tv Bloomberg Surveillance Bloomberg September 2, 2021 7:00am-8:01am EDT
♪ >> the consumer is very healthy and we are unburdened by death and saving and we have the demand. >> i believe that the fundamentals are not as supported as many think. >> you don't want to be out of the market. >> at some point we get a shock and policymakers will overreact step >> we are trying to figure out how transitory the pressures are and how long will it take and which companies can navigate this the best. >> this is bloomberg surveillance. jonathan: from new york city for our audience worldwide, good morning, this is bloomberg surveillance live on tv and radio. equity futures are up 2/10 of 1%. tom: a quarter of a million without power. the scope and scale that i was in the heart of hurricane bob i
think 1991. that was nothing compared to what i witnessed last night. jonathan: more than three inches of rain in a single hour in the heart of new york stuff lisa: the hurricane aftermath of ida affecting the subway system. the highways were completely inundated as cars got maroon. jonathan:jonathan: futures are posited by eight points in the s&p advancing to tenths of 1%. the euro just a little bit stronger. lisa: not a lot of drama heading into the job or tomorrow. we get a preview today. 8:30 a.m., we get initial u.s. jobless claims and the expectation is for the momentum to continue. we want fewer jobless claims to indicate that that momentum continues. we are talking about the flooding in the tri-state area and the northeast. president biden will deliver
remarks on his response to hurricane ida and perhaps the aftermath and the discussion about infrastructure spending, how much will this be a related discussion? after the market, we get a view perhaps into the chip shortage. broadcom will report earnings as well as hp. jonathan: it's always good to catch up with you but unfortunately, it's a difficult time for this city and beyond. let's talk about how historic yesterday was. >> we are talking about a one in 500 year event if you talk about the statistics. there is less than a .2% chance of this happening every year. the rainfall totals for central park are remarkable. as you mention, over three inches in one hour last night. in two hours, 6.5 inches of rain and three hours, 5.2 inches
fell. the total for six hours was 6.82 inches. there is not a pumping system in the country that could handle that type of rainfall in a metropolitan area. the only place we could have put that rain would have been in the grand canyon. tom: you are the adult in the room and i want to cut to the chase on climate change. it's changed, hasn't it? do we need to get used to this? >> that such a complex question. the big issue is we have to keep in mind that the oceans are definitely warmer than they have been in the last 30 years. these storm systems feet on warm water. we had a phenomenal flow around a well-developed circulation with ida. it kept the circulation. there was a great connection of tropical moisture last evening and yesterday afternoon right up the east coast and then north of
that warm air, we had cool air so you have this warm air colliding with the cool air and you were effectively ringing out the precipitation as well as you can with a rainfall rate of i think about four inches per hour at newark airport. half an inch of rain in six minutes time. when you ring the precipitation out that efficiently, it's remarkable to see it. this has happened in the past step between 1970-1999, 60% of think that's happened due to inland freshwater flooding. with camille and 69, went through the central appalachians, it dumped 20 inches of rain in less than 24 hours. that's the bad things with these strong hurricanes. even though they are far inland, they are usually prodigious ring producers and that's exactly what happened with the remnants of ida last night russ the tri-state area and into new england. the south coasted newington and picked up seven inches of rain
from the storm system. new york city is not necessarily inland. it has the ocean right next to it. how much will the flooding get worse as the tides go about the day? >> the winds direction will shift to the north and west of that will have a tendency to push any tidal conditions offshore. that's good news. as far as local rivers and streams, they will be up the next 24 hours but we got high pressure building and for the north and east so it looks relatively dry through the rest of today, tomorrow, saturday and much of sunday. we will get a chance to get those rivers up today and tomorrow and quickly bring them back down. jonathan: good to catch up, appreciate all the statistics. going through some of the numbers, the source of this is 189 flight canceled at newark in
129 canceled at laguardia. newark airport took the brunt of this. tom: going back down to louisiana, we have to remember the destruction -- the destruction and energy. we don't face the electric grid up here. president biden is looking at a three-month story? jonathan: the federated portfolio manager joins us. can we get federal infrastructure done in d.c.? >> there's certainly a clear path for that. when you think about the $3.5 trillion soft infrastructure, there is more uncertainty there but there still a battle between the progressives and moderates. i think it got a clear track over the next several months where the $1 trillion bill could go through. i could go wild without one of these 500 year events.
i think we've had our fill for a while especially with the pandemic. tom: how do you asset allocated into a once every 500 years fiscal stimulus? >> it's even been more complicated. the way you would historically allocate into a large stimulus is you want to be long in terms of cyclicals, short on duration on the bond side and that's the way we've been position for the better part of the last year. that really has not worked since may. that's been because you had this resurgence of covid staff that has put a damper on some of the animal spirits. the hospitalizations are starting to peak and renewed spending, we thank that trade can reassert itself. you have to be patient because it hasn't worked last couple of months. lisa: as you talk about the
biblical type of events and that's been reflected recently. what catches your attention and makes you rethink a bullish outlook? >> consumer confidence coming down is something to watch. it did that last year going into the fall. confidence is important. we are watching that closely. i think we are likely to get more certainty and confidence over the course of the next couple of months and i think it starts with tomorrow's job reports. if that jobs report is reasonable, i think that clears the way for the fed to maybe announce taper as soon as september and then we know the rules of the game for the next 6-9 months. jonathan: this is the line from bill gross. double digit or barnes conjoint the garbage truck. are you expecting good earnings?
>> absolutely, we had record margins in the second order and earnings estimates are moving higher and companies can pass on price. they are not giving back and companies are navigating these once in a 500 year event extraordinarily well. i think they will continue to do so. jonathan: great to hear from you. we've been talking about this for most of this year, operations will adapt step tom: they will adapt, i learned that by losing money. jonathan: talk to us more about that. tom: you make a dumb trade like i made and you lose money and you go what happened and you misjudged the corporation. they adapted. it's a mystery and while you were going on your sabbatical, we had a terrific interview with david stubbs of jp morgan who came out pounding the table on the technological change going on right now.
that's adapting. jonathan: you've talked about adapting a lot. we are adapted do you on a daily basis. margins have held a big time. lisa: he is adapting big time. the margin story is interesting because we are seeing it hang in there as they pass along the price increases but especially when people see a decline in their income when it comes to the end of the enhanced employment then if it's. studies show they start to spend less. jonathan: just an update, new york's metropolitan transportation authority for commuter reels is largely suspended due to heavy rain and flooding across the region step that's according to the mta website this morning. tom: it's separate stations.
it's about the system but if you have six stations damaged heavily, what does that do in the coming weeks? jonathan: they are asking people to avoid all unnecessary travel. through the morning on bloomberg tv and radio. coming up, brian levitt from invesco on the equity market that keeps climbing. the equity market is up another eight points. on futures we advance 2/10. heard on radio and seen on tv, counting it down to payrolls this friday as the estimate comes in a little bit. it is a week of an expected employment component and we will talk about that data later this morning. from new york, this is bloomberg. ritika: a divided u.s. supreme court has refused to block a texas law banning abortions
after six weeks of pregnancy. they want the law to be put on hold while the legal fight goes forward. the measure will ban abortion for at least 85% of the patients in texas. the remnants of hurricane ida ripped through new york, new jersey and across the northeast and it triggered tornadoes, understands and torrential rains where streets were inundated and traffic was a mess and train service was suspended in manhattan. more than three inches of rain fell in central park in one hour. there were at least eight storm related deaths. bill gross is talking trash about the bond market. the one-time bond kinks said long-term treasury yields are so low that they can be put in the garbage can. is that stocks could fall into the category of trash if earnings for short of expectations. people's bank of china will
provide more than 46 billion dollars of funding so they can lend to small and medium-sized companies. the economy has showed signs of a slowdown in the wake of more virus out right and tighter controls. tesla has to temporally halt production at its company in shanghai. the automaker did not have enough electronic control units. this is bloomberg. ♪
major economy, the economy literally has a heart attack step without 10. input from policymakers, the state of the economy is unsustainable. jonathan: standard investments sounding bearish. good morning. the price action this thursday morning from jobless claims. tom: we are up. jonathan: we should have a little button and record that. yields are down. i don't know if you have that one in you. where are yields? tom: down. jonathan: you could take a vacation. tom: i could but i down. jonathan: crude is $69. where is cruz? tom: crude is up. the dow was up 47 points.
we say good morning and we are paying careful attention to the news from washington up to boston on this horrific storm, the aftermath of hurricane ida. what does the president's agenda do to write the ship? > it's about tomorrow. he will be going to louisiana to see what the destruction was on the ground and take stock of the situation. some people were asking about when he would actually go and the press secretary had said -- tom: i'm going to cut you off. since katrina, every callicott their flies over wherever the disaster is into a photo shoot but what can they do today? you were going to sit in the east room and they've got to worry about at janice dan, a legitimate storm, to infrastructure bills in the
state of the nationals relief pitching. what is the presence plan today? >> and the debt ceiling as well. just complete briefing today. briefings on louisiana and afghanistan. the secretary of defense will go to the gulf as they continue to try to extract about 100 american citizens and the state department is yet to tell us how many green card holders there are and many afghans that are seeking refuge. that's part of the conversation and the destruction of louisiana and what you see in new york city and what we are seeing in washington, d.c.. the president will likely use this toward his bipartisan as well as the money they wanted to spend on resiliency, energy infrastructure, coastal preservation, all of the money that didn't make it into bite partisan infrastructure, i will imagine they will use this destruction from height and the storms -- from ida and the
storms to go into the infrastructure bill. lisa: let's talk about bipartisan support. states are louisiana are resent -- are represented by republicans. how much is this shore up consensus beyond the $550 bill? >> it will be difficult for republicans to get on board because this means higher taxes. the $3.5 trillion and -- soft infrastructure agreement -- everyone i talked to in washington, no one thinks they will get that top line. this is going to be a massive show down this autumn in washington. potentially, maybe we see another bill specifically about resiliency when it comes to hurricanes. it will be hard for senator bill cassidy of louisiana to not want to go on board with some parts of the soft infrastructure. the money that didn't make it into bipartisan infrastructure
about climate and clean energy and resiliency of these coastal lines, potentially they want to -- i cannot say republicans putting their name on anything that has massive tax hikes. lisa: how much will this be the focus versus the international focus. how does he coordinate with the shift back to domestic after the aftermath of afghanistan? >> you had white house aides brief democratic senate aides about the debt ceiling. this will be another massive show down. you already see the white house wanting to move forward to discuss the -- the domestic agenda. they have tons of teams in the white house presenting the president with what his next item needs to be. i imagine the white house isn't -- is excited to move forward to leaving afghanistan behind in terms of continuous press
questions and move toward infrastructure. the problem is, there will be hearings on this and we still have americans in afghanistan that want to come home. this is going to be a cloud but i imagine there will be a two-pronged approach in congress with infrastructure and the white house will take a two-pronged approach as far as foreign policy but they want to discuss domestic policy. tom: it is now september, does your world change next year? >> we have to wait and see. washington changes on the time. the massive issue is we heard from the supreme court in terms of what's going on in texas and this sets up another battle this autumn when it comes to washington, d.c. and this is about the 1973 roe v. wade. there will be a number of issues. i cannot look into a crystal ball and tell you what will be number one next november but americans care about their kitchen sink, their jobs and
prices and they will vote with their pocket next year. jonathan: we -- she must've had an extra hour in bed. >> i stay up much later. lisa: you don't have to justify it. jonathan: people want to know. are you going to come on an hour later every day? lisa: we rotate, it's a democracy. jonathan: anne-marie down in d.c., our correspondent. lisa: is she in a hermetically sealed room? tom: one of us comes in every morning at 8:00. jonathan: do you want to do the market check? tom: i'll do that. jonathan: that's part of the negotiation.
let's try it now. up seven on the s&p. tom: i don't care if the subway is out, need more perspective -- more per sec a. -- persecco. the subway is out. our first responders need to be careful out there. jonathan: it's a really dangerous time. it took many people by surprise. tom: yes, me, i failed. lisa: this is the first flash flood warning's that the new york area has ever had. from the national weather service, that was the first one ever. that is something of the desert, not new york city. jonathan: coming up is terry
yields in about half of basis point. the debate has not changed, demand is solid. what does that mean for the central banks? the ecb on one side, the fed on the other. euro-dollar 1.1849. it is not about divergence of the data between europe and the united states but convergence between central banks, the reaction of function between the fed and ecb. euro-dollar looking for a move down to $1.14. tom: i saw matt in one of your other properties yesterday. it is an outlier call. this way or that way, it is the scale of the moves. nobody is ready for four big figures.
jon: the debate is wide open. you lost me, every single morning. where is the dow? >> oh my word. jon: that's the price action. >> the macro story has pushed folks to the sideline. as far as some of the individual stories, keep an eye on madonna. the company did release results from the study of using its vaccine as a third dose booster shot and will seek approval from the u.s. and europe. another story, this is baxter that makes ivs and infusion projects. they are going to buy hill.
baxter approached this company. shares up about 3%. the price is 156 on the yield. there is a lot going on in the software space, getting earnings from a lot of different companies. viva systems down 7%. they beat most of the metrics. investors were looking for something stronger. the guidance came in on the nose, but not necessarily enough. okta came out with earnings. they beat every metric. cheers weaker, down 1.6%.
the cofounder and ceo will be on the program. we will get a chance to get an idea of what investors are looking for. tom: the year in the p.m. -- the european central bank, jackson hole that, terry, what do you look for from christine lagarde? >> in some sense, the inflation situation has gotten worse. we saw the ppi price index rise. she has just as much reason, if not more, to follow jay powell's lead and say the inflation we are seeing is transitory.
a 3% inflation rate in europe pales by comparison to the 5% or 6% year-over-year inflation we are seeing in the u.s. if the fed can say that we have a transitory inflation problem in the u.s. and not a structural or permanent one, it should be easy for christine lagarde to say the same. that does not mean they will not start discussing their own tapering, but if they admit they have the timing of the tapering, they will condition that and qualify it with their own transitory inflation. jon: why aren't they embracing it? they have been trying to generate it. >> that speaks to my view that by saying that it is transitory
is to suggest the market should not be concerned the ecb will normalize policy in the face of this inflation. the market will read that to mean there is a partial embrace of the situation. to the extent it is cost driven inflation and not demand driven inflation, there was a modicum of worry at one should have. costs go up on these supply chain issues. that is the inflation we do not want to see. i don't think she is ready to say this is not the type of inflation they don't want to see. they change their own inflation mandate as well to being symmetric. they continue to urge on this
inflation. jon: adam poston wrote this. they talk about how central banks should not react is fine, but saying that is the motivation for staying loose, what do you make of that statement? >> i don't think it undercuts it. when we talk about average inflation target, we talk about inflation under a number of quarters. there is no consistency between average inflation target and that these banks should -- in the face of tightening. what they are best suited to do is leave against inflation that is demand driven. it's the result of a sharp increase demand. to me, it seems to be commodity
driven, narrowly focused on those areas and items in the basket that are led by the reopening. until we get much broader inflation, there is going to be a willingness to embrace inflation. this does not mean the fed will not start to taper. that is a different issue. >> has the relationship between fed policy and ecb policy and inflation been broken? the push is coming from supply chain disruptions to commodities. the fed buying fewer bonds is not going to have significant ramifications. if companies have to pay more for their debt, they will have two pass along that much more of the price increase. what is the role when it comes to inflation that it is of this
nature? >> it sounded as if you were saying by tightening policy the fed could create inflation by raising the cost of companies indebted. try to convince a central banker of that. most models of the economy do not have it embedded in them that view of the tighter monetary policy causes inflation. in their view, other channels are much more important. >> my point was that it does not translate directly to curtailing that type of inflation. i was not saying raising rates will lead to rampant inflation. it does not have a direct transmission channel. >> i think it does.
if one central bank as tightening further or more aggressively, you should expect currency appreciation. that does reduce pricing power. through that channel alone, and the central bank has been sensitive. policy can inform the outlook for inflation. jon: got to leave it there. higher rates lead to higher inflation. lisa: thank you for considering me. i think there -- my point was not to say raising rates leads to higher inflation.
my point is there is not a natural, obvious transmission mechanism through the debt market to lowering this kind of an nation driven by supply chain disruption and things that are dependent of federal control. the currency transmission affect is significant, particularly for europe, where they import so many of the goods. that is compelling. jon: tom would love it. lisa: you are trying to wind me up. i can't even. that is not what i am saying. tom: john, not one of them spoke english. lisa: that is why it was so great. jon: you can still do the show and the central bank decision as well. good morning.
this is bloomberg. ♪ >> the courts refused to block a law that restricts abortions after six weeks of pregnancy. lawmakers in new york have suspended the freeze on evictions. it was supposed to have ended two days ago. the remnants of hurricane ida ripped through new york, new jersey, and across the northeast. traffic was a mess and train service is suspended. more than three inches of rain in just one hour. talks of john kerry to push the
u.s. to improvement in the board of relationship. the chinese foreign minister said washington must take the first step to repair ties that got worst during the trump administration. at least two of china's largest non-bank creditors have demanded repayment of some loans. that adds to liquidity pressures. it is the latest sign that they are struggling to make good on the liability. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪
inflation. there are signs of that. in some countries, wages are going up a lot. it is difficult to forecast. the answers are not always obvious. jon: going into the payrolls report. a federal reserve decision. we are up nine on the s&p. yields are in by about half of basis point. euro-dollar firmer. crude positive. $68.90. tom: 28 days to the quarter end. gina martin adams to apprise earnings, revenues, and the points in between.
every research note talks about a guesstimate of earnings. >> companies have baked in their estimates. analysts -- they are just a little bit cautious, they have remained cautious. the only risk is still about the margin lines. those are the most important lines to watch. it is about margins and how companies are contending with inflation pressures. tom: migrating down the income statement, you worry about margins. you have cost of goods sold.
which line should viewers and listeners focus on moving from revenues down to ebita down to net income? >> you want to watch the components that tie into margin. those are issues you want to look at. it is cost of labor, all of the numbers we are going to get tomorrow are critically important. how much are you having to increase wages to entice employees back to the office or back to your firm at large. those are the critical questions. how are you contending with trade friction? it has been more extensive than many people anticipated. those are most important to watch now.
lisa: at the height of the pandemic, companies came out and said we do not have visibility now. we cannot give you an accurate projection of what you can expect with earnings. how much visibility will they have is -- after some of these earnings reports. >> you see emergence in the second quarter. i anticipate we see that into the third corner -- the third quarter. so few companies in the s&p 500 give guidance. at one point we got to the point where 30 some odd s&p 500 companies were guiding on the outlook. we are in the 70 to 80 range. that is low.
they are starting to get more optimistic. one of the lines i am looking at is what our company is going to do with their cash? we have buybacks back to a pre-pandemic average. company cash levels are extraordinary. what are we going to do with all this cash that is sitting on the balance sheets? what are we going to do with the cash flow coming into companies? are we going to talk about spending it? that would ramp up expectations of economic growth. >> what is the positive way for companies to spend this cash? would traders respond positively or are they going to penalize companies for higher costs?
>> even buybacks have been graded kindly. it makes sense that demand is still ramping up and that would increase prices for stocks. the most positive signal companies can give is in the form of capital spending. we should see close to 25% growth in capital spending. companies are not giving that confidence signal that they are going to spend for the future. tom: stay with us. jump in with me on this message. this is a wow note about a wow and unusual august. that is a shock to go from 6.5% to under 3%. jon: let's walk through it.
we anticipated a sharp slowdown, but look for even distribution. payback is being frontloaded. morgan stanley revising tracking the forecast for fourth-quarter gdp, 6.7%. the revision implies full year, fourth-quarter gdp. that is 1.4 percentage points lower than the fed forecast. we will get a revision to them on the 22nd. tom: there is the economist again. how does that fold into your revenue guesstimates? >> it does not. gdp is an interesting indicator.
we look at it as an indicator for the economy. there are components of gdp, inventories get drawn down, it contracts from a gdp report. it is meaningless for s&p 500 revenue growth. the things that matter for revenue growth -- what are manufacturers telling you? what are retail sales telling you about the growth? it is not particularly relevant for the s&p 500. what we drive for the s&p 500 suggest it is significantly more important for consideration. what is the unemployment rate going to be and how many jobs are we growing? those factors and interest rates
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