September Return to Normal Proves Elusive

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Clobal News. Well, two explosions we know outside of Cobbles International Airport. We've talked about deaths Americans as well of as Afghanis. Let's get an update on this continuously unfolding situation in crisis with us. Right now is Bloomberg News National Security Team Leader Bill Ferries, along with Katherine Zimmerman, fellow at the Conservative Thing Tank American

Enterprise Institute. She covers terrorism and foreign and defense policy both on the phone in d C. And we should remind you that we are awaiting a briefing from the White House as well. As the Pentagon as soon as they do begin we will take you there live in the meantime. Bill, thanks for being here with Tim and myself. What's the latest that we know in terms of the situation in Afghanistan as well as the casualties. Well, we know that several US troops have been killed in the blast,

and we believe more wounded. And obviously, um the Taliban have said that there were at least thirteen Afghans killed and several dozen wounded in the blast, and I think we all expect those um, those numbers to rise in the coming hours. We have had reports that planes are still leaving the Kabo airport, but obviously, UH, this this UH puts a big hold on efforts by US and

NATO forces to get more people out of the country. UM, and we're expecting it, as he said, a White House and Pentagon briefing, within the next thirty minutes to an hour here, so we should get an update on how this is affecting UH, what the latest numbers are, and and how this may affect President Item's plans to withdraw by August thirty one. Hey, Bill, what do we know about potentially the group or groups behind this and their

relationship with the Taliban. Well, the Taliban, the Taliban themselves have come out and said that they think that one of the ISIS offshoots is possibly responsible for this. They say they're investigating. I mean, these lasts happened in you know, outside of the airport perimeter, in the area now controlled by the Taliban UH And throughout the conflict over the last decade, you have had that Taliban UH, You've had

Taliban bombings in Afghanistan. You've had ISIS bombings in Afghanistan, and some of those ISIS bombings have been against Taliban targets. So it's a it's been a complicated picture there. But the Taliban and ISIS have been at each other at the same time they go I have been going after foreign forces. Katherine, want to bring you into the conversation here. Um, you cover terrorism, you cover foreign defense policy. Was any withdrawal American U S forces going to be difficult from Afghanistan?

No matter what the timing, it was certainly going to be difficult. But as we look back at how the withdraw always done, there was a lot that could have been done better. Well, why don't you expand upon that?

We were looking at a situation where the US drew down in a matter of months troops to next nothing, uh, and we still had American civilian personnel on the ground, and we're really placing our hands on in the our safe game in the hands of the Afghan National Security forces UM and those, as we well know, collapsed very rapidly. But what was missed in all of that is, of course, the enabling capabilities that the United States provided the Afghans

that were yanked as the United States pulled back. Well, we certainly can't go back in time. And the deadline that's looming right now is August thirty one, and that's the date that the United States has agreed to with the Taliban to remove the American presence there. I'm wondering how, Katherine, what happened there today not changes that deadline, but changes what happens over the next few days and the thousands of people who still remain in Afghanistan that need to

get out. The attack today will certainly make it more challenging for the people who need to get out of Afghanistan to get out. The United States had already changed how it was bringing Americans to the airport because of fears that the soft target, the crowds unprotected outside of the airport perimeter, would be targeted by the Islamic State Corps one as we saw UH, and that had certainly slowed down how how we're getting people to the airport.

And so if we're looking at the August thirty one deadline, there are things that we need to keep in mind. And the first is that our European partners have already said that they're basically pacing down evacuations because the U. S. Militaries won't be able to promise security. Uh. And certainly, as we're looking at the security situation today, even the security of the US military brooch was very kind of uh tenuous bill ferries, you know, with this situation rapidly deteriorating,

what can we expect? Are you hearing anything from uh the from U S. Officials when it comes to potentially upping once again the amount of American troops in Afghanistan. We're not hearing anything like that. I think, UM, I think there's gonna be a calculus uh at the White House about you know. UH. They've been saying for days that the longer troops are there, the more the more at risk they are, the more dangerous the situation becomes.

UM So I wouldn't. I wouldn't for now expect them to stick with that August thirty first deadline to try to get everybody out. And but I agree, it's made it much more difficult to try to get any Americans who remain in Afghanistan who wants to leave. Uh And we really don't know the universe of those people, whether it's five hundred or more. Um, but it will make it much more difficult to get them out, especially if they're not already in cobble. All Right, we're going to

continue this conversation. Bill. I know you've got a lot on your play today. UM So we're gonna let you go. Bill Ferries, he's National Security team leader at Bloomberg News, keeping us up to date on the moving situation in Afghanistan. Joiningist on the phone from Washington, d C. We're gonna come back though with Katherine Zimmerman. She's fellow at the American Enterprise Institute, a conservative think tank based there in

the nation's capital. She's joining us from d C. You are listening to Bloomberg Business Week Carol Master along with Tim Stanivik in our Interactive Broker studio. A reminder that we are expected to hear a briefing from the White House as well as the Pentagon on Afghanistan. We will take you their live as soon as it happens. This is Bloomberg Radio. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim sten It on Bloomberg Radio,

crossing the Bloomberg terminal headline from the Associated Press. Eleven marines and a Navy medic killed in the Afghanistan. Uh, those explosions in that country. So continuing to get some updates Tim on the situation there, and we'll continue to bring those updates as soon as we get them. As Carol mentioned moments ago, we are waiting a press conference from the White House and also one at the Pentagon. Will bring those to you live when we get them

as well. In the meantime, let's get back to Katherine Zimmerman, a fellow at the Conservative American Enterprise Institute, joining us on the phone from Washington, d C. Katherine, Uh, I want to try to understand from you to what extent you think the President Biden's hands were tied at least in the UH withdrawal, not necessarily the timing, but the fact that the United States had to withdraw from Afghanistan, given that the U. S And Taliban signed a deal

UH back in the early part of in order to end this war, and for the US to ultimately withdraw, that of course happened under the Trump administration. President Biden made his own decision to withdraw, and I think that that has been missed in all of this. The Trump administration did sign a deal, but the Taliban was not upholding its end of the deal. And the two key points that the Taliban weren't executing was breaking ties with

al Qaeda. We actually saw the Taliban continuing to support al Qaeda and al Qaeda spreading in the country after it had signed the deal. And the second point was reducing the level of violence inside of Afghanistan. And certainly the idea was to make space for a political negotiation that would have allowed some sort of transitionary government, and the Taliban simply escalated and we know the impact of

that now. So, Catherine, what would you say the the what would you rather have had the Biden administration do when it when it entered office in January of this year. Would you like to have seen US troops stay there?

I have advocated for the ongoing light footprints that the US had gotten to by the by the point that the Biden administration took office, we had troops inside of Afghanistan, which sounds like a lot except when you look at what they were doing, which was primarily supporting the Afghan national security forces who were doing the brunch of the

fighting against the Taliban. And then, of course the part that matters for the United States, our troops were the ones with the high end counter terrorism capabilities going after the Taliban, uh and and al Kaina and Islamic state elements that that we're posing terror threats. But I want to go back to Katherine. You know, there are so many uh different groups within Afghanistan. Um. I think fourteen

different ethnicities. Uh, There's just so many different groups. Would it have been impossible to ultimately get an ideal situation there um and with the Taliban kind of following through on its commitment and in order for the US to

withdraw anytime soon. Yes, I think when the Trump administration negotiated the deal, it was very clear that there wasn't going to be a political resolution for the reasons that you lay out, and the fact fundamentally that the United States had shifted years prior from engaging on on the the ongoing civil war in Afghanistan. And I think that's something that we don't actually separate in our heads enough.

Is the counter terrorism fight that the United States has an Afghanistan and the civil war against the Taliban that was ongoing. You understand this situation, You understand this region of the world. Thomas Friedman of the New York Times recently, writing in an opinion piece, you know, but citing how more than seventy Afghanistan's population is under twenty five years old, Most of them, he writes, know nothing about the Taliban um. How will that create the future of Afghanistan. It's a

great question. And as we're looking at what the future of Afghanistan looks like, you know, the Taliban have taken power again. But the Afghanistan today is are different from the one twenty years ago. And as you mentioned, the most of the population have very different expectations than the population did when the Taliban was in power in through

two thousand one. So there are much higher demands on any government of Afghanistan today where where people in the urban centers in Kabul and and other major cities do expect government service to be provided. So that's one of the reasons why we we're watching the Taliban's actions carefully and why the Taliban are so worried about the economic

collapse that has followed their takeover of the country. What kind of economic pressure can the international community put on the Taliban in order to use sticks more so than carrots, or perhaps even carrots to push the Taliban in a direction that the Afghan people want. We've already seen the international community try to use some of those those sticks where of course, UH, the I m F has has kind of frozen ongoing relations until the situation with the

Afghan government is settled. UH, and the amount of assistance that has been provided by the international community to Afghanistan has helped to prop up the government that was in power, and so almost all Western nations have frozen that for

the time being. My big concern is that we are looking at a growing humanitarian situation, and of course there is a careful balance between our national security and UH, you know, helping precipitate a humanitarian crisis in Afghanistan, and so you know what we might see is humanitarian assistance needing to flow into Afghanistan, which the Taliban was only used to build their own legitimate say, Katherine, thank you

so much for being with us. Katherine Zimmerman, fellow at the American Enterprise Institute, with us on the phone from d C. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stenovic on Bloomberg Radio. The international cover Bloomberg Business Week this week. It's about September next month. How it promised a return to normal, Tim, But we're just a few days away and it's not

gonna happen. It's not I was gonna say you got to travel outside of the United States, perhaps North America to see this cover, but you actually don't, because it's available at Bloomberg dot com slash business Week, and also available of course on the Bloomberg termittal. It is a fantastic cover to the international edition. It's a calendar of September. All these dates are circled but scribbled out. And that's exactly how I think a lot of employees and certainly

offices and managers feel about the return to work. We're still dealing with the health pandemic, and you know, Afghanistan, that crisis also reminding us that things are not normal as well. So let's get into it. The story by Bloomberg News US economic reporter read pick her to m. Bloomberg US economy reporter Olivia Rockman read she joins us now on the phone in Washington. It is such a smart story. Read. We really thought, if you go back six eight months, we thought September it was going to

be quote unquote normal. Yes, so thank you so much for having me. So Yeah. The idea for this story mainly came from the fact that back several months ago, I think May is kind of when I think of it as being the main moment where um, we were all kind of looking to September and the fall more generally to be um a little bit more normal and at least a turning point point of some kind for

the US economy. And and back then, I mean, with the data that we had it it looks like vaccinations were rising rapidly, and it looks like that we'd reached that seventy five threshold of vaccination of the population in September it looks like schools, we're going to be back in person and be normal. Um end A lot of companies firmed up their return to office dates, and I think the whole point of this story was pointing out that that is not the circumstances that we're dealing with

as we're rolling into September now. Insteada has thrown a huge risk in that right, companies, as you write, like Alphabet's, Google black Rock, they've pushed returned to office states to October. Delta has disrupted already strained supply chains, China temporarily close to terminal at one of the world's busiest ports to quarantine dock workers. That delayed shipments of materials that businesses and factories needs. So take us into the economic impact

of this. The economic implications of this, we talked a little bit about them a few minutes ago. If we're not you know, then just very minorly right, if we're not commuting in, we're not hitting tolls and in municipalities, were not spending money on lunches outside of the office. But beyond that, what are the bigger implications? So I think the bigger implications for now is that we don't really know. I mean, we won't start getting a lot of the data that starts to show us, um what

Aug looks like until we get into September. And we also don't know if the delta wave is going to follow a similar kind of peak as the UK did, or if it will follow a different path. Um. But we pointed this out in the story. But some of the high frequency indicators are starting to show some signs that consumer behavior is changing a little bit. And I think when we think about the impact of consumer behavior changing, UM, we need to keep in mind of what the profile

for economic growth is right now. So for a huge portion of the pandemic from consumer spending was based on goods UM. But now consumer spending is um wholly dependent on the snap back and services spending, and even just some changes in consumers behavior not dining out as much, not traveling, those kind of things that we we thought we're gonna continue, um really hot into the fall. Um

that could have UM pretty big implications, all right. So as we all keep crossing our fingers and our legs and our arms in hopes of getting back to normal sooner rather than later, what visibility do we have because it certainly feels different read than where we were, of course a year ago or even eight months ago. I

think that's what you know. Powell has talked about this before, and I think it was in the July press conference when he talked about how with every kind of new wave of delta, there there seems to be a little bit less reaction in terms of the consumer response. And I think we're certainly seeing that now because you know, when I walk around DC as people restaurants, I see UM a lot of people who are UM vaccinated and feel great about the risks that they're taking UM to

part taking these activities. But then I also know people who are canceling their trips and are really nervous about sending their kids back to school. And so I think we're all so seeing this divergence as we've seen throughout the course of the pandemic, but we're really seeing a divergence in terms of risk assessment UM. And I think you know how we fall on that really depends on people's own comfort levels rather than you know, geography or UM whatever it may be. Okay, So enter fed chair

at your own Powell. That's his enter music tomorrow, Jack, essentially his virtual entrance. Look, you know, if we had a cowboy hat for every time we talked about the FETE, as Carol said earlier than we'd have you know, we'd we have spent seven million dollars on cowboy hats this year.

But the fact is is investors are awaiting what he says tomorrow, and I'm wondering how the high frequency data, how the decline of passengers going through t s A checkpoints or people in hotspots who are not dining out with open table um, how that changes. Among other things, the way that the FETE is thinking about tapering are the way that the FETE is thinking about pulling back on some of the stimulus. I think from the perspective of tapering, it doesn't seemed to have had a huge impact.

I mean, the biggest clear impact that the delta has had on the FED recently is the fact that Jackson Hole shifts to being shifted to being virtual from in person and um a very short amount of time and right before it was actually happening. UM. But in terms of what that means for keeping I think, UM, there's been a lot of FED speak out recently, UM where where folks are encouraging on papering sooner rather than later.

So I don't know how much Delta is playing into that decision, but I'm definitely curious to see how Powell talks about that in his Jackson Hole speech, since he definitely got peppered with a lot of questions about Delta in the last press conference. Well, here's a number for for us, and you've got it in your story. You talk about the progressive think tank, the Century Foundation, estimates seven and a half million workers will lose all unemployment

benefits on September six, when the main pandemic programs. And that's a lot of Americans, it is. And how do the ripple effects that it has throughout the economy and also what does it do for job for the jobless who exactly potentially do you go and start working again? All right, it's a great story, a great read, and a lot of information in it. Read. Thank you so much,

really appreciated. Of course, that's Bloomberg News US economic reporter Read Pickard jointing us on the phone from Washington, d C. It is the international cover store, but as you said, you can find it at Bloomberg dot com. Ro Marco Journal Now, but you let me drive. No, no, no night please, I'll do the riding drivel. I want to drive, just drive baby, good questions, drying This is the drive to the globe. Give me thanks, We'll drying us down

on Bloomberg Radio. Is it is time for the drive to the clothes And I'm just looking at the equity trade Doug of course, just breaking down the numbers. We're hovering near or loads of this session, as Doug mentioned, about half a percent on the S and P dow down a hundred seventy two points, also down a half percent. Same thing for the NASTAC on a percentage basis, but again hovering near our highs on a day where we've

seen several couple of explosions in Afghanistan. Let's get to it with Randy Watts, Randy Watts's chief investment strategist at O'Neil Global Advisors, joining us once again on the phone from Miami. Wow, Randy, you heard me, And take a deep breath a big side there, because that's the type of day it has certainly been. Like. Uh, when we talk about macro, we often talk about what's happening with trade and what's happening, of course with the Federal Reserve

and with the virus. But today it was a different story with those two explosions in Afghanistan. We did see the equity markets reach session lows just following that news. Um, how did you watch it? Well? First off, thanks for having me back. And I do want to say my thoughts and prayers go out to the families of the servicemen and women and others who were killed in those two bombings today in Kabul. Obviously, it's a very bad situation my understanding, as they have over five thousand people

at the airport right now. They're still trying to get out, so it's a very tenuous situation and our thoughts and prayers are with those people and hoping get them evacuated safely. I think what's happening in the Afghanistan is a big deal. I think it raises the specter that there is going to be more terrorist activity the US is going to have to deal with, uh that Afghanistan is not stabilized and it's not going to be as quick and easy and exitus that maybe some of the some of the

procrastinator procrastinators thought. So I do. I am a little worried about that, and I think anytime there's geopolitical instability, that's bad for marketing. So yeah, let me just jump into that a little more randy. Does that mean that that you see this playing out as a market story as well? Like, what what effect does that instability actually

have on on equity markets and financial markets? I think it just adds another kind of negative element to some of the other macro negative elements we're dealing with with COVID. I don't think it's the dominant story. I think the dominant story remains COVID and how we're going to get through that and recover from that. But I think it does just remind people up the world's a dangerous place, and when the US withdraws from places, oftentimes bad things happen.

And I think we maybe haven't heard the end of of things that are going to affect the US and Afghanistan. Just because we leave doesn't mean there can't be other negative occurrences there like crop up well. And what's interesting is I was thinking about this as I watched the market trade um branding and good to be talking with you again. I was kind of comparing it to the First Persian Gulf War, where we saw a huge market impact,

obviously in the energy markets. I think about after nine eleven, to have a terrorism incident right here on US domestic soil, a much more severe market impact initially. And I'm not saying and I agree with you. My heart's uh and thoughts are going out to those friends and families of anyone who has lost their lives in Afghanistan. But I do feel like the market decline has not been uncontrollable, if you will, It's been very measured, and I'm trying

to understand what that tells us. I think right now the mark it still isn't sure exactly how Afghanistan is going to play out over the over the longer run. I think the fear is does that become a country that becomes a breeding ground for further terrorist activity or does it stabilize. I think that is obviously a question that's up in the air, and whether or not we're going to really meet this August thirty first deadline which we've imposed on ourselves to to get all of our

personnel and people out of there. So I think I think that remains to be seen. I think this just does remind people though that the again the world's a dangerous place, and when the US withdraws from places oftentimes that let's uh negative parties of faster or grow. All right, So we can separate ourselves from this, and I understand it's not so easy to do, but if we can

think about, um, what else is going on? And I do want to mention a headline crossing present bind to speak about Afghanistan from the White House today, So we're monitoring that as well. If we separate out what's going on in Afghanistan right now, the major talking point this week, Grandy, as you would guess, has been about Jackson Hall and what we might get from j Powell. What are you anticipating, uh,

if anything, and how it might maybe impact your market. Think. So, I think we're still going to hear from Powell, and and again I do another crystal ball. I'm often wrong, but I think we're still going to hear from him that the taper is going to start at some time in the fourth quarter this year, and the FED, I think, really wants to be done by the end of next year.

And so the question is really the pace of that. Obviously, U St. Louis of Federal Reserve Bank President Bullard today talked about a quicker taper where they would be done by the end of Q one. I think that's unlikely. I think, especially given what's going on with the delta variant of COVID, that that they're not going to move that quickly. If you remember the last time around they did this, they did it in in two thousand and thirteen.

They started in January of two thou and fourteen, and they finished in October of two thousand and fourtune, they took ten months. They were buying about eighty five billion a month back then. Right now we're doing about a hundred and twenty billion a month. I do think it's going to be more of like that kind of a pace of taper. Then it's going to be one where they try to do it all in six months. But I think the Fed does want it to finish in two because I think they want the flexibility to raise

rates if they need to. In So, what is the what is the what is the market listening for? With Fed Chair Powell's virtual remarks tomorrow? Right now, the mark is expecting that the taper starts in December and that they do about ten billion a month in reductions, So it takes them twelve months, and they finished kind of December next year November next year. I think if if if the rate is different than that, or if it

starts earlier and later, that can affect the market. I think if it starts much later, that could have set market participants because they feel like inflation continues to get a little bit out of hand. If it's a lot faster than people expected, that could also cause a little bit of a dislocation. One thing that's important for everyone to look at is, remember tomorrow we're going to get

the personal consumption price index for July. If we go back and remember the June one was up four percent, which was the largest increase since July two thousand and eight. The forecast for July is up four point one. So it's possible that we're going to get a negative number there tomorrow, and that's gonna make market participants anxious about when the set does start to taper so they can

try to maybe eventually move ahead on the inflation. So having said that, we have talked a lot randy about investors coming in and buying the dip here, how constructive is this market to be a buyer right now? Would you rather be a seller. I think that the thing about the market is it's not quite as good as it appears on the surface. Only sixty of the SMP is above it's fifty day, but only thirty six percent of the NAS deck is above it's fifty days, so

that's actually not a great number. I think the issues are are really twofold. First is when is delta peak? And the second is what kind of stimulus we're gonna get out of Washington and we're going to get both of those bills out of out of the out of Congress. Are we're just going to get one of them? And

how that's going to impact the economy. I think people are a little in a little bit of a weight and C mode on both of these issues, and that's why they've been moving into some of the bigger, more stable names, particularly tech. All Right, wait, you have to repeat that again because Tim and I are going to want to say this, it's only the s andps above it's fifty day, and how much of the NASDAC. Only thirty six of the nastic is above its fifty day

moving average. That means breadth has not been good, particularly in the nastack investors are rotating into larger cap, more defensive stocks, particularly in technology, while they try to get a handle on what's going to happen with all three things you mentioned, the FED, the delta, and what kind of stimulus we're gonna get out of Washington. I think investors are maybe holding some money back until they see that so they can then make better, more informed decisions.

Gotta run always wish we had more time. Randy B. Woll, Randy Watt's chief investment Strategies that own Neil Global Advisors, on the phone in Miami. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News