

SOMETHING OBVIOUSLY TOP OF THEIR MIND AND HOPEFULLY THEY

ARE OPTIMISTIC ABOUT IT. ONE CONCERN IS WHAT WE ARE

SEEING OUT OF CHINA THIS MORNING.

ALREADY CITIGROUP IS CUTTING THEIR GDP GROWTH TARGET FOR

CHINA. WHAT DOES THIS MEAN FOR THE

GLOBAL ECONOMY? THIS IS WHAT IS PAINTING THE

BACKDROP OF THE BANKERS MEETING THE SECRETARY IS AT IN INDIA.

JONATHAN: MOHAMED EL-ERIAN WRITING THIS

MARKET HAS BEEN RALLYING ON WHAT HAS NOT HAPPENED.

LET'S TALK ABOUT WHAT IS NOT CHANGED BETWEEN THE FORMER

ADMINISTRATION AND THIS ADMINISTRATION.

I MENTION CHINA WILL BE TOP OF MIND FOR YOU AND THE TREASURY

SECRETARY. WHAT IS HAPPENING WITH THOSE

TARIFFS? ANNMARIE: THEY'RE ALMOST AT THE FINISH

LINE OF THIS REVIEW OF THE TARIFFS. THE POINT YOU MAKE IS

IMPORTANT. THIS ADMINISTRATION, THE BIDEN

ADMINISTRATION NOT ONLY KEPT THE TRUMP ERA TARIFFS IN LINE,

ESPECIALLY IN A TIME INFLATION WAS INCREDIBLY HIGH AND

ECONOMISTS THAT THAT COULD BE ONE TOOL OF THE TOOLBOX TO

BRING INFLATION DOWN. THEY STILL KEPT THEM IN PLACE.

THEY ARE DOUBLING DOWN WHEN IT COMES TO THEIR EXECUTIVE ORDER

THEY ARE STARTING TO LIFT THIS SUMMER, POTENTIALLY AS SOON AS

THE END OF JULY, AND OTHER PENALTIES OR SANCTIONS ON CHINA

OR EXPERT CONTROLS ON CHINA. YOU SEE THE TREASURY SECRETARY

SAYING THEY WANT TO DE-ESCALATE, BUT RIGHT NOW WHEN

YOU SEE A TIT-FOR-TAT ON THE ECONOMIC FRONT BETWEEN CHINA

AND BEIJING THAT DOES NOT BODE WELL FOR ANY DE-ESCALATION.

LISA: AND THE FACT SHE IS SPEAKING IN

INDIA WHERE SHE HAS VISITED THREE TIMES AND TALKS ABOUT THE

INCREDIBLY CLOSE FRIENDSHIP SHE HOPES TO TRANSPIRE IN INDIA

MOVING POTENTIALLY AWAY FROM CHINA.

HOW DOES THAT MESSAGING GO OVER IN CHINA.

HOW DO SHE TRY TO FINESSE OVER THAT REALITY? ANNMARIE:

I THINK IT IS NO SURPRISE TO CHINESE AUTHORITIES WHAT UNITED

STATES HAS BEEN DOING. AFTER THIS SHE WILL BE GOING TO

VIETNAM. SHE HAS BEEN A STALWART WHEN IT

COMES TO THIS IDEA OF FOR ENSURING AND THEIR SUPPLY CHAIN

WHEN IT COMES TO COVID-19 AND NATIONAL SECURITY WHEN IT COMES

TO SUPPLY CHAINS IN CHINA AND THEY WANT TO DIVERSIFY.

I WOULD ALSO NOTE INDIA IS A CRITICAL PLAYER.

MODI'S GOT A STATE VISIT TO THE UNITED STATES.

JANET YELLEN HAS VISITED THREE TIMES IN 10 MONTHS.

SHE IS NOT VISITED ANY PLACE AS MUCH AS INDIA.

THEY WILL BE HOSTING THE LEADERS SUMMIT IN SEPTEMBER.

INDIA WILL BE THE PRESIDENCY AROUND THIS, AND THEY ARE IN A

VERY DIFFICULT POSITION BECAUSE THEY ARE STILL CONDUCTING A

TREMENDOUS AMOUNT OF TRADE WITH RUSSIA AND AT THE SAME TIME THE

U.S. WANTS TO MAKE SURE THEY ARE IN

LINE WITH HOW THEY VIEW THE WORLD ORDER. TOM:

THE HERITAGE OF JANET YELLEN UNDER JAMES TOBIN AND STIGLITZ

WERE HUGELY INFLUENTIAL AND SHE WAS RENOWNED FOR HER ACUITY,

HER IMMEDIATE SEAT OF HER JANET YELLEN NOTES.

THEY WERE LITERALLY CALLED YELLEN NOTES AND SHE WAS IN A

MEETING. HOW ARE HER YELLEN NOTES ON

CHINA RECEIVED IN THE OVAL OFFICE.

IS ANYONE PAYING ATTENTION TO PROFESSOR YELLEN? ANNMARIE:

CERTAINLY THEY ARE. THERE HAS BEEN A LITTLE BIT OF

DIVERSION WITHOUT TREASURY SEES THE RELATIONSHIP WITH CHINA

VERSUS HOW THE WHITE HOUSE SEES THE RELATIONSHIP.

THIS COMES DOWN TO AN ISSUE LIKE THE TARIFFS.

THE ISSUE WITH THE TARIFFS BECOMES AN ISSUE WITH ECONOMICS

VERSUS POLITICS.

A LOT OF ECONOMISTS WOULD SAY IT WOULD BE PRUDENT IF YOU WANT

TO EASE UP ON INFLATION TO LIFT THE TRUMP ERA TARIFFS.

OBVIOUSLY THAT WOULD BE POLITICALLY TOXIC FOR THIS

ADMINISTRATION, ESPECIALLY GOING INTO AN ELECTION NEXT

YEAR. SHE SAID IT WAS PREMATURE TO

SAY THEY ARE ON THE TABLE, BUT POTENTIALLY THIS IS SOMETHING

THIS ADMINISTRATION IS LOOKING AT YET AGAIN.

I WOULD FIND IT HARD TO SEE THEM NOW THAT WE ARE SEEING

INFLATION COOLING AND GOING INTO AN ELECTION CYCLE THAT NOW

WOULD BE THE TIME. IT SEEMS LIKE THE BOAT HAS

MISSED IN TERMS OF LIFTING THOSE TARIFFS.

THAT IS WHERE YOU SEE SOME OF THE TENSION BETWEEN THIS WHITE

HOUSE AND THE TREASURY MARKET. JONATHAN:

JUST TO GIVE TOM AN EXTRA QUESTION, I WILL ASK ONE FOR

HIM. THERE WAS A VIEW OVER THE LAST

COUPLE OF YEARS THAT JANET YELLEN HAD BEEN SIDELINED IN

THIS ADMINISTRATION. I THAT WE HAVE TALKED ABOUT HER

POTENTIAL DEPARTURE 10 DIFFERENT TIMES.

WHAT IS HAPPENING NOW? SHE HAVING A BIGGER VOICE IN

THIS WHITE HOUSE? ANNMARIE: I THINK THE TREASURY SECRETARY

HAS BEEN USED AS AN IMPORTANT AID WHEN THEY'RE TRYING TO HAVE

THIS WE ENGAGEMENT WHEN IT COMES TO CHINA.

WE HAVE SECRETARY OF STATE ANTONY BLINKEN GO FIRST. THE

ADMINISTRATION WANTED TO SET THIS TONE WE HAVE SERIOUS

ISSUES WHEN IT COMES TO THE SUPPORT OF VLADIMIR PUTIN, WHEN

IT COMES TO TAIWAN. THESE ARE ALSO THE TWO BIGGEST

ECONOMIES IN THE WORLD AND THE ADMINISTRATION UNDERSTANDS THE

REST OF THE WORLD WANTS TO SEE HOW THEY HAVE A DIALOGUE AND

HOW THEY CAN BE THERE AS AN AID TO EXPLAIN WHAT WAS GOING TO BE

COMING DOWN ON THE PIPELINE. IN THAT SENSE SHE IS A SAFE

PAIR OF HANDS. ONE CRITICISM OF THE SECRETARY

IS WE KNOW HER AS AN ACADEMIC, AS OF FED CHAIR, NOT SO MUCH AS

A POLITICIAN.

JONATHAN: WILL BE SPEAKING TO THE

TREASURY SECRETARY ABOUT 45 MINUTES.

AND REORDERING SITTING DOWN WITH JANET YET -- ANNMARIE

HORDERN SITTING DOWN WITH JANET YELLEN.

AMH USE THE WORD PREMATURE, CITI USING THE SAME WORDS.

ANDREW HOLLENHORST SAYS ALL OF THE OPTIMISM IS PREMATURE.

UPSIDE RISK TO SHELTER AND OTHER SERVICES INFLATION MEANS

WE DO NOT SHARE THE OUTLOOK. TOM:

SAME PAGE AS MOHAMED EL-ERIAN. THAT IS WHAT THE MARKET IS

TRYING TO DO. TRIPLE LEVERAGED ON CASH.

JONATHAN: NO DRAMA THIS MORNING. STOCKS DOWN A TOUCH ON THE S&P.

THE NASDAQ TOTALLY UNCHANGED AFTER A DECENT WEEK OF GAINS ON

THE S&P 500.

WE ARE -.1% ON THE S&P 500. THE NASDAQ TOTALLY UNCHANGED.

-- VALIDATED BY SOME OF THE DATA.

RETAIL SALES TOMORROW MORNING. WE TALKED ABOUT ANDREW

HOLLENHORST AT CITIGROUP PUSHING BACK AGAINST THAT VIEW.

SOFT LANDING OPTIMISM IS PREMATURE.

ANDREW AND THE TEAM SAYING A TIGHTENING OF FINANCIAL

CONDITIONS BUT INFLATION MAY RE-ACCELERATE IN 2024.

I AM SURE YOU CAN AGREE WE ARE SICK TO DEATH ABOUT TALKING

ABOUT IT. THEIR HOPES IN 2024 THAT IT

WILL NOT BE. THERE IS MORE OF THIS TO COME.

TOM: I GET THAT WE HAVE TO RATIONALIZE WITH THE SUM OF ALL

OF OUR FEARS OF THE MARKET AND I GET IT IS A HEALTHY EXERCISE

BUT THE PHRASING WRAPPED AROUND WE JUST HAVE TO WAIT FOR THE

DATA IS COMICAL.

JONATHAN: RETAIL SALES TOMORROW MORNING

IS THE NEXT BIG DATA POINT. IT IS QUIET ON THE FED SPEAK AS

WELL. THEY ARE IN THE QUIET PERIOD OF.

WEDNESDAY LOOKING FOR ANOTHER RATE HIKE AND THEN ONTO THE

EARNINGS FROM BANK OF AMERICA AND MORGAN STANLEY TOMORROW.

GOLDMAN SACHS ON WEDNESDAY. THE EURO, EIGHT CONSECUTIVE

DAYS. TOM: THAT IS THE ONE THING I'M

WATCHING. JONATHAN: GRINDING OUT ANOTHER ONE. TOM:

I NOTICE ON CHINA WEAKNESS, BRENT CRUDE BACK TO $78.9.

WHAT IS IMPORTANT IS BRAMO WHEN WE DIVE INTO STOCKS, BRAMO WILL

CONTROL THE TRUTH. THAT IS WHAT SHE IS DOING.

JONATHAN: THE TRUTH AROUND MARKETS OR

MISSION IMPOSSIBLE? YOU'VE GIVEN THE IMPRESSION WE

WATCH -- YOU WATCH THAT MOVIE OVER THE WEEKEND.

TOM: FULL DISCLOSURE, OUR WORLD STOPPED ON FRIDAY EVENING WITH

THE TV SHOW FOR MISSION IMPOSSIBLE. LISA:

I WANT TO START WITH CHEWY. THE NEWSFLASH OF THE MOMENT IS

ALL OF THE PETS PEOPLE ADOPTED DURING A PANDEMIC STILL HAVE TO

BE FED. SHARES OF JULIE WERE UP 210%

AND THEN DOWN -- SHARES OF CHEWY UP 210%.

GOLDMAN SACHS RAISE THE EXPECTATIONS THAT PROFIT WOULD

EXPAND BECAUSE TOM KEENE WOULD BE SPENDING THE MOST AS

POSSIBLE ON OR GET DOG FOOD. TOM:

THE CHEWY THON IS UNBELIEVABLE. THEIR WHOLE RACKET IS THERE IS

NOTHING YOU CAN DO WITH A FEW CLICKS TO SPEND MORE MONEY THAN

CHEWY. JONATHAN: AMAZON IS THE SAME THING. TOM:

CHEWY IS BETTER. LISA: IT IS LIKE A DATING APP EXCEPT

FOR DOG FOOD. TOM: THE DOG FOOD JUST KEEPS GOING

UP. UP AND UP.

LISA: SPEAKING OF PRICES GOING UP

TESLA LOOKS LIKE IT WILL BE ITS FIFTH DAY OF GAINS, UP 2.2%.

YOU CAN SEE GAINS IN CHINESE ELECTRIC VEHICLE MANUFACTURERS

BECAUSE SALES ARE COMING IN STRONG.

YOU ALSO HAVE THE FIRST CYBER TRUCK ROLLING OFF THE

PRODUCTION LINE AT ITS TEXAS PLANT.

THE CYBER TRUCK I KNOW JOHN WILL DRIVE.

HERE'S WHAT WE BEEN WAITING FOR, THE WHOLE DAY SINCE JOHN

TEASED HIS REVIEW ON MISSION IMPOSSIBLE:

DEAD RECKONING PART ONE. THERE SHARES LOWER 2.8% BECAUSE

THE BOX OFFICE NUMBERS WERE NOT AS GOOD. THE REVIEW? JONATHAN:

$56 MILLION OVER THE WEEKEND. PEOPLE WERE LOOKING FOR

SOMETHING INTO THE 70'S. IT FELT LIKE YOU ARE WATCHING

PART ONE OF PART TWO, THAT IS WHAT IT IS.

IT IS NEVER GOOD WHEN YOU HAVE THAT EXPERIENCE.

I ALSO GOT THE FEELING -- YOU MENTIONED GRACE PLAYED BY HALEY

ATWELL, I GOT THE FEELING THAT MAYBE HE WOULD HAND OVER THE

FRANCHISE TO A NEW LEAD. THERE WAS TALK ABOUT ETHAN HUNT

TAKING A BACKWARD STEP IN LETTING THE CHARACTER PLAY OUT

HIS LAST MOVIE. I UNDERSTAND BASED ON THE

SUCCESS OF HARRISON FORD AND INDIANA JONES MAYBE TOM CRUISE

WILL STICK AROUND. TOM: HE IS A LONG WAY FROM 80.

JONATHAN: YOU CAN SEE WHAT THEY DO WITH

GRAPHICS TO MAKE YOU LOOK YOUNGER.

THEY CAN GO BACK TO 1996 TOM CRUISE AND KEEP CHURNING OUT

THE MOVIE. I AM ACTUALLY 65 AND HAVE BEEN

DOING THIS FOR 30 YEARS. LISA: I AM 106. TOM:

I AM LESS QUALIFIED THAN EVERYONE BUT EVERYONE RAVES

ABOUT TOM CRUISE SKILLS AND HIS INTENSITY OF MAKING FILMS.

JONATHAN: THE STUNT HE DOES WHEN HE GOES

OFF THE EDGE OF THE CLIFF, THEY USE THAT FOR THE BLIZZARD HE

TORE. -- FOR THE PUBLICITY TOUR. TOM:

WHAT DID A THING OF POPCORN COST? JONATHAN:

I DO NOT BUY ANY. SOMETIMES I LIKE TO GET POPCORN.

SOMETIMES. I DID THAT 18 MONTHS AGO.

LISA: VERY SPECIFIC. [LAUGHTER] JONATHAN: WINTER PROGRAMMING.

TOM: TO THEY HAVE POPCORN AND MOVIE

THEATERS IN ENGLAND? JONATHAN: OF COURSE THEY DO.

WHAT YOU THINK ENGLAND IS, THE DARK AGES? [LAUGHTER] TOM:

DO HAVE MOVING -- LISA: DO YOU HAVE MOVING PICTURES?

TOM: JENNY GO SEE BARBIE AND GIVE US

A REVIEW? JONATHAN: IF YOU BUY THE TICKETS? TOM:

LETS GO AND WATCH BARBIE TOGETHER.

SAVING THE SHOW IS DEBORAH CUNNINGHAM, GLOBAL LIQUIDITY

MARKET. THIS IS AN IMPORTANT CONVERSATION.

WE TALKED TO STEPHEN AUTH THE OTHER DAY AND HE MADE CLEAR

THAT A LONG TIME FRAME IS NECESSARY.

WITH THE BOND LOSSES OVER THE

LAST 36 MONTHS, THE PANDEMIC BOND LOSSES, WHAT IS YOUR TIME

FRAME TO RECOVER IN THE BOND MARKET? DEBORAH:

WE THINK WE ARE NOT GOING BACK TO ZERO RATE.

RECOVERY TO THAT LOW IS UNLIKELY.

YOU WILL HAVE MATURITIES AND A BOTTOM THAT IS PROBABLY MORE

LIKE 3.5% OR 4% IF INFLATION IS ALLOWED TO SETTLE IN.

OUR EXPECTATION IS THAT IS AT LEAST A YEAR IN THE MAKING.

AS YOU KNOW WE ARE LOOKING FOR SOMETHING THAT IS HIGHER FOR

LONGER. OUR EXPECTATION FROM THE FED IS

A MOVE AT THE END OF THIS MONTH AND MAYBE ANOTHER ONE IN

SEPTEMBER OR NOVEMBER. IN EITHER CASE WE ARE LOOKING

AT RATES FIVE PLUS PERCENT FOR A PERIOD OF TIME, AT LEAST INTO

THE MIDDLE OF 2024. AS SUCH THAT MEANS THE BOND

MARKET IS RECOVERING ON A MILD BASIS, BUT IT IS NOT GOING TO

BE A FULL RECOVERY FOR A WHILE. TOM:

THE MISSION IMPOSSIBLE OF THE BOND MARKET IS TO GET RETAIL

ENTHUSIASM. RETAIL ENTHUSIASM IS HOW MUCH

APPLE CAN I OWN RIGHT NOW. WHAT IS THE PROCESS TO GET BACK

TO A BOND ENTHUSIASM AMONG RETAIL? TOM: -- DEBORAH:

RIGHT NOW RETAIL ENTHUSIASM FOR THE CASH INVESTOR OR THE FIXED

INCOME INVESTOR IS CASH AND THAT IS BECAUSE THEY WERE WOKEN

UP ABOUT THEIR DEPOSITS IN BANKS BEING ZERO, 25, 50 BASIS

POINTS NOT THAT LONG AGO. THEY WENT TO MONEY MARKET FUNDS.

THEIR NEXT MOVE IS TO ULTRA SHORTS AND FROM ULTRA SHORTS

THEY GO LONGER. THAT TAKES TIME. THE RETAIL INVESTOR RIGHT NOW

FROM A CASH PERSPECTIVE IN THE FIXED INCOME MARKET IS SHORT

AND PROBABLY WILL NOT BE GETTING LONG UNTIL THERE IS

SOME PLATEAU REACHED AND MAYBE EVEN THE FIRST RATE CUT, NOT

UNTIL THE FIRST RATE CUT WE SEE FROM THE FED.

LISA: THIS IS FASCINATING AND ANSWERS

A QUESTION WE’'VE BEEN ASKING. JOHN AND TOM TALKING ABOUT WHEN

WILL TAKE THE MONEY AND START PUTTING IT INTO EQUITIES AND

OTHER RISKY SECURITIES. ARE YOU SAYING YOU'RE NOT

SEEING ANY SIGNS OF THAT? PEOPLE ARE VERY HAPPY CASHING

IN ON THOSE COUPONS? DEBORAH: ABSOLUTELY HAPPY.

QUITE HONESTLY, THE INSTITUTIONAL SIDE OF THE

MARKET HAS NOT COME INTO THE MONEY MARKET FUND PROJECTS, BUT

THEY ARE IN DIRECT SECURITY. THEY ARE IN REPO AND SHORT-TERM

PAPER AND IT IS BECAUSE THERE INSTITUTIONAL IN NATURE AND

HAVE THE OPPORTUNITY TO PURCHASE DIRECT SECURITIES WHEN

THE FED IS RAISING RATES THEY HAVE THE ABILITY TO BE ON TOP

OF THE RATES RIGHT AWAY, WHEREAS THE MONEY MARKET FUND

MAY LAG 30 OR 40 K. THE INSTITUTIONAL TRADE HAS NOT

HAPPENED YET. THAT WILL HAPPEN WHEN RATES

PEAKED. RETAIL TRADE IS STILL ON IN

FULL FORCE. LISA: ARE YOU CONCERNED PEOPLE SAY

THINGS LIKE THERE'S A LOT OF MONEY ON THE SIDELINES BUT IT

IS NOT REALLY ON THE SIDELINES BUT IT IS AN INCREDIBLY

LUCRATIVE INSTRUMENT LIKE CASH LIKE SECURITIES? DEBORAH:

IT IS A GOOD THING. WE HAVE SEEN THESE PATTERNS

OCCUR BEFORE. I THINK PEOPLE WATCH EARNINGS

OR UNDERSTAND WHAT IS HAPPENING FROM AN ECONOMIC PERSPECTIVE

FROM THEIR OWN DAY-TO-DAY HAPPENINGS WITH WHAT THEY ARE

PAYING AT THE GAS PUMP, WHAT THEY'RE PAYING AT THE GROCERY

STORE, WHAT THEY'RE PAYING IN RENT OR MORTGAGES.

I THINK IT IS A NATURAL THING FOR RETAIL TO LEAD INTO THE

SHORT END OF THE MARKET. I ALSO THINK IT IS NATURAL FOR

THEM TO LEAD INTO THE LONGER END OF THE MARKET.

THEY DO NOT DO IT IN A U-TURN. IT IS SOMETHING THAT IS A

GRADUAL PROCESS. IT IS NOT PARTICULAR WORRY SOME.

WE TRY TO KEEP OUR FINGER ON THE PULSE OF WHAT IS HAPPENING

FROM AN ECONOMIC AND EARNINGS PERSPECTIVES. JONATHAN:

DEBORAH CUNNINGHAM THERE. THERE WAS A VIEW AT THE START

OF THE YEAR YOU WANTED TO BE IN CASH. THEN ALL OF THE SET OF THE

EQUITY MARKET HAPPENED. I KNOW IT SOUNDS CLICHE BUT

CAPITAL GOES TO WHERE IT IS TREATED BEST THERE IS A FEELING

IT IS BEEN TREATED BEST INEQUITIES AND WE WILL SEE WHO

WINS OUT. TOM: IS A MODERN VIEW? A FEAR OF MISSING OUT?

THE IDEA IS YOU GET YOUR 401(K) AND YOU LOOK AT THE THING AND

THE BOND MARKETS ARE UP 2%, CASH IS UP 4%.

EVEN A MIDDLING S&P PORTFOLIO IS UP 11 OR 12% AND THAT IS

WHAT FEEDS THE RETAIL ENTHUSIASM. LISA:

WE MENTIONED RICK RIEDER OF BLACKROCK AND HOW HE DOES NOT

SEE A RECESSION. GIVEN THAT YOU WOULD THINK IS

HE GOING ALL IN ON EQUITIES OR RISKIER BONDS, AND HE SAYS ONE

OF THE BEAUTIFUL THINGS ON INVESTING IS YOU CAN ON THE

FRONT END YIELDING ASSETS. I BOUGHT COMMERCIAL PAPER AT

6.5%. I WANT TO GO HOME AT 6.5% AND

JUST SIT. TOM: WHEN DOES THE MONEY MARKET

FRENZY STOP? DO NOT UNDERSTAND WHY ANYONE

RULE OUT A FIVE-POINT EXPERT MONEY MARKET FUND. JONATHAN:

YOU CAN GET A MONEY MARKET FUND. HE ALMOST EIGHT PHD IN

PSYCHOLOGY. IF YOU HAVE NOT BEEN IN THIS

MARKET AND HAVE SAT IN CASH.

THIS IS WHY POLASKY THINKS IF THE MONEY COMES IN FROM MONEY

MARKET FUNDS IT GOES TO WHERE THE GAINS HAVE NOT BEEN.

THAT IS NOT MY VIEW, THAT IS JUST A RANGE OF VIEWS. TOM:

ID DOW 36,000 TO CONSIDER THIS. JONATHAN:

THAT IS WHAT YOU'RE WAITING FOR. WELCOME TO THE PROGRAM WHERE WE

DO NOT QUOTE THE DOW JONES, WHICH IS -.13%.

LOOKING FORWARD TO CATCHING UP WITH THE CHIEF ECONOMIST AT EY

PARTHENON. WE WILL DO THAT IN 50 MINUTES.

IN ABOUT 30 MINUTES YOU WILL HEAR FROM JANET YELLEN

ALONGSIDE BLOOMBERG'S ANNMARIE HORDERN IN AN EXCLUSIVE

CONVERSATION. WE ARE ALL LOOKING FORWARD TO

THIS ONE ON CHINA. TOM: IT WILL NOT JUST BE ONE

SENTENCE. IT WILL BE WHAT ANNMARIE

HORDERN CAN CROWBAR OUT OF HER. NOT SO MUCH WHAT THE MARKET

WILL DO BUT THE DOMESTIC CHALLENGES WE HAVE INTO AN

ELECTION SEASON AND THE OVERLAY OF INTERNATIONAL ECONOMICS.

TO BE BLUNT SHE IS BETTER QUALIFIED ON THIS THAN ANYONE

IN THE ADMINISTRATION.

JONATHAN: MORGAN STANLEY AND BANK OF

AMERICA REPORT EARNINGS IN THE MORNING AND THAT IT IS GOLDMAN

SACHS ON WEDNESDAY. IN A MOMENT WE WILL CATCH UP ON

THE BANKING SECTOR. THE LAST TIME WE CAUGHT UP WITH

HIM WAS A FEW MONTHS AGO AND THE CONVERSATION AROUND THE

BANKING SECTOR WAS VERY DIFFERENT A FEW MONTHS AGO. TOM:

IT WAS BRUTAL AND THE FIRST QUESTION WILL BE WHAT IS THE

LEVEL OF ANGST AMONGST SMALLER BANKS, WAY BELOW THE SUPER

REGIONALS WHERE THE BIG FOUR. JONATHAN:

WHAT HE SOFTER .1% ON THE S&P. YEAR TO DATE UP AROUND 17%.

>> WHO IS FIRING ON ALL CYLINDERS? IT IS JPMORGAN CHASE.

CITIGROUP IS ON THE RIGHT COURSE.

IF WE HAVE A STABLE OR HEALTHY ECONOMY, IS A PRE-GOOD PICTURE

FOR BANKS. JONATHAN: THAT IS THE VIEW OF KEN LEON

FOLLOWING EARNINGS FROM JP MORGAN, WELLS FARGO, AND

CITIGROUP. TOMORROW YOU'LL HEAR FROM

MORGAN STANLEY AND BANK OF AMERICA.

TONS OF REGIONAL BANKS YOU'VE NEVER HEARD OF THAT LISA

ABRAMOWICZ HAS TALKED ABOUT A FEW TIMES.

IN THE EQUITY MARKET A BIT SOFTER. NOT GOING ANYWHERE.

A QUIET SURE IN THE EQUITY MARKET.

IN THE BOND MARKET WE JUST RESUMED THIS MOVE LOWER.

THE 10 YEAR AT 3.78. EURO IS POSITIVE AGAINST THE

U.S. DOLLAR. 1.1236. OVER THE LAST COUPLE OF DAYS DO

HIGHS FOR THE YEAR, NEW EURO STRENGTH FOR 2023. TOM:

BLOOMBERG SURVEILLANCE COMMITTED TO GIVING YOU THE

BEST OF THE EARNINGS SEASON. LISA DRIVING FORWARD OUR

COVERAGE. WE ARE THRILLED WITH OUR

COVERAGE FRIDAY OF THE BIG BANKS AND WE'LL HAVE MORE

COVERAGE TOMORROW. JONATHAN: LOOKING FORWARD TO IT.

TOM: WEDNESDAY, BIG BANKS. THEN WE ARE DONE.

OUR GUEST UNDERSTANDS THIS AMERICAN BANKING SYSTEM LIKE NO

ONE WE SPEAK TO.

OFF THE MARCH SHOCK, I AM STUNNED BY THIS.

A DEAD COUNT BOUNCE UP 4% OF MARCH.

I THOUGHT IT WOULD HAVE DONE MUCH BETTER.

WHY ARE THE BROADER INDEXES OF BANKS, WHY IS IT LAGGING?

THOMAS: MAINLY BECAUSE THE MARKET IS

UNSETTLED ABOUT WHAT THE EARNINGS WILL BE FOR THE

REGIONAL BANKS AND THE BANKS AND THERE IS A RESET UNDERWAY,

THE FIRST RESET IS AROUND NET INTEREST INCOME AND WHAT IS

HAPPENING WITH DEPOSIT COSTS. I THOUGHT IT WAS INTERESTING

THAT WHEN YOU LOOKED AT THE BIG BANK EARNINGS ON FRIDAY WHICH

ARE ACTUALLY PRETTY GOOD RELATIVE TO EXPECTATIONS THE

STOCK STILL WENT DOWN ACROSS THE SECTOR.

IT IS BECAUSE THE VIEW IS WE ARE NOT THERE YET IN TERMS OF

UNDERSTANDING HOW THIS REMIXING IS HAPPENING IN DEPOSITS.

THE GOOD NEWS IS WE ARE NOT SEEING BIG SHOES DROP ON CREDIT.

THAT ALSO CONTINUES TO BE A CONCERN.

I THINK KBW FOR OUR 2024 ESTIMATES FOR BANKS, WE HAVE

CUT ESTIMATES 20% IN THE LAST SIX MONTHS.

INVESTORS WANT TO KNOW WHEN IS THAT GOING TO STOP?

WHEN IS THE RESET TO PROFITABILITY GOING TO STOP?

JONATHAN: CAN YOU HELP US UNDERSTAND THE

SIZE OF THE BANKS? TOM M.: IT IS ALL THE WAY THROUGH THE

INDUSTRY. JONATHAN: UP AND DOWN? TOM M.:

IF I WERE TO TALK ABOUT DYNAMICS, IF YOU ARE A SPREAD

INCOME LENDER VIEW OF MORE PRESSURE.

DON'T FORGET WE THINK THE SECOND QUARTER WILL BE A

DIFFICULT QUARTER FOR INVESTMENT BANKING.

THEY DID A SMIDGEN BETTER THAN WE THOUGHT BUT LET'S SAY DOWN

20% YEAR-OVER-YEAR. WE ARE SEEING GREEN SHOOTS AND

INVESTMENT BANKING. ONLY HALF A DOZEN OR SO

COMPANIES WERE THAT MATTERS. THE OTHER COMPANIES ARE FEELING

THE BRUNT OF THE SPREAD COMPRESSION WHICH IMPACTS THE

BIGGER BANKS, EVEN THOUGH THE BIGGEST BANKS ARE FARING BETTER.

JONATHAN: HAVE YOU BEEN SURPRISED AT HOW

QUICKLY WE HAVE LEFT BEHIND THE EVENTS OF MARCH AND APRIL? LISA:

I AM -- TOM M.: I AM, WHICH IS GOOD AND BAD.

IT IS GOOD BECAUSE THE AMERICAN BANKING INDUSTRY IS RESILIENT

AND THESE WERE IDIOSYNCRATIC RISKS.

AT THE SAME TIME WE NEED THE RIGHT REFORM AND IN THE LAST

QUARTER I DID TESTIFY IN FRONT OF CONGRESS AND I WAS URGING

DEPOSIT INSURANCE REFORM.

INSTEAD WE ARE GETTING CAPITAL INCREASES WHICH I THINK WILL

CREATE UNINTENDED CONSEQUENCES AND BE A WHOLE OTHER DYNAMIC.

LISA: HOW IDIOSYNCRATIC WAS IT? I ASK THIS AT A TIME A LOT OF

PEOPLE ARE STUDYING COMMERCIAL REAL ESTATE, WHICH ACCOUNTS FOR

ABOUT HALF OF ALL LOANS ON SMALLER BANK BALANCE SHEETS,

AND WE ARE LOOKING AT A RECORD OF MATURITIES, MATURING

COMMERCIAL REAL ESTATE LOANS THIS YEAR.

HOW DO YOU DOVETAIL THAT INTO FUTURE WEAKNESS WE COULD START

TO SEE THIS EARNINGS CYCLE. TOM M.:

I REMEMBER THE LAST TIME AROUND WE TALKED ABOUT THIS.

WE HAVE A COMMERCIAL REAL ESTATE RESEARCH GROUP AND

HIGHER RATES WILL HURT COMMERCIAL REAL ESTATE VALUES

EVERYWHERE IN THE COUNTRY. BUT ONCE WE ARE MOST WORRIED

ABOUT ARE THE CITIES IN THE CITIES WHERE THEY HAVE THE BIG

PROPERTIES, THAT IS WHERE USING THE BIGGEST STRESS IN TERMS OF

OCCUPANCY IN PARTICULAR, WHERE WE THINK THE HITS MAY BE THE

BIGGEST. BIG NEWS OUT OF FRIDAY, WELLS FARGO TOOK THE

RESERVE FOR THOSE TYPE OF PROPERTIES TO 9%.

9% IS A BIG NUMBER FOR A BANK AFTER YOU THINK ABOUT ALL OF

THE EQUITY ALREADY IN THOSE PROJECTS. THAT IS PRETTY BIG.

WE HAD A REGIONAL BANK WE TOOK AROUND IN NEW YORK TO THINK

ABOUT INVESTORS. THEIR MEDIAN COMMERCIAL REAL

ESTATE LOAN WAS $1 MILLION AND ALMOST NONE OF IT IN THE CITY.

WE FEEL BETTER ABOUT THAT. IF THAT DESCRIBES WERE REGIONAL

BANK PORTFOLIO LOOKS LIKE THERE'LL BE PRESSURE BUT

NOTHING LIKE THESE BIG CITIES WHERE THERE WILL BE BIGGER HITS.

LISA: WE TALKED A LOT ABOUT CONSOLIDATION.

YOU DID EXPECT A WAVE OF CONSOLIDATION AMONG SMALLER

BANKS. YOU FEEL BETTER OR DO YOU FEEL

LIKE WE WILL SEE AN ONGOING TURN OF CONSOLIDATION? TOM M.:

I THINK WE WILL SEE CONSOLIDATION BECAUSE IT HAS

BEEN THE TREND FOR THE LAST COUPLE OF DECADES, AND YOU ASK

YOURSELF WHY WOULD THAT HAPPEN? IT WILL HAPPEN BECAUSE THE COST

OF REGULATION WILL GO UP AND ONE WAY TO AFFORD IT IS TO HAVE

MORE SCALE OR MERGE WITH A BANK THAT HASN'T.

THAT WAY YOU DO NOT HAVE TO BUILD IT YOURSELF AND IT MAKES

THE SYSTEM MORE SOUND. OVER TIME HEALTHY BANKS TEND TO

ACQUIRE BANKS THAT ARE NOT PERFORMING AS WELL AND THAT IS

A HEALTHY STEP THAT ALSO HAPPENS.

LASTLY, IT IS A BIGGER STORY. OVER THE LAST DECADE,

ESPECIALLY SINCE DODD-FRANK, YOU HAVE SEEN NONBANK LENDERS

PICK UP MARKET SHARE. WE GET A REPORT EARLIER THIS

YEAR WHERE WE THINK BANKS HAVE ABOUT HALF OF THE MARKET.

ANYTIME CAPITAL RATIOS GO UP, VICE CHAIR BAR TALKED ABOUT 2%,

THAT WILL BENEFIT NONBANKS. JAMIE DIMON TALKED ABOUT THAT

IN HIS CAR -- IN HIS CALL. THAT WORLD IS LESS REGULATED.

TOM: ALL OF US HAVE A BANK WE WILL

FOLLOW. I WILL NOT MENTION THE BANK

THAT IT IS A SMALL BANK AND IT IS CALLED BANK X.

IT HAS DELIVERED 2.2% SHAREHOLDER RETURN INTO THE

LAST 20 YEARS HAS RETURNED 1.4%. ARE THESE GUYS NOT PUT OUT OF

THEIR MISERY BECAUSE THEY ARE PROTECTED BY AN UMBRELLA OF

GOVERNMENT SUPPORT BACK TO ANDREW JACKSON?

WHEN DO YOU AND THE REST OF THEM ROLL THESE DOGS UP? TOM M.:

IN SOME CASES THERE MAY NOT BE A BUYER.

THERE IS A CHANCE THERE MAY NOT BE A BUYER.

AS TECHNOLOGY CONTINUES TO EVOLVE AND THERE IS LESS BRANCH

TRAFFIC SOME OF THESE COMPANIES MAY FIND THERE IS NOT THE BUYER.

TOM: SO WHAT DOES BANK X DO IN THEIR

20 YEAR GARBAGE MEDIOCRITY , KEPT AFLOAT BY GOVERNMENT

REGULATION? TOM M.: THE OTHER THING IS SURE THAT

COMPANY NEED CAPITAL BECAUSE LET'S SAY THEY HAVE A BAD LOAN

OR THE NEED TO MAKE AN INVESTMENT, INVESTORS WILL LOOK

AT THAT AND IN AN INDUSTRY WHERE INVESTORS DO NOT HAVE

STRONG INCENTIVE TO INVEST, I THINK THIS APPLIES TO ANY

INDUSTRY. IF THERE IS NOT A RETURN THEY

WILL NOT HAVE THE ACCESS TO THE CAPITAL REGULATORS WOULD LIKE.

YOU NEED A HEALTHY INDUSTRY UP AND DOWN. TOM:

THIS IS A UNIQUELY AMERICAN THING. TOM M.:

I GET A LOT OF QUESTIONS SAYING OTHER COUNTRIES HAVE FIVE OR

SIX BIG BANKS. WE HAVE FOUR BIG ONES.

IT WOULD BE GREAT IF WE HAD 15 TO 25 BIG ONES AND THEN HE

WOULD HAVE REALLY GOOD CHOICE AND REALLY GOOD COMPETITION AND

SOME OF THOSE LOCAL BANKS WILL STILL BE CRITICAL TO THEIR

LOCAL COMMUNITIES. IT IS THAT MIDDLE.

97% OF THE BANKING INDUSTRY IN AMERICA IS BELOW $10 BILLION IN

ASSETS. THAT MEANS THERE ARE 140 THANKS

ABOVE $10 BILLION. WE ARE APPROACHING THE END GAME.

JONATHAN: WHEN YOU WENT IN FRONT OF

CONGRESS, DID YOU GET THE IMPRESSION THEY WANTED TO MAKE

SENSIBLE POLICY OR PUNISH THE SECTOR? TOM M.:

I WOULD SAY THE MAJORITY WAS THEY WERE THINKING ABOUT STEPS

THEY COULD TAKE, BUT I FELT AS IF THEY WERE GOING TO ADDRESS

ISSUES THAT WERE NOT SOLELY SILICON VALLEY AND OTHER BANK

FAILURES IN THE CHANCES FOR UNINTENDED CONSEQUENCES WHEREBY.

IF YOU PUSH TOO HARD YOU WILL BENEFIT THE NONBANK INDUSTRY

AND I THINK WE COULD BE HEADED IN THAT DIRECTION. JONATHAN:

THANK YOU.

A DIPLOMATIC RESPONSE TO THE QUESTION.

THE QUESTION, NOT SO MUCH. DAVID BALIN OF CITIGROUP A

WEALTH COMING UP. WHAT YEAR IT HAS BEEN FOR WALL

STREET AND BEYOND. TOM: ALL THE SMALL BANKS WANT TO DO

IS GO TO LUNCH WITH TOM MICHAUD. THAT IS THE ONLY REASON THEY

ARE IN BUSINESS. THEY WANT TO GO TO THE

RESTAURANT ON TOP OF THE RITZ-CARLTON IN BOSTON.

THEY GO UP TO BROOKLINE COUNTRY CLUB AND SAY HERE'S HOW WE DO

IT.

>> WE ARE OF THE VIEW THAT INFLATION WILL BE ABLE TO

SETTLE BACK TO 2%. OF >> CONDITIONS ARE STARTING

TO BE PLACE FOR CAPITAL MARKETS TO REALLY OPEN UP IN THE BACK

HALF OF THE YEAR.

>> WE DON'T WANT TO GET AGGRESSIVE.

>> WE THINK HIGHER RATES WILL BITE IN THE THIRD PART OF THIS

YEAR.

>> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE,

JONATHAN FERRO AND LISA ABRAMOWICZ. TOM:

JONATHAN FERRO, LISA ABRAMOWICZ AND TOM KEENE ON ADO AND

TELEVISION, COMMERCIAL FREE FOR MOST OF YOU FOR A GOOD PART OF

THIS HOUR. A CONVERSATION WITH THE

SECRETARY OF TREASURY. ANNMARIE HORDERN WITH MANY

QUESTIONS ON CHINA AS WELL. JONATHAN:

CHINA AND CHINESE GROWTH DISAPPOINTING OVERNIGHT.

FREE ECONOMIC GROWTH IN THE WORLD'S SECOND-LARGEST ECONOMY,

IT COMES FROM THE LIKES OF THAT CITY, SOCGEN AND OTHERS.

THEY HAVE TAKEN DOWN THE EXPECTATIONS FROM 5.5% TO 5%.

IT'S A ONLY ACHIEVABLE IF THE GOVERNMENT CONTINUES TO STEP UP

USING MEASURES.

THE CHINA STIMULUS STORY, HE FIXED ME OR IN DEFLATION AND

ULTIMATELY YOU WILL NEED SOMETHING REALLY BIG TO ADDRESS

THE MARKET IN CHINA. TOM:

JANET YELLEN KNOWS THAT CHINA OF AGO, SIX OR 7% GDP, WE SEE

IT WITH A DEFLATIONARY, DISINFLATIONARY IMPULSE OUT OF

THE PACIFIC GIANT.

THAT IS BRENT CRUDE 80 DOWN TO 78 .88. BRENT CRUDE GIVES WAY.

JONATHAN: THE INFLATIONARY NUMBERS IN

CHINA -- SOFTER PPI. THERE IS HOPES THIS WILL

CONTINUE. SOME PEOPLE THINK A SOFT

LANDING CONVERSATION IS PREMATURE.

IN 2024, WILL HAVE THE DYNAMIC INFLATION ACCELERATOR.

SOMETHING TO EXPLORE, LET'S SAY ANDREW IS RIGHT.

WHAT CAN YOU DO AS A MARKET PARTICIPANT NOW?

MADE THE POINT ON FRIDAY, YOU DON'T WANT TO FIND THAT IN THE

MARKETS. TOM: IS THE CREDIT SPREAD MARKET

AWAY FROM FULL FAITH AND CREDIT? WHAT ARE OTHER BONDS DOING?

HOW DID THEY RESPOND TO THE LAST 36 TRADING HOURS TO WHAT

WE SEE? LISA:

KELSEY BARROW WAS SAYING, PERHAPS NOT WHAT THEY ONCE WERE

CREDIT SPREADS. THE LOWEST RATED SECURITIES,

THE TIGHTEST GOING BACK MORE THAN A YEAR TO APRIL.

IT IS THE SAME KIND OF TREND WE ARE SEEING IN THE STOCK MARKET

WHICH IS SUPPORT, STRENGTH, NOT A DEFAULT CYCLE.

IF WE DO GET A READ EXCEL ARRAY OF INFLATION, WHICH SOME PEOPLE

ARE CALLING FOR.

THIS -- EVERYBODY IS IGNORING THE -- PEOPLE TODAY ARE

IGNORING THAT. DO YOU START TO SEE CHIPPING

AWAY AT THE STRENGTH WE HAVE SEEN WITH CONCERNS OVER AN

OVERHEATING ECONOMY? TOM:

I DON'T THINK WE WILL HEAR AN OVERHEATING ECONOMY FROM JANET

YELLEN.

BUT FROM THE BANK OF ENGLAND AND BRANDEIS, SHE WOULD SEND --

SAY IT CAN'T EMPHASIZE ENOUGH. I WONDER HOW ALONE IN A

BIPARTISAN WASHINGTON THEY CAN'T STAND BEIJING. JONATHAN:

THE SEAT HAS CHANGED FOR JANET YELLEN. IN THAT SEAT, HOW DO YOU

BALANCE ECONOMIC OBJECTIVES WITH NATIONAL SECURITY CONCERNS?

THE NATIONAL SECURITY ADVISOR IN THE SAME ADMINISTRATION.

THAT IS ALWAYS GOING TO BE THE CHALLENGE, NOT JUST FOR THE

ECONOMY BUT FOR SECURITY AS WELL.

ANYONE WHO IS GOING TO BE IN THE WHITE HOUSE FOR THE

FORESEEABLE FUTURE. TOM:

WITH ECONOMIC DATA, WHAT MANNERS -- MATTERS?

LISA: RETAIL SALES, BUT SHE IS LOOKING AT THE HOUSING MARKET,

MANY THINGS. EVERYONE IS LOOKING AT THEIR

EARNINGS. WE KNOW THAT JANET YELLEN HAS

HAD A LOT OF DISCUSSIONS WITH BUSINESSES.

MAY TALKING ABOUT WHAT THEIR TRYING TO DO AND HOW THEY WILL

WORK WITH CHINA. TOM:

THE DOW DOWN 600, THE NASDAQ 60,000. THEY ARE TERRIBLE.

JONATHAN: EQUITIES A BIT SOFTER, YIELDS

LOWER. DOWN FIVE BASIS POINTS.

THE LONGEST RUN OF EURO STRENGTH AGAINST THE U.S.

DOLLAR GOING ALL THE WAY BACK TO JUNE 2020.

IT HAS BEEN A WHILE AND WE HAVE SEEN THIS.

IT HAS BEEN RELENTLESS. ANOTHER .05% TODAY. IT TOM:

WE ARE PEOPLING OUR DISCUSSION WITH PEOPLE OF VINTAGE WHO HAVE

SEEN THIS, MICHAEL MET WITH US EARLIER.

ANY NUMBER OF OTHERS INCLUDING GINA MARTIN ADAMS, JOINING US

NOW OF EXPERIENCE IS DAVID, THE CIO AT CITY GLOBAL WEALTH.

-- CITIGROUP GLOBAL WEALTH. WHAT IS THE CHARACTER OF THIS

BULL MARKET? DAVID: IT IS A BULL MARKET BORN OF A

VARIETY OF THINGS. A LOT OF EXCEEDING EXPECTATIONS.

WE STARTED THE YEAR EXPECTING AN ENERGY CRISIS IN EUROPE

THAT DID NOT HAPPEN. THE BANKING CRISIS YOU

DISCUSSED DID NOT TURN OUT TO BE A BANKING CRISIS.

ULTIMATELY, WHAT WE SAW AS INFLATION COMING DOWN

MEANINGFULLY, IT IS HARD TO MAKE THE ARGUMENT THAT NEXT

YEAR INFLATION GOES UP. WHAT WILL THE SOURCE OF I.B.?

THE LAST REMNANTS OF INFLATION ARE THE AREAS OF HOUSING AND

RENTAL COSTS. IT IS POSSIBLE FOR US TO GET TO

THE TWO, TWO POINT 5% INFLATION RATE IN 2024.

THINK ABOUT WHERE THEY START -- WE STARTED THE YEAR FROM AN

INVESTMENT POSITION. MUCH WORSE THAN 2008 AND 2009.

WE HAD $1.25 TRILLION OF MORNING MARKET FUNDS, PEOPLE

THINKING THEY SHOULD INVEST OR WAITING TO INVEST. AND THEN A

TOPIC CAME ABOUT ARTIFICIAL INTELLIGENCE AND THE IMPACT OF

IT HAVE ON MARKETS. THAT IS THE ACCOMMODATION THAT

HAS BROUGHT US HERE. AND THE BACKDROP IN 2022 IS

THAT THIS WAS A RARE YEAR. ONLY IN 1931, 1969 TO RECEIVE

MARKETS AND EQUITIES THAT GO DOWN AT THE SAME TIME.

A LOT OF FACTORS. IT HAS CONTRIBUTED TO WHERE WE

ARE NOW AND WHERE WE GO FORWARD IS MORE DIFFICULT BECAUSE SO

MUCH OPTIMISM IS BUILT INTO THE MARKET AT THESE LEVELS. TOM:

DO YOU HAVE ENOUGH COMBINED INFORMATION FROM YOUR

SECURITIES ANALYST TO SAY THAT WE HAVE A BETTER REVENUE GROWTH

LINE BECAUSE OF A BETTER NOMINAL GDP? DAVID: NOT REALLY.

NEXT YEAR WE ARE GOING TO BE .5% HIGHER.

IT WILL TAKE TIME FOR MOMENTUM TO BUILD.

WE IMAGINE A SHORT RECESSION WOULD NEVER BE LIKE THIS UNLESS

FOR SIX MONTHS WE THINK THIS IS PROBABLY A 15 MONTH LINK.

IT IS JUST A SHALLOW TROUGH. IT IS GOING TO TAKE A WHILE FOR

US TO HAVE BUILT MOMENTUM. WE ARE LOOKING AT WHAT IS GOING

TO HAPPEN IN 2024. IT IS NOT THIS YEAR THAT WE SEE

REVENUE GROWTH, BUT NEXT YEAR. THE NEXT QUARTERS WILL BE

CHALLENGING.

LISA: WHEN DID YOU START TO MAKE A

MORE MANY FULL SHIFT ON THE HEELS OF BETTER-THAN-EXPECTED

DATA? DAVID:

THE FIRST WAS TO BRAZIL, AND ABOUT WEEK AND A HALF AGO WE

ADDED EMERGING MARKETS INTO OUR PORTFOLIOS.

WE WANT EVERYONE TO THINK ABOUT THEIR CASH POSITION A LOT.

THE FIVE OR SIX YEAR DURATION RISK, CAPTURE THE YIELDS IN

YOUR MONEY MARKET FUND TODAY FOR THE NEXT FIVE TO SIX YEARS.

AN EMERGING MARKETS, IF YOU DON'T TAKE A LOT OF CREDIT

RISK, YOU CAN GET YIELDS OF SEVEN TAPE PERCENT.

THAT IS ATTRACTIVE IF WE EXPECT INFLATION TO BE AT 2.5%.

LISA: HOW MUCH OF THAT IS PREDICATED

ON THE DOLLAR CONTINUING TO WEAKEN? DAVID:

THE DOLLAR REALLY TOOK A MOVE ONCE THE INFLATION PRINT CAME

OUT LAST WEEK. THAT IS INDICATIVE OF WHAT THE

WORLD IS EXPECTING. THE U.S. HOUSE AND MORE ACTIVE CENTRAL

BANK IN EUROPE. THE EXPECTED RATES IN THE

UNITED STATES WILL COME DOWN WHEN THEY NEED TO.

THINK ABOUT THE EUROPEAN CENTRAL BANKS.

THEY WILL KEEP THEIR POLICIES CONSTANT.

IF THAT IS THE TRUTH, YOU HAVE SEEN THE BEGINNING OF THE

WEAKENING DOLLAR AND WE THINK THAT TREND COULD LAST SEVERAL

YEARS FROM HERE AND THE DOLLAR COULD BE WEAKER IF WE WERE TO

LOOK OUT 18 MONTHS. TOM:

I AM TOLD IT IS PUSHING AGAINST 60-40. THE WORK IN 2024, 2025?

DAVID: I'M BACK IN LOVE WITH A-40.

YOU'RE GETTING PAID NOW FOR THE FIRST TIME IN A LONG TIME TO

HOLD A MEDIUM DURATION ON PORTFOLIO.

IF YOU CAN MAKE IT 5%, 5.5%, OR YOU WANT TO TAKE MORE RISK, YOU

CAN EARN SOME TERRIFIC YIELDS IN EMERGING MARKETS AND CRIED

-- PRIVATE CREDIT. IT WILL HAVE DIVERSIFICATION

COMPARED TO YOUR EQUITY PORTFOLIO.

THE SECOND THING PEOPLE HAVE TO BE MINDFUL OF IS THAT VALUE

THEY ARE GETTING FOR THE PORTFOLIO.

WE ARE AT A RECOVERY IN 24, YOU WANT TO HAVE SMALLER MEETINGS

NONSTOP. YOU WANT TO DIVERSIFY INTO

AREAS EVEN LIKE CHINA. THEY ARE TRADING AT LOW VALUES.

BUT ULTIMATELY IT YOU HAVE GOT TO BE FORWARD-LOOKING IN YOUR

PORTFOLIO CONSTRUCTION AND DIVERSIFICATION IS ONLY FREE

LUNCH ON WALL STREET. WE NEED MORE OF IT. LESS U.S.

INTERESTS. TOM:

ONE FINAL QUESTION, DAVID, ARE WE CLIPPING COUPONS OR CAN WE

OWN THE DEBT PORTION FOR TOTAL RETURN? DAVID:

RIGHT NOW I THINK YOU CAN GET IT FOR TOTAL RETURN.

IF YOU CAN CAPTURE THREE OR 4% OF REAL INTEREST RATES A YEAR

AND A HALF OR NOW, THAT IS EXCITING RELATIVE TO THE LAST

11 YEARS. IT SHOULD BE BOTH RISK REDUCTION AND TOTAL RETURN.

WE ARE SEEING SOME REAL MOVEMENT AT THE PRIVATE BANK

INTO THESE AREAS. WE ARE SAYING WOW, I'VE GOT TOO

MUCH CASH. I CAN PUT MONEY TO WORK AND

SUSTAIN YIELDS. JONATHAN:

FOR THE PEOPLE WHO HAVE BEEN TRAPPED IN CASH THIS YEAR, ARE

YOU AWARE OF GAINS IN THE S&P 500?

IF THEY COME BACK IN, THEY WILL FEEL FOOLISH BRINGING THAT IN.

WHAT DO SAY TO THEM? DAVID: OUR CLIENTS HAVE BEEN SITTING

THERE 10 YEARS WAITING TO COME BACK INTO THE MARKET.

SO THE DIFFERENCE BETWEEN NOW AND IN A TIME IN THE LAST 10

YEARS IS IF YOU WANT TO CAPTURE A REAL YIELD.

YOU NEED TO DO THAT NOW. THIS OPPORTUNITY MAY GO AWAY

WITH THAT MUCH CASH ON THE SIDELINES.

IF YOU THINK ABOUT THE TECHNOLOGY TRADE, THE VALUATION

OF THE NASDAQ, THE S&P AT 21, THERE ARE MUCH OF THE MARKET

THAT YOU CAN INVEST IN. IT IS TOTALLY ACCEPTABLE IF WE

EXPECT RATES TO GO DOWN. YOU WANT TO MOVE AWAY FROM THE

TRENDIEST MARKETS INTO THE MID-CAPS, SMALL CAPS, FOREIGN

MARKETS.

IF YOU DO THAT MEANINGFULLY, YOU WILL GET THE BENEFIT OF THE

MARKET YOU WILL TAKE PLACE.

YOU HAVE THIS MOVEMENT IN TECHNOLOGY.

THE TYPE OF CHANGE WITH

ARTIFICIAL INTELLIGENCE AFFECTS YOUR

INTELLIGENCE -- WE'RE LOOKING FOR SUMMING THAT WILL BE

EFFICIENT. THE RESULT OF THE RAPID

ACCEPTANCE OF AI. JONATHAN:

DAVID BAILIN, THANK YOU. WAITING FOR WHAT TOM ALWAYS

TALKS ABOUT, THE ENTRY POINT, THE ELUSIVE ENTRY POINT.

WE TALKED ABOUT IT A FEW TIMES, YOU GO TO CASH, THAT IS THE

DECISION ONE. THE HARDEST IS ONE TO GET IT

BACK OUT AGAIN.

TOM: WE DON'T HAVE TO BE WILDLY ASYMMETRIC.

IT IS EASY TO GET OUT OF THE MARKETS WHEN YOU ARE IN PROFIT

MODE. A LOT OF PEOPLE ARE IN THAT

POSITION. YOU TAKE PROFIT, TAXABLE OR

NOT, AND YOU ARE IN CASH AND YOU ARE COMFORTABLE.

AND IT APPROACHES A SET UP. WHAT IS YOUR MENTAL AND ACTUAL

ON PAPER SET UP TO GET A PROCESS TO GET BACK IN THE

MARKETS? MOST DON'T HAVE THAT. LISA:

I LOVED WHAT HE SAID ABOUT 60/40.

HE IS BACK IN LOVE WITH IT. THAT IS THE QUIET STORY

UNDERNEATH.

IT SEEMS TO BE THIS FEELING THAT PEOPLE PUSH INTO OTHER

AREAS LIKE WE HEARD FROM MICHAEL. TOM:

REAL SIMPLY HERE, THERE IS NO RESPECT FOR DAVID BRAYLEN --

DAVID BAILIN UNTIL YOU ARE DOWN 13.2%. JONATHAN:

A 5% RETURN UNTIL THE NASDAQ STARTED TO DO THE 10%, 30.

TO YOUR POINT, THE PSYCHOLOGY I FIND THE MOST INTERESTING, IF

YOU HAVE SET THIS OUT, WHAT DO YOU DO?

CHASE GAINS IN TECH, LOOK FOR GAINS ELSEWHERE, LOOK FOR THE

MARKET THAT BROADENS OUT? WE HAVE HEARD THAT FROM

MULTIPLE PEOPLE. LOOKING FOR A MARKET RUNNING

BROADER.

MICHAEL FROM THE ASSET MANAGEMENT, LOOKING FOR THAT.

TOM: IT IS SO MUCH LIKE 1976 WHEN

JANET YELLEN WAS FIVE YEARS OUT OF YALE.

SHE WAS AT THE HOTDOG PLACE AT HARVARD SQUARE.

SHE WAS A RESEARCH ASSISTANT AT HARVARD BEFORE SHE WENT TO

BERKELEY TO BE AT THE SCHOOL FOR ONE MILLION YEARS. JONATHAN:

SHE DID NOT DO HOTDOGS QUITE LIKE YOU DID. TOM:

I'M SURE SHE WAS TEACHING AT HARVARD. JONATHAN:

ANNMARIE HORDERN SITTING DOWN WITH THE TREASURY SECRETARY,

JANET YELLEN. OVER TO YOU. ANNMARIE:

WE ARE PLEASED TO BE JOINED BY TREASURY SECRETARY JANET

YELLEN, JOINING US FROM INDIA WHERE YOU ARE MEETING YOUR

COUNTERPARTS, THE G20. THE CLOUD AROUND THE MEETING IS

THE DATA OUT OF CHINA, BEIJING SLOWING IN THEIR GROWTH.

CITY IS TALKING ABOUT THE GROWTH TARGET BEING AT RISK.

I WOULD LIKE TO START WITH THE FACT OF WHETHER YOU THINK THIS

MEANS THERE COULD BE AN INCREASED CHANCE OF A U.S.

RECESSION.

JANET: WELL, YOU'RE TALKING ABOUT THE

SLOW GROWTH NUMBER FROM CHINA. IS THAT RIGHT? ANNMARIE:

THAT IS CORRECT. JANET:

I THINK CHINA HAS SEEN SLOWER GROWTH THAN THEY EXPECTED UPON

OPENING UP FROM COVID. CONSUMER SPENDING HAS BEEN

RELATIVELY WEAK. IT LOOKS LIKE CONSUMERS ARE

MORE FOCUSED ON BUILDING BACK THE SAVINGS BUFFERS.

GROWTH HAS BEEN SLOW AND AS YOU KNOW, YOUTH UNEMPLOYMENT IS

QUITE HIGH.

I THINK THE CHINESE ARE CONCERNED ABOUT SLUGGISH GROWTH

IN THEIR ECONOMY. ANNMARIE:

WHAT DOES THIS MEAN FOR U.S. GROWTH AND GLOBAL GROWTH, IS

THE SOFT LANDING IN THE U.S. YOUR BASE CASE SCENARIO?

JANET: MAYBE COUNTRIES DO DEPEND ON

STRONG CHINESE GROWTH TO PROMOTE GROWTH IN THEIR OWN

ECONOMIES.

PARTICULARLY COMPANIES -- COUNTRIES IN ASIA.

AND SLOW GROWTH IN CHINA CAN HAVE NEGATIVE SPILLOVERS.

FOR THE UNITED STATES, GROWTH IS SLOWED BUT OUR LABOR MARKET

CONTINUES TO BE QUITE STRONG. I DON'T EXPECT A RECESSION.

I THINK WE ARE ON A GOOD PATH TO BRINGING INFLATION DOWN.

THE MOST RECENT INFLATION DATA WERE QUITE ENCOURAGING.

WE ARE MAKING PROGRESS ON GETTING INFLATION DOWN.

I HAD HOPED AND EXPECTED THAT WOULD OCCUR IN THE CONTEXT OF A

STRONG LABOR MARKET AND WE CONTINUE TO SEE THAT.

THE FACT THE LABOR MARKET HAS

BEEN SO STRONG HAS ENCOURAGED MORE PEOPLE TO ENTER THE LABOR

FORCE AND WORK. THAT HAS HELPED TAKE A BIT OF

HEAT OUT OF THE LABOR MARKET.

THE FACT OF GROWTH OVERALL IS SLOWED AFTER WE ENJOYED A RAPID

RECOVERY. THAT IS NORMAL BUT IT IS ALSO

LED TO REDUCTION IN THE DESIRE OF FIRMS TO HIRE.

STILL LOTS OF DROP OPENINGS, BUT WAGE GROWTH IS MODERATING

AND INFLATION IS SUBSIDING. SO I THINK WE ARE IN A GOOD

PATH ON THE UNITED STATES. ANNMARIE:

IT SOUNDS LIKE SOFT LANDING IS YOUR BASE CASE.

YOU DON'T THINK WE ARE GOING TO SEE A RECESSION.

YESTERDAY WHEN WE WERE SPEAKING TO REPORTERS WE TALKED ABOUT

DE-ESCALATION WITH CHINA. YOU PULLED OUT LIFTING TARIFFS

AS PART OF THE DE-ESCALATION WITH BEIJING.

WHAT IS ON THE TABLE?

JANET: SEVERAL YEARS OF GONE BY IN

WHICH WE HAVE HAD COVID LOCKDOWNS, ESPECIALLY IN CHINA.

AND VERY LIMITED CONTACT BETWEEN SENIOR OFFICIALS AND

THE UNITED STATES AND CHINA.

WE NOW HAVE A NEW ECONOMIC TEAM IN CHINA THAT WE NEED TO

ESTABLISH RELATIONSHIPS WITH. WE NEED TO GET OUR RELATIONSHIP

BACK IN A MORE STABLE PLACE. PUT A FLOOR UNDER IT AND TRY TO

PROMOTE BETTER UNDERSTANDING BETWEEN OUR COUNTRIES.

I RECENTLY MADE A TRIP, MET WITH A NUMBER OF SENIOR CHINESE

OFFICIALS, INCLUDING THE NEW ECONOMIC TEAM THERE.

WE HAD VERY CANDID DISCUSSIONS. EACH SIDE IT RAISED A SERIES OF

CONCERNS. CHINESE, CERTAINLY MENTIONED

THEIR CONCERN WITH THE TARIFFS THAT WE HAVE IN PLACE.

BUT WE HAD CONSTRUCTIVE CONVERSATIONS THAT DEEPENED OUR

UNDERSTANDING.

AND OF THE ECONOMIC SITUATION AND OUR CONCERNS, WE ARE ABLE

TO ADDRESS THEM AND AGREE THAT THERE ARE A BROAD RANGE OF

GLOBAL CHALLENGES, DEBT AND CLIMATE CHANGE, THAT AFFECT THE

ENTIRE GLOBAL ECONOMY. WE NEED TO WORK ON IT JOINTLY.

I AM HOPEFUL WE WILL BE ABLE TO DO THAT MORE SUCCESSFULLY.

AND TARIFFS, WE PUT TARIFFS IN PLACE ON CHINA BECAUSE WE HAD

UNDERLYING CONCERNS ABOUT UNFAIR TRADE PRACTICES,

PARTICULARLY THOSE AFFECTING INTELLECTUAL PROPERTY AND

TECHNOLOGY TRANSFER. THOSE CONCERNS REALLY HAVE NOT

BEEN ADDRESSED.

WE ARE UNDERGOING A 40 YEAR REQUIRED REVIEW WITH TARIFFS.

OF COURSE CHINA ALSO RETALIATED, PUTTING TARIFFS IN

PLACE ON US.

WE HAVE TO SEE WHAT COMES OUT OF THE FOR YOUR REVIEW.

BUT I WOULD EMPHASIZE THAT THE UNDERLYING CONCERNS HAVE NOT

YET BEEN ADDRESSED AND WE HAVE TO WORK ON THAT GOING FORWARD.

ANNMARIE: BUT WE ARE TRYING TO FIGURE OUT

WHAT IS LEFT ON THE TABLE. IT FEELS LIKE THE

ADMINISTRATION'S AND HUNG UP WHEN IT COMES TO TIT FOR TAT

WITH BEIJING. THERE IS THE OUTBOUND EXECUTIVE

ORDER WE COULD SEE AT THE END OF SUMMER.

IT COULD NOT PULL A PLACE FROM THE OUTBOUND EXECUTIVE ORDER,

COULD THAT BE A PLACE YOU COULD DE-ESCALATE WITH BEIJING? JANET:

FIRST, I WANT TO SAY THAT WHAT WE ARE DOING IS NOT TIT FOR TAT.

WHAT WE ARE DOING IS PUTTING IN PLACE CONTROLS THAT ARE

DESIGNED TO PROTECT U.S. NATIONAL SECURITIES.

AND TO ADDRESS FUNDAMENTAL HUMAN RIGHTS ABUSES.

WE DO INTEND TO PROTECT OUR NATIONAL SECURITY.

WE HAVE CONTROLS THAT PLAY AN IMPORTANT ROLE IN ACCOMPLISHING

THAT. WHAT I TRIED TO EXPLAIN TO OUR

CHINESE COUNTERPARTS IS THAT OUR DESIRE IS TO MAKE THESE U.S.

POLICIES CLEARLY NATIONAL SECURITY FOCUS, TRANSPARENT AND

NARROW. WE ARE NOT ATTEMPTING TO STIFLE

ECONOMIC PROGRESS IN CHINA. WE HAVE AND WANT TO CONTINUE TO

HAVE DEEP ECONOMIC TIES AFTER THIS YEAR.

OUR TRAINERS REACHED ALMOST $700 BILLION.

-- ANNMARIE: IF THE NATIONAL SECURITY

CONCERNS ARE SO IMPORTANT, JAKE SULLIVAN CALLED FOR THIS

OUTBOUND EXECUTIVE ORDER TWO YEARS AGO.

WHILE THINKING THE INITIATIONS ALONG -- THE ADMINISTRATION SO

LONG? JANET: WE ARE LOOKING AT OUTBOUND

CONTROLS AND THEY WOULD SERVE AS A COMPLEMENT TO THE EXPORT

CONTROLS WE HAVE IN PLACE TO MAKE SURE WE HAVE COVERED ALL

THE TOWN -- CHANNELS BY WHICH TECHNOLOGY CAN BE TRANSFERRED

TO CHINA THAT WE THINK POSE NATIONAL SECURITY CONCERNS.

I EXPLAINED TO MY CHINESE COUNTERPARTS THAT IF WE GO

FORWARD WITH THESE, THEY WOULD BE NARROWLY TARGETED.

THEY WOULD FOCUS ON A FEW SECTORS.

IN PARTICULAR, SEMICONDUCTORS, QUANTUM COMPUTING AND

ARTIFICIAL INTELLIGENCE. THEY WOULD CONTAIN A

COMBINATION OF NOTIFICATION REQUIREMENTS.

AND IN NARROWLY SCOPED PORTIONS OF THESE SECTORS, PROHIBITIONS.

BUT THESE WOULD NOT BE BROUGHT CONTROLS THAT WOULD AFFECT U.S.

INVESTMENT PROBABLY IN CHINA OR -- BROADLY IN CHINA OR IN MY

OPINION HAVE A FUNDAMENTAL IMPACT ON AFFECTING THE

INVESTMENT CLIMATE FOR CHINA. THESE WOULD BE NATIONAL

SECURITY FOCUSED. ANNMARIE:

IT SOUNDS LIKE IT IS ALREADY DONE.

DOES THE INITIATION HAVE IT FINISHED AND IS WAITING FOR A

GOOD TIME TO RELEASE AT? JANET:

WE WANT TO MAKE SURE THAT IF WE DO THIS, WE GET IT RIGHT.

IF WE DO GO AHEAD, AND THERE IS A GOOD CHANCE WE WILL, WE WOULD

PUT OUT ALONG WITH THE EXECUTIVE ORDER A NOTICE OF

PROPOSED RULEMAKING SO THAT THE PUBLIC WOULD HAVE THE CHANCE TO

COMMENT ON THESE PROPOSED CONTROLS .

WE WOULD RECEIVE A WIDE RANGE OF PUBLIC INPUT BEFORE

FINALIZING ANYTHING THAT WE DO. ANNMARIE:

YOU OBVIOUSLY HAVE A LOT ON YOUR PLATE WHEN IT COMES TO

RE-ENGAGING WITH CHINA IN YOUR DISCUSSIONS THERE OFF THIS TRIP

FROM BEIJING. HOW DIFFICULT WILL THE DIALOGUE

BE AFTER THE REVELATIONS ABOUT THE CHINESE HACKING OF YOUR

COLLEAGUE, SECRETARY ROLANDO -- SECRETARY GINA RAIMONDO?

JANET: I DO HAVE CONCERNS ABOUT HACKING OF U.S.

GOVERNMENT OFFICIALS OR PRIVATE INDIVIDUALS OR COMPANIES.

I KNOW THE UNITED STATES HAS THE GROWTH --EXPRESSED THOSE

CONCERNS.

BUT WE CONTINUE TO DEEPEN OUR DISCUSSIONS WITH CHINA TO

INCREASE OUR ENGAGEMENT. IT IS ESPECIALLY IMPORTANT TO

EXPLAIN WHAT OUR MOTIVATION IS, TO AVOID MISUNDERSTANDINGS THAT

CAN LEAD TO UNNECESSARY AND DANGEROUS ESCALATION.

PRESIDENT XI JINPING AND

PRESIDENT BIDEN AGREED IN BALI THAT SENIOR OFFICIALS,

INCLUDING IN ECONOMICS, SHOULD INTERACT MORE REGULARLY.

I THINK AN OUTCOME OF MY TRIP THERE WAS THAT WE WILL HAVE

DEEPER, ONGOING ENGAGEMENT AT ALL LEVELS. ANNMARIE:

WHEN DID YOU LEARN ABOUT THE CHINESE EMAIL HACKING?

I AM CURIOUS IF YOU HAD A CHANCE TO BRING IT UP IN

BEIJING. JANET: I BELIEVE I DID NOT KNOW ABOUT

THAT IN BEIJING. IT WAS NOT ONE OF THE THINGS WE

DISCUSSED. ANNMARIE: I ALSO WANT TO ASK ABOUT WHAT

IS HAPPENING ON THE GROUND.

SOMETHING I KNOW IT'S IMPORTANT YOU, DEBT RELIEF IN DEVELOPING

COUNTRIES.

THERE IS BEEN A PUSH FOR THE U.S.

AND MEDITATION TO USE THAT AS A PRINCIPAL FOR COME--OTHER

COUNTRIES LIKE GHANA.

BUT IT IS NOT GETTING THE SUPPORT AMONG OTHER G20 FINANCE

MINISTERS. HIS CHINA THE HOLD UP YOUR?

-- IS CHINA THE HOLD UP? JANET: THE G20 DESIGNED SOMETHING

CALLED THE COMMON FRAMEWORK, A SET OF PRINCIPLES AND PROCESSES

TO DEAL WITH UNSUSTAINABLE DEBT SITUATIONS.

WE WOULD LIKE TO SEE COUNTRIES THAT APPLY TO USE THE COMMON

FRAMEWORK, GET RAPID RELIEF

FROM THEIR DEBT THAT THEY NEED IN ORDER TO GROW AND BE ABLE TO

ATTRACT INVESTMENT AND UNDERTAKE IMF PROGRAMS THAT CAN

HELP STABILIZE THEIR ECONOMIES.

THE FEW CASES THAT HAVE APPLIED TO USE THE COMMON FRAMEWORK,

INCLUDING ZAMBIA, HAVE TAKEN TOO LONG.

THE PROCESS HAS BEEN ONEROUS AND HAS TAKEN A LONG TIME TO

GET DEBT RELIEF. WE ARE PLEASED THAT CHINA HAS

BECOME -- CHINA IS A MAJOR CREDITOR OF THESE COMPANIES --

WE HAVE BEEN ANXIOUS TO SEE CHINA MOVE MORE QUICKLY AND

TAKE A MORE CONSTRUCTIVE ATTITUDE, PARTICIPATING IN

THESE DEBT RELIEF TALKS. AND GETTING AGREEMENT ON ZAMBIA

WAS AN IMPORTANT STEP. CHINA IS ALSO HELPFUL IN THE

CASE OF GHANA AND SRI LANKA. I AM HOPEFUL THAT WE WILL BE

ABLE, GOING FORWARD, TO MAKE MORE RAPID PROGRESS.

I SHOULD EMPHASIZE THAT THE DEBT ISSUE IS ONE THAT CONCERNS

THE ENTIRE G20.

WE ARE UNITED IN WANTING TO SEE THIS FRAMEWORK WORK MORE

EFFECTIVELY. IT IS A

>> MADAM SECRETARY, THANK YOU SO MUCH FOR YOUR TIME TODAY.

HE FROM INDIA, THE G20 FINANCE MINISTERS AND GOVERNORS MEETING.

SAFE TRAVELS TO YOU, AS I KNOW YOU ARE HEADING OFF TO VIETNAM

NEXT. THAT WAS OF COURSE TREASURY

SECRETARY JANET YELLEN. THE MAIN TAKEAWAY FOR ME,

OBVIOUSLY, IS THAT SHE IS PRETTY MUCH ROLLING OUT A U.S.

RECESSION.

ALSO, WHEN IT COMES DOWN TO THE ESCALATION BETWEEN CHINA AND

THE UNITED STATES, SHE DID NOT WANT TO GET INTO THE TOOLS THEY

CAN USE ON THE TABLE, AND TARIFFS SEEM LIKE SOMETHING THE

ADMINISTRATION WON'T TOUCH. WHEN IT COMES TO THE OUTBOUND

EXECUTIVE ORDER, IT SOUNDS LIKE IT IS ALMOST DONE.

IT SEEMS LIKE IT IS VERY NARROW IN SCOPE. JONATHON:

GREAT QUESTIONING THERE. FANTASTIC CONVERSATION, AS

ALWAYS. ANNMARIE HORDERN IN CONVERSATION WITH TREASURY

SECRETARY JANET YELLEN. TWO THEMES THERE.

ONE ABOUT CHINA, ONE WITH U.S. GROWTH.

THIS FROM JANET YELLEN MOMENTS AGO.

CHINA HAS NOT ADDRESSED U.S. CONCERNS THAT LED TO TARIFFS.

THOSE OF COURSE FROM THE PREVIOUS ADMINISTRATION STILL

ON CHINA, BEING CONTINUED BY THIS ADMINISTRATION.

JANET YELLEN ON THE U.S. ECONOMY .

WE ARE ON A GOOD ECONOMIC PATH IN THE UNITED STATES.

I DON'T EXPECT A RECESSION. THE LABOR MARKET IS STRONG.

ON THAT SECOND POINT, THE LABOR

MARKET BEING STRONG, SEVERAL ARE GOING BACK TO LAST YEAR,

WERE UNEMPLOYMENT WAS 3.5% TO OR PERCENT, AND RIGHT NOW, IT

IS THE .5%. TOM:

THIS IS ONE OF OUR EXPERTS, WHATEVER YOUR VIEW ON POLITICS

YOU WANT TO WEAR SLACK IS WHEN IT IS TWO POINT SIX

UNEMPLOYMENT RATE IN MILWAUKEE. IT IS THE ODDEST OF TIMES AND

SHE IS SUPER, SUPER, WICKED QUALIFIED TO UNDERSTAND HOW

EMPLOYED THE EMPLOYABLE ARE IN AMERICA.

THERE IS THE POLITICAL ISSUE THAT THE PRESIDENT FACES, OF

PEOPLE WHO ARE LESS THAN EMPLOYABLE. JONATHON:

WE WILL PLAY OUT TOMORROW THAT CONVERSATION TO THE NEXT

SEVERAL HOURS ON BLOOMBERG TV AND RADIO.

I WILL CATCH UP WITH ANNE-MARIE AGAIN AND GET SOME REACTION TO

THAT CONVERSATION WITH MATT MISS CAN AND COLIN MARTIN FROM

JOHN HANCOCK AND SWAP -- AND SCHWAB RESPECTIVELY.

A SURPRISING PERFORMANCE FROM THE AIRLINES, FROM THE CRUISE

LINE OPERATORS. JANET YELLEN TALKED ABOUT THE

STRENGTH OF THE LABOR MARKET.

CAN CONTINUE, GIVEN THE PERFORMANCE OF STOCK SO FAR

THIS YEAR? TOM: IF ARE YOU WEAK, IT IS A

DIFFERENT AIRPORT. I THINK EVERYONE IS SO

DUMBFOUNDED BY THE NEW CHARACTER OF OUR TRAVEL, I

DON'T THINK ANYBODY HAS AN INFORMED UNDERSTANDING OF

AUTUMN 2225. LISA: I WOULD AGREE.

I ALSO THINK PEOPLE ARE LOOKING OUT OCTOBER, WHEN STUDENT LOAN

PAYMENTS HAVE TO GET GOING AGAIN FOR THE FIRST TIME IN

THREE YEARS. WHERE DOES THAT MONEY COME OUT

OF AT A TIME WHEN A LOT OF THESE CREDITORS HAVE NOT BEEN

PAYING DOWN DEBT, THEY HAVE BEEN INCURRING OTHER DEBT? TOM:

LET'S GO THERE RIGHT NOW. THAT IS BRILLIANTLY SAID.

LET'S GO TO WHAT WE HEARD FROM THE TREASURY SECRETARY.

GREGORY DACO HERE WITH US.

IS THE OVERLAY OF AN INDEBTED AMERICA, LET'S BEGIN WITH THE

CONSUMER. HOW INDEBTED DOES ERNST & YOUNG

SEE THE AMERICAN CONSUMER?

GREG: THERE'S NO DOUBT WE HAVE SEEN

OVERALL DEBT RISE FOR ALL

CONSUMERS, BUT IF YOU LOOK AT HISTORICAL NUMBERS, WE ARE

STILL AT A HISTORICAL LOW. WE HAVE STILL SEEN REVOLVING

DEBT COMBAT QUITE AGGRESSIVELY. THAT IS ONE POCKET OF CONCERN,

AS LISA WAS HIGHLIGHTING, WITH CONSUMERS HAVING TO NOW PAY

STUDENT LOANS ONCE AGAIN. THAT WILL PUT TREMENDOUS

PRESSURE ON THOSE AT THE LOWER END OF THE INCOME SPECTRUM.

WE KNOW THAT IS ALREADY WHERE WE WERE STARTING TO SEE SOME

CRACKS IN THE FOUNDATION, WITH HIGHER DEBT SERVICING RATIO,

AND ALSO INTEREST RATES ON THESE CREDIT CARDS RISING TO

LEVELS THAT ARE 21%, 22%, VERY HIGH FOR ANYONE TO PAY. TOM:

THIS IS ONE ASPECT OF CONSUMER ANALYSIS THAT YOU GUYS DO.

LISA AND I BROUGHT THIS UP THE OTHER DAY.

I AM SPEAKING AS BOTH A COMPLETE HACK BOTH IN RELIGION

AND FINANCE. IT IS BIBLICAL THESE RATES THAT

WE ARE BEING ASKED TO PAY ON CHARGE CARDS.

ARE THEY SUSTAINABLE? DO WE GET UP TO THE NEW, NEW

TESTAMENT ON WHAT WE ARE GOING TO PAY HERE? GREG:

WHAT'S IMPORTANT TO REALIZE IS THAT WE ARE GOING TO BE IN AN

ENVIRONMENT WHERE THE COST OF CAPITAL IS GOING BE HIGHER.

IT IS NOT JUST CONSUMERS, BUT BUSINESSES AS WELL.

WE ARE SEEING GRADUAL ADAPTATION OF THIS HIGHER COST

OF CAPITAL AND HEARING FROM A LOT OF CLIENTS THAT THEY ARE

BEING MUCH MORE CAREFUL WITH THEIR INVESTMENT DECISIONS

BECAUSE IN THIS HIGHER RATE OF INTEREST ENVIRONMENT, YOU HAVE

TO BE CAREFUL THAT THIS PROJECT IS TO GOING TO BE PROFITABLE.

THAT IS THE NEW REALITY THAT WE ARE GOING TO BE IN, STILL

TAKING SOME TIME TO FILTER THROUGH TO EVERY ACTOR IN THE

PRIVATE SECTOR. ONCE WE GET TO MORE STABILITY

AND MORE FORESIGHT AS TO WHERE THE FED WILL END UP IN TERMS OF

TERMINAL RATE, WHERE LONG-TERM INTEREST RATES WILL SETTLE, WE

WILL HAVE MORE CLARITY, AND LIKELY A BIT MORE OF A TAILWIND

IN TERMS OF BUSINESS SECTOR INVESTMENT AND PERHAPS EVEN

HIRING. I THINK THAT IS WHERE THE HOPE

REALLY COMES FROM. IN THIS ENVIRONMENT, THERE IS

NOT ENOUGH SUPPLY, WE ARE UNDERSUPPLIED.

THIS POTENTIAL BOOST FROM THE SUPPLY SIDE, ONCE THE PRIVATE

SECTOR ADAPTS TO THIS, IT COULD BE A TAILWIND IN THIS ECONOMY.

THAT IS WHERE THE HOPE OF A SOFT LANDING COMES FROM. LISA:

JUST TAKING A STEP BACK, IS LESS CONSUMER SPENDING A

POSITIVE, A NECESSARY PRESCRIPTION TO GET A SOFTER

LANDING, TO BRING THE ECONOMY TO A MORE SUSTAINABLE PACE?

GREG: WE HAVE SEEN IT CONSUMER SPENDING SLOW, INVESTMENT SLOW.

WHAT WE HAVE NOT SEEN IS RETRENCHMENT LIKE WE DO HEAD OF

RECESSIONS. THAT IS WHY YOU ARE SEEING A

LOT OF FORECASTERS DIALING BACK RECESSION CALLS.

ESSENTIALLY, WE HAVE NOT SEEN EMPLOYMENT RETRENCH, CONSUMER

SPENDING RETRENCH, MANUFACTURING RETRENCH.

WHAT WE HAVE SEEN IS A SLOWDOWN IN THE PACE OF ECONOMIC

ACTIVITY. STILL MOVING FORWARD, BUT AT A

MORE CONSCIOUS PACE. THAT MAY BE JUST ENOUGH TO GET

US ONTO THIS TRAJECTORY BACK TO A 2% TARGET.

THAT IS WHAT THE FED IS HOPING FOR.

IT'S GOING BE VERY DIFFICULT FOR THE FED IN THIS ENVIRONMENT

TO CALIBRATE MONETARY POLICY. WE KNOW THERE ARE STILL HAWKS

THAT WERE DISAPPOINTED NOT TO HAVE RAISED RATES IN JUNE.

THE QUESTION IS WHAT HAPPENS LATER IN THE YEAR, IN TERMS OF

FURTHER TIGHTENING. LISA: IT DOES FEEL LIKE EVERY WEEK,

WE HAVE DIFFERENT STORIES. WE WERE SPEAKING EARLIER WITH

MARKET FIELD ASSET MANAGEMENT. POINTING TO THE MANNISH -- TO

THE MANUFACTURING SECTOR, EXPECTING IT TO CATCH UP WITH

SERVICES, NOT NECESSARILY THE OTHER WAY AROUND.

JUST MOMENTS AGO, WE GOT THE EMPIRE MANUFACTURING DATA FOR

JULY. IT WAS SUPPOSED TO CONTRACT.

IT DID NOT. AND EXPANDED BY 1.1%.

ARE WE SEEING THAT TREND THAT MANUFACTURING HAS BEEN IN A

SLUMP AND WILL RECOVER AND CATCH UP TO THE DYNAMISM WE ARE

SEEING IN THE SERVICES AREA? GREG: EVENTUALLY.

THAT'S WHAT CAN HAPPEN IN AN UNDERSUPPLIED WORLD.

IN THE CAN STRUCTURE -- IN THE CONSTRUCTION WORLD IN

MANUFACTURING, WE ARE SEEING BUSINESSES INVEST IN AREAS

WHERE THERE IS A SHORTFALL OF SUPPLY.

THAT CAN BE A VERY INTERESTING ECONOMY GOING INTO 2024.

ACTUALLY, IT IS THE SUPPLY SIDE THAT DRIVES MOMENTUM AND THE

FED DOES NOT NEED TO DO TOO MUCH ON THE DEMAND-SIDE TOOT --

TO COOL DEMAND TOO MUCH BECAUSE IT HAS ALREADY COOLED.

AS WE GET THIS REBALANCING, IT HELPS WITH INFLATIONARY

PRESSURES, IN TERMS OF COST, AS WELL AS WAGES.

THAT IS THE OPTIMISM THAT IS THERE.

STILL HAVE TO NOTE THAT THERE ARE RISKS.

WE HAVE AN ENVIRONMENT WHERE CREDIT CONDITIONS HAVE

TIGHTENED. WE ARE TALKING ABOUT LEVERAGE

IN SOME SECTORS OF THE ECONOMY. WE HAVE A GLOBAL ECONOMY

SLOWING. THE NUMBERS OUT OF CHINA WERE

NOT THAT GOOD THIS MORNING. THE BACKOFF IS SOFT.

THAT IS A RISK IN TERMS OF U.S. ACTIVITY. TOM:

THIS MOMENT -- THIS HEADLINE OUT MOMENTS AGO.

I DON'T WANT YOU TO COMMENT SPECIFICALLY.

FORD CUTS F-150 LIGHTNING PRICES, SOME BY AS MUCH AS NEAR

$10,000. IS THIS THE DISINFLATION AND

DEFLATION UP AT THE REVENUE LINE?

IS THIS THE PRICE ADJUSTMENT WE ARE BEGINNING TO SEE? GREG:

I THINK TO SOME EXTENT, IT IS. WE HAVE SEEN BOTH USED CAR

PRICES AND NEW CAR PRICES SURGE WELL BEYOND THEIR PRE-PANDEMIC

TRENDS. WE ARE STARTING TO SEE SOME

CORRECTION ON THAT, BOTH IN TERMS OF NEW AND USED CAR

PRICES. THAT IS THE DISINFLATIONARY WIN

THAT WE WERE TALKING ABOUT SIX MONTHS AGO.

THE FACT THAT ONCE THIS INFLATION GETS UNDERWAY, IT CAN

ACTUALLY SURPRISE TO THE UPSIDE, IN TERMS OF VELOCITY.

TOM: GREG DACO, THANK YOU SO MUCH.

GREATLY APPRECIATED ON THE ADJUSTMENTS OF THE ECONOMY.

THE TOXIC BREW HERE, WHICH IS REALLY INTERESTING TO SEE, IS

AT THE REVENUE LINE. I AM TALKING ABOUT A HOLISTIC,

NOT MICROCOSM, BUT JOY NORMA'S REVENUE LINE.

IT IS PRICE DYNAMICS. MY RIGHT THAT THE F-150 IS A

SUCCESSFUL PRODUCT? I KNOW THAT YOU LOVE IT.

MATT MILLER DECIDED TO GET ONE, TOO.

BUT WE ARE NOT TALKING ABOUT TESLA STRESS OR TOO MUCH CATCH

UP ON THE SHELVES -- CATCH UP ON THE SHELVES. LISA:

WE HAVE SEEN THIS AND OTHER ELECTRIC VEHICLES AS WELL.

THE KEY ISSUE IS, DID THEY JUST GET TOO GREEDY AND THE MARGINS

WERE TOO BIG TO BEGIN WITH, OR IS THIS A LACK OF DEMAND AND

SOMETHING MORE INSIDIOUS ABOUT CONSUMER SPENDING?

PEOPLE WILL TRY TO SAY THIS IS MORE ABOUT THE FORMER, NOT

NECESSARILY THE LATTER, AND IT IS SIMPLY THAT THE MARGINS WERE

TOO WIDE. BUT FORD SAID IT WAS CUTTING

PRICES UP TO NEARLY 17%. THE F-150 LIGHTNING PRO, THE

PRICE CUT IS A MOST $10,000. THE F-150 LIGHTNING BY ABOUT

$6,000 OF A PRICE CUT.

BUT IS THIS TO COMPETE ALSO WITH MORE TRADITIONAL CARS?

BECAUSE PEOPLE COULD NOT SPEND WHAT IT COSTS. TOM:

THIS GOES BACK TO SECRETARY ELLEN TALKING ABOUT CHINA.

I LOVE HOW OUR CONTROL ROOM HAS YOU DRIVING.

FOR YOU OWN RADIO, THIS IS LISA IN HER LIGHTNING. LISA:

[LAUGHTER] I WANTED A PICKUP TRUCK. TOM:

WHAT DID YOU TAKE OUT OF SECRETARY YELLEN?

WHAT I TOOK OUT OF IT IS THAT THERE ARE DEBATES WITHIN

PENNSYLVANIA AVENUE HOW TO PROCEED. LISA:

AND THE INTERCONNECTEDNESS OF THE U.S.

AND CHINA, HOW TO BREAK SOME OF THAT DELICATELY WITHOUT CAUSING

AN ECONOMIC COLLAPSE IN EITHER COUNTRY.

ALSO THE SENSE THAT THERE IS A LOT OF LOVING FROM PRIVATE

COMPANIES TO JANET YELLEN, I'M GUESSING QUIETLY SAYING THIS IS

GOING TO BE TOUGH FOR US TO GET TOO COMBATIVE. TOM:

YIELDS DOWN 2%.

LISA: I HAVE TO SAY, TO ME, THE THEME

OF THE WEEK IS GOING TO BE THAT ALL OF THE DATA WE GET, BUT

ALSO EARNINGS. IN PARTICULAR, WHAT WE SEE FROM

BANKS, NOT JUST BIG BANKS. HOW MUCH DO WE GET GUIDANCE

THAT WE'RE GOING TO SEE A RAPID TIGHTENING AND GUIDANCE THAT WE

HAVE NOT SEEN YOU? -- SEEN? TOM: TO KEEP YOU ALL INTERESTED

SUNDAY INTO MONDAY INTO TUESDAY INTO WEDNESDAY, THE FOCUS IS ON

GOLDMAN SACHS. WE THINK MORGAN STANLEY WILL

COME OUT WITH A STORY. WE WILL SEE OTHERS.

I THINK A LOT OF WALL STREET, THERE IS A CURIOSITY TO THE

STATE OF GOLDMAN SACHS. LISA: ESPECIALLY CONSIDERING ALL THE

NEWS WE HAVE HEARD AND HOW THEY HAVE PULLED DOWN SOME

EXPECTATIONS. IF WE DO HAVE ALL OF THE BANKS

COME OUT WITH A JAMIE DIMON-LIKE PROCLAMATION THAT

CONSUMERS ARE STILL SPENDING, STILL SEEING A REALLY ROBUST

ECONOMY, A RECESSION NOWHERE IN SIGHT, WE HEARD THAT FROM WELLS

FARGO AS WELL, WHERE DOES THAT LEAVE THE MARKET?

IS 60/40 BACK INVOKE? -- IN VOGUE? TOM:

WE WILL HAVE ALL OF THAT FOR YOU WITH SONALI BASAK, COMING

UP ON TUESDAY AND WEDNESDAY. BUT I'M GOING TO GO BEYOND IT

TO WHAT WE SEE WITH THE REST OF THE EARNINGS.

THAT GOES BACK TO THE FORT ANNOUNCEMENT, OR ALL THESE

PEOPLE AT THE BLOOM OF OUTSTANDING REVENUE, 4% REVENUE

GROWTH SUDDENLY BECAUSE -- BECAME A PERCENT REVENUE GROWTH.

THE CALLS ON THAT WILL BE ABSOLUTE FASCINATING. LISA:

YOU HAVE BEEN GREAT ON THAT. AND REVENUE GROWTH MIGHT SLOW

WITH SLOWER INFLATION. THAT IS THE INTERESTING

CONUNDRUM. TOM: MISERY HERE ON A MONDAY.

GREEN ON THE SCREEN, UNCERTAIN.

>> GROWTH IS SLOWED, BUT OUR LABOR MARKET CONTINUES TO BE

QUITE STRONG. I DON'T EXPECT A RECESSION.

I THINK THAT WE ARE ON A GOOD PATH TO BRINGING INFLATION DOWN.

THE MOST RATION -- MOST RECENT INFLATION DATA WERE ENCOURAGING

THAT WE'RE MAKING PROGRESS ON GETTING INFLATION DOWN. TOM:

YELLEN VIEJO, A MOST ORIGINAL SECRETARY-TREASURER.

I CANNOT EMPHASIZE THAT ENOUGH. REALLY UNIQUE IN THE MODERN

HISTORY OF THE OFFICE. I WILL TAKE IT BACK TO ANDREW

MELLON A FEW YEARS AGO. LISA DOES NOT REMEMBER THAT,

BUT I DO, UNFORTUNATELY, REMEMBER ANDREW.

BUT THAT IS A REALLY ORIGINAL SECRETARY-TREASURER.

EVERYONE KNOWS I'M A BIG FAN OF CHAIRMAN YELLEN.

THE BOTTOM LINE IS, THEY ARE REALLY FORCEFUL HERE ON THE

STATE OF THE AMERICAN ECONOMY.

THE BIDEN ADMINISTRATION, FOR WHATEVER REASON, THEY STAND

TALL ON WHAT THEY ARE FED THEIR INSTITUTION IS DOING. LISA:

AND THEY SEEM TO JUST LET IT RUN ITS COURSE.

THE CONSISTENCY WE HAVE HEARD, SOFT LANDING, SOFT LANDING, AND

PEOPLE USED TO SHRUG IT OFF. NOW, THEY ARE SAYING, ACTUALLY

IT IS. AND EVERYONE IS AGREEING. TOM: WE'RE GOING TO PAUSE NOW.

I'M GOING TO SUGGEST THIS IS THE INTERVIEW OF THE WEEK.

WHAT'S IMPORTANT HERE IS TO UNDERSTAND A FINANCIAL MEETING

IS FOCUSED ON FULL FAITH AND CREDIT. ON GOVERNMENT PAPER.

IT IS EASY, PEOPLE FOLLOW IT. THEY LOOK AT THE 10 YEAR YIELD

AND THE DOW. THERE IS A WHOLE NEW WORLD OUT

THERE AFTER ALL.

LONG AGO AND FAR AWAY, I THINK SHE WAS A POLITICAL ENGLISH

ECONOMICS MAJOR. SHE WAS PRETTY SPREAD.

SHE OWNED THE HIGH GROUND AT THE UNIVERSITY OF CHICAGO AND

BROUGHT IT TO BLOOMBERG NEWS TO LOOK AT THE SECURITY CALLED THE

BOND MARKET. WE ARE NOW GOING TO TALK ABOUT

YOUR ABSOLUTE WHEELHOUSE, WHICH IS THE DIFFERENCE IN YIELD

BETWEEN NORMAL FULL FAITH AND CREDIT GOVERNMENT, WERE

AMATEURS LIKE ME LOOK, AND WHERE GUYS LOOK ON A PIECE LIKE

PROCTER & GAMBLE OVER SEVEN YEARS. LISA:

THIS, TO ME, IS A FASCINATING MOMENT.

IT IS THE EQUITY-LIKE ASSET IN THE MARKET.

HOW DO YOU PRICE OUT ECONOMIC SLOWDOWN?

THE PERSON TO TALK ABOUT IS NOT ME. IT IS BRADLEY ROGOFF, HEAD

RESEARCHER OVER AT BARCLAYS. HE IS JOINING US AT A TIME WHEN

THAT EQUITY-LIKE PREMIUM IS AT ITS LOWEST LEVEL GOING BACK

MORE THAN A YEAR. EVEN THOUGH WE ARE SEEING

DEFAULTS PICK BACK UP, EVEN THOUGH THINGS ARE SLOWING,

ALBEIT NOT A CRASH AND BURN RECESSION, HOW DO YOU MAKE

SENSE OF THIS? BRADLEY: EVERYTHING IS RALLYING ACROSS

MOST MARKETS. THE HIGH-YIELD CREDIT MARKET,

FOR EXAMPLE, WHICH YOU ARE REFERENCING, IS RALLYING LIKE

EVERYTHING ELSE. IT IS HARD FOR THE RISING TIDE

NOT TO LIFT ALL SHIPS. WHEN YOU HAVE ALL SPREADS, I'M

SURE YOU CAN PULL UP THE BLOOMBERG INDEX, GETTING INSIDE

OF 400, THAT IS WELL INSIDE OF AVERAGE LEVELS.

IT DOES FEEL TIGHTER THAN YOU CAN JUSTIFY IF YOU THINK ABOUT

MEDIUM-TERM FUNDAMENTALS AND EVERYTHING GOING ON IN MARKETS,

AND ESPECIALLY DEFAULT RATES. WE THINK THIS YEAR IN HIGH

YIELD, YOU WILL SEE A 3% TO 4% DEFAULT RATE.

YOU WOULD EXPECT A LITTLE PREMIUM FOR THAT.

IS THE MISMATCH REALLY LARGE? NO.

WHEN WE FEEL BETTER IF IT WAS ON A POINTS WIDER?

YES, WE WOULD. LISA: IF CREDIT IS A LEADING

INDICATOR, IT WOULD SUGGEST THAT THERE IS NOT GOING TO BE A

SIGNIFICANT DEFAULT CYCLE. SHE SAID IT IS NOT A LEADING

INDICATOR. IS CREDIT NO LONGER THE SMART

MONEY? BRAD: I THINK EACH CYCLE IS DIFFERENT.

THAT IS WHAT WE ARE LEARNING. CREDIT WAS CERTAINLY THE

LEADING INDICATOR IF WE GO BACK TO 2008 IN THE FINANCIAL CRISIS.

BUT THINGS ARE QUITE A BIT DIFFERENT THIS TIME.

YOU THINK ABOUT THE MOST RECENT EPISODE WE HAD AROUND RECENT --

REGIONAL BANKS, WE CAME UP WITH SOME RULES THAT WORKED REALLY

WELL VERSUS THE 2008 CRISIS WHEN IT WAS AN ASSET QUALITY

PROBLEM. WHEN YOU DO THAT TO YOU WITH

RULES, YOU BOUGHT UP THE CURVE, BECAUSE IT WAS SLIPPING AT THE

TIME. I DO THINK YOU HAVE TO TAKE A

STEP BACK AND SAY THAT MAYBE THIS CRISIS IS NOT GOING TO BE

LIKE THE NEXT ONE, IF YOU'RE LOOKING FOR THAT NEXT EPISODE.

THE LAST THING I WOULD SAY IS THAT THE HIGH-YIELD MARKET

SPECIFICALLY HAS GOTTEN A BIT HIGHER QUALITY THAN IT WAS

HISTORICALLY BECAUSE OF THE ALTERNATIVE OF FINANCING.

AS A RESULT, MAYBE THAT IS NOT THE BEST PLACE TO LOOK. TOM:

I WANT TO MAKE IT CLEAR THAT WE ARE TRYING TO GET HIM OVER TO

BLOOMBERG HERE. YOU BRING UP THE LEHMAN TOTAL

RETURN INDEX. NOW, THE CORPORATE INDEX AS

WELL. IT IS BASICALLY A LINEAR REGRESSION STRAIGHT OUT.

EVERYTHING GOES OFF A CLIFF IN WHAT I CALL A DEAD CAT COUNTS.

BRAD: I THINK THE REASON WE HAD THAT

FALL OFF A CLIFF THAT YOU JUST ALLUDED TO, A LOT OF THAT IS

WHEN YOU THINK ABOUT CORPORATE'S IN GENERAL,

ESPECIALLY INVESTMENT-GRADE CORPORATE'S, FOR EXAMPLE.

THE DURATION IS SIGNIFICANT AND LONGER THAN ON AVERAGE

TREASURIES. AS A RESULT, WHEN YOU HAVE A

HUGE INCREASE IN INTEREST RATES, YOU CAN HAVE PRETTY BAD

TOTAL RETURNS. THAT DOES NOT MEAN THE CREDIT

SPREAD COMPONENT IS PROBLEMATIC. AS LISA WAS ALLUDING TO, AND

TOM, YOU WERE ORIGINALLY, THAT HAS COME IN QUITE A BIT.

THREE MEDICATIONS HERE IS THAT YIELDS ACTUALLY LOOK PRETTY

ATTRACTIVE ON A LOT OF THESE ASSETS. THE SPREAD IS WELL BELOW

AVERAGE , AROUND 400 SPREAD. IF YOU LOOK AT RETURNS GOING

FORWARD, IT TENDS TO BE MEDIOCRE.

BUT IF YOU LOOK AT A PERCENT TO 9% YIELD, WHICH IS THE RANGE WE

HAVE BEEN IN, THOSE RETURNS TEND TO LOOK PRETTY GOOD.

I THINK THE ONE THING YOU HAVE TO FACTOR IN IS BECAUSE OF THE

MOVE, YOU HAVE GOT MARGIN FOR ERROR RIGHT NOW IN TOTAL

RETURNS AND CREDIT MARKETS. LISA:

I MENTIONED PROCTER & GAMBLE EARLIER TAKING GIVEN CORPORATE.

WITH YIELDS UP, YOU HAVE PRICED DOWN AND CORPORATE LANDSCAPE.

IS THIS A TENDENCY WHERE YOU LOAD THE BOAT ON SIZE OR ARE

YOU MORE SOPHISTICATED ABOUT DURATION AS YOU LADDER INTO

CORPORATE BONDS? BRAD:

I THINK WHAT WE'RE SEEING RIGHT NOW IN TERMS OF CORPORATE'S IS

PEOPLE TAKING A COMPARISON AND SAYING YOU CAN GET RISK-FREE OR

FULL FACING CREDIT, AS YOU MENTIONED, AT THE FRONT END FOR

A LOT OF YIELD. IF YOU LOOK AT THE SHAPE OF THE

CURVE, YOU HAVE TO WANT DURATION , TO NOT HAVE THE

REINVESTMENT RISK, AND FEEL REALLY COMFORTABLE IF YOU ARE

GOING TO BUY LONGER DATED CREDIT. LISA:

YOU SAID YOU WOULDN'T NECESSARILY LOOK IN CREDIT FOR

RISK SIGNALS, YOU WOULD LOOK ELSEWHERE. WHERE IS ELSEWHERE?

IS IT THE PRIVATE MARKETS THAT ARE CREATED ALMOST A BUFFER FOR

THE PUBLIC CREDIT MARKETS THAT USED TO BE A FRONTIER FOR A LOT

OF THIS INVESTING? BRAD: I THINK YOU HAVE MORE RISK

THERE. DO I THINK IT IS A SYSTEMIC

PROBLEM? NO. I DON'T THING THE SIZE OF THOSE

MARKETS ARE BIG ENOUGH TO HAVE ANY SYSTEMIC PROBLEM LIKE WE

HAD IN 2008. I ALSO DON'T THINK THE LEVERAGE

IN THE SYSTEM THEY ARE, IN TERMS OF PEOPLE USING FINANCIAL

LEVERAGE TO BUY THOSE ASSETS, IS QUITE ENOUGH TO HAVE WHAT WE

LIKELY HAD IN 2008. BUT IF YOU LOOK AT CORPORATE

LEVERAGE, SOME OF IT WENT TO THE LEVERAGE LOAN MARKET.

A LOT OF IT DID GO TO THE PRIVATE CREDIT MARKETS.

WHILE THERE IS SOME OPACITY AROUND THAT, YOU CAN LOOK AT

THINGS LIKE BBC'S AND SEE A LOT OF LEVERAGE THERE.

THERE'S A LITTLE MORE RISK THERE. LISA:

BUSINESS DEVELOPMENT CORPORATION.

IT IS A CLOSE-AND FUND. I WAS LOOKING AT LISA WHEN I

SAID THAT. SORRY. LISA: ONE FINAL QUESTION AS WE CAME

OUT WHAT IS TO HAPPEN. TOM ASKED THIS EARLIER AND IT

WAS A GREAT QUESTION. HOW THE EQUITY INVESTORS ARE

PARLAYING INTO YOUR SPACE BECAUSE OF THE YIELD? BRAD:

THERE WERE A LOT. IF I LOOK BACK AT THE SECOND

PART OF LAST YEAR, THE CREDIT MARKETS WERE UNDER PRESSURE.

THERE WAS ONE, WAS ON ABOUT THESE LEVERAGED BUYOUT THAT GOT

HUNG AT THE BANKS. WE SAW A LOT OF THAT.

RIGHT NOW, THE SPREAD IS STARTING TO SCARE THEM A LITTLE

BIT. AS WE GET INTO EIGHT HANDLE YIELD AND NOT A TON OF SPREAD

IN HIGH YIELD, WE ARE SEEING A LITTLE LESS. TOM:

THERE'S 8% YIELDS OUT THERE ON SOMETHING I CAN TOLERATE? BRAD:

MAYBE SEVENS FOR YOU. LISA: [LAUGHTER] YOU GOT A HAIRCUT.

TOM: I REMEMBER FULL FAITH CREDIT,

I'LL SAY 11% FULL FAITH. LISA: WHEN YOU THINK ABOUT IT, RIGHT

NOW, THE AVERAGE YIELD ON HIGH-END BONDS IS 8.3%.

EVEN WITH THAT REALLY NARROW SPREAD.

JUST TO GIVE YOU A SENSE, THAT'S AVERAGE. TOM:

WHAT DO YOU SAY QUICKLY HERE TO THE YOUNGSTERS AT BARCLAYS THAT

HAVE NEVER KNOWN A NORMAL YIELD MARKET? BRAD:

THAT'S ACTUALLY A GREAT POINT. SOMEONE WHO WAS NOT THERE

BEFORE 2008, IT'S A VERY DIFFERENT CONVERSATION.

THE CONVERSATION WE ARE HAVING, AND I HAD A BIG INVESTOR EVENT

LAST WEEK, THE CONVERSATION WAS THAT WHEN YOU LOOK AT

HIGH-YIELD , DO YOU LOOK AT PRICE OR YIELDS? TOM:

THAT'S BEAUTIFUL. I'M GOING TO STEAL IT FROM YOU.

THAT IS MY THEME FOR THIS WEEK. COMING UP, WE'RE GOING TO LOOK

AT PRICE AND YIELD, ALL ON BLOOMBERG "SURVEILLANCE."

WE WILL STEAL FROM BARCLAYS ANYTIME WE CAN.

RADLEY, THANK YOU SO MUCH. IMPORTANT BANK EARNINGS

TOMORROW. WE WILL HAVE COMPLETE COVERAGE.