tv Bloomberg Surveillance Bloomberg July 11, 2022 8:00am-9:00am EDT
the fed wants it to slow, so i think all of the recession talk is a little bit premature. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz, and tom keene. the three of us back together again, at least for a number of hours. that is a good and beautiful thing. lots of economic data this week. no one cares. right now it is about the markets. strong dollar speaks volumes. jonathan: cpi wednesday, retail sales friday. right now, front and center, strong dollar. euro-dollar, a break of 101. where are we heading now on dxy? 108, maybe even higher. tom: george sarah vallas making clear this is foreigners hoarding dollars in cash. these are not strategic moves. jonathan: right now, they don't
want euros. they certainly don't want yen, and they don't want sterling. i'm sure they would quite like a strong currency. tom: a glorious four hours straight with me and jon and all that, as you hear the previous guests frame out what we will here with wei lee in a moment. jonathan: two big points. ultimately, this fed is going to keep on hiking and there could be a financial accident. dislocations in places like credit the second point was that this time around, if there's going to be a massive issue, it could will be in europe. there are real concerns about the energy story not just in the here and now, but later this year as well. i keep repeating this, i have no idea what the optimal policy for the ecb actually is, even if there is an optimal policy, and
i have some doubts as to whether there is as well. tom: in foreign exchange for the past two weeks, we have not looked credit. we can do that with bramo. what is the dynamic with credit versus full faith and credit. lisa: detention is very strong. -- the tension is very strong. you have seen people piling back into credit. you saw a bid into corporate debt. how long can that last given the volatility in the benchmark yields? how much can you really go into some of these riskier places if you are getting such massive moves in full faith and credit in one of the most liquid markets in the world? tom: is jp morgan's guidance the big moment of the week, the first look by the mega bank? jonathan: looking for the equity report hello but later? tom: i mean the ceo report. jonathan: i thought you meant the equity strategist report a little bit later that would
typically get. we will find out. very important to get guidance from a banker who told us he -- from a bank ceo who told us a hurricane might be coming. they are privately positioned to be talking about at this. there is one person that sounded a little more bullish on friday. it was rick rieder of black rock. i will share the quote with you. "if we are going to see a run rate of inflation over the next five to 10 years, you can buy high yield at 9% or 9.5%, you can buy investment grade odyssey in the front and medium part of the curve forget that is a pretty good real rate. so blackroc -- real rate." so blackrock has had this massive cash position, slowly starting to put some of that money to work. just something to think about. tom: 26.45% on the vix. jonathan: talk a lot about the
dollar strength story already. just a little bit lower this morning, down three basis point 05% on the tenure. tom: wei lee with blackrock, global chief investment strategist. please assist on the new wants to change here as you look through the rest of the year. wei: we are releasing our second half of the year outlook today, and the main theme is that we are in a regime change, that the great moderation of the past four decades characterized by an environment driven by supply, that is now over because we are in an environment driven by supply, and that means the trade-off between growth and inflation is so much tougher. whichever way central-bank act,
to fight inflation by hurting growth, we are going to be looking at a worse set of outcomes for growth and inflation, and that is why this year we have been incrementally reducing portfolio level risk-taking, and we reduced portfolio risk further. in this moment we are applying quite a get -- applying quality adjustment by downgrading equities further into underweight and upgrading investment grade to overweight at this juncture. jonathan: talk to me about the future about everything you have just said. is it volatility as far as the eye can see into next year and after that? wei: in this new regime when it comes to investment, i think the most important thing to remember is the goldilocks outcome is now off the table. the goldilocks outcome whereby you have sustained bull markets
in equities and bonds, which is what categorized recent decades, that is now off the table. when it comes to portfolio construction, we are talking about higher risk premia for equities and bonds, reevaluating risk calibrated to history. we are also talking about being more dynamic when it comes to adjusting portfolios because the cycles are becoming shorter and market volatility is higher as well. i just mentioned the adjustment we are making, downgrading developed market equities, but we do not expect to hold it for an extended time. when we would exit this bear market, when we would become more positive, there's a super big call we are very focused on. lisa: how much is your
bullishness on certain instruments of credit hinged on this belief of a fed put, that if there is a big enough dislocation in this area, the fed will step in, versus equities where they will not? wei: at this juncture it is hinging on valuation. when we talk about downgrading equities and upgrading credit, equity by our assessment, thing about the correction in equities so far this year, it is refunding hawkish risk equity, whereas credit this juncture already prices and a version of growth stalling, and it is offering attractive yield for the first time in over a decade. this is where we are convertible getting into credit. the fed put is related, but slightly different. we are not expecting the default profile to borrow up -- to blow
up. we are quite comfortable with a reasonably contained default outlook for credit, and that is why even as we head into growth slowing down and the risk of the central banks over tightening, we want to own credit to reflect this quality adjustment portfolios. jonathan: how much is the nash lisa: how much -- lisa: how much is the dollar a key component of your call, given some of the overweight's in that area? wei: the dollar has been a challenge to this outlook, as you heard in the previous segment as well. so for the dollar has been a good place to hide as we think about portfolio resilience or get but given the very good performance so far this year, there is limited expectation to how much more it can come to the rescue, as we think about portfolio resilience. we definitely think about dollar and international
diversification as we construct this folio. tom: we are in the inner sanctum here. behind wei li is some extremely sophisticated mass. behind her is either time reversal and variance of lambda, or a formula to order pizza at blackrock. i don't know which it is. jonathan: who is was possible for that mess behind you? [laughter] wei: it is myself. it is really how we are entering the great moderation and into an environment that is a lot tougher in terms of the higher volatility in the trade-off between growth and inflation. jonathan: very cool. tom: that is the real world, jon. jonathan: thank you. i have just been making a list of some of the things people have told us this morning get -- this morning. michael shaoul of market field in the last hour or so, "we could face a market accident."
at the start of the show, "we are pricing in rate cuts next year to early to buy risk assets." pretty bearish start to the week from our guests. tom: acclaimed morningstar manager of the year linked with wei li on the measurement of what now that may be the raging debate of spring of next year. jonathan: everybody on lisa's page, just like that. perfectly lined up this morning. tom: it is just amazing. lisa: there is a very big concern when you see inflation and you hear the likes of them say we could get down to 7.5%, 8% by year end. to me, that was the call that really stood out in my mind. what does the fed do with that? jonathan: very interesting to hear that, and great to hear
from lisa abramowicz. good to have you back. you were care of airing -- you were caravan and around in a canoe? i'm looking forward to coverage of that. [laughter] tom: the deer flies await. jonathan: from new york, don't miss this, george sarah vale of -- george seravelos. ritika: shares of twitter falling today. the company is preparing to go to court for ceylon musk to follow through with his commitment to buy. bloomberg has learned a filing could happen as soon as today. the court has rarely sided with parties who are attempting to bail on acquisition commitments. in the u.k., foreign secretary liz trust is the latest to enter the race to replace boris johnson as prime minister. truss is making tax cuts the heart of her campaign. she wrote that she would start
cutting taxes from day one. she joins 10 other candidates in the race. the timetable for the leadership contest is expect it to be set out late today. president biden says the administration is still discussing possible action regarding u.s. tariffs on chinese imports. the u.s. is considering easing some of the trump era duties. meanwhile, the president and chinese leader xi jinping are set to speak again in the coming weeks. secretary of state antony blinken spoke with china's foreign minister the weekend to lay the groundwork. broadcom losing one of its most senior executives, i blow to the chipmaker as him stew close one of the biggest deals in history. tim krause is leaving to join an unnamed company. broadcom agreed to buy cloud computing company vmware for $61 billion. 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 gupta. this is bloomberg.
>> we are calling for a technical recession in the first half of this year. we had a negative q1 gdp growth. we expect it of q2 gdp growth, but we are expecting the economy to bounce back in the second half of the year, avoid a more conventional recession this year, and eventually fall into recession next year. jonathan: you got all that? whipsawed by weakness. the chief economist at deutsche bank looking ahead for the u.s. economy. good morning. futures negative on the s&p. on the nasdaq, too.
right across the board, we are lower by 0.7% on the s&p, 0.9% on the nasdaq 100. treasuries rally in just a bit off of the lows of last week. yields a little bit lower after creeping higher through pretty much all of last week, down three basis points right now, 3.0449 percent on u.s. 10 year. tom: the distinction today is the link up here with yen, weaker as well. a 138 print would be truly shocking. george saravelos is with deutsche bank. there are real interest rates, nominal interest rates. capital flows. then there's the thermodynamics statics of the hoarding of dollars.
what is the importance of a static hoarding of dollars versus normative flows in the global economy? george: i think it is extremely important because if you look at what happened this year, you've had a very big regime shift. currencies were generally pretty highly correlated to interest rate inferential's up until march, so you had the more hawkish fed, the dollar was rallying. in the ecb turned more hawkish and the rate differential earn significantly higher in favor of the euro, but the euro failed to follow, and the market more broadly has stopped being responsive to the interest rate differential and is instead a lot more sensitive to the flow dynamics you discussed. what we are seeing globally is essentially a huge hoarding of dollars from investors. europe is obviously really burden that the -- burdened at the moment i this energy crisis.
the conclusion the market has is it is just holding onto dollars, even if investors are selling u.s. assets, selling u.s. equities and bonds, it is just not being repatriated back. jonathan: let's focus on the euro. how low can the currency pair go, and rate from this ecb, bullish or bearish for that currency? george: your last question is an interesting one. if you look at the u.k., the bank of england was one of the first central banks to hike rates. you have seen sweden also hawkish. so at the moment, central bank reaction functions, rate hikes don't seem to matter all that much, and it is a lot more about the underlying energy balance. how far can it go? i just crunched some numbers in a piece this morning. if you map out the extra energy deterioration along the back at this big spike in natural gas prices, that is worth about 200
billion euros extra of supply into the market. roughly speaking, that equates to euro-dollar parody. but of course, these are only rough estimates of numbers. when you look at how much euro has overshot in the past, we have come up with a range of anywhere between 95 and parity. in the current environment, that sort of range is not really unreasonable. lisa: this is piling onto what citigroup was calling for as well, a 95 on the euro should this gas ban go into effect with some sort of weaponization. at what point does that become your base case versus a bearish outlier? at what point do you have conviction around it, given that germany is already starting to tweak how it is handling a potential lack of gas supplies at the end of the year? george: when an outcome rests so much on what we have out of russia and president putin, it is very difficult to have a base case. i think the best thing we can do at the moment is just put numbers around the different scenarios.
under the scenario of the complete gas cutoff, i really would not say 95 would be unreasonable. up until three so -- three weeks ago, nat gas prices were higher, so it is all about the north stream pipeline. what i would say is now the market is built for risk premium because it knows it can be switched off, so even if this gas returns in terms of slow after the maintenance period, the premium is unlikely to go away. i think that is a critical thing that has changed over the last few weeks. jonathan: your point, you have to understand what regime we are in and what matters to foreign exchange and what doesn't. to your point, it has not been about rates so much as flows. do you think it is going to stay that way? because the recession scenario stuff, that is helpful, but unless we understand what is driving the underlying currency, who knows where this goes?
george: absolutely. what is driving the dollar at the moment is safe haven flows. the dollar is the so-called risk parity and people. the fed being more sensitive to growth, and at the moment, that is not the case. there are very growth agnostic, so to speak. number one, a shift from the fed, and number two, a change in the energy dynamics, especially as they relate to the euro and the yen. i don't see the current environment changing, which is why we pushed down euro-dollar forecasts in recent months. the last point i would make, everyone is talking about this recession. i would argue the recession should be a given. indeed, the market is already pricing it. it is now a question of length and depth. the second half of the year is all going to be about that learning process amidst an extremely unusual environment. the growth data is slowing. labor markets globally are extremely tight and strong. people talk about the u.s.
if you look at the canadian data, the un-limit rate hit a huge record low and dropped sharply. it is these things central banks are looking at, and they would need to see the labor market overall turn before we start talking about a more dovish pivot. jonathan: super interesting stuff, as always. when it comes to europe right now, we are all forecasting the price of gas. if you are forecasting the euro, if you've got a call on the equity market, a call on the economy, underlined that is a call in the price of gas. tom: the cross on all of this is the importance of economic data. as george mentioned, in canada they are fully employed. all the data matters here because the uncertainty in the where are we right now is off the charts. i think there has been a real preponderance of gloom here today. to be fair, there's some people really pushing against that gloom. jonathan: lisa is not one of them. your fx market, euro-dollar 101
right now. lisa: look, there is definitely an upside down the line. i think when you start to talk about the volatility in this benchmark currency pair, how does a company arrange around that? we dovetail that into earnings and the projections. how do companies give guidance when it depends on the price of gas in europe and what that does to the dollar? jonathan: and what are we looking to earnings season for? we are looking for guidance in a world where it is hard to provide any. we are down 0.6% on the s&p. yields lower by four or five basis points. her tenure just north of 3%. from new york, this is bloomberg. ♪
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citi published moments ago. here's the take from them. ton of jobs added in june. this is their take. "it does not change the view that the fed is materially slowing inflation. the very tight job market may make it more difficult to obtain a soft landing." tom: this is out front. andrew hallman horst leading the way with a shocking report nine months ago. jonathan: when he came out calling for big rate hikes from the federal reserve. tom: way lonely at the time. veronica clark works with him out of chapel hill, global markets economist at citigroup as well. what does a 70 point lift here actually do to our viewers and listeners? i get that it is an economic exercise. it keeps financial media employed. but what does it actually do?
george: for the fed -- veronica: for the fed -- rates that have skyrocketed on just about everything that i've already priced that in. at this point it is just a matter of the fed following through on that. tom: what do bonds do with a citigroup economic outlook? george: we are not -- veronica: we are not expecting a near-term recession. we expect the fed to be more hawkish, responding to high inflation. i would not be surprised if we see yields still moving higher. markets are pricing cuts as we are getting into later next year, but this really comes down to inflation, and if inflation stays high, the fed might not be able to cut, so we see some upside for yields here. lisa: can you respond to michael shaoul's point that there could be some sort of financial accident in the next couple of months simply because of how quickly things are moving and
how much tightening is getting affected, and that the fed will ultimately have to respond to that? what is your view on how high the threshold is for some sort of step in by the central bank? veronica: it is really hard to know when the fed is moving so quickly, and this is unlike something we have seen in a long time. that is certainly possible. i think ultimately the fed's reaction function will still come down to what we are seeing in the real economy. and number two, if there is something traumatic in the labor market, they told us they are focused on inflation for right now, but i don't think you have the best since of the reaction function if the labor market as we can more -- labor market does weaken more. lisa: how much will it take to get down to the 2% level the fed is looking for? veronica: they do have the unemployment rate coming up above 4%, and that is consistent their projections that show
inflation getting closer to target. i think you would need to see may be a full percentage point rise in the unemployment rate because we are getting into next year. tom: what does trade do? if there is domestic calculus in the core equation, what does it do within the view? veronica: we have had really strong imports over the last year, tied to really strong domestic demand. that is what wade on q1 gdp growth. so we are expecting domestic demand to slow, and you would expect to see trade volumes also to slow. we have already seen some of that happening over the last couple of months. tom: what does the mix do as people game the move from goods over to services inflation dynamics? fit that into your view of much higher yields. veronica: this is what we are
really starting to see in the inflation data over the last couple of months. we have seen goods prices that are softer in autos and furniture and things like that, but we have seen this rotation away from really strong goods inflation towards really strong services inflation, and that last cpi report we got from a -- we got for may, those prices should probably stay strong. those that are rising more substantially is tied to really tight labor markets, which is a more worrisome scenario for the fed. even if you have goods price inflation that us surging. lisa: the citigroup call for inflation remaining above 7%, ending the year at 7.5% to 8%, of this year, even with some of the tightening from the fed, does that cohere with what you are calling for?
veronica: that is about consistent with what we have. some of that is gas prices may be coming off more at the end of the year, goods inflation coming off more. but with do -- but we do have that strong services, so for something like headline cpi, i can definitely see that. core pce inflation, we have that ending this year around 4.7%. that is about where it is now. coming down more in 2023, but the risk is it stays higher for longer. lisa: what brings that rate down quickly to that 2% level unless it is a recession that is pretty deep? if you are looking at 7.5% to 8% by year-end, that is flashing warning signals for a central bank very much still scarred from what happen in the 1970's. veronica: absolutely, i think that episode is definitely influencing the fed here. they don't one inflation expectations to become unanchored. they have to see inflation cooling. that definitely does pose
recession risk as we are getting into next year. what is underlying a lot of forecasts right now is this goods price slowing. that was a pretty big driver over last year. if that comes down, maybe not the total rating down of it, but that is a greater recession risk. tom: insecurities analysis, you have to have a risk to your call. in your economics, your domestic economics, what is the risk to the city group call where we don't get such a large interest rate move? veronica: our goal of course is for rates to go above 1% next year. if that isn't happening, i imagine it is because the labor market has begun faster than we were expecting. those jobs numbers are maybe some of the last to turn when we are going into a steeper slow down. we have seen initial jobless
claims may become up a bit, so if we are starting to see the labor market weaken more, i would imagine the fed is more uncomfortable for that, and maybe that does create a pause. jonathan: can you elaborate on what you think number two is? veronica: cpi of course on wednesday, number one. a very close second be the university of michigan survey on friday, especially on five to 10 year inflation expectations. in a preliminary leading -- print lay -- parliament every meeting last month, i think that scared a lot of said members into realizing that there's longer-term inflation expectations are at risk of moving higher, potentially becoming unanchored, so markets am sure will be very focused on that. jonathan: amazing. you end the whole of the team over at citigroup, thank you. to hear that on a week where we've got retail sales, that the number two data point of the week is actually u mich consumer
expectations, that was the difference. the federal reserve told us that, between a 50 basis point hike and 75 get that is what it has come down to. this is where some of the volatility is coming from, right? lisa: it shows the fear of the 1970's repeat. the fear of entrenched expectations, the fear of expectations driving a cycle that is much more pernicious and difficult for the fed to fight, and it highlights the deep uncertainty and how you track the now that is moving so quickly when some of the data is backward looking. i think that is what it indicates at a time when companies attempt to give guidance at a very murky point. jonathan: right now we need the tk cam. tom: the only thing between now and the 1970's is we really need a redux of bob seeger. other than that, i don't buy the ideas like the dismal 1970's. lisa: i'm not saying it is.
i'm saying that is the fear entrenched in some of the movement. tom: we've got to focus. what a joy to have lisa with us for five days. it is great. jonathan: i'm happy to have bramo back. tom: she's going up north. she's going to wear the hudson bay blanket coat in the birchbark canoe. she's doing the monte mile -- the 90 miler this year. day two, that is the one. day two you are going north out of blue mountain lake, and it is forever. she's going to have to have the gloves on. you will get calluses, blisters. lisa: i love tom's reliving. jonathan: that is his use. lisa: his scars of my vacation plans. i'm looking now at trying to have family time. tom: the worst part about the
adirondacks is all the tang is warm. jonathan: this is how tom spent the 1970's. tom: 1970's? no, jon. [laughter] i was there right after theodore roosevelt was named president. jonathan: i'm going to do the markets. we are down 0.75% on the s&p. on the nasdaq 100, if you are just tuning in, down 0.8% get the main event mother this morning -- event through most of this morning has been the dollar. a clean break 101. we are looking ahead to earnings season with stuart kaiser of ubs in about 20 minutes. tom, i knew you got a special guest coming up on this program in about four minutes. tom: vince cooperman is going to drop by. we are going to blow someone away here any second. jonathan: i think we probably are, given our direction of travel. perhaps over the next 24 hours. from new york city, with tom keene and bramo, for four more
days, and then you are gone for a week and then you are back for good? lisa: then there is no more vacation. jonathan: from new york, heard on radio, seen on tv, this is "bloomberg surveillance." ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. the scene is set for a disruptive legal battle over the future of twitter. shares of the social media platform fell today after elon musk walked away from his $44 billion deal to buy the company. musk alleges twitter misrepresented user data. japan's ruling coalition has expanded its majority in an upper house election. the vote was held two days after the killing of former prime minister shinzo abe. the results could strengthen prime minister fumio kishida's grip over the liberal democratic party. president biden's economic agenda is heading into a crucial month on capitol hill. democrats are scrambling for a
deal on a scaled-back version of what was once a multitrillion dollar overhaul of domestic policy. the key once again is west virginia senator joe manchin, who blocked an earlier version of the package. democrats are hoping they can get him on board with a less expensive bill. in london, u.k.'s heathrow airport has apologized for trouble disruptions caused by staff shortages. the airport warns it may ask airlines to cut lights from the summer schedules if the chaos continues. heathrow has been plagued by long lines at security and baggage that arrived late. newspapers in the u.s., u.k., and france are amongst those reporting on the so-called uber files. it work does not deny any allegations, but says it is a different company today. 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 ready. this is bloomberg. ♪ >> you can't just look at the data and say that tells me what to do. you have to take all that information and say we need to get inflation down. how do we both try to look at all the data and get the best approach to do that, but also manage risks? the wrist today is inflation being stuck too high, and we want to make sure that does not happen. tom: john williams, the new york fed president, at the university of puerto rico. i am sure we will get a lot of that coming up here. if you're just joining us right now, some deterioration of the tape in the last hour as well. dow futures, -130, now -200 or get the vix, 26.42. this is a joy for lisa
abramowicz and myself. leon cooperman is chairman, chief executive officer of omega family office, and he is not shy about talking about his track record. i say this with everybody and their uncle this week coming out and saying vote for me at the institutional investor beauty fast here. i want to talk about the character of this bear market. you and i do that with a bond overlay we have never seen, which is bond price down, yield up. the losses in bonds are extraordinary. how does that redound over to a stock bear market? leon: actually i would take a slightly different approach. i'm shocked interest rates are as low as they are. for most of my career there was a real return associated with buying a bond. buying nominal yield was excess
inflation. we have an inflation rate in this country currently set at low growth and the couple of present or get you have 10 year bonds at 3%. it makes no sense. it makes everything in the stock market look attractive. tom: what part looks attractive to you, or are you in the triple leveraged all-cash fund? leon: i'm of the view that equities are the best house in the financial asset neighborhood, but i don't like the neighborhood for a lot of reasons. i have been a seller of strength and not a buyer of weakness. i think ultimately the price of oil or the fed or maybe the strong dollar will lead us into a recession, and when the recession hits in 2023, not 2022 , the market will find a bottom somewhere between 35% and 40% below its peak of 4800. i think coming on the program
and having a cautious view is not value-added, so i differentiate myself get i talk about the pharaoh -- myself. i talk about the pharaoh. the pharaoh had a dream interpreted by joseph. i would be surprised if we went to a new bull market anytime soon. we have been through the most speculative period in our financial history. spac's, would be faang's. we saw an extremely speculated period, and we are not going to able market -- to a bull market. tom: it is seven years of abundance led by the seven years of famine or get that does not get it done for us. lisa: we will have to put the exodus aside and talk about what
we are looking for in terms of the safety during this seven years of lean. you talked about bonds and the surprise that yields were so low , particularly benchmark rates. what is the safety if it is not bonds? leon: i would think undervalued common stocks. i would rather be in a common stock than in a bond, any day of the week, given the relative price of buying versus equities. we got to understand stocks are very heterogenous -- or rather, homogenous. aaa bond, aa bond, they will all trade within a quarter-point of each other. stocks are heterogenous. i look at a seedy bank of seven times earnings, bank of america nine times earnings, apollo, the financial service company. i'm doing relatively well this year because i have a big energy exposure, and the stock has gone
from two to 28. when i got finished talking to the ceo, i figured i might add to my position. it generates over 3% dividend yield, so that three times cash earnings. it is growing production double digits, and they have something like three times cash flow. they have other energy holdings. i'm never -- i am very negative on bonds. it is very complex. i happen to think it is like a layup. they have debt outstanding, a 15% coupon. these are very real people, very real assets.
the head of the firm -- the former head verizon, former head of the sec. lisa: there is so much of this specific story here. let's talk about the bear case for the recession call of a 40% drawdown from the peak, which is about 20% further than where we are today. what leads things lower if there are these positive stories of whether it is undervalued financials, or at least fairly valued energy companies? leon: i'm a classicist. we have recessions, we used to have recessions every four or five years. because of liberal policies, it has been stretched out. if we have a recession, typically you have a bear market . i think given the exceptions we have had, multiples that would
ensue from that are not unreasonable. let's face it, everybody is using the wrong profit estimates. i think someone on your program this morning said everyone percent improvement in the dollar is about eight sendoff of earnings. tom: let's talk about that. you have seen dollar bouts. i believe you are in the meetings at the plaza accord a few years ago. what does strong dollar mean for our viewers and our listeners? leon: negative for corporate profits. we already have a profit warning on microsoft under strong dollar. recession profits typically dropped 20%. i don't see any estimates we are having earnings on the s&p 500. jonathan: how big are the institutional -- tom: how big are the institutional money and whatever they do with their portfolio, which are bonds?
we have guest after guest rationalizing a bond bear market . but the fact is, on an actually real -- on an actuarial assumption, boy are you underwater of that bond bear market. what you do, shift the stocks? leon: i would say it is a combination of cash and stocks that would be my answer. i'm in a different position. i'm approaching 80 years of age. i don't have any clients. i can take a longer term horizon. i recognize that in the bear market, he loses least wins. jonathan: -- tom: should president biden serve a second term. give us the cooperman energy level as the nation considers a second term for the president. leon: i think he definitely should not run. i don't think he will run. i am told by people that he's
not happy in washington. he spent more time with his grandkids in delaware. he has not done a good job. i voted for him because i voted my values and not my pocketbook, and i found trump, who has superior economic ideas to biden, his conduct was totally on acceptable -- totally on a separable. but i think the democrats are going to get crushed in november. the progressives have led them too far to the left and the nation is more center. it is not about politics, but i would blame a good man by the name of barack obama for a lot of these problems. i don't think that bush 1 or bush 2, ronald reagan villa lysed wealth -- ronald reagan villainized wealth.
you should be telling the 99% that was any luck they could become part of the 1% and appreciate the american dream. president biden has picked up on that theme. i see no reason to villainize wealth. how do you get to be wealthy? you developed a product or service the world needs. jonathan: leon cooperman with omega, thank you for joining us today. greatly appreciate that as well. what an odd day. i will be honest, when i walked in the door this morning at 5:42, i did not expect this kind of monday lisa: which truist day -- a to mull to us day in the fx channel. i go back to what michael shaoul said. today was fascinating to me, some of the calls we were hearing. there was a lot of gloom, but a lot of discussion about what the fed response will be and a regime shift. that to me was the narrative of the day, that biblical leon cooperman call for seven lean years following the seven fat ones.
tom: i will go back to one of the essays for the weekend in "the guardian." he walked through the four bouts of sterling weakness going back i believe to the depression. we have seen than the last 10 minutes. 119.18 on sterling, driving dxy right up against when i wait as well -- against 108 as well. to me, jon and i were focused on those emerging markets, which is europe and the united kingdom. lisa: that is the shocking part of this. how much is that the epicenter of the weakness? these are not regions that can save their currencies and strengthen them through policy actions. what is the potential contagion? tom: we have had a firestorm of interest by global wall street, particularly the young lads of the northeastern corridor over your sojourn over the adirondacks. can she light a coleman lantern?
lisa: oh yeah, no problem. that's good. it kind of has a new sound with the mask. tom: my father would help me stay 50 feet away. [laughter] lisa: well, it will be interesting. today we are definitely going to be watching the dollar. tom: an important interview this morning, the 11:00 a.m. our. a lot of talk about the gentlelady of rhode island, the secretary of commerce gina raimondo with bloomberg this morning. futures -27. good morning.
jonathan: what a week we've got coming up for you. good morning. equities heading south. the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg the open," with jonathan ferro. ♪ jonathan: live from new york city, we begin with a big issue, gearing up for earnings season. >> we've got earnings season. >> huge earnings season coming up. >> positioning in valuation is very bearish. >> between inflation and recession.