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tv   Bloomberg Surveillance  Bloomberg  September 23, 2020 7:00am-8:01am EDT

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>> i am not to say there is a bubble forming. i am saying that there is a potential for one to form. >> we are still going into this weakness with some people unemployed. >> monetary policy the way we grew up with it doesn't work anymore. >> monetary policy will do its part. it is not the primary driver of this recovery right now. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: from new york and london, good morning. this is "bloomberg surveillance ," live on bloomberg tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. .5%ty futures positive dear , and i -- positive 0.5%, and i have absolutely no idea why we have a rally in europe. we will be catching up with the vice chair of the federal reserve. tom: the speech he gave august
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31 was exceptionally important. i spoke to the vice chairman yesterday, and he's really enthused about expanding on a lot of this monetary mumbo-jumbo. it is an important speech, but the backdrop, you nailed this weeks ago, is the massive case build up in the united kingdom that the prime minister talked about yesterday. i'm sorry, the landscape changed yesterday when he went out to march of 2021. jonathan: the outlook for europe gets a little bit worse. the data on the services side backing that up. from my perspective for the federal reserve, the message they want to send if things get -- the message they want --said, if things get better they want to send, if things get better.
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tom: how many times will we mention it? jonathan: i lost count. lisa, will you count it? lisa: no, but i'm going to let tom know that. tom: 47 times. lisa: there you go, 47 times we mentioned fiscal stimulus. jonathan: just to clear this up for our listeners, our audience worldwide, tom keene has not counted how any times. [laughter] maybe he find out it was 47 times. just inant to clarify case someone puts it down in a research note. tom keene wasn't watching that in the testimony yesterday. lisa: jay powell keeps saying we need this go support. we don't know how much moment to him it's going to decline as cases this momentum it's going to decline as cases think -- momentum is going to decline as cases increase. that seems to be the major of a point in the framework for the
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federal reserve. vice chair richard carrin adjoining "bloomberg --veillance" at 8:00 a.m. vice chair richard clarida joining "bloomberg surveillance" at 8:00 a.m. you do not want to miss it. you talked about the discipline in europe with manufacturing. we will get the read for september in the united states. 10:00 a.m., fed chair jay powell going back to congress with his hands out, saying you guys have to act. they won't act. then we will hear what he has .otentially to do about it we don't get a fiscal package before the election. jonathan: equity futures positive on the s&p 500 this morning, up 16, around 0.5%. a real lift in the european equity market as well. service is bad, manufacturing good. euro-dollar, $1.17. pretty much dead flat. get me a red bull.
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the treasury market a total snooze. 0.67% on the 10-year is basically where we have closed every day. tom: i guess it is a glimmer of vol in the bond market, but you are right. ,ll of that is secondary including the stronger dollar. even the bloomberg dollar index comes in stronger as well, so you're right. everything is moving except bonds. jonathan: let's bring in victoria fernandez, cross mark global investments chief market strategist. great to catch up with you. walk me through that. you've identified to the same thing, the volatility. what is behind the pickup in vol we are seeing inequities? victoria: -- we are seeing in equities? victoria: it goes to what you
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guys are saying. with think the underlying fundamentals are still strong. the volatility is really going around the election time, those october futures which encompassed november 3. obviously, increase of covid cases in the u.k. and in europe is going to be driving that. we talked about how the volatility is driven by covid more than anything else. we had pfizer out yesterday talking about their vaccine trials. j&j made the announcement about their phase 3 trial. obviously, you tie in the fact that now you have a supreme court issue. is that going to push some of the stimulus further down the road? that leads to, again, increased volatility, although underlying economic fundamentals seem to be trending ok. tom: i want to congratulate you on your research note, that you talk about a barbell strategy, holding onto the highflying techs and adding to it as well. why are so few people talking
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about that? victoria: it seems that a lot of investors tend to want to go all in on a sector, and they really find themselves chasing the market and chasing those headlines. that is a very dangerous position tobegin -- be in. longer-term, these names have really moved up. we have seen that with the highflying tech names you mentioned, but we think there is still more runway for them, not of you will need more data infrastructure. there are things people are doing what telemedicine. keep some of those names there. but we are all looking at the recovery process. those looking some of stable and cyclical names you should have in your portfolio to increase your exposure across the board. a long term investor arbel strategy is what keeps your portfolio from being too
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barbell -- investor's strategy is what keeps your portfolio from being too volatile. lisa: we have seen a number of pretty big outflows from the highest yield bond etf's. at what point do you start to pay attention? victoria: i think you have to constantly pay attention to the credit market. the treasury has been closing at 67 basis points continually. if you look at the technicals, you've got the triangle forming that seems kind of like a coil starting to wind up. i am not sure whether we will .ee rates shoot higher or lower then we will see credit markets move as well. you have to watch and see, especially with earnings coming up next month, what we think we are going to see from these companies. are they going to report strong
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balance sheets like we saw out of nike last night? if so, maybe you see a little more strength in the credit market is that fear starts to come back. jonathan: the numbers from nike absolutely phenomenal, and the comments as well. how difficult is it to find winners that other people haven't already identified? it feels like everybody is already in the same trade. victoria: i thick it all comes down to the fundamental analysis that you have to do on these companies. don't go all in on a particular sector. find those names where they have the strong balance sheets. we talked about broadband. charter communication is a great example of that. they are using their free cash flow to pay down their debt. look for companies doing things like that during this time to strengthen their position, so they will be solid during volatility. you can see that in names like mccormick, bigger names like walmart, so that fundamental analysis for us, finding those low net debt levels on companies is going to be key. tom: what about their ratios?
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pe multiple, price to cash flow. it is just stunning where these are set. these are almost once in a lifetime valuations. and you: you are right, do have to pay attention to those. that cost of capital is so low that when you going you look at some of the pe earnings, i am not sure that is a valid valuation component at this point. we like to look at free cash flow. we like to look at the management that people have in place. those are some of the key ratios that we are looking at in regard to cash flows in order to see if a company can withstand the volatility that we anticipate we are going to see over the coming quarter. jonathan: victoria, good to hear from you. the taurean mentioning nike -- victoria mentioning nike, the stock to watch in the session. the conversation i've had in the morning -- i've had throughout
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the morning, policy is one thing. how people and companies respond to that shift is another. i wonder to what degree consumers will disengage. wo, what the company's want? had taken away from them and just the last couple of months? the message was back to work. home.e messages work from i think for corporations right now, a serious hit to confidence. tom: for those of you on bloomberg radio, they gave me the arsenal wedding china today. i am not sure why i have a red cup here. lisa: wait a minute. this is a big deal. tom: but jon, i look at where london is, and can you explain to me why barclays or jp morgan in london has to abandon their office? is it just about masks? jonathan: goldman and hsbc have made the decision, tom. i am not sure what jp morgan is
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doing, but goldman is disengaging with the return to work effort in london. tom: why can't they wear masks in the united kingdom? isn't that the shortest path? jonathan: that is the message in the last day, tom, to start wearing masks in a much more pronounced way. and to be clear, that is not the only reason why people are worried about the economy. it is not because people have got to wear a mask. the worry of this government has been the city and the services around the city that depend on people coming back to work. what we are seeing play out in london it basically the message coming from this government. delay that return to work, and if you can work from home, work from home. but how much. lisa: -- if you can work from home, work from home. lisa: but how much is that exodus really using covid as an excuse, but brexit being a driver as well? lisa: i haven't seen that just yet -- jonathan: i haven't seen
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that just yet. i have spoken to a lot of people who want to get back to the office and are probably quite disappointed in the way things are going. the big take away of the last 24 hours, let's be clear, is the fact that this is going to be with us for six more months. these measures are going to be with us for a while. i thing that was a wake-up call. it wasn't the u.k. punching above its weight and getting everybody concerned. it is a reality check here. back in march, we thought a month. then we thought christmas. maybe now spring 2021. tom: i totally agree. you can see it with a shift in markets. sterling moved off of that single sentence from prime minister johnson in our early morning hours. jonathan: equities looking good this morning. equity futures up 16 on the s&p. , vicet, richard clarida chair of the federal reserve, at 8:00 a.m., right here on bloomberg. ritika: with the first word
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news, i'm ritika gupta. more news in the race to develop an effective covid-19 vaccine. johnson & johnson has kicked off a massive trial in the u.s. to test its vaccine. the company has begun dosing up to 60,000 volunteers with its one-shot and oculus and. j&j -- with its one-shot inoculation. j&j is the fourth company to move its candidate into phase three trials. it would seek authorization in early 2021. the trump administration has moved billions of dollars previously allocated to public of programs into its operation warp speed vaccine push. it was disclosed in a government audit and reported by bloomberg news. one of the biggest transfers came in august, where $6 billion to obtain to
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vaccine research. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika agrippa. this is -- i'm ritika gupta. this is bloomberg. ♪
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>> i'm not going to get into the particulars. there are many possibilities that we could go through. i've indicated that what i intend to do is to proceed with
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the consideration process, and if a nominee actually reaches the floor, then i will vote based upon the qualifications of that nominee. jonathan: senator romney of utah. when he announced that just yesterday, the market did respond quite briefly. futures in equities over just a little bit. the past clears a little bit more for republicans to fill that vacancy. .4% onfutures up 12, 0 the s&p 500. cross asset worldwide, from new york and london, good morning to you all. in the bond market, yields go nowhere. get used to that. i have no idea what it takes to rake out of this range. we will talk about it for the next couple of hours. 0.67% is your 10 year yield. euro-dollar, $1.1709. the data is interesting though. manufacturing was ok. services really was not.
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a lot of people will keep a key in -- will keep in kenai on that. tom: i really agree with you -- will keep a keen eye on that. tom: i really agree with you. the turkish lira down to a new low. really an ugly three days. right now, kevin cirilli out of washington, somber today in memory of ruth bader ginsburg. but then of course, there is analysis. we are really proud of the work bloomberg,dman from and a stomping story on all of this in washington this morning. kevin, to frame it, it is roberts and cavanaugh in the middle -- and kavanaugh in the middle. how do we migrate justice kavanaugh over to the middle? kevin: i think it is a really good illustration of how
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president donald trump has essentially, when there have been some who have raised political concerns about him within the republican party, whether it is someone like senator mitt romney, for example, who has disagreed with him publicly on a host of different issues, how that has actually permeated into the supreme court. the new neutral, as you pointed way forgoing to give some of those justices to forge perhaps a new type of middle ground as it relates to important issues relating to abortion rights, gay marriage, but also in terms of other cases relating to dodd-frank, relating to other dilatory issues pertaining to the economy, and of course, a huge driving issue potentially in the upcoming election, the affordable care act. tom: i want to go there, kevin.
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this is so important. right after the election, they address the affordable care act, so-called obamacare. how will that play out given the craziness of this election? we may not know the results when we begin to look at this. kevin: back on the campaign ,rail in 2016, the drip, drip becomingomey letters public were driving the conversation on cable news. something that never really got talked about was just how aggressively and how hard then candidate donald trump and the republican surrogates in the republican machine were hitting obamacare, were hitting the affordable care act. when you look at the exit polls, that really resonated with many independent and swing voters. flashforward four years later, when millions of americans are hurting as a result of the pandemic and collapse of the economy. whether or not that is going to
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be a significant driver at the polls, republicans are banking that it will be, but for senate majority leader mitch mcconnell, is one of the senior aides to the senate foreign put it to committee me, this is game, set, almost match in terms of getting another supreme court justice across the finish line. it is going to have severe implications a battleground states. whether it has the reverse effect, i don't know. leader mcconnell is up against amy mcgrath, though, by 15% in kentucky according to a poll that came out just the other day. lisa: we are focusing more than we would on the supreme court vacancy in part because that is where the focus is in washington, and not on fiscal support, not on some of the other key issues people have been looking for. yesterday, the house did manage to pass a stopgap funding bill to avoid a shutdown at the end of the month.
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can we take any positive signs from this, or was this basically the bare minimum washington could get done in its current dis-functional state? kevin: i'm an optimist. it could always be worse, right? you look at the volatility and how markets have always negatively reacted to there being a government shutdown, the volatility that could come out from that, look, they kicked the can down the road, but the government is not shutdown. it gives all politicians the opportunity to go back to their districts in the next couple of weeks and say the government is open. lisa: yesterday, jon asked you about the change of the polls with former vice president biden, as well as president trump, and who is in the front running seat heading into the election. where are we in terms of what the belief is with secret trumpers, the idea that there is a shy error around people that
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support the president? kevin: i think it assists -- it exists. onn you look at one source the president's campaign, you are hard-pressed to find a politician who has worse of a political summer than the current occupant of the white house, but to still be trailing by only 3% in a state like pennsylvania is somewhat remarkable. i would note that if you look back in 2016, the republicans were able to win florida, and they were able to do so because of a lack of early mail-in voting in that key battleground state. for the reelection campaigns to have a conference call last week with reporters and say that they don't need to win florida would give some pokes -- some folks pause. maybe they are looking at early voting members that tip of the help democrats and say we've got to make up ground in a stately soda or defend the ground in a stately sewing it. but 3% in a state like
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pennsylvania, if you track the rate of 2016 where he was down against clinton and now, that is the same margin. however, joe biden has a lot more money than hillary clinton had, and he has other advantages in that he can hit the occupant of the white house in a way that republicans were able to do in 2016, so it is a bit reversed. kevin: -- jonathan: kevin cirilli, great to catch up. have you ever seen that down in washington before, the d.c. correspondent get up before 9:00? tom: he's an hour and a half ahead of everybody else. jonathan: he's on wall street time. six days away, that debate. tom: huge deal, way underreported. it's going to be another debate, but this debate is john norma's -- is ginormous.
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jonathan: on that conversation, andrew hallman horst -- andrew hollenhorst joining us shortly on the program. heard on bloomberg radio, seen on bloomberg tv, this is "bloomberg surveillance." ♪ ♪ you can go your own way
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jonathan: from new york and london, this is "bloomberg surveillance," for our audience worldwide. alongside tom keene and lisa abramowicz, i'm jonathan ferro. equities pushing higher, up 13 on the s&p. we advance 0.4%. in the bond market, look out ,ice chair richard clarida with us at 8:00. british prime minister boris johnson speaking to the house of commons. it is not sensible to extend the current furlough program. that headline just crossing the brumberg -- crossing the bloomberg from the prime minister. any people piling on the presser on chancellor sue knock -- on chancellor sunak and prime
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minister johnson. the economy will face a tough time in the next 12 months. tom: this is absolutely critical. unpack us for this now, particularly the u.s. audience. basically, what this means is the government is not going to come to the rescue of a medical national disaster which would be extended up to march of next year. jonathan: not in the same way they came to the rescue in march and april. that is the key distinction. tom: what do people do, jon? jonathan: i don't think the government is going to completely pull away from offering assistance, but it is going to be much more targeted. what do people do? let's be clear. i said repeatedly that the end limit rate in the united kingdom in and around 4% is the funniest data point on the planet -- the phoniest data point on the planet. expect those numbers to go the wrong way. tom: it is absolutely extra ordinary.
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this really speaks to the united states of america, where we have modeled 12%, 14% actual unemployment, and powell and mnuchin yesterday begging for fiscal support. lisa: this is the story all around the world right now, that we don't need the same degree of fiscal support that we did initially, that we are out of the worst of it, and that is the question. is that really true? seeing the secondary, the tertiary layoffs at some of the big employers. this has a real effect of economic and psychological. tom: we talk to the fancy people, and we have barclays and the other fancy banks. what do you see in the rest of the united kingdom? tavern down lexington avenue with small business crushed? jonathan: i think everyone is excess about the future to different degrees, and i don't want to get into that game of divide the population from one
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segment to another. i think for many people uncertain about the future, when you have the kind of restrictions the government is putting back on the economy right now, especially for the hospitality business, there will be many people worried about their future and their jobs as well. the return to work is a big issue for the city of london and cities across this country as well. if people are going to stay at home, there are services in the city that won't be required in the same way, and there will be layoffs. we had an income crisis in spring, and governments around the world stepped up and offset those losses of income. what we didn't see, and what many people thought we might see , was a balance sheet recession or people start to pare down debt loads. people took on more debt. if this goes on for longer and the government didn't replace that lost income, i think the economic recovery, the economic downturn takes on a different character. that is something we've got to discuss. tom: many themes here to the end
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of the year, as prime minister johnson mentioned, into the first quarter. with us now is andrew hollenhorst, citi chief u.s. economist. what is so important here is farmer-hollenhorst was an important paper on what richard clarida is best known for. i will not go into a right now. but andrew hollenhorst has had the privilege of diving into the minutia of dynamic models of guessing what the future would be. with that knowledge and your wonderful work with professor farmer, does the fed have a clue what it is doing trying to reshape its model into a new reality at the zero bound? andrew: it's a great way to introduce it might let me say, roger farmer was a great mentor at ucla. i am very grateful for the
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privilege of working with him. but this idea of trying to marry the theory with how you actually get to an operational monetary policy is exactly what we are talking about right now. theoretically it makes a lot of sense to think about having a moderate overshoot of the 2% target. you are trying to get inflation expectations more stable around 2%. but operationally, how do you go about doing that? i think we have a lot of agreement on the theory unless about operationally what we are going to do next. as jon ferro would eloquently state, get out the krista ball. what is the new -- the crystal ball. what is the new crystal ball for the fed? andrew: i think it is more just looking at the conditions on the ground as they are, and that is partly because we spent so much time five or 10 years ago thinking about what is the natural rate of an employment. is there a way that we can deduce that from what we are seeing in the economy?
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if we get to a low enough unemployment rate, we know they're getting to where there will be inflationary pressure, and you kind of do the backwards deduction, and you are raising rates as soon as unemployment gets close to that number. the issue with that is although theoretically, the natural rate of unemployment is a great idea, empirically it is hard to identify, so you end up in this strange scenario over the last decade where you are constantly revising downward that natural rate of unemployment, and saying maybe we can go further. there's a bit of recognition at the fed not to play this game this time around, and say that's not respond until we see evidence that inflation is picking up. jonathan: they've given us a ton of clarity over rate policy and what they would and wouldn't do. we get clarity on the qe program? andrew: that is really where we are looking for there to be more guidance. i think that has really been done almost purposefully, where things are going well right now. the big dislocations in the
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market from a few months ago have been cured, where we saw a lot of illiquidity, so now there is a shift from you are not just trying to continue market functioning in a healthy way. you are trying to actually support the economy, and exactly how much they are going to do, with the composition is going to be, those are positions they need to make, but that is probably a december or later decision. for now, things are going well, so they have left things where they are. jonathan: vice chair richard clarida on this program in 23 minutes. right the first question for us. what would you ask? andrew: really going back to what tom was asking about initially, we know that the fed is very likely to keep rates low for a considerable period of time. we know they want to see evidence that inflation is picking up. but what does that evidence look like? i think that is something chair powell was asked in the press conference, and i am not sure that there is really agreement within the committee at a very
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high level on the idea that we want to get inflation stable at 2%. we want to see inflation expectations moving higher. but what would it actually take? let's imagine the scenario that continues to surprise's to the upside. recovery continues. inflation is close to 2%. if we are looking at the data right now, it looks like in april, we will be above 2%. a more interesting discussion there. but what exactly does the fed reaction function look like? what would it take to get to that first hike? lisa: aside from the evidence the fed needs to see come on the fiscal side they are definitely requesting more fiscal support from washington. from the u.k., we are hearing that they are not necessarily going to continue the furlough program, and there is a similar sentiment in the u.s. does the economy move more like a motorboat or like a barge? if policymakers get this wrong and there is a downturn in the economy, how quickly can they
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profit backup? -- can they prop it back up? andrew: the direction of travel right now is in the upward direction, so you have that positive momentum behind you. you also have this issue or this positive development where, because the income support has been so great, we had a substantial amount of savings, about $1 trillion that households have done. so even if we have some of this fiscal flow down, households can continue to spend. to your point, if you are actually thinking about if this is going to get done pre-election and not in the lame-duck, i think it will by the time we get to the end of the year, but let's say nothing gets done through the end of 2020. then the momentum is going against you, and that is a much harder place to climb out of. lisa: if we do not get another round of fiscal support, how hard will it be to hit that target of the fed's? andrew: i think it will likely be longer.
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we are looking to where we can get to a level above 2%, but we still have the end limit rate at 8.4%, and that is a lot of people that have dropped out of the labor force. so a lot of slack is out there. you really would like to see more fiscal. the positive here is that you do have bipartisan agreement that more fiscal is necessary. you have the fed saying more fiscal is necessary. so it is quite different from 2012,we were in 2011 or when there was a real debate. everyone agrees we should do more fiscal. unfortunately, politics is getting in the way of that right now. jonathan: andrew, great to catch up. andrew hollenhorst, citigroup little markets chief u.s. economist. the priority has shifted away from the fiscal discussion to something else. tom: big time. a lot of people assuming we will get some a should in february or march, but as we heard from the prime minister yesterday, you've got to get to february or march.
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i really can't emphasize the perception of six months from thanis totally different march to september that we saw in 2020. jonathan: feels like a lifetime away tom:. it does -- lifetime away. tom: it does. stunning. jonathan: it is open-ended. until we've got a real handle on how to deal with this, how to control people's movement without them getting ill, we are still talking about the same thing in the u.k. that we were discussing six months ago. the prime minister comes under increased questioning about where is the track and trace system. why is it -- why isn't it as good as what we see in italy, germany? and you got some pretty flippant responses, i've got to say. andrewd i nail that with farmer? lisa: nailed it.
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jonathan: it is always beautiful. lisa: new drinking game. nailed it. tom: professor farmer went on to work -- went on to warwick. , pronouncing it right? -- mi pronouncing it right? jonathan: my old school. tom: i nailed it. jonathan: did i think andrew? i will thank him again, just in case i didn't. [laughter] coming up, vice chair of the fed richard clarida. right here on bloomberg. ritika: with the first word news, i'm ritika gupta. there's more news in the race to develop an effective covid-19 vaccine. johnson & johnson has kicked off a massive trial in the u.s. to test its vaccine. the company has begun dosing up to 60,000 volunteers with its one-shot and ocular asian. jn -- one-shot inoculation.
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j&j is the fourth to move its candidate into this phase. the company would seek emergency authorization in early 20 to anyone. the british government is defending its strategy for fighting a second wave of coronavirus. the new rules are "focused, balanced and proportionate." they include a curfew for bars and restaurants, increased use of masks, and encouraging people to work from home. many say the new restrictions don't go far enough. secretary of state mike pompeo is heading to america's heartland. he will be in wisconsin today to address the republican-controlled state legislature. he is expected to talk about u.s. based in china. his job to bring the state department's message
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to the american people. president trump narrowly won wisconsin in 2016. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. gupta.ika this is bloomberg. ♪
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but ipowell: i do to
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think it is likely that more fiscal would be needed. jonathan: you know what they say about everything that is said before the word but. it is not my job to tell fiscal authorities what to do, but maybe they should do more seems to be the message coming from federal reserve chairman powell. tom: they delivered what we expected to hear, i suggest. there's a marginal fiscal improvement area what we need to review here is gdp down like a up., gdp up, but where do we settle out? i would say conversation to conversation, economists are looking for a pretty grim settling out. jonathan: are we drawing lines on radio again? tom: i'm drawing lines on radio. jonathan: we go up, we go down. tom: good morning on bloomberg radio and bloomberg television worldwide. it's charts and lines on radio.
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it works every time. jonathan: i'm with you. i think you make a really good point. tom: can we do a data check here to save us? jonathan: i am going to do that right now. we advanced 0.4%. we've got to talk about the bond market. yields exec liver they have been, in and around 70 basis -- yields exactly where they have and, in and around 70 basis points. do we start to reprice inflation expeditions a little bit lower? that could be a big conversation in the weeks to come. tom: ira jersey the expert on this with bloomberg intelligence, with an important note on libor. the bond market is quiet, we are all in search of inflation expectations up or the anchor rising. is there any indication of it? ira: not a lot, tom. inflation expectations for the next 10 years are expected around 1.6%, so you guys asked your last guest when you think
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we are going to see inflation well above 2%. that would be the liftoff pace for when the fed might hike. the market is not expecting that any time really within the next decade at the moment. so how can we get inflation expectations up? i do think another fiscal response is one way to do that. there's not really a lot the fed can do one its own in order to significantly increase the patient's at the moment -- those expectations at the moment. jonathan: this is a conversation for richard clarida in about 10 minutes' time. do you really think we need to see a breach of 2% before liftoff? ultimately, that they will wait for 2%. the question is for how long. if you go back to 2012, 20 13, you did see a few year-over-year 2% in thet were above fed didn't hike. but what they did do was taper.
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2013, we started to see inflation patients go up. they started to decrease bond purchases. that is probably the first step and probably a necessary condition of what the fed is going to do terms of that sequencing you just mentioned because they are not going to be hiking while they are still buying a lot of assets. still buying $120 billion of mortgages and treasuries every month area until you get that out of the way, the likelihood you are going to raise the fed funds rate is still near zero. lisa: does the fed measure inflation correctly? ira: there's a lot of different measures of inflation. i would argue that certainly, the pce deflator is a better measure than, say, cpi. one of the things i think is consumersciated by and a lot of people in the markets when they look at inflation is that we consume mostly services. almost 70% of what we consume our services.
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that is where prices are going down because implement is bad, because prices of things like rents are going down in the commercial sector. it is really goods prices that are sometimes going up, but that is not what we spend a majority of our money on. tom: italian 30 year yield to a record low today. you and i know that they libor rate lower yesterday, to a record low, the 90 day red libor -- the 90 day libor rate in the u.s. it seems like they are going in the exact opposite direction of the zeitgeist that we are going to talk to the vice chair about. ira: it is going down because of deflation and the fear that you will have very low interest rates, as well as ecb actions that will be supportive of yields. in the u.s., libor is an unsecured bankrate.
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with the federal reserve pumping and a lot of reserve, they are not doing quantitative easing, but in effect, it is. is a lot of liquidity in the banking sector. unlike 2007, -- 2008, this is not a banking crisis. this is a general economic crisis, more akin to 2000. so we can't use that as the exemplar. with all of that liquidity running around, libor is just symptomatic of the fact that banks have tons of funding. plus you have backstops that are in place that the fed has created. there's actually three different facilities they have to make sure that banks overseas have enough dollars, so libor is going to remain low, and libor ois is going to remain very depressed. jonathan: final question from me. what makes the fed somewhat
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unique compared to its peers, it was part of a recovery that actually led the hiking cycle. do you think they can do it again? ira: i don't think that they can at this point, quite frankly. basically itself is at its limit. they won't say that, and there are other things they can do, like making more asset purchases, but at the end of the day, we really need more fiscal response and we need to get a vaccine. that is ultimately what needs to happen in order for the fed to ever be active again and for what they have already done to be most effective. jonathan: great to catch up. good to see you, sir. equity futures up 11, 0.3%. the vice chair of the federal reserve, richard clarida, here in an interview six minutes away. that comment pretty interesting from ira on the prospect for a hiking cycle from this fed. the way the fed is set up, they
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are not hiking for a long time. tom: a longtime. as prime minister johnson goes out to march of 2021, the powell presser, i think we really started to hear about 2023 -- excuse me, 2020 two. so you really get into a vision up to 2023. jonathan: equity futures up 10. we advanced 0.3 percent. here's the price action come across asset, worldwide. we talked about the snooze in the bond market. it continues. 0.67% on the u.s. ten-year. it had some choppiness in between, but this is basically where we have landed every single week to end the week. in the fx market, there's your breaker. the data today not convincing. manufacturing in germany still ok. across europe, still ok. services, not so much. euro-dollar down 0.1 percent. futures elevated. from london and new york, good
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morning to you all. alongside tom keene and lisa abramowicz, i'm jonathan ferro. heard on bloomberg radio, seen on bloomberg tv, a conversation you do not want to miss. coming up next here on bloomberg, federal reserve vice-chairman richard that -- vice-chairman richard clarida. ♪ ♪
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>> i'm not going to say there is a bubble forming. i'm going to say there is potential for one to form. >> the market has ignored all incoming bad news. >> we are still going into this weakness with 70 people still unemployed. >> the need for policy maneuvers is very limited. >> monetary policy the way we grew up with it doesn't work anymore. >> monetary policy will do its part. it is not the primary driver of this recovery right now. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone.


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