>> THERE HAS BEEN A VERY
MATERIAL TIGHTENING AND FINANCIAL CONDITIONS OVER LAST
COUPLE OF MONTHS. >> THE RECESSION CHATTER IS
PICKING UP. >> PEOPLE ARE LOOKING AT THE
GLASS AND SEEING HALF-EMPTY. >> THE CONSUMER IS STILL
OUTSPENDING. IT IS STUBBORNLY RESILIENT. >> THIS IS "BLOOMBERG
SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO,
AND LISA ABRAMOWICZ. JONATHAN: GOOD MORNING.
THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO.
I AM JONATHAN FERRO. FUTURES DOWN MORE THAN .1% ON
THE S&P. IT IS ALL ABOUT THE SQUEEZE ON
THIS CONSUMER. KAILEY: THE SQUEEZE ON CONSUMER.
9% IN THE UNITED KINGDOM. IT IS A SQUEEZE ACROSS ALL.
YOU CANNOT PARSE OUT ENERGY. IT IS ABOUT CORE CPI AND LET'S
CALL IT A DOUBLE OF WHAT WE HAVE SEEN PRE-COVID. JONATHAN:
ONE OF THE MOST IMPORTANT NOTES ON WALL STREET CAME FROM J.P.
MORGAN. CRUEL SUMMER: WHITE U.S. GASOLINE PRICES COULD BREAK
ABOVE SIX DOLLARS LATER THIS YEAR.
THAT IS A BIT -- THAT IS A BIG DEAL. KAILEY:
JUST GOT INVITED TO THE MORGAN CALL IN LONDON ON OIL.
THEY WALK THROUGH THE WHY WE ARE GOING TO $150 A BARREL.
THE ANSWER IS JP MORGAN AND OTHERS SEE OIL PRICES HIGHER
BECAUSE OF CONVENTIONAL ANALYSIS. JONATHAN:
HOW MUCH DOES THIS FED NEED TO SQUEEZE? LISA:
AND HOW MUCH THEY WILLING TO? JAY POWELL SAID FIGHT FOR FOR
CREDIBILITY. HE CAME OUT SAYING WE WILL NOT
TAKE A NUANCED VIEW OF INFLATION.
THAT IS THE BEDROCK OF THIS ECONOMY.
IF WE DO NOT HAVE THAT WE HAVE NOT DONE OUR JOB. JONATHAN:
LET ME THROW THIS AT YOU. THE MARKET RALLIED YESTERDAY.
IF IT CONTINUES TO RALLY, IS THAT CONSIDERED AN UNWARRANTED
LOOSENING OF FINANCIAL CONDITIONS THE FED HAS TO PUSH
BACK AGAINST AND IF THAT IS THE CASE HAS THE FED PUT A LID ON
MARKETS, A LID ON RISK ASSETS? LISA:
IT IS MORE NUANCED THAN THAT. ANY THERE'S BEEN A SIGH OF
RELIEF FOR MARKETS THAT IS A BAD THING FOR THE FED.
WHERE DID IT RALLY? YOU SAW THE HAVENS RALLY.
THE LEFT FOR DEAD STOCKS. HOW MUCH ARE PEOPLE REVERTING
BACK TO HER BELIEF THE VET COULD GET INFLATION UNDER
CONTROL AND THEN THE BEHEMOTHS THAT MAKE MONEY LOOK BETTER
BECAUSE YIELDS WILL GET UNDER CONTROL OVER THE LONG-TERM.
I KNOW THIS IS COUNTERINTUITIVE. JONATHAN:
FRONT END OF THE YIELD CURVE, WHAT HAPPENED?
DOES YOUR YIELDS ADJUSTED HIGHER?
-- TWO YEAR YIELDS ADJUSTED HIGHER. LISA: NEEL KASHKARI, THE CLASSIC
DOVE, SAID IT WAS EASY FOR HIM TO BE A DOVE WHEN INFLATION WAS
LOW AND NOW IT IS EASY FOR HIM TO BE A HOP.
HE DID NOT KNOW IF HE WILL HAVE TO BECAUSE RECESSION. JONATHAN:
WHAT A TOUGH MOMENT FOR THIS FEDERAL RESERVE.
HERE IS YOUR PRICE ACTION IN THE EQUITY MARKET. THE S&P FUTURES -.27 -- -.2%.
YIELDS ON THE 10 YEAR DOWN THREE BASIS POINT.
EURO-DOLLAR 105.26. LISA:
AMONG ALL OF THE ECONOMIC DATA WE ARE GETTING I AM TRADE ON
ALL HOUSING DATA BECAUSE THIS IS ONE AREA PEOPLE SAY HAVE A
PERSISTENCY TO INFLATION. INFLATION TENDS TO TRAIL
HOUSING DATA. WE GET U.S. HOUSING STATS AT 8:30.
THIS COMES AT A TIME WHEN HOUSING PRICES ARE STILL RISING
AT A RECORD PACE. HOW MUCH TO SOME OF THE
BUILDERS RESPOND TO THIS AT A TIME WHEN LABOR IS EXPENSIVE
AND THE INPUT COSTS ARE EXPENSIVE.
IF THEY DECELERATE HOW MUCH DOES THAT INDICATE A SLOW DOWN
THAT IS PERHAPS WHAT THE FED WANTS TO SEE OR WILL CAUSE
PEOPLE TO BRING BACK EXPECTATIONS FOR GROWTH.
JANET YELLEN IS HOLDING A NEWS CONFERENCE IN GERMANY AT THE G7
MEETING. WE WILL HEAR ABOUT EUROPEAN GAS
POTENTIAL EMBARGOES ON RUSSIA AND MORE IMPORTANTLY OIL.
I WANT TO HEAR WHAT YOU HAS TO SAY ABOUT THE CONNECTION
BETWEEN CRUDE PRODUCTS AND GOODS. SHOULD WE TALK ABOUT OIL PRICES
-- BUT GAS PRICES ARE IN A CONSISTENT TRAJECTORY UP, KIND
OF LIKE THE JP MORGAN NOTE SAID. THAT IS IMPORTANT BECAUSE THIS
LEADS INTO THE CONSUMER APPETITE TO CONTINUE TO SPEND.
RETAIL EARNINGS CONTINUE. TARGET AND LOWE'S. T.J.
MAXX AT 9:30. BATH AND BODY WORKS AFTER THE
BELL. THIS COMES AFTER WALMART PLUNGING THE MOST SINCE 1999.
HOW MUCH OF THIS IS IDIOSYNCRASY AND HOW MUCH IS
THIS A BELLWETHER? JONATHAN: DOWN 11% YESTERDAY.
WHAT WAS THE STORY YESTERDAY? THE RESILIENCY OF HOME DEPOT OR
THE TROUBLE OF WALMART? KAILEY: I THINK IT IS A MACRO CALL ON
RECESSION. THERE A LOT OF PEOPLE MODELING
IN RECESSION. THERE IS ANOTHER GROUP SAYING
THERE IS RESILIENCY WE WILL NOT GET BACK TO BACK NEGATIVE GDP. BUT I WOULD FOCUS ON, JAPAN IS
ONE INDICATOR OF THE IMPORTANCE OF STUDYING TRADE.
EXPORT DYNAMICS AND IMPORT DYNAMICS, AND MAYBE THAT WILL
BE THE DECIDING POINT IN LATE SUMMER OF WHERE THE UNITED
STATES IS. JONATHAN: KIT JUCKES THINKS WE NEED TO
TALK MORE ABOUT EUROPE. IN YOUR WORDS THE ECB RATES
HAVE BEEN NEGATIVE FOR ALMOST EIGHT YEARS.
IF THE ECONOMY CAN SUSTAIN POSITIVE RATES, THE ECONOMY
WILL BE STRONGER WHEN IT HAPPENS. IF. HOW BIG IS THE IF?
KIT: ENORMOUS. THE FIRST CASE IS THE
SHORT-TERM. ELEPHANT IN THE ROOM DOWNSIDE
RISK. WHAT IF THE GASKETS TURNED OFF
AND NATURAL GAS GETS EXPENSIVE? THAT IS BAD FOR EVERYBODY BUT
SPECTACULARLY BAD FOR EUROPE. I DO NOT SEE HOW WE AVOID A
RECESSION. THE EU COMMISSION ADMITS WE
WILL GET A RECESSION IF THAT HAPPENS.
THAT IS THE FIRST PIECE. THE SECOND PIECE, THEY HAVE
BEEN GOING ONE WAY, LOWER AND LOWER RATES FOR LONG ENOUGH THE
FIRST TURN UPWARDS WILL HAVE A SIGNIFICANT MARKET REACTION.
ALREADY WE HAVE CLIENTS ASKING WHERE IS THE REAL SENSITIVE
POINT ON THE SPREAD BETWEEN PERIPHERAL AND GERMAN BOND
YIELDS IN EUROPE. IT IS EVEN LESS LIKELY -- TOM:
THE HALLMARK OF YOUR WORK IS IN A FEW PARAGRAPHS YOU SQUEEZE IN
A LOT ON A LOT OF DIFFERENT COUNTRIES AND ECONOMIES. RIGHT NOW THERE IS A PISSING
MATCH IN THE UNITED KINGDOM WITH THE GOVERNOR OF THE BANK
OF ENGLAND, OTHERS IN THE TELEGRAPH COMING TO THE DEFENSE
OF ECONOMIST WHO PUT THEIR PANTS ON ONE LEG AT A TIME. WHAT IS THE KIT JUCKES
SCORECARD ON HOW CENTRAL BANKERS WORLDWIDE ARE DOING?
KIT: THEY ARE DOING THEIR BEST. THE
ONLY ANALOGY I HAVE AT THE MOMENT IS WE ARE SAYING CAN TOM
HANKS LAND HIS PLANE ON THE HUDSON?
IT DID NOT HAVE A BIRD STRIKE. IT WAS HIT WITH A BIRD STRIKE
AND THEN ELECTRICAL STORM AND THEN LIGHTNING AND THEN
VLADIMIR PUTIN FILED A MISSILE AT IT.
WHICH TOM HANKS CAN DO THAT? I GIVE THEM A BREAK.
THEY DID THEIR BEST BY FLOODING THE SYSTEM WITH MONEY AT THE
START OF THE PANDEMIC. SINCE THEN -- IN THE END WE
WILL GET A RECESSION BECAUSE THIS IS TOO HARD.
CRITICS CAN CRITICIZE FOR ALL OF THAT. LISA:
WHEN YOU SAY WE WILL GET A RECESSION TALKING ABOUT EUROPE,
I KNOW YOU AND YOUR COLLEAGUES DO NOT BELIEVE THE U.S.
IS HEADED FOR A RECESSION. YOU THINK THOSE DUALITIES ARE
PRICED INTO THE U.S. DOLLAR OR DO YOU THINK THIS HAS
MORE TO GO AND YOU COULD GET TO PARITY AND BEYOND? KIT: THE TROUBLE WITH THE EURO IS
THAT IT BRINGS THE RECESSION FORWARDS IN TERMS OF TIME AND
BREAKS THROUGH. I CANNOT MEASURE THE DOWNSIDE
OF THE EURO FROM THAT FOR THE PROBABILITY OF IT HAPPENING.
HOW CAN I BUY THE EURO? THAT IS WHY I FIND IT UNVIABLE.
THERE IS A DIFFERENCE BETWEEN THE U.S. AND EUROPE. WE HAVE NOT SEEN THE PEAK OF
TREASURY YIELDS YET. WHEN THAT HAPPENS I SUSPECT WE
WILL SEE LOWER LEVELS IN EUROPE. MODEL STRUGGLE WITH RECESSION
BECAUSE IT IS DIFFICULT TO WORK OUT THE ACCUMULATED EFFECTS OF
BEING BOMBARDED BY SO MANY ONCE EVERY FIVE YEAR STOCKS IN A TWO
YEAR PERIOD. JONATHAN: YOU SOUND LIKE A HARD LANDING
GUY. YOU SAID WE WOULD GET A RECESSION.
IT IS ABOUT MAGNITUDE AND TIMING. WHERE ARE YOU ON THAT.
KIT: I THINK NEXT YEAR. THERE ARE THINGS THAT COULD
MAKE IT GO FORWARD. EVERY OTHER VERSION OF OIL I
USED IS UP MORE THAN CRUDE. UPMOST IS JET FUEL.
DIESEL IS UP A LOT. THEY ARE ALL UP BY MORE THAN
CRUDE. IF WE GET IN THERE PUSH HIGHER
IN CRUDE FULL HURT -- IT WILL HURT.
BRUTAL FOOD PRICES WERE REALLY HURT. THE HOUSING MARKET IN THE
U.K.'S JUST THREATENING TO ROLL OVER NOW.
I WOULD STATE RECESSIONS ARE PRETTY LIKELY IN 2023 AND LOTS
OF PLACES. I THINK IT IS PLAIN BLIND LUCK
IF WE CAN AVOID WITH A NUMBER OF PRESSURES COMING FROM THE
SYSTEM. EUROPE IS RIGHT IN THE FIRING
LINE. JONATHAN: AWESOME TO CATCH UP.
YOU BROUGHT UP ARSENAL. TOM IGNORED IT.
WE ARE STILL FRIENDS. I'M JUST HIGHLIGHTING THE FACT
HE BROUGHT IT UP AND TOM IGNORED IT AND I WILL NOT BUILD
ON IT. WILL NOT BUILD ON THAT. TALK ABOUT THE SQUEEZE ON THE
CONSUMER STUCK BETWEEN THE ROCK AND A HARD PLACE.
I AM LOOKING TO THE U.K. WHAT A BRUTAL MOMENT FOR THE
UNITED KINGDOM. BANK OF ENGLAND DECISION WHERE
WE ALL ASKED THE SAME QUESTION. IS THIS IN THE FUTURE OF THE
FEDERAL RESERVE AND IF IT IS WE HAVE SOME PROBLEMS AHEAD. TOM:
WITH ALL OF THE PROBLEMS THIS MORNING AND THE UPROAR IN THE
UNITED KINGDOM, IT DRAGS ME TO JULY 27.
THE FED TALK NOW IS EASY. DOES IT GET HARD AFTER THE NEXT
MEETING. JONATHAN: IT GETS HARDER FOR THE U.K.
AND THE ECB. THE QUESTION IS WHEN WE SEE A
PEAK YEAR-OVER-YEAR INFLATION RATE IN THE U.K.
AND EUROPE BECAUSE WE MIGHT HAVE SEEN IT STATESIDE. LISA:
DOES THE ECB TAKE THE SAME TONE CHAIR POWELL DID YESTERDAY?
WE DO NOT CARE WHERE INFLATION IS COMING FROM, WE HAVE TO GET
IT UNDER CONTROL. JONATHAN: THE MARKET IS OK.
FROM NEW YORK, THIS IS BLOOMBERG. RITIKA GUPTA -- RITIKA: KEEPING
YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD, I AM RITIKA
GUPTA. JEROME POWELL SAYS THE FED WILL
KEEP RAISING INTEREST RATES UNTIL THERE IS "CLEAR AND
CONVINCING EVIDENCE INFLATION IS IN RETREAT."
POWELL TOLD A WALL STREET JOURNAL EVENT THE ECONOMY IS
STRONG ENOUGH TO WITHSTAND ANYTHING. INFLATION IN THE U.K.
HAS RISEN TO ITS HIGHEST LEVEL IN 40 YEARS.
CONSUMER PRICES ROSE 9%. A BIG CHUNK OF THE INCREASE
CAME FROM A RISE IN ENERGY PRICES.
ALL OF THAT WILL ADD TO MORE PRESSURE FROM THE GOVERNMENT
AND THE BANK OF ENGLAND. FINLAND AND SWEDEN HAVE MADE IT
OFFICIAL AND APPLIED FOR MEMBERSHIP IN NATO, MOVE THAT
RESHAPES EUROPE'S DEFENSES. THE TWO MUST OVERCOME
OPPOSITION FROM TURKEY'S PRESIDENT, WHO ALLEGES BOTH
COUNTRIES SUPPORT KURDISH MILITANTS. MADISON CAWTHORN LOST HIS BID
FOR A SECOND TERM DESPITE BACKING FROM FORMER PRESIDENT
TRUMP. NORTH CAROLINA STATE SENATOR
CHUCK EDWARDS BEAT HIM IN THE REPUBLICAN PRIMARY.
NEARLY EVERY REPUBLICAN LEADER IN THE STATE OPPOSED MADISON
CAWTHORN. THE BOARD OF TWITTER SAYS IT
WILL RECOMMEND SHAREHOLDERS APPROVE MUST BID OF $54.28 A
SHARE, ALMOST $16 HIGHER THAN WHERE THE STOCK CLOSED TUESDAY.
ELON MUSK SEEMS TO BE MANEUVERING TO DITCH OR
RENEGOTIATE. GLOBAL NEWS 24 HOURS A DAY, ON
AIR AND ON QUICKTAKE BY BLOOMBERG, POWERED BY MORE THAN
2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES.
I AM RITIKA GUPTA. THIS IS BLOOMBERG. >> INFLATION IS COMING DOWN.
THAT IS WHAT WE NEED TO SEE. WE ARE WATCHING FOR THAT.
IF THAT INVOLVES MOVING PAST BROADLY UNDERSTOOD LEVELS OF
NEUTRAL, WE WILL NOT HESITATE AT ALL TO DO THAT. JONATHAN:
CHAIRMAN POWELL FOCUSED ON GETTING INFLATION BACK DOWN.
FUTURES -.2% ON THE S&P. ON THE NASDAQ SOFTER AS WELL.
YIELDS LOWER BY ONE BASIS POINT ON THE 10 YEAR.
CRUDE CLOSE TO 114. THE AVERAGE GAS PRICE IN
AMERICA RIGHT NOW PUSHING $4.60. TOM:
LISA MENTIONED THIS EARLIER. WE ARE DONE QUOTING BRANDT AND
HAVING A MEANINGFUL DISCUSSION BECAUSE THE STILL SET BRENT AT
A FAR HIGHER PRICE. JONATHAN: THE REFINING ISSUE IS A BIG ONE.
I MENTIONED THE JP MORGAN NOTE EARLIER.
THEY'RE LOOKING AT SIX DOLLAR CRUDE LATER THIS SUMMER -- SIX
DOLLAR GASOLINE. TOM: IS HAZARDOUS TO TRY TO GAME
THIS OUT. MUCH OF THIS HAS LESS TO DO
WITH THE WAR IN UKRAINE AND MUCH MORE TO DO WITH
MICROECONOMICS. JONATHAN: PROVIDERS PRODUCE MORE GASOLINE
AHEAD OF THE SUMMER ROAD TRIP SEASON, BUILDING UP INVENTORIES.
THIS YEAR U.S. GASOLINE INVENTORIES HAVE
FALLEN. TOM: HARSH HEADLINES. RUSSIA EXPELS 34 FRENCH
DIPLOMATS IN RETALIATION. JONATHAN: ANYTHING ELSE? TOM:
I DON'T KNOW WHAT TO MAKE OF THAT. THE WORK CONTINUES. SLOG FORWARD IS NOT THE RIGHT
WORD. ANNMARIE HORDERN JOINS US NOW.
SHE HAS BEEN GETTING UP-TO-DATE ON OUR DOMESTIC POLITICS.
AN IMPORTANT QUESTION WITH THIS PENNSYLVANIA RACE IS THE EFFECT
OF THE RIGHT AND CONSERVATIVES ON THE MIDDLE.
WHAT DID WE LEARN ABOUT THE MIDDLE OF THE REPUBLICAN PARTY,
THE MIDDLE OF THE DEMOCRATIC PARTY IN THE LAST 24 HOURS?
ANNMARIE: IS A MIXED BAG. WE HAD IDAHO, OREGON, KENTUCKY,
NORTH CAROLINA, PENNSYLVANIA. YOU SEE IN SOME PLACES
PROGRESSIVES WON BIG, AND OTHER PLACES TRUMP CANDIDATES WON
BIG, AND THEN YOU SEE THIS RACE IN PENNSYLVANIA.
WE HAVE A HEDGE FUND MANAGER DAVID MCCORMICK.
HE HAS A LOT OF TRUMP EMPLOYEES WITHIN HIS CAMPAIGN.
THEN YOU HAVE THE INDIVIDUAL BACKED BY TRUMP, MEHMET OZ, I
GREW UP KNOWING HIM HAS DR. OZ, AND IT IS IN THERE IN THIS RACE.
THIS IS SENATOR PAT TOOMEY SEAT. HE IS A REPUBLICAN.
IF DEMOCRATS WERE ABLE TO WIN THIS SEAT THEY HAVE THE
POTENTIAL TO MAINTAIN CONTROL OF THE SENATE WHEN MANY SAY THE
HOUSE WILL SWING TO REPUBLICANS. TOM:
WHAT IS IMPORTANT IS WITHIN OUR DOMESTIC POLITICS THERE ARE
ONLY DOMESTIC ISSUES. YOU JUST CAME FROM THE UNITED
ARAB EMIRATES. INTERNATIONAL AFFAIRS IS NOT
PART OF THIS DISCUSSION. IT IS ABOUT INFLATION AND THE
CULTURE WARS OF AMERICA. ANNMARIE: YES.
DOMESTICALLY THOSE ARE IMPORTANT ISSUES.
LET'S LOOK AT INFLATION AND ABORTION.
THESE WILL BE TWO BIG ISSUES. I WOULD ARGUE THAT WHAT GOING
ON INTERNATIONALLY IS AFFECTING THINGS LIKE INFLATION.
I HAD SOME CHATS IN ABU DHABI AND I CAN TELL YOU THIS -- ALSO
OTHER CHATS LAST WEEK WITH OPEC OFFICIALS -- THEY ARE QUITE
CONCERNED WITH THINGS HAPPENING IN CONGRESS LIKE THIS PANEL VOTING FOR A NOPEC BILL.
THE STORY OF GASOLINE PRICES WHICH TODAY ARE CLOSER TO FIVE
DOLLARS THAN FOUR DOLLARS AND WE'RE JUST ABOUT TWO WEEKS OUT
FROM PEAK DRIVING SEASON, NOT EVEN IN HIGH DRIVING SEASON,
YOU START TO SEE CANDIDATES TALKING ABOUT INTERNATIONAL
ISSUES THAT PLAY INTO THE DOMESTIC STORIES. LISA:
THIS IS INCREDIBLY RELEVANT. IN ABU DHABI, I WONDER HOW MUCH
THIS IS ABOUT ANTONY BLINKEN GOING AND SAYING PLEASE GIVE US
MORE, GIVE US MORE SO WE CAN SHORE UP SOME SORT OF PRICE
STABILITY. WAS THAT PART OF THE UNDERTONE
OF THE MEETINGS? ANNMARIE: WE DO NOT KNOW.
SECRETARY BLINKEN DECIDED TO GO TO ABU DHABI BECAUSE HE WAS
JOINING WITH THE VICE PRESIDENT AND HIGH-PROFILE U.S.
OFFICIALS INCLUDING BILL BURNS, SECRETARY AUSTIN AND CLIMATE
ENVOY JOHN KERRY. HE THEN DID MEET WITH HIS
EMIRATE COUNTERPART. THIS WAS A CLOSED-DOOR SESSION.
WE DO NOT KNOW WHAT THE ASK WAS. WE KNOW THE UNITED STATES HAS
BEEN ASKING OPEC PRODUCERS TO PUMP MORE.
THE ISSUE IS LESS OIL AND MORE REFINING CAPACITY.
YOU HAVE THE SAUDI OIL MINISTER TALKING ABOUT IT DOES NOT
MATTER IF WE PUMP MORE OIL. THE ISSUE IS WE CANNOT TURN THE
CRUDE QUICKEN UP INTO THE PRODUCTS CONSUMERS USE EVERY
DAY. THAT IS A MAJOR ISSUE INTO THE
SUMMER MONTHS. LISA: AS WE HAVE BEEN TALKING ABOUT
FOR MONTHS, NUANCE DOES NOT SELL IN WASHINGTON, D.C., BUT
WHAT KIND OF NUANCED POLICIES COULD BE IMPLEMENTED TO BRIDGE
THIS GAP? ANNMARIE: IT IS DIFFICULT.
YOU CANNOT BUILD A REFINERY OVERNIGHT.
WE HAVE HAD REFINERY SHUT DOWN BEFORE THE PANDEMIC.
THERE IS NOT A LOT OF INVESTMENT IN THIS INDUSTRY.
THIS IS NOT JUSTIN INDUSTRY THAT FEELS -- THIS IS NOT JUST
AN INDUSTRY THAT FEELS HOSTILE -- PRESIDENT BIDEN RAN TO BE A
CLIMATE PRESIDENT IN THIS TURNED OUT A LOT OF THE BOAT
WITH THE YOUTH. WHEN IT COMES TO REFINERIES
THIS WILL BE INCREDIBLY DIFFICULT TO CHANGE OVERNIGHT.
THIS IS MONTHS AND YEARS. WHEN YOU HAVE AN ISSUE
EXACERBATED BY THE WAR IN UKRAINE -- RUSSIA HAS TAKEN OFF
THE MARKET MAY BE 1.5 BILLION BARRELS OF REFINED PRODUCT, NOT
JUST OF CRUDE, BUT THOSE ACTUAL REFINED PRODUCTS.
IT IS TRICKY BECAUSE NOW WE ARE IN THE SUMMER MONTHS AND THIS
IS WHERE WE CP DRIVING DEMAND IN THE UNITED STATES.
LOOK AT TICKET PRICES. THEY WILL GO HIGHER BECAUSE YOU
HAVE JET FUEL AND DIESEL ACROSS THE BOARD. JONATHAN:
JET FUEL AND THE AIRLINES UNREAL. AMH, THANK YOU. LISA, WE TOUCHED ON THIS
YESTERDAY. YOU'VE GONE FROM UNDERSTAFFED
OVERSTEPPED, UNDERSUPPLIED TO OVERSUPPLIED.
YOU THINK ABOUT WHERE THE LACK OF CAPACITY IS, ENERGY AND THE
AIRLINES. THAT IS ALL DELIBERATE. LISA:
HOW MUCH IS THIS INTENTIONALLY REDUCED SUPPLIES IN ORDER TO
INCREASE PRICING? YOU SEE PEOPLE CONTINUE TO PAY
THOSE PRICES FOR AIRLINES. THIS WILL BE A POINT OF
INCREASED FOCUS IN WASHINGTON, D.C. JONATHAN:
THEY HAVE TOLD US IT IS. LISA: THE AIRLINES HAVE.
HOW MUCH IS THE OIL AND GAS PRICES HAVING TO DO WITH
SOMETHING INTENTIONAL? JONATHAN: I AM WITH YOU. LISA:
I WAS KIND OF SHOCKED. WHO IS THIS. TOM:
I AM STILL HERE -- JONATHAN: I AM STILL HERE.
FUTURES DOWN .2% ON THE S&P. FOR OUR AUDIENCE WORLDWIDE, JONATHAN:
LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING.
FOR OUR AUDIENCE ON WORLDWIDE TV AND RADIO, HERE THE PRICE
ACTION. S&P 500 DOWN .2%.
FUTURES NEGATIVE. HERE'S A HEADLINE FOR YOU,
TARGET. IT'S A DOWNSIDE SURPRISE.
THE ESTIMATE $3.06. MARGINS LOWER THAN EXPECTED.
THIS IS SOUNDING A WHOLE LOT LIKE WALMART. TARGET DOWN BY 7.6% IN EARLY
TRADING AND THIS CEO NOTE SOUNDS A WHOLE LOT LIKE
WALMART, TOO. THROUGHOUT THE QUARTER WE FACED
UNEXPECTEDLY HIGH COSTS DRIVEN BY A NUMBER OF FACTORS
RESULTING IN PROFITABILITY THAT CAME IN WELL BELOW OUR
EXPECTATIONS AND WELL BELOW WHERE WE EXPECT TO OPERATE OVER
TIME. THAT STOCK YOU GETTING HERE IN
THE PREMARKET. TOM: I GO BACK TO THE LEGEND PHILIP
CARAY WHO DIED AT AGE 102 AND HE WOULD TALK ABOUT THE BRIGHT
LIGHTS OF INFLATION. WE HAD A NOMINAL GDP THAT WAS A
RISK -- THAT WAS A GIFT TO PERFORMING WELL. THE COMP SALES OF TARGET DON'T
LOOK LIKE THAT KIND OF NOMINAL GDP. THEY LOOK LIKE A NORMAL ECONOMY
AND YOU HAVE TO ADJUST GIVEN LABOR COSTS AND PETROLEUM COSTS.
JONATHAN: IT'S HOW THINGS FALL FROM THE
TOP LINE TO THE BOTTOM LINE ON THE MARGINS ARE GETTING
SQUEEZED. LISA: THIS IS SOMETHING A LOT OF
PEOPLE WERE EXPECTING. JUST HOW MUCH THEY ARE BEING
SQUEEZED SURPRISED THE CEO. WHY ARE THEY BEING SURPRISED. CEOS ARE COMING OUT,
DOWNGRADING THEIR FORECASTS FOR THE YEAR. HOW MUCH IS THIS A PRECURSOR TO
TRYING TO TEST CONSUMER DEMAND PUSHBACK. RAISING PRICES FOR THE
POPULATION THAT CAN LEAST AFFORD TO ABSORB THEM. JONATHAN:
I DON'T THINK THEY CAN RAISE PRICES ANYMORE.
THAT'S WHY MARGINS HAVE COME IN. TOM:
I DON'T SEE EVIDENCE OF THAT YET. WHAT I SEE IS A CHANGING
ECONOMY. WE HAVE THE GIFT OF HUGE
EFFERVESCENT REAL GDP WITH HUGE GINORMOUS INFLATION, AND THAT
IS SHIFTING. YOU SEE IT IN THE HEADLINES
FROM WALMART AND TARGET. TOM: -- JONATHAN: WE HAVE MISSED ON
PROFIT. THIS IS A MARGIN STORY RIGHT
NOW. TOM: IT'S A MARGIN STORY RIGHT NOW,
BUT THEY CAN FIX THAT. THAT'S WHAT PEOPLE DO.
I'M GOING TO SAY THIS AND OUR NEXT GUEST WILL BE MALLEABLE
ABOUT THIS AS WELL. THEY ARE MALLEABLE. JONATHAN:
WASN'T THAT THE STORY LAST YEAR? TOM: I THINK IT'S MORE NOW.
YOU'RE GOING TO SEE SOME BRUTAL DECISIONS MADE. YESTERDAY GOLDMAN SACHS ALLUDED
TO THIS. YOU'RE GOING TO SEE SOME TOUGH
-- OCTOBER PLANNING IN MAY. JONATHAN:
WE ARE TOTALLY ON THE SAME PAGE. LAST YEAR WAS ABOUT PUTTING UP
PRICES. THIS YEAR IS THE COST SIDE.
THE STOCKS DOWN 13.6%. PROBLEM IS, SOME OF THESE
COMPANIES BELIEVE THAT OVER TIME THINGS MAY GET BACK TO
WHERE IT WAS. TOM:
I THINK THEY ARE GOING TO AMEND IT BASED ON A FED THAT IS NOT
NEARLY AS HAWKISH AS THE ZEITGEIST RIGHT NOW.
ALL OF A SUDDEN -14. JONATHAN:
THE WORLD STARTS TO LOOK MORE LIKE TARGET, WALMART. LISA:
THE OTHER QUESTION IS HOW MUCH DOES THIS HAVE TO DO WITH THE
CHANGE IN WHAT PEOPLE ARE BUYING.
THEY ARE NOT BUYING THE HIGHER MARGIN ITEMS. THEY ARE BUYING
FOOD. HOW MUCH IS THIS A SPECIFIC
STORY VERSUS A BROADER ONE THAT'S GOING TO REALLY TEST THE
RESILIENCE OF CONSUMERS TO HIGHER PRICES? JONATHAN:
THAT'S WHAT WALMART WAS DISCUSSING YESTERDAY.
TARGET DOWN BY MORE THAN 13%. IT'S ACTUALLY BEEN PRETTY
RESILIENT THROUGH THE YEAR SO FAR TO DATE. TOM: WE'VE GOT THE FAMED
SURVEILLANCE ROLODEX. JOINING US NOW, SENIOR
PORTFOLIO MANAGER AT MORGAN STANLEY IN CHARGE OF THE BEEN
THERE DONE THAT DIVISION. FIRST YOU TRY TO RAISE PRICES
AND THEN THERE IS A MEETING ON THE 14TH FLOOR WHERE YOU SAY
THEY'RE GOING TO CUT COSTS AND WE ARE NOT WAITING FOR OCTOBER
AND YEAR-END PLANNING. IS THAT WHAT WE ARE GOING TO
SEE IN THIS QUARTER? >> I THINK WHAT WE ARE SEEING
IN THIS QUARTER IS CONSUMERS PUSHING BACK.
THEY ARE SAYING YOU CAN'T RAISE PRICES. CLASSIC MARGIN SQUEEZE. IT COULD BE A SITUATION WHERE
THE CONSUMER IS SAYING NO MORE INFLATION, I'M NOT GOING TO PAY
THE HIGHER PRICES. THEY ARE GRADING DOWN. THIS IS CLASSIC PUSHBACK ON THE
INFLATIONARY PRESSURES. UNFORTUNATELY COSTS ARE STILL
GOING UP. YOU ARE SEEING THE EARNINGS
MISSES ARE STARTING TO COME IN. JONATHAN:
WHAT DOES THIS SAY ABOUT EARNINGS POTENTIAL? >> SO FAR WE HAVEN'T SEEN IT.
I THINK THERE WILL BE EARNINGS CUTS.
THE ONLY QUESTION YOU HAVE TO ASK YOURSELF IS IF STOCKS ARE
DOWN 20% TO 30%, DO THEY REFLECT SOME EARNINGS CUTS AND
TO THE EXTENT THAT IF STOCKS ARE DOWN TODAY, THEY ARE NOT
DONE ENOUGH. HOW MUCH ARE THEY GOING TO MISS
AND ARE THEY ALREADY REFLECTING THAT IS THE QUESTION.
THAT GIVES ME SOME OPTIMISM. ON THE MARKET THAT MAYBE WE
WANT TO SEE THE MAGNITUDE OF EARNINGS CUT THAT WILL BE
CONSISTENT WITH THE AMOUNT OF DECLINES WE HAVE SEEN IN SOME
OF THESE STOCKS. LISA: THERE IS SOME PERVERSE
REASONING ON WALL STREET RIGHT NOW IF WE START TO SEE
CONSUMERS PUSH BACK, IT'S ACTUALLY A GOOD THING.
IT'S BAD FOR COMPANIES AND MARGINS, BUT IT MEANS PERHAPS
THERE IS A NATURAL SLOWING AND INFLATION.
A BREAKING POINT WHERE INFLATION SOLVES INFLATION.
ARE WE GETTING TO THAT POINT? >> WE ARE JUST GETTING TO THAT
PART. BUT I THINK THAT'S EXACTLY RIGHT.
IT'S MY VIEW THAT INFLATION WILL PEAK AT SOME POINT THIS
SUMMER. I THINK IT'S TOO EARLY. YOU COULD SEE A SCENARIO WHERE
THE FED DOES BEGIN TO SLOWLY BACK OFF.
I THINK THAT'S THE OPTIMISTIC OUTLOOK. AND TODAY IS A GREAT EXAMPLE OF
CONSUMERS PUSHING BACK ON HIGHER PRICES.
NO BETTER WAY TO SOLVE HIGHER PRICES THAN HIGHER PRICES
HURTING DEMAND. LISA: HOW DOES THIS CHANGE YOUR
THESIS OR SHAPE OR YOUR CONVICTIONS LIVE FOR THE
REMAINDER OF THE YEAR? >> I THINK THERE ARE A LOT OF
COMPANIES OUT THERE THAT ARE NOT NECESSARILY GOING TO SEE
THIS MARGIN SQUEEZE BUT THERE STOCKS ARE ABOUT -- ARE DOWN A
LOT BECAUSE OF FINANCIALS. SOME OF THESE REGIONAL BANKS
ARE SAYING THEIR NET INTEREST MARGINS ARE GOING UP. AND THERE STOCKS ARE DOWN 30% I
THINK IT'S TOO LATE TO BUY UBER DEFENSIVE STOCKS. BUT WE ARE CERTAINLY IN THAT
RANGE AND THEN FROM A STOCKPICKING STANDPOINT, YOU
HAVE TO FIND COMPANIES THAT HAVE A GOOD CHANCE OF
DELIVERING ON THEIR NUMBERS BUT THERE STOCKS ARE ALREADY DOWN A
LOT. THAT'S A GREAT GAME PLAN AND HAS WORKED FOR ME IN PREVIOUS
20% DECLINE AND THAT'S OUR GAME PLAN I WILL CONTINUE TO PURSUE.
JONATHAN: WE'VE GOT A $100 BILLION NAME
DOWN ABOUT 20% IN THE PREMARKET ON A STORY WE'VE BEEN
DISCUSSING MONTHS AFTER MONTHS AFTER MONTHS FOR 12 MONTHS.
FOR MOST OF LAST YEAR, CORPORATIONS MANAGED TO ADJUST,
RAISE PRICES, MARGINS STAYED HEALTHY. IN MANY PLACES MARGINS
IMPROVED. I FIND IT REALLY DIFFICULT TO
BELIEVE THAT THIS MARGIN STORY BEGINS AND ENDS WITH TWO
COMPANIES. WALMART AND TARGET. WE'VE BEEN TALKING ABOUT THIS
HAPPENING FOR A LONG TIME. THIS FEELS LIKE THE START OF IT.
WE MAY HAVE SEEN PEAK INFLATION. FINE, WHATEVER.
BUT IF WE PLATEAU AT 4% OR 5% AND THESE GUYS CAN'T PASS ON
HIGHER COSTS, WE'VE GOT AN EARNING PROBLEM ON WALL STREET. >> AND A DECOMPRESSION PROBLEM.
STOCKS DON'T GO UP WHEN INFLATION IS RUNNING NORTH OF
4%. IT'S A TOUGH SITUATION. I DON'T THINK THE MARKET THIS
YEAR IS GOING TO PUT IN A GREAT YEAR.
BUT AGAIN, LET'S MAKE SURE WE TAKE A STEP BACK AND SAY THAT'S
DOWN A LOT FROM WHERE WE STARTED THE YEAR.
I JUST WANT TO TEMPER THAT BECAUSE AGAIN, I SEE A LOT OF
DESTRUCTION IN STOCK PRICES ALREADY.
YESTERDAY THE HOME-IMPROVEMENT STOCKS WERE DOWN A LOT. IT'S A REAL STOCKPICKING
SITUATION WHEN COMPANIES CAN PASS ON THIS -- THE COSTS,
CLEARLY NOT THE RETAILERS. JONATHAN:
ANDREW SLIMMON, GREAT TO GET YOUR VIEW.
ANDREW SLIMMON OF MORGAN STANLEY. TOM:
WE'VE GOT TO REMIND OURSELVES THIS WAS ROUGHLY $120 PER SHARE
IN THE BEGINNING OF THE PANDEMIC.
TARGET WAS A MOONSHOT UP TO 253. IT HAS GIVEN THAT BACK, 170 168
MOMENTS. WE NEED TO PUT IN PERSPECTIVE
THE GLIDE PATH OF THESE COMPANIES BEFORE VALENTINE'S
DAY OF 2020 AND AFTERWARD. I THINK THAT PERSPECTIVE IS
REALLY GOING TO BE IMPORTANT COMPANY TO COMPANY. LISA: BASICALLY THE FACT THAT WE HAVE
ALREADY PRICED IN SOME PAIN AND THEN A DOWNSIDE SURPRISE COULD
YIELD THIS KIND OF MOVE IN SUCH A BIG NAME SHOWS YOU THE
POTENTIAL RISK, THE POTHOLES AS PEOPLE REASSESS AND THE BINARY
OUTCOMES. EITHER THEY CAN WITHSTAND THIS
INFLATIONARY PRESSURE OR THEY CAN'T AND THESE NAMES SEEM TO
SUGGEST THEY ARE GOING TO STRUGGLE A LITTLE BIT. JONATHAN:
IT'S DIFFICULT TO EXECUTE IN THIS ENVIRONMENT.
I AM SURPRISED THAT THERE IS SOME SURPRISE HERE.
I'M STRUGGLING WITH THIS ONE. TO MISS LIKE THIS, TO SEE THE
STOCK DOWN LIKE THIS IN THE WORLD THAT WE HAVE BEEN TALKING
ABOUT FOR A YEAR NOW. IT'S KIND OF SURPRISING. LISA: IT IS SURPRISING THAT IT IS
SURPRISING. HOW MUCH IS THIS TIED TO FOOD
AND THINGS THAT CAME OUT THAT PEOPLE WEREN'T EXPECTING.
JONATHAN: WE ARE DOWN 21% ON TARGET.
FUTURES ARE LOWER BY .4% ON THE S&P. FROM NEW YORK, THIS IS
BLOOMBERG. >> KEEPING YOU UP-TO-DATE FROM
NEWS AROUND THE WORLD. U.S. FUTURES ARE FLIPPING TODAY
AFTER COMMENTS FROM JEROME POWELL.
HE TOLD A WALL STREET JOURNAL LIVE EVENT THE FED WILL KEEP
RAISING RATES UNTIL BILLS CLEAR AND CONVINCING EVIDENCE THAT
INFLATION IS FALLING. HE SAID THE ECONOMY IS STRONG
ENOUGH TO WITHSTAND TIGHTENING. THE BIDEN ADMINISTRATION IS SET
TO BRING RUSSIA CLOSER TO THE BRINK OF DEFAULT.
THE TREASURY DEPARTMENT WILL MOVE TO FULLY BLOCK MOSCOW'S
ABILITY TO PAY NEXT WEEK. A TEMPORARY WAIVER LET'S RUSSIA
PAY ITS COUPONS. THE EU IS CONSIDERING WHETHER
TO USE PROCEEDS SEIZED FROM RUSSIAN OLIGARCHS TO HELP
REBUILD UKRAINE. IT ALSO WILL PROPOSE ISSUING
JOINT DEBT. THE FOREIGN MINISTER TOLD HIS
EUROPEAN COUNTERPART THAT THE RECONSTRUCTION BILL COULD REACH
$1.1 TRILLION. NEW COVID OUTBREAKS IN CHINA
RAISE THE RISK OF MORE DISRUPTIVE RESTRICTIONS. BEIJING REPORTED AN INCREASE IN
INFECTIONS ON TUESDAY. ALL THIS IS HAPPENING AS
SHANGHAI SLOWLY EMERGES FROM THAT SIX-WEEK LOCKDOWN. THE JUSTICE DEPARTMENT HAS SUED
BILLIONAIRE CASINO MOGUL STEVE WENT TO FORCE HIM TO REGISTER
AS AN AGENT OF CHINA. HE USED HIS RELATIONSHIP WITH
PRESIDENT TRUMP AND MEMBERS OF HIS ADMINISTRATION TO ADVANCE
ASIANS INTEREST IN 2017. HIS LAWYERS SAY HE HAS NEVER
ACTED AS AN AGENT OF THE CHINESE GOVERNMENT.
GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICKTAKE
POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN
OVER 120 COUNTRIES. >> IF IT WERE UP TO ME I WOULD
START WITH 75 BASIS POINTS. I WOULD GIVE A VERY CLEAR
SIGNAL THAT I'M SERIOUS ABOUT THIS AND I WILL TRY TO CONTAIN
INFLATION EXPECTATIONS FROM NOW. JONATHAN:
THAT WAS MOHAMED EL-ERIAN CATCHING UP WITH FRANCINE
LACQUA EARLIER. GOOD MORNING. MARGINS, WE HAVE A PROBLEM.
THAT'S THE STORY AT WALMART. TARGET IS DOWN 22%.
IN PREMARKET TRADING. THE EARNINGS OF MISS.
THE REVENUE WAS OK BUT ULTIMATELY THAT'S THE PROBLEM.
IT DOES NOT FALL TO THE BOTTOM LINE. LISA:
BECAUSE THEY HAVE TO PAY A LOT OF UNEXPECTED HIGHER COSTS.
I FIND IT INTERESTING THEY ARE ALSO DOWNGRADING THEIR FORWARD
LOOK. HOW MUCH ARE THESE THE TEA LEAVES OF A WAVE OF DOWNGRADES
TO MARGINS TO COME AND HOW MUCH OUR TARGET AND WALMART THE
PRECURSORS TO SOMETHING LARGER? JONATHAN:
WHEN IT WAS JUST WALMART, HE WONDERED IF IT WAS JUST ABOUT
EXECUTION. NOW WE HAVE A SECOND DATA POINT.
WE SPENT SO MUCH TIME LAST MONTH SAYING WHEN IS IT GOING
TO HAPPEN. WE ARE SEEING IT HAPPEN RIGHT
NOW. TOM: IN THE OLD DAYS, THIS STUFF
WOULD BE MANAGED FORWARD. THERE WOULD BE NOT LEAKS, BUT
ADJUSTMENTS. ALL THAT WITHIN THE DIALOGUE
AND THE RESEARCH COMMUNITY AND THE EXECUTIVES.
IT ENDED ON ONE SINGLE DAY WHEN THEY INSTITUTED A THING CALLED
REG FD AND THAT'S WHY YOU HAVE THIS BLANKET SILENCE FROM
EXECUTIVES SCARED STIFF THAT THEY ARE GOING TO BE SUED.
YOU GET ANNOUNCEMENTS LIKE THIS. JONATHAN:
YOU HAVE BEEN CRITICAL OF THE TECH SECTOR FOR DOING SOMETHING
SIMILAR. HOW ARE WE SURPRISED BY ANY OF
THIS? I'M SURPRISED WE ARE SURPRISED.
IF YOU SPEAK TO ANYBODY OUTSIDE OF WALL STREET AND SAY WE HAD A
REPORT THAT EVERYONE IS SHOCKED, THEY WOULD LOOK AT YOU
WITH A BLANK FACE AND SAY WHAT DO YOU GUYS DO ON WALL STREET?
THAT'S RIDICULOUS. TOM: IT'S THE MAGNITUDE OF THE
MARGIN DROP. IT'S A 20% SHORTFALL ON MARGIN. I NOTICE SOMEONE LIKE JOE
FELDMAN REAFFIRMED AN OUTPERFORM ON WALMART EVEN
AFTER THE HAMMERING YESTERDAY. THESE ARE JUST OFF THESE
ANNOUNCEMENTS, YOU RETELL A CRATE WILL KEEP A BUY ON TARGET.
JONATHAN: IF YOU LOSE A QUARTER OF YOUR
VALUE, IT'S A BETTER OFFER TODAY. TOM:
SHARES ARE ON SALE THIS MORNING. WE'RE GOING TO DIVE FORWARD TO
WHAT THE PANDEMIC LOOKS LIKE IN THE REST OF 20.
WE GOT AN UPDATE FROM ASSOCIATE PROFESSOR OF EMERGENCY MEDICINE
AT JOHNS HOPKINS UNIVERSITY. I'M GOING TO CUT TO THE CHASE.
CASES A LITTLE BIT UP. HOSPITALIZATIONS A LITTLE BIT
UP. BUT DEATHS A PRETTY GOOD. ARE WE GOING TO SEE A LITTLE
BIT UP ON THE TRAGEDY OF THE DEATHS FROM THIS PANDEMIC? >> I REALLY DON'T THINK SO.
IF YOU LOOK AT THE ICU DATA, THE PERCENTAGE OF
HOSPITALIZATIONS IN THE ICU IS AROUND 11% WHICH IS THE LOWEST
NUMBER THAT WE HAVE SEEN THROUGHOUT THE PANDEMIC.
I DO NOT ANTICIPATE DEATHS RISING SIMILAR TO
HOSPITALIZATIONS AND CASES. LISA:
WE WERE SAYING THAT WE HAVE REACHED ENDEMIC POINT.
THE CONVERSATION INCREASINGLY IS IF I HAVE GOTTEN VACCINATED
AND BOOSTED, HOW PROTECTED MI SIX MONTHS LATER.
HOW MUCH DOES THIS LEAVE TO LONGER-TERM BRAIN DAMAGE OR
LONGER-TERM COVID TYPE SYMPTOMS? HOW MUCH IS THAT A CONCERN FOR
YOU VERSUS LINGERING FEARS FOR PEOPLE WHO HAVE BEEN
CONDITIONED BY TWO YEARS OF JUST FEAR? >> THE TRUTH IS THAT EVEN IF
YOU HAVE BEEN VACCINATED, BOOSTED TIMES TWO AND HAD DELTA
OR OMICRON, YOU CAN STILL BECOME COVID POSITIVE.
BUT ARE YOU LIKELY TO THEN BECOME HOSPITALIZED AND DIE,
ABSOLUTELY NOT. REGARDING ON COVID, IT'S NOT
CLEAR. THIS IS WHERE THE RESEARCH
REALLY NEEDS TO PIVOT AND FOCUS. THERE IS NUMEROUS THEORIES OF
WHAT CAUSES LUNG COVID AND ITS MULTI-MECHANISM.
A COMBINATION OF DAMNEST TO THE BRAIN, DAMAGE TO THE VAGUS
NERVE. WE DON'T KNOW HOW TO QUANTIFY
HOW MUCH LUNG COVID IS OUT THERE. AND HOW DOES IT AFFECT ACTIVITIES OF DAILY LIVING.
RIGHT NOW THE FOCUS IS ON SYMPTOM CONTROL.
THERE IS NO OBVIOUS TREATMENT. WE ARE GETTING TO THE STAGE
WHERE NUMEROUS RESEARCH PAPERS ARE SHOWING THE MODIFIABLE RISK
FACTORS FOR LUNG COVID SUCH AS THE PRESENCE OF TYPE TWO
DIABETES. LISA: WE ARE SPEAKING ABOUT THIS AT A
TIME WHEN WE ARE SEEING THE REOPENING PLAY OUT IN MARKETS
AND AT BUSINESSES. I WONDER IF WE ARE REACHING A
POINT WHERE WE HAVE HAD THE LIMITS.
PEOPLE ARE FLYING AROUND, TAKING RISKS THEY FEEL
COMFORTABLE WITH. IS THIS THE NEW NORMAL? >> ABSOLUTELY.
EVERY SINGLE AMERICAN RIGHT NOW IS ASSESSING OR REFLECTING ON
WHERE WE ARE AT RIGHT NOW. WHAT MAKES SENSE FOR THEIR OWN
FAMILIES. SOME FAMILIES STILL HAVE
IMMUNOCOMPROMISED ADULTS AT HOME. SO WE ARE DEFINING WHAT IS OUR
NEW NORMAL. WHAT DOES GRADUATION WEEKEND
LOOK LIKE TO YOU? ARE YOU GOING TO GO TO THE
GRADUATION OR HAVE A SMALL CELEBRATORY DINNER AND AN OPEN
AIR RESTAURANT? THERE'S OPTIONS TO REINTEGRATE
AS A COMMUNITY AND SOCIETY. JONATHAN: GOOD TO SEE YOU AGAIN.
TARGET STOCK DOWN BY 21 POINT 56%.
IF YOU'RE JUST TUNING IN, JUST A LITTLE BIT EARLIER THIS
MORNING THEY CAME OUT WITH EARNINGS AND EARNINGS MISSED.
MARGINS NOT GREAT AND THE GUIDANCE LIKEWISE.
THE STOCK A WHOLE LOT LOWER. LISA: IT FOLLOWS WALMART.
IT BECOMES THE SAME STORY. MARGIN COMPRESSION IS HERE.
WE WERE WONDERING WHEN IS IT GOING TO HAPPEN. THIS IS IT WHEN IT COMES FASTER
THAN THE CEOS SEEM TO HAVE EXPECTED. HOW MUCH IS THIS A PRODUCT MIX
AND A CLIENTELE AND TERTIARY BUYING BASE THAT IS MORE
PRICE-SENSITIVE AND HOW MUCH IS THIS SOMETHING THAT REALLY
SPEAKS TO THE FED AND SPEAKS TO MOMENTUM IN THE U.S. ECONOMY.
JONATHAN: THE C-SUITE THIS SURPRISED. TOM:
THE IDEA THAT RETAIL IS ADJUSTING TO NOMINAL GDP COMING
DOWN. THE ANIMAL SPIRIT OF THE COUNTRY , THAT HUGE FISCAL BOOM
THAT WE HAD OUT OF THE PANDEMIC AND YOU END UP WITH 12%
HEADLINE GROWTH OR WHATEVER THE NUMBER WAS AND WE ARE BRINGING
THAT DOWN. 7% HEADLINE GROWTH. I'M LOOKING AT THE TARGET COMP
SALES AND THEY HAVE TO READJUST. THEY HAVE TO READJUST
THEIR EXPENSES BACK DOWN TO THE NORMAL. JONATHAN:
IT'S ABOUT HOW THEY ADJUST. LAST YEAR THEY COULD ADJUST BY
PULLING UP PRICES. THE CONSUMER PRICE TOLERANCE
WAS THERE. THIS TIME THEY HAVE TO ADJUST
IN A DIFFERENT WAY. THROUGH COSTS.
THAT'S GOING TO HAVE CONSEQUENCES FOR GROWTH. TOM:
WE ARE JUST BEGINNING TO HEAR THIS, FOLKS.
THERE'S EVEN SOME PEOPLE ALLUDING TO OVER HIRING, WHERE
PEOPLE ARE COMING BACK FROM PANDEMIC.
MAYBE THERE'S TOO MANY BODIES. I WOULD RESPECTFULLY SUGGEST
THAT WILL GET BACK RAPIDLY TO WHERE THEY WANT TO GO. JONATHAN:
THAT WAS WALMART YESTERDAY. HOW QUICKLY WE HAVE GONE FROM
UNDERSTAFFED TO OVERSTAFFED, UNDERSUPPLIED TO OVERSUPPLIED.
MARGINS ARE GOOD, PRICES ARE UP. WE CAN'T PUT THEM UP ANYMORE
AND MARGINS ARE SUFFERING. TARGET IS DOWN BY 22% IN EARLY
TRADING. FROM NEW YORK CITY, THIS IS
BLOOMBERG. ♪ >> THERE'S BEEN A VERY MATERIAL
TIGHTENING IN FINANCIAL CONDITIONS. >> IT FEELS LIKE WE ARE IN A
BOND BEAR MARKET. >> PEOPLE ARE LOOKING AS THE
GLASS -- AT THE GLASS AS BEING HALF-EMPTY. >> THE CONSUMER IS STILL
OUTSPENDING AND HAS BEEN PRETTY STUBBORNLY RESILIENT. >> THIS IS BLOOMBERG
SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA
ABRAMOWICZ. JONATHAN: HELLO MARGIN PRESSURE.
FROM NEW YORK CITY, GOOD MORNING.
THIS IS BLOOMBERG SURVEILLANCE LIVE ON TV AND RADIO ALONGSIDE
TOM KEENE AND LISA ABRAMOWICZ, I'M JONATHAN FERRO. TOM:
TARGET OF A SYMBOL OF RETAIL AMERICA AND THE CONSUMPTION
CHALLENGES FORWARD. I'M GOING TO BE HONEST, YOU
WILL HAVE PHD'S IN ECONOMICS AT THE FED ALL OF A SUDDEN
ANALYZING RETAIL DYNAMICS OF THESE TWO PEOPLE, WALMART AND
TARGET. TOM: WE'VE GOT TO ADJUST --
JONATHAN: WE'VE GOT TO ADJUST. I'M JUST
SURPRISED TO HEAR THE C-SUITE SAY THIS IS A SHOCKER. TOM: MAINLY -- MAYBE IT'S THE
MAGNITUDE. I'M GOING TO DO A QUICK 2.7 5
MILLION EMPLOYEES BETWEEN WALMART AND TARGET. THIS IS A HUGE MASS OF LABOR
AND ALL OF A SUDDEN THAT COULD ADJUST THAT THING THAT WE ARE
HEARING FROM ECONOMISTS AND FED OFFICIALS.
THERE ARE WATCHING THE LABOR DYNAMICS OF THE COUNTRY.
THIS IS THE PRECURSOR FOR THAT. JONATHAN:
THIS IS A TOUGH MOMENT FOR WALL STREET. LISA: IS THERE AN OBLIGATION FOR CEOS
TO COME OUT IF THEY SEE AN INCREASE IN PRICES SEVERAL
WEEKS BEFORE THEY RELEASE EARNINGS.
WHEN IT COMES TO MAIN STREET, HOW MUCH IS THIS PUSHBACK FROM
CONSUMERS. HOW MUCH IS THIS TARGET AND
WALMART NOT WANTING TO RAISE PRICES AS MUCH.
WHERE DOES THIS PUSHBACK COME INTO PLAY.
ANDREW SLIMMON SAYING WE ARE SEEING SIGNS OF CONSUMER
PUSHBACK. PROBABLY A SILVER LINING FOR
THE FED. JONATHAN: A BIG MOMENT FOR TOM AS WELL.
A FALCON NINE ROCKET IS SCHEDULED TO LIFT OFF FROM
KENNEDY SPACE CENTER IN FLORIDA. TOM:
CAN WE TALK ABOUT ELON MUSK THE VISIONARY?
CAN WE GET AWAY FROM THE TWITTER IDIOCY?
THIS GUY IN 2009 SAID WE ARE GOING TO PUT ANYTHING IN ERROR
AND WE ARE GOING TO TAKE THE MAIN ROCKET WHICH IS LOADED
WITH ROCKET FUEL KEROSENE AND WE ARE GOING TO BRING THAT
PUPPY DOWN AND LANDED IT ON A BARGE.
HE'S GOT A SENSE OF HUMOR. THE BARGES ARE CALLED OF COURSE
I STILL LOVE YOU. JUST READ THE INSTRUCTIONS.
AND THE ONE USED TODAY IS A SHORTFALL OF GRAVITAS.
THEY ARE GOING TO BRING THAT PUPPY DOWN AND LAND IT ON A
CONVENTIONAL BARGE IN THE ATLANTIC OCEAN. IT'S STUNNING.
I STILL AM NOT USED TO THAT IDEA OF THE RETRIEVAL OF THE
MAIN ROCKET. THIS IS KEROSENE WITH LIQUID
OXYGEN FEATHERING OFF. THAT HAS ONLY BEEN LOADED IN
THE LAST 30 MINUTES. WE NEED TO REMIND PEOPLE THIS
IS AN UNMANNED FLIGHT. JONATHAN: WALK US THROUGH THE DIFFERENCE
OF THE VANITY PROJECT OF SPACE TOURISM AND WHAT'S PLAYING OUT
BEFORE OUR EYES. TOM: JOHN HAS BEEN WITH ME WITH THE
BEVERAGE OF MY CHOICE. USUALLY WHEN WE ARE DOING SPACE
LAUNCH, I USE TANG. SERIOUSLY, THIS IS UP TO ORBIT,
ACTUALLY DOING THINGS IN SPACE, NOT A TOY STRIDE WITH ALL OF
THOSE TENSIONS COME WITH THE SPEEDS TO GET UP TO ORBITAL
VELOCITY. JONATHAN: COMING UP TO 10 SECONDS TO
LAUNCH. LET'S TAKE A LITTLE LISTEN IN. >> T -10, 9, 8, 7, 6, 5, 4, 3,
2, 1. FULL POWER. AND LEFT OFF. -- LIFT OFF. >> FALCON 9 HAS SUCCESSFULLY
LIFTED OFF FROM LAUNCH COMPLEX 30 98 CARRYING OUR 53 STARLING
SATELLITES INTO SPACE. MOMENTS AGO WE DID THROTTLE
DOWN THE ENGINES ON THE FIRST STAGE AND THIS IS IN
PREPARATION FOR MAX Q. MAX Q.
IS THE MAXIMUM DYNAMIC PRESSURE THAT THE VEHICLE SEES. TOM:
THAT'S A KEY POINT. THE MAXIMUM DYNAMIC PRESSURE IS
THE DIFFERENTIAL OF THESE VERY HEAVY PAYLOADS.
THE FUNDAMENTAL ISSUE OF THIS BACK TO THE SPACE SHUTTLE IS
THE WEIGHT OF WHAT THEY ARE PUTTING IN SPACE. THAT WAS AN IMMENSE CHEMICAL
CHALLENGE FOR PRIVATE AND PUBLIC FOR NASA TO DO, TO GET
THE CHEMISTRY RIGHT, TO PUT BIGGER STUFF IN SPACE.
JUST GOING FOR MERCURY THROUGH TO APOLLO WAS A FEAT WITH A
SATURN ROCKET. BUT YOU CAN SEE AND ON RADIO
YOU KNOW THAT THESE ROCKETS TODAY ARE MUCH SMALLER THAN THE
SATURN FIVE ROCKETRY OF THE WORLD AGO. JONATHAN:
THIS FALCON 9 ROCKET TOPPED WITH 53 STARLING SPACECRAFT.
A SUCCESSFUL LAUNCH THIS MORNING.
WE ARE GOING TO LEAVE THE PICTURES UP FOR YOU.
WE WILL CONTINUE THE MARKET COVERAGE. FUTURES NEGATIVE. WE ARE DOWN BY .4%. FROM WALMART TO TARGET, MARGINS
UNDER PRESSURE. LISA: THIS IS REALLY THE FIRST SALVO
IN TERMS OF SEEING REAL MARGIN COMPRESSION THAT IS UNLIKE WHAT
PEOPLE WERE EXPECTING AND IT IS COMING AT THE BASIC ASPECTS OF
THE U.S. CONSUMER ECONOMY. WALMART AND TARGET.
WHAT PERCENTAGE OF RETAIL SALES DOES NOT ACCOUNT FOR.
AND FRANKLY THEY ARE STILL SELLING.
IT'S JUST THAT THEY CANNOT PASS ON THE COSTS. JONATHAN:
LET'S GET TO EQUITY STRATEGIST AT WELLS FARGO SECURITIES.
THE MARGIN PRESSURE FROM WALMART TO TARGET.
YOUR THOUGHTS PLEASE. >> IT IS CERTAINLY A BIG
INDICATOR. THEY EMPLOY A LOT OF PEOPLE.
AS PEOPLE HAVE A TIGHTER LABOR MARKET AND YET IF PEOPLE ARE
SPENDING LESS, THE QUESTION IS CAN COMPANIES PASS ALONG PRICE.
THIS IS SORT OF WHAT WE ARE LOOKING FOR.
THEY WANTED TO SEE DEMAND COOL OFF A BIT TO BALANCE THINGS, TO
BRING INFLATION MORE UNDER CONTROL. SO IT'S SORT OF WHAT WE WERE
HOPING FOR BUT ALSO A LITTLE CONCERNING ON HOW MUCH THIS
RAISES THE POSSIBILITY OF RECESSION. TOM:
WE ARE LOOKING AT THE PHYSICS OF A ROCKET LAUNCH RIGHT NOW
AND THEY MENTION THE MAXIMUM DYNAMIC PRESSURE.
YOU DID THIS VIOLATE IN YOUR PHYSICS OF UNDERGRADUATE --
BALLET IN YOUR PHYSICS OF UNDERGRADUATE.
ARE WE AT THE MAXIMUM DYNAMIC PRESSURE OF INFLATION RIGHT NOW?
>> I THINK IT'S GOING TO BE
HARDER TO GET THAT SOFT IS SPLENDID -- SOFTISH LANDING.
WE ARE SEEING THAT'S GOING TO TAKE SEVERAL MORE QUARTERS. TOM:
LET'S GO ASTRONAUTICAL -- AERONAUTICAL AGAIN IF WE CAN.
THE ACCELERATION FUNCTION IS A SQUARED FUNCTION.
GUESSING TIME ON THE X-AXIS IS THE HARDEST THING TO DO IN THIS
RACKET. WHAT ARE THE DETERMINANTS YOU
ARE GOING TO USE TO GUESS WHEN INFLATION ROLLS OVER? >> ONE IS THE DYNAMIC BETWEEN
HOW DOES THAT GOOD SPENDING GO VERSUS THE SERVICE SPENDING. WHEN YOU HAVE A TIGHT LABOR
MARKET AND COMPANIES HAVE TO BE COMPETITIVE AND RAISE WAGES SO
THAT CONSUMERS ACTUALLY HAVE MORE TO SPEND, BUT HOW WILL
THAT OFFSET WITH COMPANIES BEING ABLE TO PASS ALONG PRICE
BECAUSE CONSUMERS HAVE MORE MONEY TO SPEND.
A THIRD COMPONENT I THINK WE ARE UNDER APPRECIATING IS RIGHT
NOW HOUSEHOLD WEALTH IS HEAVILY TIED TO THE EQUITY MARKET.
WE SAW A HISTORICAL AMOUNT OF NEARLY A QUARTER OF HOUSEHOLD
WEALTH TIED TO IT THESE. -- TIED TO EQUITIES. YOU COULD SEE THAT SOURING
SENTIMENT BLEED INTO CONSUMER SPENDING.
WE ARE NOT QUITE CONVINCED THE CONSUMER IS REALLY DECELERATING.
LISA: CAN YOU ELABORATE WHAT YOU SAID
WHICH IS THIS PARTICULAR SERIES OF REPORTS IS A LITTLE
CONCERNING WITH HOW MUCH IT RAISES THE RISK OF RECESSION.
HOW SO? >> WHEN YOU TALK ABOUT WHAT IS
THE POSSIBILITY OF RECESSION, FOR US IT IS NOT OUR BASE CASE.
WE STILL PUT THE POSSIBILITY BY THE END OF A RECESSION BY 2023
AT AROUND 30%. THE MAIN DRIVER AND SOMETHING
WE HAVE ALL FOCUSED ON AND RELIED ON TO PULL US OUT OF THE
RECESSION POST-PANDEMIC AND CONTINUE TO DRIVE OUR ECONOMY
HAS BEEN THE U.S. CONSUMER. THE STRENGTH OF SPENDING AND
THE WILLINGNESS TO SPEND NOT JUST ON GOODS BUT AS COVID AND
LOCKDOWNS RELAXED, ON EXPERIENCES AND GET OUT THERE
AND TRAVEL AND PUT THAT MONEY TO WORK. AS THAT DRIVER STARTS TO COOL
DOWN, OUR MARGINS REALLY COME UNDER PRESSURE AND NOT THE
EARNINGS GROWTH WILL TURN NEGATIVE.
THAT GDP GROWTH COULD TURN NEGATIVE. NOT AIR BASE CASE, BUT THE TAIL
RISKS ARE GETTING BIGGER. LISA: A NUMBER OF STRATEGISTS HAVE
COME ON AND SAID THEY STILL LIKE CONSUMER DISCRETIONARY.
WOULD YOU BACK AWAY FROM THAT IDEA BASED ON WHAT WE ARE
SEEING RIGHT NOW IN THESE NUMBERS? >> I WOULDN'T PARTICULARLY BACK
AWAY, BUT PERHAPS IT WOULDN'T BE OUR NUMBER ONE CALL HERE. WE ARE STILL POSITIVE WHERE YOU
CAN HAVE LEISURE SPENDING. REOPENING SPACE.
THE TRAVEL INDUSTRIES. WHAT WE HAVE BEEN LOOKING AT
VERY CAREFULLY ESPECIALLY WITH THE TIGHTENING OF MONETARY
POLICY HAS BEEN THE GROWTH STYLE. WE THINK WE ARE STARTING TO SEE
THE BOTTOM. WE ARE STARTING TO WARM UP TO
IT AGAIN. TOM: WHEN WE LOOK AT THE MARKET
ADJUSTMENT YEAR, IT IS OF CENTRAL BANKS.
IT IS OFF THE FED. I'M FOCUSED ON THE NONLINEARITY
OF THE FED DECISIONS THEY HAVE TO MAKE.
IT'S FRANKLY TRUE FOR ECB AS WELL.
LINK EQUITY MARKET PERFORMANCE INTO THE MASSIVE CHALLENGES THE
FED HAS AFTER THE JULY 27 MEETING. >> YOU BRING UP A GREAT POINT.
HOW ARE EQUITIES GOING TO HANDLE IT IF THE FED CONTINUES
TO TIGHTEN AND WE START TO REALLY SEE THAT GDP GROWTH SLOW.
WE DO EXPECT GDP TO COME DOWN BUT WE STILL THINK UNEMPLOYMENT
RATES COULD COME EVEN LOWER. IN THAT KIND OF ENVIRONMENT
WHERE JOBS AND WAGE GROWTH IS AGGRESSIVE AND WAGES ARE GOING
HIGHER, WE STILL THINK EQUITIES CAN GO HIGHER FROM HERE. WE THINK THERE COULD BE A
CHANGE IN LEADERSHIP HERE. IF GROWTH HAS BOTTOMED AND WE
START GET A BETTER HANDLE ON INFLATION, THAT'S GOING TO VOTE
MUCH BETTER FOR THESE GROWTH SECTORS. JONATHAN:
IT WILL BE HARDER TO GET A SOFT LANDING.
IS SHE TALKING ABOUT A FALCON 9 ROCKET OR THE ECONOMY? TOM:
THE DRONE SHIP LANDING WILL BE JUST EXTRAORDINARY TO SEE.
JONATHAN: I HAD TO TEA YOU UP -- T YOU
UP, TOM. TOM: WHAT'S TWITTER DOING THIS
MORNING? IT WAS A 38 HANDLE LAST TIME I
LOOKED. THIS IS NOT THE ELON MUSK OF
TWITTER ACQUISITION. THIS IS A VISIONARY WHO SAID
YOU COULD TAKE A HUGE HUNK OF ROCKET AND PUT IT ON A BARGE IN
THE ATLANTIC OCEAN AND TO WITNESS THAT IS TRULY THE
SINGULAR FEATURE OF MODERN SPACE TECHNOLOGY. JONATHAN:
ALWAYS IMPRESSIVE. LET'S GET BACK TO THIS MARKET
BECAUSE WE ARE SEEING A MONSTER MOVE. TARGET IS DOWN BY 21.6 PERCENT
IN EARLY TRADING. IT IS WALMART VOLUME TWO ON
STEROIDS. LISA: WHAT DOES THIS MEAN GOING
FORWARD. THIS ISN'T NECESSARILY A BIG
PART OF THE INDEX. WE ARE SEEING THIS BASICALLY
SPEAKS TO CONSUMER APPETITE TO ABSORB PRICES. WE TALK ABOUT HIGH GAS PRICES
ARE HIGHER. WE TALK ABOUT FOOD PRICES
CLIMBING IN THE U.S. AND BEYOND. HOW MUCH IS THIS STARTING TO
ACCELERATE. JONATHAN: AVERAGE GAS PRICES IN THIS
COUNTRY. JP MORGAN U.S. GASOLINE PRICES. CAN YOU IMAGINE AN AVERAGE OF
SIX DOLLARS. TOM:
A BARREL OF OIL ADJUSTED FOR INFLATION.
YOU BRING UP A REALLY IMPORTANT POINT. THIS IS NONLINEAR. YOU GO FROM THREE DOLLARS. EVERY TIME UP IS A HUGELY
NONLINEAR FEELING. I WILL BE HONEST. I CAN'T DO IT
BECAUSE I DON'T DRIVE. EVERYBODY HAS A VISCERAL STORY
OF WHAT IT'S GOING TO MEAN AT 480 OR 520. JONATHAN:
SOMETHING TELLS ME GOVERNMENTS AROUND THE WORLD WANT TO GET
OUT IN FRONT OF THE PUBLIC AND SITE TO THIS NOTE FROM JP
MORGAN. TYPICALLY REFINERS PRODUCE MORE
GASOLINE AHEAD OF THE SUMMER SEASON. THIS YEAR U.S.
GASOLINE INVENTORIES HAVE FALLEN COUNTER SEASONALLY.
THAT'S NOT GOING TO WORK POLITICALLY. PRICE GOUGING. LISA: REFINERIES. JONATHAN:
NUANCE DOES NOT WORK IN POLITICS.
WE WILL TALK ABOUT THE POLITICS NEXT. WE WILL HEAD DOWN TO D.C. FROM A BEAUTIFUL NEW YORK, THIS
IS BLOOMBERG. >> KEEPING YOU UP-TO-DATE WITH
NEWS FROM AROUND THE WORLD. SHARES OF TARGET PLUNGING.
THE DISCOUNT RETAILER CUT ITS PROFIT OUTLOOK AND MISSED FIRST
QUARTER EARNINGS ESTIMATE. TARGET SAYS A SURGEON COST
SHOWS LITTLE SIGN OF EASING ANYTIME SOON.
IF AND FREIGHT CHARGES OR A BILLION DOLLARS MORE THAN
EXPECTED. -- IF YOU WILL AND FREIGHT
CHARGES WERE A BILLION DOLLARS -- FUEL AND FREIGHT CHARGES
WERE A BILLION DOLLARS MORE THAN EXPECTED.
-- THE ECONOMY IS STRONG LEFT TO WITHSTAND TIGHTENING.
INFLATION IN THE UK2 HAS RISEN TO ITS HIGHEST LEVEL IN 40
YEARS. CONSUMER PRICES SURGED 9%.
ALL THAT WILL ADD TO PRESSURE FOR ACTION FROM THE GOVERNMENT
AND THE BANK OF ENGLAND. FINLAND AND SWEDEN HAVE NOW
APPLIED FOR MEMBERSHIP IN NATO. A MOVE THAT RESHAPES EUROPE'S
DEFENSES. OPPOSITION FROM TURKEY'S
PRESIDENT ERDOGAN. HE ALLEGES BOTH COUNTRIES
SUPPORT TURKISH MILITANTS THAT HE SEES AS TERRORISTS.
-- DIRECTORS VOTED UNANIMOUSLY TO RECOMMEND THAT SHAREHOLDERS
APPROVE ELON MUSK'S BID OF $64 AND $.20 A SHARE. THE BOARD STATEMENT CAME AS
MUSKA APPEARED TO BE MANEUVERING TO DITCH OR
RENEGOTIATE HIS OFFER. GLOBAL NEWS 24 HOURS A DAY ON
AIR AND ON BLOOMBERG QUICKTAKE POWERED BY MORE THAN 2700
JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M RITIKA GUPTA.
THIS IS BLOOMBERG. >> WHAT A LOT OF ECONOMISTS ARE
SCRATCHING THEIR HEADS AND WONDERING ABOUT IS IF WE REALLY
HAVE TO BRING DEMAND DOWN TO GET INFLATION IN CHECK, IS NOT
GOING TO PUT THE ECONOMY INTO RECESSION. AND WE DON'T KNOW. JONATHAN:
NEEL KASHKARI, THEY DO NOT KNOW. FUTURES DOWN .7% ON THE S&P.
THE NASDAQ DOWN BY ONE FULL PERCENTAGE POINT RIGHT NOW.
YESTERDAY IT WAS WALMART, TODAY ITS TARGET. TARGET IS DOWN HARD.
END OF 21 POINT 5%. WE HAVE SEEN IT REPEATEDLY OVER
THE LAST HOUR. MARGINS, WE HAVE A PROBLEM. TOM:
DREW MEDICINE COMING ON WITH A NICE QUICK NOTE.
HE SAYS THE DISTINCTION IS THESE ARE LARGEST EMPLOYERS. AS I MENTIONED -- THIS IS A GUY
WHO IS CONGENITALLY OPTIMISTIC. DREW MEDICINE MAKES REAL CLEAR
LARGE EMPLOYERS WITH THESE KIND OF PRESSURES IS A UNIQUE UNIQUE
MOMENT. JONATHAN: WE ARE IN AT AROUND 3.5%
UNEMPLOYMENT IN AMERICA. 50 IS THE ESTIMATE FROM THE FED
AND 350 IS THE ESTIMATE FOR NEXT YEAR FROM THE FED AS WELL.
CAN THEY MAINTAIN THAT? DO YOU REMEMBER WHEN THOSE
FORECASTS CAME OUT AND DIANE SWONK CAME ON THE SHOW AND SAID
THIS IS FANTASY LAND AND SCOTT MINERD SAID THE SAME THING.
HOW ARE THEY GOING TO DO THIS. REBALANCE THE LABOR MARKET,
KEEP UNEMPLOYMENT AT 350. TOM: WE HAVE A TEST TUBE KNOWN AS
THE UNITED KINGDOM WHERE THEY HAVE BEEN WORKING ON THIS SINCE
THE 1920'S. THE ANSWER IS THE FANTASY IN
THE TEXTBOOKS IS JUST THAT. MY CORE THEME HERE,
CORPORATIONS WILL ADAPT TO PRESERVE THEIR FINANCIAL
CONDITIONS AND TO PRESERVE THEIR FREE CASH FLOW.
THAT'S WHAT HAPPENS. JONATHAN:
YOU HAVE SAID THAT SO MANY TIMES OVER THE LAST COUPLE OF
YEARS. IT'S THE CHALLENGE AND HOW THEY
ARE GOING TO ADAPT. IN COST. TOM:
AT THE END OF SUMMER, YOU'VE GOT YOUR SUMMER HOME.
WE HAVE TO DO OCTOBER PLANNING INTO NEXT YEAR.
ALL OF THAT AS OF YESTERDAY HAS BEEN YANKED FORWARD. JONATHAN: WE ARE ALL SURPRISED THEY ARE
SURPRISED BY THE INFLATIONARY BACKDROP. TOM:
ONE OF THE FIRST PEOPLE IN WASHINGTON TO TAKE AN INTEREST
IN ME AT BLOOMBERG WAS ONE DAVID GERGEN. YOU KNOW HIM FROM
CNN, BUT FAR MORE IS HIS PUBLIC SERVICE TO REPUBLICANS AND
DEMOCRATS IN ANNMARIE HORDERN'S WHITE HOUSE. GERGEN OUT. WITH AN IMPORTANT BOOK ON
LEADERSHIP. YOU ARE THE YOUNGEST PERSON IN
WASHINGTON. THE PROBLEM IS THE NEXT
YOUNGEST PERSON IS 78 YEARS OLD. HOW DID WE GET TO A WASHINGTON
THAT YOU COVER WHERE 80 IS A NORMAL AGE FOR LEADERSHIP? >> I CAN ASSURE YOU I'M
CERTAINLY NOT THE YOUNGEST PERSON IN WASHINGTON, BUT YOU
ARE RIGHT. I AM ON THE YOUNGER SCALE
ESPECIALLY WHEN YOU LOOK AT OUR ELECTED LEADERS.
THIS WASHINGTON POST ARTICLE IS THE FACT THAT ALL OF OUR
ELECTED LEADERS WHEN YOU LOOK AT THE LEADERSHIP, SENATOR
MCCONNELL, SPEAKER PELOSI, THE PRESIDENT OF THE UNITED STATES.
THE FORMER PRESIDENT WHO WANTS TO TAKE ON THE CURRENT
PRESIDENT IN 2024 ARE ALL IN THEIR 70'S AND 80'S AND THIS IS
THE WORLD WE LIVE IN WHERE THE LEADERSHIP IS AT THE UPPER END,
I'M NOT TRYING TO BE IN A JUST, BUT THEY ARE AGING. -- AN AGEIST, BUT THEY ARE
AGING. LISA: ARE WE GETTING A SENSE OF HOW
THAT LEADERSHIP IS CHANGING BASED ON THE PRIMARY RESULTS WE
HAVE GOTTEN OUT OF PLACES LIKE NORTH CAROLINA AND THE ONES
THAT WE HAVE HEARD FROM PENNSYLVANIA? LISA: THE REALLY BIG DRAMATIC
HEADLINE IS THE REPRESENTATIVE WHO HAS BEEN OUSTED.
HE HAD A LAST-MINUTE INFLUENCE OF SUPPORT FROM DONALD TRUMP.
IT DOES SEEM LIKE THE OLD REPUBLICAN GUARD REALLY HAD
ENOUGH WITH SOME OF THESE HEADLINES COMING OUT OF HIM
THAT HAD TO DO WITH CLAIMING ABOUT REPUBLICANS AND OR GENES
ON THE CAPITAL, COCAINE ETC. THIS WHITE HOUSE WOULD MAYBE
CALL HIM PART OF THE ULTRA MAGA. PENNSYLVANIA IS AN IMPORTANT
SENATE RACE. YOU HAVE AMENDMENT'S -- MEHMET
OZ AGAINST A FORMER HEDGE FUND MANAGER.
THIS RACE IS NECK AND NECK. LISA: WE ARE GOING TO BE TALKING
ABOUT HOW MUCH CONSUMERS ARE STARTING TO PUSH BACK ON HOW
MUCH CONSUMER PRICES ARE JUST GOING UP.
HOW DOES THAT PLAY HEADING INTO THE MIDTERMS. WHAT DOES THAT DO
IN TERMS OF THE MIX OF WHO WINS BASED ON POLES AND HISTORY? >> BASED ON HISTORY IT MEANS
THE DEMOCRATS ARE REALLY GOING TO SUFFER IN THE MIDTERM
ELECTIONS. YOU HAVE ANOTHER RECORD TODAY
FOR GASOLINE PRICES. JAVIER BLAS POINTED OUT TO ME
THAT IN CALIFORNIA, IT'S MORE THAN SEVEN DOLLARS ON AVERAGE
FOR GASOLINE AND WE ARE NOT EVEN IN THE PEAK SUMMER DRIVING
MONTHS. AT THE SAME TIME YOU ALSO HAVE
DIESEL GOING HIGHER. I DON'T KNOW HOW MANY TIMES WE
SAY THIS ON THIS PROGRAM, BUT WE ARE A FARM TO TRUCK TO
KITCHEN ECONOMY SO WHEN DIESEL GOES UP, GROCERY BILLS ARE
GOING UP AND ALL OF THAT IS EXACERBATED BY THE FACT THAT
RUSSIA AND UKRAINE ARE REALLY BIG EXPORTERS OF WHEAT, CORN
OIL, BARLEY. THIS IS ALSO GOING TO PLAY INTO
INFLATION AND FOOD SECURITY. ALL OF THIS IS A GLOBAL MARKET.
A LOT OF THESE PRESSURES ARE GOING TO HIT AMERICANS AT THEIR
KITCHEN TABLE AND AT THE PUMP AND THIS IS NOT GOING TO BODE
WELL FOR THE PARTY IN CHARGE. JONATHAN: WHAT HAPPENED TO THE GAS TAX
HOLIDAY CONVERSATION? >> THERE IS NO LEGISLATION AS
OF YET. THERE IS TALK OF THIS NOPEC
BILL. IT NEVER REALLY WORKS WHEN IT
REACHES THE WHITE HOUSE BECAUSE IT WOULD BE ANTAGONIZING
INDIVIDUALS WITH SPARE CAPACITY TO LET OIL INTO THE MARKET.
POTENTIALLY THEY WILL MAKE GASOLINE CHEAPER WHICH MAY HAVE
AN INDIRECT EFFECT OF NOT HELPING THEM.
WHAT YOU REALLY NEED IN THIS KIND OF MARKET IS DEMAND
DESTRUCTION. JONATHAN: THAT'S THE BOTTOM LINE.
DEMAND DESTRUCTION. THAT'S WHAT MANY PEOPLE ARE
FOCUSED ON. TOM: HOW MANY PEOPLE CAN SUBSTITUTE
OUT A GALLON OF GAS? I REMEMBER IN THE SECOND OPEC
CRISIS. IT WAS 1986. SHOULD I DRIVE TO THE OTHER
SIDE OF THE CITY? DO I REALLY WANT TO SPEND THE
MONEY TO GO A FAIR AMOUNT OF DISTANCE? ARE WE BACK TO THAT.
IT WILL BE INTERESTING. JONATHAN:
IT'S ABOUT WHAT YOU CALL HERE THE FLYOVER STATES, TOM.
IT'S A VERY DIFFERENT WAY OF LIVING.
AND THESE POLICIES ARE ALWAYS SET BY PEOPLE IN CITIES.
I KNOW THEY CALL THEM THE COASTAL ELITE BUT ULTIMATELY
THEY ARE PULLING THE POLICY LEVERS. GETTING DRIVEN BY UBER. JONATHAN:
BRAMO HAS A TREAT FOR YOU IN A MOMENT.
I'M LOOKING FORWARD TO IT. THE S&P DOWN ABOUT 0.8%.
GOOD MORNING. ON THE NASDAQ 100, DOWN BY MORE
THAN 1%, AND WE TOOK A LITTLE BIT OF A DIVE ABOUT AN HOUR AGO
FOLLOWING EARNINGS FROM TARGET. IT IS ABOUT THE MARGINS, A
DOWNSIDE SURPRISE, AND I AM SURPRISED THEY ARE SURPRISED.
I WILL CARRY ON A LITTLE BIT LATER.
FUTURES A LITTLE BIT NEGATIVE. THERE'S A SQUEEZE ON THE
CONSUMER. THEY CAN'T PASS ON THE HIGHER
COSTS SO THEY'VE GOT TO ABSORB IT THROUGH MARGIN PRESSURE.
WE TALKED ABOUT THAT FOR SO LONG OVER THE LAST YEAR, AND
NOW YOU ARE SEEING REAL EVIDENCE OF IT FROM TWO OF THE
BIGGEST RETAILERS IN THIS COUNTRY. OMAR YESTERDAY, AND THEN TARGET
TODAY -- WALMART YESTERDAY, AND THEN TARGET TODAY. TOM:
I WOULD BE OPTIMISTIC AND SAY THESE COMPANIES WILL ADAPT.
THEY ARE GOING TO DO IT BECAUSE THEY ARE GINORMOUS.
THINK HOW THE LITTLE GUYS FEEL AFTER SEEING THESE CHALLENGES.
JONATHAN: LET'S LOOK AT A LITTLE BIT MORE
CLEAR. TOM: THE FED IS GOING TO CAPITULATE.
JONATHAN: ARE YOU AFTER MYSTIC FROM THE
ECONOMIC SIDE -- ARE YOU OPTIMISTIC FROM THE ECONOMIC
SIDE? GUEST: -- TOM: I WOULD RESPECTFULLY
SUGGEST THE FED IS GOING TO WALK IT BACK. JONATHAN: ON WHAT?
TOM: NOT SURE. IT IS A TOUGH TASK.
BILL DUDLEY WOULD SAY I'M WRONG. JONATHAN: HOW SOON? TOM:
DON'T KNOW. YOU NEVER MAKE A TIME FUNCTION
CALL. JONATHAN: I COULD SAY WE ARE GOING TO
HAVE A RECESSION, BUT IF I DON'T GIVE YOU THE SCALE,
MAGNITUDE, AND THE TIME -- TOM: THE HOUSTON ASTROS HIT FIVE
HOME RUNS OFF THE RED SOX IN THE SECOND INNING LAST NIGHT.
THAT'S MAGNITUDE. JONATHAN: TWOS, TENS AND 30'S LOOK LIKE
THIS. HIGHER BY ABOUT A BASIS POINT
TO 2.9952%. STERLING, CABLE NEGATIVE BY
0.7%. INFLATION IN THE U.K. AT 9%. THE BANK OF ENGLAND STUCK
BETWEEN A ROCK AND A HARD PLACE. AS FOR THE EURO, WE'VE HAD A
VISUAL AFTER OFFICIAL TALKING UP INTEREST RATES GETTING BACK
TO ZERO. I HAVE TO SAY, ONE OF THE MORE NEUTRAL MEMBERS OF THE
ECB, NOT WANT TO BE MOST HAWKISH MEMBERS, TALKING ABOUT
A BE QUICKLY GETTING BACK TO ZERO. THAT IS THE STORY AND
FOREIGN-EXCHANGE. LET'S GET YOU SOME SINGLE NAMES.
LET'S GET TO BRAMO FOR MORE. GOOD MORNING, LISA. LISA:
I WILL GET TO THE ASTROS REVIEW AT SOME POINT.
I WILL NOT GIVE YOU A TIMEFRAME. WE WILL GET TO RETAIL AND A
SECOND, BUT BEFORE WE GET TO THAT, THE ELON MUSK SHOW,
TWITTER. WE ARE SEEING THAT $38 PRICE
STICK EVEN THOUGH HE PROPOSED A $54.20 TARGET.
THE BOARD SAYING THEY ARE GOING TO HOLD HIM TO IT.
HE IS SAYING I DON'T KNOW IF I WANT TO PAY THAT.
TESLA YOUR SEEING SINK AS A RESULT OF SOME OF THE SUPPLY
AND MANUFACTURING ISSUES IN CHINA, SO SHARES ARE DOWN ABOUT
1.7%. NETFLIX, WHEN YOU START TO GET
SUPPLY AND DEMAND SHIFT AROUND SO DRAMATICALLY, WHAT YOU GET
IS OVERSUPPLY OF STAFF. USE ON NETFLIX COME OUT AND SAY
THEY ARE LAYING OFF 150 PEOPLE AS A RESULT OF SOME OF THE
PRESSURES AND THE LACK OF SUBSCRIBERS.
THOSE SHARES DOWN ABOUT 1%. THE ACTION ALL IN RETAIL.
TARGET THE BIG STORY OF THE DAY AFTER REPORTING WORSE THAN
EXPECTED EARNINGS AS A RESULT OF THOSE MARGIN PRESSURES, DOWN
22% AND LEADING A WHOLE HOST OF OTHER RETAILERS LOWER WHO ARE
GOING TO REPORT TODAY. TJX SPEC COULD TO REPORT BEFORE
THE OPEN, AND THAT HAS SHARES DOWN IN SYMPATHY.
BATH AND BODY WORKS SO A LITTLE MORE THAN 3%.
I DO WONDER, THE CONSUMER DISCRETIONARY SCUM ARE THEY
JUST GOING TO REMAIN PERMANENTLY ON SALE?
BECAUSE THOSE ARE GOING TO HAVE A HARDER TIME PASSING ALONG
THOSE COSTS TO EVERYONE, ESPECIALLY AS THEY ARE
SURPRISED BY THE INCREDIBLE COST PRESSURES. TOM:
SHE CAN DO IT ALL. SHE CAN DO BONDS, SHE CAN DO
EQUITIES. LISA: AND ASTROS AT SOME POINT, BUT I
AM NOT GOING TO TELL YOU WHEN. JONATHAN: SHE'S GREAT AT THAT.
A LITTLE BIT OF A BEARISH TILT TO IT. LISA:
LET'S MOVE ON BEFORE THIS GOES SOUTH. [LAUGHTER] TOM:
LISA ABRAMOWICZ, THANK YOU SO MUCH.
THIS IS THE CONVERSATION OF THE WEEK, TO SAY THE LEAST, OR
MAYBE THE MONTH. LOSSES IN THE BOND MARKET.
BROOKE MASTERS OVER AT "THE FT" HAS DONE A TOUR DE FORCE ON THE
NEW PIMCO, AND A BIG PART OF THAT, IS JEROME SHOULD -- AND A
BIG PART OF THAT IS JEROME SCHNEIDER, THEIR HEAD OF
PORTFOLIO SHORT-TERM. JEROME SCHNEIDER SAYS THE BOND
MATH DOES NOT WORK, AND JOINS US TODAY.
LET'S CUT RIGHT TO THE MATH, WHETHER IT IS OFF BILL GROSS'S
MUNRO TRADER WERE OFF OF YOUR FOUR BLOOMBERG SCREENS.
WHY DOES THE MATH NOT WORK? JEROME:
WHEN YOU LOOK AT WHERE WE ARE TODAY, THE MARKET NEEDS TO LOOK
AT THE CALIBRATION WE HAVE SEEN PREDOMINANTLY IN THE FRONT END
OF THE MARKET. WE HAVE SEEN A TREMENDOUS PART
OF THAT COME FROM THE MARKET PLACE WITH REGARDS TO
TIGHTENING FINANCIAL CONDITIONS, WHICH MARKETS HAVE
REALLY ADAPTED TO. MORE IMPORTANTLY, I THINK YOU
HAVE TO RATIONALIZE WHERE FRONT END RATES HAVE COME.
THE TIGHTENING POLICY PROCESS HAS COME FROM THE EXPECTATION
OF HIGHER RATES, BUT THAT HAS ALSO PUT US ON PRETTY FIRM
FOOTING WHERE WE CAN DERIVE A LOT OF INCOME FROM WHERE BONDS
ARE. I THINK THAT IS THE BOND MATH,
THE MOST PEOPLE -- POND MATH THAT MOST PEOPLE ARE -- BOND
MATH THAT MOST PEOPLE ARE OVERLOOKING IN THIS ENVIRONMENT.
YOU HAVE A 2-YEAR NOTE IT IS 2.7% THIS MORNING.
YOU DECOMPRESS THAT, IT REALLY IMPLIES THAT THE ONE-YEAR RATE
IS ABOUT 3.3%, 3.4%. NOT TO GET TOO BOND GEEKY, THAT
IS WELL ABOVE THE TERMINAL RADIX PETITIONS OF THE FED.
SO WHEN YOU THINK ABOUT THE MARKETPLACE AND WHERE WE ARE,
INVESTORS SORT OF NEED TO RATIONALIZE. TOM:
I'M GOING TO CUT TO THE CHASE. TURNING AROUND, ASSETS LARGER
THAN WHEN GROSS WAS THERE. THE HEART OF YOUR CALL WAS
RETICENCE ON OWNING BONDS THROUGHOUT THE BULL MARKET.
IT HAS ENDED. WHEN YOU GO LONG BONDS?
WHEN CAN YOU EXTEND THE RATION? JEROME:
YOU'VE GOT TO THINK ABOUT THE PURPOSE OF BONDS AS A DUET.
YOU GOT CAPITAL DEPRECIATION, PLUS CARRY AND INCOME.
THAT COMPONENT HAS BEEN UNDERSTATED FOR THE PAST 10
YEARS. IT IS BACK. SO ONE PART OF THE DUET IS
HAVING THE SECOND PART OF THE SYMPHONY COME INTO PLAY AND
HELP A COMPANY. THE THEME AT THIS POINT IN TIME
IS FUNDAMENTALLY WHAT WE NEED TO BE THINKING ABOUT AND
PORTFOLIO CONSTRUCTION. THERE'S A FUNDAMENTAL CHANGE,
WHICH IS SIMPLY THAT NOT ONLY ARE WE DEALING WITH FINANCIAL
CONDITIONS WHICH ARE CLEARLY INFLUX, BUT LIQUIDITY
CONDITIONS IN FLUX. THAT SIMPLY MEANS THAT FOR AN
INVESTOR, THERE'S A FEW THINGS THEY NEED TO KEEP IN MIND.
ONE, TRANSACTION COSTS ARE HIGHER IN THEIR PORTFOLIOS.
YOU THINK ABOUT RISK ALLOCATIONS, THOSE NEED TO BE A
LITTLE BIT LONGER IN TERMS OF TENOR AND ALSO STICKIER,
MEANING THE COST OF THOSE FUNDS IS MORE PUNITIVE, SO WE NEED TO
BE THINKING ABOUT WAYS TO MITIGATE THE VOLATILITY IN THE
PORTFOLIOS AND THE COST OF THESE TRANSACTIONS, WHICH MEANS
ULTIMATELY YOU NEED MORE CASH. NEED MORE FIXED INCOME ANY
PORTFOLIO. WHILE IT SOUNDS LIKE WE ARE
TALKING OUR BOOK, WHEN YOU SEE WHERE WE HAVE COME FROM SINCE
2021 WITH SLIGHT YIELD CURVES, FLAT CREDIT CURVES, WE FIND
OURSELVES IN A PRETTY DEFINING MOMENT NOW WHERE THE
RECALIBRATION OF FRONT-END RATES AND RATES IN GENERAL SORT
OF PUTS THAT DUET BACK INTO SOMETHING A LITTLE MORE
HARMONIC NOW. LISA: THIS DUET SOUNDS LOVELY, AND
I'M SURE THAT IT ACTUALLY IS A GREAT NARRATIVE TO PAINT FOR
CLIENTS. I WONDER HOW MUCH SOOTHING THEY
REQUIRE AFTER SEEING THEIR EARNINGS STATEMENTS, THE
RESULTS AFTER A QUARTER THAT WAS ABSOLUTELY HORRIBLE, A
BLOODBATH FOR MANY PEOPLE IN TERMS OF TOTAL LOSSES.
HOW MUCH DO WE GET WITHDRAWALS FROM SOME OF THE SHORT-TERM
BOND FUNDS THAT EXACERBATE THIS? HOW MUCH DO WE GET BANKS
REASSESSING THEIR TEAMS OF PEOPLE AND CUTTING JOBS AS A
RESULT? THIS CAN'T GO ANY BACK YOU WHEN
YOU SEE THIS MAGNITUDE OF LOSSES IN SOMETHING SUPPOSEDLY
SAFE. JEROME: THAT IS A GREAT QUESTION.
WHEN WE THINK ABOUT THE MARKET AND WHERE WE HAVE COME FROM AND
WHERE WE ARE TODAY, YOU CAN'T BE DISMISSIVE OF PERFORMANCE IN
THE FIRST QUARTER, BUT THAT IS THE BETA LARGELY.
THAT IS THE RE-CALIBRATION RATES.
THE LEVEL SET IS VERY IMPORTANT HERE. CAME FROM A VERY LOW RATE
ENVIRONMENT WITH TIGHT CREDIT SPREADS, AND MORE IMPORTANTLY,
RELATIVELY FLAT YIELD CURVES. PEOPLE WERE REACHING FOR RETURN
ACROSS ALL MARKETS THROUGHOUT 2021. SO WHEN THE RECALIBRATION
HAPPENED IN EARLY 2022, IT SHOULD NOT COME IS THIS A PRICE
THAT THERE ARE SOME LOSSES. BUT THIS IS WHERE THE MASS
COMES IN. I THINK INVESTORS SHOULD REALLY
RATIONALIZE THAT STARTING WENT. WHEN YOU THINK ABOUT THE BETA
OF WHERE FIXED INCOME HAS GONE, SURE, BOND RATES HAVE MOVED
LOWER, BUT IF YOU LOOK AT THE FRONT-END AS AN EXAMPLE HERE,
THE ONE-YEAR INDEX WAS DOWN ABOUT 100 BASIS POINTS, 1%.
ON'S MOVED -- BONDS MOVED TO $99 OVER THE COURSE OF THE LAST
QUARTER. WE HAVE ALSO RECALCULATED THAT
INCOME AND CARRY COMPONENT TO SOMETHING CLOSER TO 3%.
WHEN YOU PUT THOSE TWO PIECES TOGETHER, THAT PUTS THIS IN A
CONTEXT OF A TOTAL RETURN WHICH IS ACTUALLY SO POSITIVE.
WHILE WE HAVE HAD A LITTLE SHORT-TERM PAIN, ESPECIALLY
ACROSS SOME MARKETS, THE FIXED INCOME MARKET CAN STILL BE
REWARDED FOR THE SECOND COMPONENT OF TOTAL RETURN.
THAT IS THE PART I THINK PEOPLE ARE GOING TO HAVE TO
RATIONALIZE. IN TERMS OF THE BROADER MARKET,
THAT IS SOMETHING PEOPLE ARE GOING TO HAVE TO THINK ABOUT IN
TERMS OF NOT ONLY THE CHANGING FINANCIAL CONDITIONS THAT ARE
OUT THERE, BUT ALSO THE CHANGE OF OPPORTUNITY.
THE QUESTION IS, IS IT REALLY TIME TO BE A HERO, PER SE?
I THINK YOU HAVE TO THINK ABOUT WAYS TO KEEP PEDALING HIM
EFFECTIVELY. TO DO THAT UNTIL WE GET CLARITY
ON THE QUIDDITY CONDITIONS AND THE OVERWHELMING URGE AS JEROME
POWELL STATED YESTERDAY TO CONTINUE TO FIGHT INFLATION CAN
CREATE VOLATILITY FOR PORTFOLIOS, AND I THINK THAT
ULTIMATELY IS THE CONSTRUCT OF THINKING ABOUT PORTFOLIO
MANAGEMENT THESE DAYS, TO TRY TO LIMIT VOLATILITY AND SEEK
OUT WAYS TO PRODUCE RETURNS WITHOUT ADDING TO VOLATILITY
AND PORTFOLIO CONSTRUCTION. THAT IS WHETHER YOU AND
INSTITUTIONAL -- YOU ARE INSTITUTIONAL OR RETAIL
INVESTOR. JONATHAN: HOW BUSY HAVE YOU BEEN? JEROME:
VERY, VERY BUSY. JONATHAN: THAT'S WHAT I WAS THINKING.
WHEN WAS THE LAST TIME YOU WERE THIS BUSY? JEROME:
2015 AND 2016, AND THAT WAS THE EXACT TYPE OF MARKET WHERE WE
HAD RISING INTEREST RATES, PEOPLE WERE FEEL FOR -- WERE
FEARFUL OF WHERE THE FED WAS GOING.
THE IMPACT OF RATE HIKES ON THE MARKET WASN'T EXACTLY CLEAR.
YET INVESTORS WERE LOOKING FOR A SALVE.
THEY WERE LOOKING FOR A WAY TO REALLY IMMUNIZE THEIR
PORTFOLIOS . TOM: HOW DO YOU CALL YOUR WAY BACK
FROM A 12% PRICE DECLINE, FULL FAITH AND CREDIT? JEROME:
YOU EFFECTIVELY LOOK AT WAYS TO MINIMIZE WHERE YOU WANT THE
INTEREST RATE CURVE, LOOK AT WAYS TO MID MY THE INTEREST
RATE RISK AND CREDIT RISK WITHIN PORTFOLIOS, AND NOT
NECESSARILY REACH. STAY IN HIGH-QUALITY.
THERE'S THE WAYS YOU CAN CONTINUE TO ADD CARRY TO YOUR
PORTFOLIOS. JONATHAN: GREAT TO CATCH UP, AS ALWAYS.
JEROME SCHNEIDER OF PIMCO. FUTURES DOWN 0.8% ON THE S&P
COME ON THE NASDAQ, NEGATIVE BY MORE THAN 1%.
TARGET HEADING SOUTH AND FURTHER SOUTH.
DOWN 22.6% IN EARLY TRADING. THIS IS BLOOMBERG. ♪ RITIKA:
KEEPING YOU UP TO DATE WITH NEWS FROM AROUND THE WORLD,
WITH THE FIRST WORD, I'M RITIKA GUPTA.
SHARES OF TARGET FELL MORE THAN 20% IN EARLY TRADING.
THE DISCOUNT RETAILER CUT ITS PROFIT OUTLOOK, SAYING A SURGE
IN COSTS DURING THE FIRST QUARTER SHOWS LITTLE SIGN OF
GOING AWAY ANYTIME SOON. TARGETS FUEL AND FREIGHT ILL
WAS $1 BILLION MORE THAN EXPECTED.
ADDITIONAL HITS CAME FROM HIGHER PAY FOR WAREHOUSE
WORKERS AND LOCKDOWNS DRIVEN BY OVERSTOCKED INVENTORY.
THE EU CONSIDERING WHETHER TO USE PROCEEDS SEIZED FROM
RUSSIAN OLIGARCHS TO HELP REBUILD UKRAINE.
THE EU WILL ALSO PROPOSE ISSUING JOINT DEBT.
UKRAINE'S FOREIGN MINISTER TOLD HIS EUROPEAN COUNTERPARTS THAT
THE BILL COULD REACH $1.1 TRILLION. A TIGHTENING EUROPEAN BANKING
TRANSFORMED THE INVESTMENT BANK AT UBS AND THEN BATTLED
SANTANDER OVER ITS BOTCHED ATTEMPT TO HIRE HIM AS CEO.
NOW HE IS LEADING UNICREDIT AT A TIME OF WAR AND INFLATION.
IN HIS FIRST TV INTERVIEW SINCE TAKING THE HELM, HE SPOKE
EXCESSIVELY TO FRANCINE LACQUA WITH BLOOMBERG'S "FRONT ROW." >> INFLATION IS BITING.
WE SEE FOR A LOT OF LOW INCOME OR LOWER INCOME FAMILIES,
REALLY DIFFICULT TO DEAL WITH THE RISING COST OF ENERGY. WE ALSO SEE THAT FOR COMPANIES
THAT HAD INVESTMENTS OR WERE DEPENDENT ON ENERGY OR ON GRAIN
TO A CERTAIN EXTENT, THEIR WHOLE VALUE CHANGE HAS BEEN
COMPLETELY DESTROYED. RITIKA: SHARES OF UNICREDIT ARE UP SOME
17% SINCE HIS ARRIVAL LAST APRIL.
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. >> I HAVE BEEN CONCERNED THAT
WE NEED TO TAKE AGGRESSIVE ACTION TO KEEP INFLATION UNDER
CONTROL, BUT RIGHT NOW I THINK WE HAVE A GOOD PLAN IN PLACE.
WE'VE MADE A LOT OF MOVES. JONATHAN:
TO BE FAIR TO JIM BULLARD OF THE ST. LOUIS FED, THEY HAVEN'T
MADE THAT MANY MOVES. WE'VE HAD A COUPLE OF INTEREST
RATE HIKES AND QT. LISA: HONESTLY, THE IDEA WHEN YOU
TAKE A LOOK AT THE BALANCE SHEET, IT BASICALLY HAS
PLATEAUED AT NEARLY $9 TRILLION. WE ARE TALKING ABOUT REMOVING
LIQUIDITY. JONATHAN: THE MARKET HAS MADE A FEW BIG
MOVES. FUTURES NEGATIVE ZERO POINT A
PRESENT ON THE S&P. ON THE NASDAQ WE ARE DOWN BY
MORE THAN 1%. STOCKS TO WATCH, THERE'S ONLY
ONE, TARGET DOWN BY 22.6% IN EARLY TRADING.
JUST A MONSTER MOVE LOWER. IT IS ABOUT THAT REVENUE
FALLING TO THE BOTTOM LINE AND WHAT THE MARGINS LOOK LIKE.
THE MARGINS ARE NOT GREAT. TOM: YOU'VE GOT THEM AS A LEAD
STORY, BUT MY RECOLLECTION IS WE WERE AT NEGATIVE NINE SPX
FUTURES AS THOSE HEADLINES CAME OUT AN HOUR AND 15 MINUTES AGO,
AND NOW WE ARE -33, SO THIS ANNOUNCEMENT MOVED THE MARKET,
NO QUESTION. JONATHAN: WITHOUT A DOUBT.
YOU SAW THE WALMART NUMBERS YESTERDAY.
THE CHALLENGE WITH MARGINS, THE PRODUCT MIX, AND ALL OF THAT.
TARGET CLOSED DOWN YESTERDAY BY 1.8%.
I AM TO STRUGGLING WITH WHAT IS GOING ON HERE AND HOW THEY
MARKET IS DISCOUNTING SOME OF THIS STUFF GET DID WE JUST
THINK THE WALMART STORY WAS AN EXECUTION ISSUE AND SOMEHOW
THERE WAS NOT SOMETHING BROADER GOING ON HERE? TOM:
I JUST THINK IT IS THE NEW SILENCE THAT YOU GET FROM
CORPORATIONS. LET US DIVE INTO THAT.
THIS IS A BIG DEAL. JOSEPH FELDMAN IS WITH US.
HE HOLDS COURT WITH DAY NICOLE SY -- WITH DANA TULSI AT THE
TULSI ADVISORY GROUP. I WANT TO TALK ABOUT WHAT WE
LIVED IN THE REAL CODIFICATION OF REG FD.
ARE THESE CORPORATIONS AFRAID TO GIVE GUIDANCE TO ANIMALS
LIKE YOU? JOSEPH:
WELL, I THINK THE CORPORATIONS ARE CERTAINLY AFRAID TO GIVE
INTO QUARTER COMMENTARY THAT WOULD GIVE TOO MUCH OF AN
INSIGHT INTO HOW THE EARNINGS MIGHT SHOW UP, AND WHEN DOING
SO THEY DO HAVE TO MAKE THINGS BROADLY PUBLIC AND AVAILABLE AT
THE SAME TIME, SO THAT EVIDENTLY PLAYS INTO THIS, AND
I DO THINK YOU HAVE SEEN CORPORATIONS ACT DIFFERENTLY.
I'VE SEEN INVESTOR RELATIONS RATIONAL GET FIRED OVER IT.
SO I THINK PEOPLE ARE VERY CAREFUL TO NOT GIVE TOO MUCH
INTO QUARTER INFORMATION. JONATHAN:
I STRUGGLE WHEN I SEE A STOCK DOWN 22% OFF THE BACK OF
EARNINGS ON SOMETHING THAT SHOULD NOT BE A SURPRISE. COSTS.
THEY SEEM TO BE STRUGGLING WITH SOMETHING THAT WAS OBVIOUS TO
EVERYONE. I DON'T GET THAT. IF WE HAD A BIG EXECUTION
PROBLEM IN A SINGLE NAME, IT FEELS LIKE FROM MY PERSPECTIVE
AND OTHER LOOKING AND THEY ARE STRUGGLING TO FIND THE RIGHT
BALANCE. THESE COMPANIES HAVE GONE FROM
BEING UNDERSTAFFED OVERSTAFFED, UNDERSUPPLIED TO OVERSUPPLIED,
AND ALL OF A SUDDEN THERE'S ALL OF THIS INVENTORY AND THEY
DON'T KNOW WHAT TO DO WITH IT. HOW DO YOU FIND THE RIGHT
BALANCE IN AN ECONOMY MOVING THIS FAST? JOSEPH:
I THINK THAT IS REALLY THE CHALLENGE, AND SOMETHING DOUG
MACMILLAN TALKED ABOUT YESTERDAY WAS THE SPEED OF ALL
OF THIS. THAT IT IS REALLY HARD TO
ADJUST THE BUSINESS THAT QUICKLY TO PLAY SOME CATCH-UP.
OBVIOUSLY THE CONSUMER IS CHANGING QUITE RAPIDLY.
I THINK YOU ARE RIGHT, I THINK THE RETAILERS, WE SAW THIS WITH
AMAZON WHERE THEY KIND OF WERE BUILDING OUT TO THE CAPACITY
THAT THEY NEEDED AT THE TIME DURING THE HEIGHT OF THE
PANDEMIC, AND NOW YOU ARE SEEING SOME OF THE GIVEBACK.
WHAT IS REALLY INTERESTING HERE IS IF YOU GO BACK IN HISTORY,
TARGETS GROSS MARGIN HAS BEEN VERY STABLE RIGHT AROUND 28%.
OBVIOUSLY THIS QUARTER IT REALLY DROPPED A LOT TO 25.5%,
AND THEIR GUIDANCE FOR THE YEAR WOULD IMPLY THAT IT IS GOING TO BE WELL BELOW THE 28, MAY BE
MORE LIKE 25, 26. I THINK THAT IS TRANSITORY.
I KNOW THE STOCK IS DOWN A LOT RIGHT NOW, BUT IF YOU REALLY
LOOK CLOSELY AT THAT LINE ITEM AND LOOK AT THE WAY THEY ARE
OPERATING THE REST OF THE BUSINESS, THERE'S A LOT OF
PRESSURES RIGHT NOW ON SUPPLY CHAIN, ON FUEL COSTS, ON
EVERYTHING THAT IS HURTING THE BUSINESS RIGHT NOW. TOM:
I HAD A BRAIN FREEZE THEIR BECAUSE I GOT THE FUEL COST OF
THE JET STREAM TO DAVOS. THAT HAS GONE UP, TO SAY THE LEAST. REGULATION FD, THAT WAS
1999. LISA: I THING I SEE THAT LITTLE
VIOLIN IN THE CORNER. I DON'T THINK THAT IS PROBABLY
WHERE PEOPLE'S FOCUS IS OUR ON THE JET STREAM.
HOWEVER, THIS IS THE ISSUE OF WHAT COMES NEXT.
WHAT IS THE NEXT SHOE TO DROP AFTER WE SAW WALMART AND TARGET?
WHAT IS YOUR SENSE OF THE OTHER PLAYERS THAT WILL ALSO SEE SIMILAR HITS THAT ARE NOT YET I
STILL -- THAT ARE NOT YET PRICED AND? JOSEPH:
I THINK THOSE ARE LIKELY TO SEE SOME PRESSURE.
WE HAVE BEEN PLEASANTLY SURPRISED TO SEE HOME DEPOT AND
LOWE'S PERFORMING FAIRLY WELL IN THE FACE OF THIS.
EVERYBODY THOUGHT HOME WAS GOING TO BE DONE, AND IT IS NOT.
BUT IT DOES FEEL LIKE WE HAVE SEEN A SLOWER TREND IN APPAREL
AND OTHER DISCRETIONARY CATEGORIES LIKE HOME
FURNISHINGS . THAT IS WHERE WE SEE SOON
CONCERN. SOME OF THE OTHER DISCOUNTERS
MAY BE UNDER SOME PRESSURE TODAY.
I THINK YOU HAVE TO JUST START WORRYING ABOUT EVERYBODY ON THE
GROSS MARGIN SIDE AND SEE HOW THAT PROFITABILITY COULD BE
IMPACTED BY THAT, EVEN WITH STRONGER SALES LIKE WE JUST SAW
FROM WALMART AND TARGET. LISA: CAN YOU JUST FRAME THIS MOMENT,
HOW MUCH OF A TURNING POINT THIS IS FOR A LOT OF THE
CONSUMER DISCRETIONARY AREAS AND FRANKLY THE CONSUMER STABLE
COMPANIES LIKE GROCERY STORES AND OTHERS, ESPECIALLY IN LIGHT
OF THE SURPRISE IN THE C-SUITE THAT TO US, SHOULD NOT HAVE
BEEN A SURPRISE? JOSEPH: I THINK THAT WE WERE ALL
ASSUMING THAT THE SUPPLY CHAIN PRESSURES HAD BEEN FULLY
FACTORED IN AT THIS POINT, AND THEY ARE JUST NOT.
WE ARE DEFINITELY SEEING A SLOWDOWN OR CHANGING CONSUMER
BEHAVIOR WHERE THERE'S MORE OF A FOCUS ON CONSUMABLES, BASICS,
GETTING TO WORK AND PAYING THOSE HIGH GAS PRICES RIGHT NOW.
I THINK THAT LENDS WELL TO THE CPG COMPANIES THAT ARE OUT
THERE AND THE GROCERS AND OTHER VALUE ORIENTED RETAIL WHERE
PEOPLE ARE GOING TO BE LOOKING TO SAVE MONEY RIGHT NOW.
JONATHAN: THANK YOU, AS ALWAYS. GREAT PERSPECTIVE.
JOE FELDMAN THERE. THE STOCK IS LOWER BY 22.8%.
HARDLY MENTIONED THE STORY OUT OF CHINA EITHER WHEN IT COMES
TO GROWTH OUT OF CHINA. GOLDMAN LITTLE EARLIER THIS
MORNING WITH A DOWNGRADE, JOINING MANY OTHERS WHO HAVE
DONE THE SAME THING. THEY EXPECT GDP THIS YEAR TO BE
AT 4% VERSUS 4.5% PREVIOUSLY, RIGHT ON THE LINE OF A 3%
HANDLE. VERY CLOSE TO A NUMBER THAT WAS
ALMOST UNTHINKABLE A FEW YEARS AGO FOR THIS ECONOMY. TOM:
IT WAS UNTHINKABLE FOR GET A CUP AND ASKED AT THE IMF -- FOR GEETA COPE AND F -- FOR GITA
GOPINATH AT THE IMF A COUPLE OF WEEKS AGO.
THE TREND IS IN THAT DIRECTION. JONATHAN:
THINGS HAVE CHANGED SO QUICKLY. IT IS SOME YOU PICKED UP ON
WITH AMAZON AND THEN ON TO WALMART, THAT WE HAVE GONE FROM
UNDERSTAFFED OVERSTAFFED. GONE FROM UNDERSUPPLIED TO
OVERSUPPLY. THERE'S A REAL SEEM BUILDING
ACROSS THREE BIG RETAILERS FOR THIS ECONOMY. LISA:
HOW MUCH DOES THIS PLAY INTO THIS IDEA OF A SOFTENING LABOR
MARKET? WE UNDERSTAND IT IS VERY STRONG, BUT HOW MUCH AROUND THE
MARGINS? NETFLIX CUTTING 150 JOBS.
AMAZON CURTAILING STAFF. WHAT HAPPENS AT WALMART.
JONATHAN: ON THE NASDAQ, DOWN BY 2.1%.
HEARD ON RADIO, SEEN ON TV, >> THERE'S A LOT OF PESSIMISM
IN THE MARKET, MORE THAN WE HAVE SEEN IN YEARS. >> DON'T FIGHT THE FED IS
DEFINITELY THE MANTRA AND THE BOND MARKET. >> THE FED IS STILL TRYING TO
SLOW THE ECONOMY, SLOW EMPLOYMENT. >> FOR THE FED TO REBALANCE OR
SUPPORT THE REBALANCING IN THE ECONOMY, THEY DO NEED TO HOLD
DEMAND -- TO PULL DEMAND. >> THE TRAJECTORY OF INFLATION
IS IMPORTANT. >> THIS IS "BLOOMBERG
SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO,
AND LISA ABRAMOWICZ. TOM: GOOD MORNING, EVERYONE. ON RADIO, UNTIL BULLISH AND --
ON RADIO, ON TELEVISION. WE INTERRUPT THIS HOUR OF
"BLOOMBERG SURVEILLANCE" TO SEE RETAIL AMERICA AT NEW
LOWS. TARGET JUST BREAKING DOWN 24%,
A BIG 51 POINT MOVE RIGHT NOW. JONATHAN:
IT IS WALMART VOLUME AND SOME. WALMART GOT HAMMERED YESTERDAY.
MARGIN PRESSURE IS HERE RIGHT NOW.
TALKING ABOUT IT FOR QUARTERS. HERE IT IS. TOM:
WHAT WE GET IS A VALUE ADDED IN THE LAST HOUR.
IT IS ABOUT THE NET INCOME, EBIT., AND ALL THE OTHERS.
JOE FELDMAN GOES TO WHERE THE TARGET EXECUTIVES ARE, WHAT IS
UP THE INCOME STATEMENT TO GROSS MARGIN.
THE WAY YOU FIX GROSS MARGIN IS CUT COSTS. JONATHAN:
I WOULD LOVE TO KNOW WHERE TARGET HAS BEEN.
THEY HAVE BEEN UNDER A ROCK. HOW ARE YOU SURPRISED BY HIGHER
COSTS? WE TALK ABOUT IT EVERYDAY. TOM:
MAYBE IT IS THE MAGNITUDE OF HIGHER COSTS OR A SUM OF MOVING
COSTS. IT IS DOWN NOW BIG. JUST MAKING THOSE LOWS, BUT IN
DEFENSE OF THEM AND EVERYBODY ELSE IN RETAIL, THEY ARE
WORKING WITH IN A PANDEMIC, BUT NOW IT IS OVER. NOW WHAT?
JONATHAN: THAT IS THE PROBLEM. THERE ARE STRUGGLING TO FIND
BALANCE. WE'VE GONE FROM UNDERSTAFFED
OVERSTAFFED, UNDERSUPPLIED TO OVERSUPPLIED, AND THERE'S
CLEARLY A PROGRAM -- A PROBLEM WE DID NOT HAVE 12 MONTHS AGO.
PELOTON SPOKE TO THAT TOO. TOM:
I LOOK AT THE MIX THAT WE ARE IN RIGHT NOW, THE STEW OF SIX
DOLLAR GASOLINE FROM I BELIEVE JP MORGAN, BUT ALSO THE IDEA OF
A FULLY EMPLOYED AMERICA. HOW LONG DOES THAT HONEYMOON
LAST? LISA: WHEN YOU HAVE 11 JOBS, BASIC
LEAD TO JOBS FOR EACH WORKER, I LIVE IN .5 MILLION JOB
OPENINGS, HOW MUCH ARE YOU LOOKING AT THAT NEEDS TO GET
WORKED OUT? AT THE SAME TIME, YOU WONDER AT
WHAT YOU START TO SEE THIS BLEED INTO IT.
IF YOU START TO GET INCREASING PUSHBACK BUT CONSUMERS, THIS
COULD BE A TELL FOR A DOWNTURN, AND THAT IS SOMETHING THAT AN
INCREASING NUMBER OF INVESTORS ARE WORRIED ABOUT. TOM:
I AM FASCINATED BY THE DATA TODAY. EVEN FIXED INCOME IS PRETTY
QUIET, BUT OFF TARGET NEWS, NEGATIVE NINE SPX HAS BECOME
-33. JONATHAN: WE ARE NEGATIVE BY 1.15% ARE
YOU LOOKING AT THE TREASURY MARKET, YIELDS HIGHER BY ABOUT
A BASIS POINT AT 2.9 AND 15%. TALKING ABOUT THE QUIET IN
FIXED INCOME, THE WORLD OF CORPORATE DEBT, DID YOU SEE
PELOTON YESTERDAY? FASCINATING. $750 MILLION LOAN, SOMETHING
LIKE AN 8% YIELD, AND THE DEMAND FOR THAT OFF THE RICHTER.
LISA: I DID NOT REALLY KNOW WHAT TO
MAKE OF THIS OTHER THAN THAT PEOPLE ARE ACTUALLY GETTING
YIELD. AT THE SAME TIME, HAVE TO WONDER WHAT WARRANTS WERE ON
THEIR, AND MAYBE ASSURANCES. IF YOU WANT YIELD, HERE IT IS.
YOU'VE GOT COMPANIES THAT ARE NOT GOING TO GO OUT OF BUSINESS.
THEY ARE GOING TO PAY THOSE COUPONS. GO AND GET IT.
JONATHAN: I WILL STAY AWAY FROM THE IDEA
OF GUARANTEEING WHETHER THOSE COUPONS GET PAID.
I HAVE NO IDEA WHAT IS GOING TO HAPPEN WITH SOME OF THESE
COMPANIES. LOOK HOW FAST THINGS ARE MOVING.
TRYING TO FIND THE RIGHT BALANCE IN THIS ECONOMY FROM
THE DOWNTURN, FROM THE QUICK SNAP BACK TO THE HEADWINDS WE
FACE, THEY ARE ALL CLEARLY REALLY STRUGGLING TO FIND THE
RIGHT BALANCE COMING TO GET THE RIGHT INVENTORY LEVELS, THE
RIGHT STAFF LEVELS, THE RIGHT SUPPLY AT THE RIGHT TIME. TOM: AND THEY ARE DOING IT WAS IN
STRATEGIST CALLS FOR MUCH HIGHER HYDROCARBON PRICES. WE RECAPITULATE THAT RESEARCH
NOTE. JONATHAN: JP MORGAN TALKED UP SIX DOLLAR
GASOLINE. U.S. GASOLINE PRICES TO BREAK ABOVE
$16. TIPSY REFINERS PRODUCE MORE AHEAD OF THE SUMMER ROAD TRIP
SEASON. THE BUILDUP INVENTORIES. IN THE INVESTMENT BANK SINCE
MID APRIL, U.S. GASOLINE INVENTORIES HAVE
FALLEN COUNTER SEASONALLY. SOMETHING JAVIER BLAS HAS
TALKED ABOUT. HE WILL JOIN US IN ABOUT 40
MINUTES. IT IS A PROBLEM. TOM: WHAT DOES THAT STUDY DUE TO
UTILITY BILLS IN THE UNITED KINGDOM WITH 9% INFLATION?
JONATHAN: DID YOU SEE THE INFLATION
NUMBERS THIS MORNING? UTILITY BILLS HAVE GONE THROUGH
THE ROOF IN THE U.K.. TOM: WHERE ARE THEY WITH SIX DOLLAR
AMERICAN GAS? THE ANSWER IS HIGHER. JONATHAN:
THINGS CAN GET WORSE BEFORE THEY GET BETTER. TOM:
FUTURES -31, AND WE ARE WATCHING TARGET THIS MORNING AS
WELL. THRILLED TO BRING YOU DANIEL
MORRIS, CHIEF MARKET STRATEGIST, BNP PARIBAS. TWO DAYS AFTER THE JULY 27 FED
MEETING, THE FED WILL GET THE PCE INFLATION STUDIES.
WHAT ARE THEY GOING TO SEE? ARE WE GOING TO SEE INFLATION
LESSENING THE END OF JULY? DANIEL:
WELL, WE ARE LOOKING FOR PEAK AT LEAST IN HEADLINE INFLATION.
THAT I THINK IS GOING TO HAVE A BENEFICIAL IMPACT FOR MARKET
SENTIMENT. IT IS NOT GOING TO BE EVERY
MONTH. NOT ONLY HAS INFLATION BEAT
EXPECTATIONS, BUT -- IF THAT STARTS TO ROLL.
BUT WE WILL STILL BE IN A HIGH LEVEL -- AT A HIGH-LEVEL IN
ABSOLUTE TERMS. REGARDLESS OF WHAT NUMBERS YOU SEE IN THE
PCE, THE CONCLUSION FROM THE FED IS NOT GOING TO CHANGE AT
ALL, WHICH IS WAY TOO HIGH RELATIVE TO OUR TARGET.
IF ANYTHING, THE RISK IS THAT THEY RAISE MORE THAN WHAT YOU
SEE PRICE IN THE MARKET RIGHT NOW. JONATHAN:
THE EARNINGS CALL STARTING NOW. THEY ARE FACING MULTIPLE COST
PRESSURES THAT WE KNOW. BUT SAYING SOMETHING THAT
REALLY ECHOES WHAT WE HEARD FROM WALMART YESTERDAY.
IT DRAMATIC CHANGE IN THE SALES MIX IN THE FIRST QUARTER.
CONSUMERS ARE STRUGGLING RIGHT NOW.
THEY ARE STRUGGLING AND TARGET STOCK IS STRUGGLING BY 23.5%.
WHERE WOULD YOU BE COMFORTABLE TAKING RISK IN THIS EQUITY
MARKET AT THE MOMENT, GIVEN THE HEADWINDS WE HAVE IN THE FACT
THAT IN MANY PLACES, WE SO I'M NOT FULLY DISCOUNTED THE
EARNINGS RISK THAT LIE AHEAD? DANIEL:
ONE THING TO KEEP IN MIND, WE SEE WHAT IS HAPPENING WITH
RETAILERS, AND IN GENERAL, COMING OUT OF THE LOCKDOWNS
INTO THE REOPENING, DEMAND SHOWS A SHIFT AWAY FROM GOODS
AND INTO SERVICES. WHEREAS IF YOU LOOK AT DEMAND
FOR SERVICES, THERE'S A LOT MORE WITH PEOPLE WILLING TO PAY
THAT. ON THE GOODS SIDE, WHEN
EQUITIES ARE ON THE SLIGHTLY UNDERWEIGHT SIDE, WE ARE NOT
TAKING A LOT OF RISK RIGHT NOW. IT IS MORE A QUESTION OF WHERE
YOU FEEL MOST COMFORTABLE, AND FOR US IT IS NOT THE U.S.
WE ARE UNDERWEIGHT IN EUROPE, NEUTRAL ON THE U.S., BUT
OVERWEIGHT IN EMERGING MARKETS, AND CHINA, AND IN JAPAN, SO IN
PARTICULAR WHEN YOU THINK ABOUT THE INTEREST RISK THAT THE U.S.
IS FACING, WHAT THAT MEANS FOR GROWTH, WHAT THAT MEANS FOR
DISCOUNT RATES, THERE ARE CERTAINLY BETTER OPPORTUNITIES
FOR US ELSEWHERE. LISA: I WOULD LOVE TO HAVE YOU BACK
ON TO TALK ABOUT THAT CHINA CALL.
STICKING WITH THE RETAIL STORY FOR TODAY, IS THERE SOME LARGER
MESSAGE ABOUT LIQUIDITY, ABOUT BRAD'S IN THE MARKET, -- ABOUT
BREADTH IN THE MARKET AFTER THIS EARNINGS REPORT THAT
REALLY COMES AFTER A LOT OF PRESSURES THAT WERE LARGELY
EXPECTED AND BAKED IN AND DISCUSS DISTANCE OF LEE BY A
LOT OF ANALYSTS, AS WELL AS ECONOMISTS? DANIEL:
I THINK THE LIQUIDITY RISK IS PROBABLY MORE ON THE CORPORATE
CREDIT SIDE. WE CERTAINLY DO HEAR FROM OUR
PORTFOLIO MANAGERS ON THE CREDIT SIDE, AND THAT MIX YOU A
BIT NERVOUS WHEN WE KNOW THERE ARE PLENTY OF OTHER THINGS THAT
COULD GO WRONG. JONATHAN:
DANIEL MORRIS THERE OF BEING YOU. -- OF BNP PARIBAS ASSET
MANAGEMENT. THE CEO GOING ON TO SAY WE ARE
SEEING HEALTHY SPENDING BY CUSTOMERS, SEEING STRONGER
SALES TRENDS IN RECENT WEEKS, BUT ON THE CORNER THEY SAW A RAPID SLOWDOWN, APPAREL BEING
ONE OF THEM. IN THE SALES MIX IN THE FIRST
QUARTER, SOMETHING WE'VE HEARD A FEW TIMES NOW. LISA:
THIS IS I THINK A BIG ISSUE FOR TARGET IN PARTICULAR BECAUSE
THERE'S A LOT OF DISCRETIONARY SPENDING AND TARGET.
SO WALMART HAS A BETTER MIX, AND I SIT BETTER IN RELATIVE
TERMS, RELATIVE TO WHAT WE ARE LOOKING AT WITH CONSUMER
APPETITES RIGHT NOW. TARGET IS GETTING THAT MUCH
MORE SLAMMED BECAUSE THEY DO TEND TO BE THE UPPER END OF
THESE PARTICULAR STORIES. JONATHAN:
ARE YOU BORROWING ATK LINE -- BORROWING A TK LINE? LISA:
HE STILL THAT. TOM: I'VE DONE NOTHING ORIGINAL.
[LAUGHTER] LISA: YEAH, THAT'S CLASSIC. JONATHAN:
I AM JUST A FOREIGNER. I HAVE NO IDEA WHAT IS TOM'S
AND WHAT IS SOMEONE ELSE'S. LOSING 1/5 OF ITS -- LOSING 1/4
OF ITS VALUE IN A SINGLE MORNING. TOM:
THIS IS A MASSIVE READJUSTMENT AND WHAT WE SEE FROM LARGER
COMPANIES. JONATHAN: 450 THOUSAND EMPLOYEES.
AS TOM HAS SAID REPEATEDLY, CORPORATIONS ADJUST. LAST YEAR
THEY ADJUSTED BY PASSING ON HIGHER COSTS THROUGH HIGHER
PRICES. WE HAVE TO START THINKING ABOUT
COSTS GETTING CUT? WHERE DO THOSE COSTS GET CUT?
LISA: HOW MUCH SLACK IS THERE IN THE
LABOR ECONOMY? HOW QUICKLY DO WE SEE THIS
BLEED INTO SOME OF THE NUMBERS TO GAUGE HOW MUCH THE WORKFORCE
IS SHRINKING? JONATHAN: FUTURES ON THE NASDAQ DOWN BY A
LITTLE MORE THAN ONE PROCEEDS. -- A LITTLE MORE THAN 1%.
THIS IS BLOOMBERG. RITIKA: KEEPING YOU UP TO DATE WITH
NEWS FROM AROUND THE WORLD, WITH THE FIRST WORD, I'M RITIKA
GUPTA. SHARES OF TARGET ARE PLUNGING
IN THE PREMARKET TRADE. THE DISCOUNT RETAILER CUT ITS
PROFIT OUTLOOK AND MISSED FIRST-QUARTER EARNINGS
ESTIMATES. TARGET SAYS A SURGE IN COSTS
SHOWS LITTLE SIGN OF EASING ANYTIME SOON.
THE COMPANY COST AND FREIGHT CHARGES WERE $1 BILLION MORE
THAN EXPECTED. THE MOST HAWKISH REMARKS YET BY
FEDERAL RESERVE CHAIR JEROME POWELL, HE SAYS THE FED WILL
KEEP RAISING INTEREST RATES UNTIL THERE IS CLEAR AND
CONVINCING EVIDENCE THAT INFLATION IS IN RETREAT.
THE ECONOMY IS STRONG ENOUGH TO WITHSTAND TIGHTENING.
INFLATION IN THE U.K. HAS RISEN TO ITS HIGHEST LEVEL
IN 40 YEARS READ CONSUMER PRICES SURGED 9%.
ALL OF THAT WILL ADD TO PRESSURE FOR ACTION FROM THE
GOVERNMENT AND THE BANK OF ENGLAND.
FINLAND AND SWEDEN HAVE MADE IT OFFICIAL.
THEY ARE NOW APPLYING FOR MEMBERSHIP IN NATO, A MOVE THAT
RESHAPES EUROPE'S DEFENSES. STILL, THE TWO MUST OVERCOME
OPPOSITION FROM TURKEY'S PRESIDENT ERDOGAN.
HE ALLEGES THAT BOTH COUNTRIES SUPPORT KURDISH MILITANTS.
IT IS A MILESTONE FOR THE U.S. SOCCER FEDERATION, THE FIRST
NATIONAL GOVERNING BODY IN THE SPORT THAT PROMISES MEN'S AND
WOMEN'S TEAMS WILL PAY. THAT YEARS ENDS OF OFTEN
ACRIMONIOUS NEGOTIATIONS. 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 NOW LOOKING FOR ONLY
1.2% GROWTH THIS YEAR IN THE FOURTH QUARTER BASIS, AND 1.5%
NEXT YEAR, AND I THINK THAT IS NEEDED TO CREATE A LITTLE BIT
MORE CAPACITY IN THE LABOR MARKET IN PARTICULAR, ALONGSIDE
AN IMPROVEMENT IN LABOR FORCE PARTICIPATION. JONATHAN:
GIVEN THE BEARISHNESS OF THE MOMENT, THAT IS THE
CONSTRUCTIVE OUTLOOK ON WALL STREET.
THAT WAS JAN HATZIUS AT GOLDMAN SACHS. FROM NEW YORK CITY THIS
MORNING, GOOD MORNING. THIS IS "BLOOMBERG SURVEILLANCE
." YOUR EQUITY MARKET LOWER BY 0.7% ON THE S&P, THE NASDAQ
DOWN BY JUST ABOUT 1%. TARGET STOCK IS GETTING
ABSOLUTELY HAMMERED. BRUTAL FOR THIS NAME RIGHT NOW.
IT IS -24%. IT IS ABOUT 0.298% OF THE S&P,
BUT IT SPEAKS TO A MAJOR WORRY OR BROADLY.
ARE WE GOING TO SEE A WHOLE LOT MORE OF THESE CONCERNS AROUND
MARGINS THROUGH THE NEXT SEVERAL MONTHS? TOM:
IF I GO INTO AISLE FOUR, LOOKING FOR THE SPEEDO POWER
FLEX SWIMSUIT OR MARINA SWIM TRUNKS, BUT THAT IS THE HEART
OF THE MATTER THAT CLOTHING. JONATHAN:
UNFORTUNATELY THIS IS LIVE AND I CAN'T REWIND THAT.
CAN WE NOT EVEN THINK ABOUT THAT? TOM:
I JUST LOVE BUSTING YOUR CHOPS. [LAUGHTER] OUR U.S. RETAIL ANALYST WITH
ENCYCLOPEDIC KNOWLEDGE ON THE FLOOR OF THE BIG-BOX STORES,
LET'S START WITH THE BASIC QUESTIONS.
ARE YOU SURPRISED AT THE MARKET SHOCK WE HAVE SEEN? REPORTER:
WE HAVE BEEN SEEING IT ALL YEAR, SO IT IS NOT THAT MUCH OF
A SURPRISE. WE SOUGHT ACROSS THE BOARD,
WHETHER IT WAS AMAZON, WALMART, TARGET.
INVESTORS ARE PENALIZING THE STOCK. TOM:
LET'S GO TO CLOTHING IN GENERAL. HOW MUCH DOES IT MAKE ON $10
T-SHIRTS? REPORTER: THE PROFIT MARGINS ON CLOTHING
ARE DEFINITELY HIGHER THAN IN ANY OTHER CATEGORY, SO WHEN
CLOSING SALES SUFFER, MARGIN DOES SUFFER.
WE SAW THAT TJX ALSO REPORTED THIS MORNING. THEIR PROFIT GUIDANCE ON THE
CONTRARY WAS BETTER-THAN-EXPECTED, AND EVEN
THOSE SALES WERE WEAKER. THE STOCK IS RECITED TO BE
HIGHER IN THE PREMARKET. LISA: THE CEO OF TARGET COMING OUT
AND SAYING THEY SAW A DRAMATIC CHANGE IN THE SALES MIX .
IS THERE ANY SENSE OF HOW THAT MIX WILL CHANGE IN TERMS OF
CONSUMER APPETITE? REPORTER: IF CONSUMERS ARE TRADING OFF
FROM DISCRETIONARY TO MORE STAPLES, THAT IS GOING TO HURT
MARGIN. WE DON'T THINK THAT DISCRETIONARY SPENDING IS DEAD
BY ANY MEANS. WE ARE SEEING PEOPLE GO OUT,
PEOPLE TRAVEL MORE. IT IS JUST WHERE ARE THEY
SPENDING, WHERE THEY BUYING THEIR APPAREL. WILL DISCRETIONARY SPENDING
FALL AS INFLATION GETS TO BE A BIGGER PROBLEM IN THE ECONOMY
OVER TIME? YES, THAT IS TYPICALLY WHAT
HAPPENS. THERE'S A TRADE-OFF BETWEEN
DISCRETIONARY AND STAPLES. LISA: IS THERE HISTORIC PRESIDENT FOR
HOW MUCH OF A MESS THIS WAS IN TERMS OF GUIDANCE FROM
MANAGEMENT? POONAM: IT IS REALLY ALL ABOUT THE
MARGIN. IT COMES DOWN TO THE HIGHER
COST OF DISTRIBUTION CENTERS ACROSS WAGES, AND THAT IS NOT
GOING AWAY. I THINK THAT IS THE KEY HERE.
DO YOU SEE SIGNS OF THE COST PRESSURES PASSING OR LISTENING
OVER TIME? WE MAY BE ENTERING A NEW NORMAL
WEAR HIGHER COSTS ARE HERE TO STAY, SO THAT MEANS YOU HAVE TO
RAISE PRICES. TOM: WHAT DOES SUPPLY CHAIN COST?
PAUL AT CITIGROUP TALKS ABOUT $1 BILLION OUT OF THE BLUE OF
NEW SUPPLY CHAIN COSTS. DEFINE THAT.
ON A CFA EXAM WHICH DOES A SUPPLY CHAIN COST? REPORTER: IT IS THE COST -- POONAM: IT IS
A COST TO MAKE THE PRODUCT, TO GET THE PRODUCT TO THE JUST TO
BE CONCENTRIC, AND THEN INTO THE STORE AND PEOPLE'S HOMES,
SO THE COSTS ARE RISING ON EVERY SNUGGLE FRONT.
IT IS NOT ONE PIECE OF THE PUZZLE THAT YOU HAVE TO FIX.
IT IS FROM THE START TO FINISH. TOM: WHAT IS THE HISTORY OF THEM
RAISING PRICES? JON HAS BEEN TALKING ABOUT THE
INITIAL TRANCHE. IS THERE A WALL THEY RUN INTO,
OR DO THEY JUST SAY THIS IS WHAT THE BICYCLE COSTS? POONAM:
IT DEPENDS ON WHAT COMPETITION IS DOING.
WHEN YOU SEE THE PRICE OF MILK GOING UP ACROSS THE BOARD, IT
IS OK TO RAISE THEM. BUT IF YOU START TO SEE SOME
RETAILERS DO IT AND SOME NOT, THAN THERE WILL BE A SHIFT IN
WHERE CONSUMERS SPEND. SO IT IS A HARD AND DIFFICULT
THING TO DO TO RAISE PRICES WITHOUT TRYING TO PRESS ON
OTHER LEVERS YOU HAVE IN PLACE. I THINK RETAILERS IN GENERAL
WILL TRY TO FLEX COST WHERE THEY CAN BEFORE TAKING A
MEANINGFUL PRICE INCREASE. LISA: WHO IS THE NEXT TARGET?
WHO'S THE NEXT WALMART? POONAM: YOU ARE GOING TO HEAR FROM
DOLLAR STORES, SO THAT WILL BE INTERESTING TO WATCH.
YOU ARE ALSO GOING TO HEAR FROM SOME OF THE E-COMMERCE NAMES.
ISAAC ACROSS ALL OF THEM HE WILL START TO SEE PRESSURE ON
THE COST SIDE. A PAIR OF RETAILERS -- APPAREL
RETAILERS MAY BE BETTER INSULATED BECAUSE THEY HAVE END
UP DEMAND FOR MORE CONSUMERS ARE SPENDING. JONATHAN:
THANK YOU. THAT HEADLINE FROM TARGET,
LET'S GO OVER THAT. THEY OFFERED MARKDOWNS AS
DEMAND FOR BIG AND BULKY GOODS ACTUALLY FELL.
THAT'S NOT A HEADLINE YOU WOULD HAVE FOUND IN MANY PLACES LAST
YEAR. TOM: I DON'T KNOW WHAT THAT MEANS.
IT COULD ALSO BE THE NINE INCH MARINA SWIM TRUNKS. JONATHAN:
YOU WANT TO DO THAT AGAIN? TOM: IT COULD BE A NUMBER OF
DIFFERENT THINGS. WE ARE TALKING ORIGINAL
STATEMENTS HERE. IS BIG AND BULKY EVER DISCUSSED
IN FINANCIAL MEDIA? JONATHAN: IT IS RELATIVE TO WHAT WE
EXPERIENCED LAST YEAR. LAST YEAR THEY FACED DOWN
COSTS, BUT ALSO HAD TO CONFRONT A BOOM IN DEMAND.
THEY COULD PASS ON HIGHER PRICES. IT JUST SEEMS TO ME THAT
CERTAIN RETAILERS, EXECUTING IN A CERTAIN WAY, THEY CANNOT FIND
THE RIGHT ISLANDS AREA TO FIND THE RIGHT AMOUNT OF
INVENTORIES, THE RIGHT AMOUNT OF STAFFING MANIA AT ANY GIVEN
TIME. WE HAD A REALLY POSITIVE DEMAND
SHOCK AT THE START OF LAST YEAR, AND NOW THIS YEAR WE ARE
FACING HEADWINDS AND ULTIMATELY COULD BE FACING THE OPPOSITE.
LISA: WE ALWAYS SAY UNPRECEDENTED,
AND THIS IS WHAT THIS ALL HIGHLIGHTS BECAUSE WE SAW A
PERIOD WHERE EVERYONE WAS STUCK IN THEIR HOMES AND BUYING AS
MUCH AS THEY COULD, AND NOW PEOPLE ARE MOVING TO
EXPERIENCES . BUT TAKE A LOOK AT AIRLINE
COSTS, HOW MUCH THE PRICES ARE GOING UP THERE.
HOW MUCH ARE BIG AND BULKY GOODS BASIC STAPLES AND HOMES.
PEOPLE SAYING WE DON'T HAVE TO PAY THAT HIGHER PRICE RIGHT NOW.
WE CAN TAKE A PLANE SOMEWHERE ELSE. HOW DO YOU EXPERIENCE THIS
SHIFTING MARKET WITH SOME SORT OF ACCURACY? JONATHAN:
YOU CAN'T BE RIGHT ALL THE TIME ON THE SELL SIDE ON WALL
STREET, BUT MIKE WILSON OF MORGAN STANLEY, WHAT A YEAR
HE'S HAVING, CALLING THIS MARKET AND THE DYNAMICS, THE
ISSUES THAT WOULD ULTIMATELY PUSH IT TO THE LOWER. TOM:
IT IS THE UNDERLYING THEMES OF MR. WILSON'S WORK, AND WHEN
YOU'RE RIGHT, YOU'RE RIGHT. BUT IT IS THE WHY YOU ARE RIGHT.
BUT THEY'VE GOTTEN RIGHT IS THE BIG MACROS YOU MENTIONED,
DEMAND IDEA THAT WE HAVE LEARNED IN 48 HOURS.
THAT IS OLIVER WILSON RIGHT. JONATHAN: FUTURES DOWN 0.7%.
THIS IS BLOOMBERG. JONATHAN:
LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING.
ON TV AND RADIO, HERE'S YOUR PRICE ACTION.
MARKET NOW, BUT OFF THE LOWS SO FAR. ON THE NASA 100, DOWN 1%.
WITH SOME HOUSING DATA, LET'S GET TO MIKE MCKEE FOR MORE.
MICHAEL: WE CARE ABOUT THIS BECAUSE
EVERYONE IS WATCHING TO SEE WHETHER THE FED IS HAVING AN
EFFECT, ADDED THEY HAVE. HOUSING STARTS ON A MONTH OF
THE MONTH -- MONTH OVER MONTH BASIS FALL BY 2.1%.
THE EXPECTATION WAS FOR 2%, SO I GUESS YOU COULD CALL THAT
BETTER-THAN-EXPECTED. THAT IS THE ANNUAL RATE, BELOW
MARCH. THE BUILDING PERMITS NUMBER
COMES IN 3.2%. BELOW THE ESTIMATE OF 0.4%. THAT SUGGESTS THAT MAYBE WE ARE
SEEING SOME CAPITULATION FROM BUILDERS.
THE HOMEBUILDERS INDEX CAME OUT. IT PLUNGED.
THERE WAS A FEELING THAT MAYBE BUILDERS ARE SEEING A REAL
RELUCTANCE OF PEOPLE NOW TO SIGN CONTRACTS ON NEW HOUSING. INTERESTING NUMBER TO WATCH IS
THE HOUSING COMPLETIONS NUMBER. WE DON'T OFTEN TALK ABOUT THAT,
BUT IT IS DOWN 5.1% BELOW MARCH. WE CAME INTO THIS YEAR WITH A
SHORTAGE OF HOUSING. NOW ALL OF A SUDDEN WE MAY END
UP WITH A SHORTAGE AT THE END OF THE YEAR, BUT WITHOUT THE
DEMAND THAT WOULD COMPEL ADDITIONAL SUPPLY.
IT DOES LOOK LIKE THE FED IS HAVING AN IMPACT OF HIGHER
INTEREST RATES NOW OVER 5% FOR MORTGAGES, SEEMING TO SLOW NOT
ONLY MORTGAGE APPLICATIONS WHICH WERE DOWN 11% TODAY, 11%
LAST WEEK -- JONATHAN: THAT IS THE REAL NUMBER, ISN'T IT THE
APPLICATIONS NUMBER? POONAM: PEOPLE -- MICHAEL:PEOPLE ARE
NOT ENTERING INTO CONTRACTS OR TRYING TO BUY HOMES ANYMORE
BECAUSE IT COSTS TOO MUCH. JONATHAN:
MORTGAGE APPLICATIONS DOWN. WE ARE NOT SEEING A MASSIVE
MOVE IN THIS MARKET. WE ARE DOWN 0.7% ON THE S&P, ON
THE NASDAQ DOWN. IT'S GOT TO BE A BIG STORY,
HASN'T IT? WE ARE RESPONDING TO THESE
HIGHER MORTGAGE COSTS BY NOT GETTING A MORTGAGE. TOM:
WE MENTIONED THIS TO JAN HATZIUS. HE SAID THIS DATA IS SPEAKING,
AND IT IS BEGINNING TO SHOW CHANGES IN HOUSING.
THE 10 YEAR YIELD NOW ABOVE 3%. THAT IS LIKE DOW 10,000.
JONATHAN: TWO MONDAYS AGO WE DROPPED TO
2.84%, AND NOW WE ARE BACK ABOVE 3%. CITI PUBLISHED MOM'S AGO,
REFLECTING ON HOW THEY WON'T HESITATE TO KEEP PUSHING BEYOND
THE POINT OF NEUTRAL. HE SAID THIS AT THE END, THE
MARKET TAKE AWAY IS CLEAR. THIS IS ANDREW HOLLENHORST AND
THE TEAM AT CITI. A VERY NEGATIVE ENVIRONMENT FOR
RISK ASSETS. TOM: RIGHT NOW JOINING US AS WELL IS
SETH CARPENTER, GLOBAL CHIEF ECONOMIST MORGAN STANLEY.
WHETHER IT WAS MAYNARD KEYNES OR THE GIANT PAUL SAMUELSON WHO
SAID WHEN THE FACTS CHANGE, I CHANGE MY MIND, RIGHT NOW FOR
THE DECILES OF AMERICA, THE FACTS ARE CHANGING. HOW CRUSHED WILL THE METACLASS
BE DUSTY MIDDLE CLASS B? -- WILL THE MIDDLE CLASS BE?
SETH: WE HAD THE END OF THE CHILD TAX
CREDIT, A SURGE IN ENERGY PRICES AND A SURGE IN FOOD
PRICES. SO THAT MEANS FOR PEOPLE WHO
ARE BELOW THE MIDDLE OF THE INCOME DISTRIBUTION, THEIR
ABILITY TO SPEND ON THINGS BESIDES THOSE TRUE STAPLES HAS
BEEN DIMINISHED, AND WE ARE LOOKING FOR THAT TO BE A BIG
PART OF THE SLOWDOWN IN CONSUMER SPENDING THIS YEAR.
TOM: JON FERRO MENTIONED CITIGROUP
WITH A MORE STRIDENT VIEW ON RATE RISES AND MANY OTHER SHOPS
AS WELL. IS THIS A CENTRAL BANK WHERE
THE FACTS WILL CHANGE AND JEROME POWELL WILL BLINK? SETH:
I DON'T KNOW ABOUT BLINK, BUT I HAVE TO SAY JAY POWELL IS IN A
VERY CHALLENGING SITUATION BECAUSE WHAT THEY ARE TRYING TO
DO IS SLOW THIS ECONOMY A LOT, BUT NOT TOO MUCH, AND NEITHER
OF THOSE IS PARTICULARLY WELL DEFINED.
THEY ARE TRYING TO BRING THE GROWTH RATE OF THE ECONOMY DOWN
ENOUGH SO THAT THE INFLATIONARY PRESSURE WE ARE SEEING OUTSIDE
OF SOME OF THESE TEMPORARY PHENOMENA, THEY WANT THAT TO
COME DOWN BY SLOWING THE ECONOMY ENOUGH THAT IT GOES
AWAY, BUT NOT SO MUCH THAT THEY DIP THINGS INTO RECESSION GET
THAT IS SUCH A TERRIBLY DIFFICULT JOB TO DO. LISA:
YOUR FORMER BOSS, THE FORMER FED CHAIR BEN BERNANKE, PUT IT
IS ALMOST A CERTAINTY HEADING INTO STAGFLATION, AND HAD SOME
PRETTY HARSH WORDS FOR THIS FED CHAIR COME OVER THE PAST THEY
HAVE TAKEN IN NOT GETTING AHEAD OF THIS.
DO YOU THINK THAT ALMOST CERTAINLY WE ARE HEADED TOWARDS
A STAGFLATIONARY LIKE ENVIRONMENT IN THE UNITED
STATES? SETH: VERY HARD TO GET INTO DEBATES
ABOUT THE DEFINITION OF STAGFLATION.
I THINK THE FOLLOWING IS VERY TRUE, SHARP DECELERATION THIS
YEAR, AND THE RISK IS CLEARLY SKEWED TO THE DOWNSIDE.
I THINK IN THAT SENSE, THERE'S CLEARLY ELEVATED RISK FOR
THINGS GOING INTO RECESSION. AND THEN INFLATION IS HIGH.
WE HAVE IT COMING DOWN, BUT IT IS NOT GOING TO BE BACK TO THE
2% TARGET ANYTIME SOON. SO CALL IT WHAT YOU WILL, IT IS
GOING TO BE A ROCKY ROAD. LISA: WHAT IS THE NEW NORMAL IN TERMS
OF THE INFLATION RATE THAT SEEMS TO STABLE IF IT IS NOT 2%?
SETH: I STILL THINK THE FED VERY MUCH
WANTS TO GET TO 2%, BUT THEY ARE FACED WITH A VERY
CHALLENGING SET OF FACT. YOU CAN EITHER BRING THE EXCESS
INFLATION THAT WE HAVE DOWN TO 2% ITALY, BUT THAT WOULD
REQUIRE CAUSING A PRETTY BAD RECESSION, OR THEY CAN BRING IT
DOWN GRADUALLY, WHICH MEANS THE REALIZED INFLATION WILL
PROBABLY STILL ELEVATED FOR ANOTHER COUPLE OF YEARS.
THAT IS A REALLY DIFFICULT CHOICE TO BE IN.
THEY WILL TRY TO SLOW THE ECONOMY DOWN A LOT WITHOUT
QUITE GETTING INTO RECESSION, AND THAT MEANS FOR THE REST OF
THIS YEAR, FOR THE REST OF NEXT YEAR, PROBABLY SOMETIME IN
22024, YOU WILL PROBABLY SEE INFLATION ABOUT THEIR TARGET.
LISA: WE HAVE BEEN TALKING ABOUT THE
POTENTIAL FOR SIX DOLLARS AVERAGE GAS PRICES IN THE
UNITED STATES, AS PER THE EXPEDITION OF JP MORGAN.
WHAT WOULD THAT DO IN TERMS OF GROWTH?
HOW DOES THAT FACTOR INTO YOUR BASE CASE? SETH:
IT GETS BACK TO TOM'S POINT ABOUT THE DISTRIBUTIONAL EFFECT.
FOR PEOPLE WHO ARE LIVING PAYCHECK-TO-PAYCHECK, CONSUMING
ALMOST ALL OF THEIR CURRENT INCOME AND HAVE TO DRIVE TO
WORK , THAT IS A HUGE CHUNK OF THIS POPULATION, THEY ARE JUST
GOING TO HAVE LESS MONEY LEFT OVER TO SPEND.
THE FUNNY THING IS THAT INFLATION TERMS, IF GASOLINE
GETS UP TO YOUR HYPOTHETICAL 6% AND STAYS THERE, THOSE ELATION
AREA FACTS START TO GO AWAY, BUT PEOPLE ARE STILL PAYING
MORE OUT OF THEIR PAYCHECK EGGS -- THEIR PAYCHECK EACH WEEK,
IT'S MONTH, EACH QUARTER, THAT DOES CONTINUE TO CRIMP SPENDING.
TOM: I COME UP TO A MIDYEAR OUTLOOK
WHICH I BELIEVE HAS DELIVERED ON SETH CARPENTER'S DESK JUNE
30. WHAT MATTERS IS JULY 27, WHICH
IS WHERE THE FED MEETINGS GET EXCRUCIATING.
AND MY RIGHT ON THAT, THAT THE TWO MEETINGS OUT IS REALLY
WHERE THIS GAME GETS TOUGH? SETH:
I THINK THAT IS EXACTLY RIGHT. CHAIR POWELL SAID FOR THE NEXT
COUPLE OF MEETINGS, SOME THING LIKE 50 BASIS POINTS IS RIGHT.
I THINK HE MADE IT CLEAR WHEN HE FIRST SAID IT, BUT
REINFORCED THE VIEW YESTERDAY THAT HE IS NOT ANYTHING ELSE
BEYOND THAT IN EITHER DIRECTION, SO THE FED REALLY IS
GOING TO HAVE TO BE LOOKING AROUND A LOT MORE, ASKING
THEMSELVES ARE WE SEEING ANY SLOWING IN THE REAL ECONOMY,
ARE WE SEEING SIGNS THAT INFLATION IS COMING DOWN, AND
QUITE HONESTLY, BECAUSE THEY ARE STARTING IN JUNE THE
RUNOFFS -- THE RUNOFF OF THEIR BALANCE SHEET, ARE WE SEEING
THE EFFECTS OF THAT SO-CALLED QUANTITATIVE TIGHTENING?
THIS IS A TOOL TO HAVE USED BEFORE ANY MUCH SMALLER DEGREE
THAN WHAT THEY'RE DOING NOW, AND THEY REALLY ARE GOING TO
HAVE TO WAIT AND SEE HOW THAT PLAYS OUT THROUGH THE FINANCIAL
MARKETS AND HOW IT PLAYS OUT IN THE ECONOMY. TOM:
YOU TOOK DATA DEPENDENCY 102 AT PRINCETON A FEW YEARS AGO.
EXPLAIN TO OUR AUDIENCE THE WEIGHT OF DATA DEPENDENCY TO
THE PHD'S AT THE ECCLES BUILDING? SETH:
IS THE ONLY GAME IN TOWN. IT IS FUNNY THAT THE TERM CAME
INTO EXISTENCE BECAUSE THERE WAS NEVER A TIME WHEN
POLICYMAKING WAS DATA INDEPENDENT.
BUT HERE IT IS GOING TO BECOME THAT MUCH MORE DIFFICULT
BECAUSE THEY ARE GOING TO HAVE TO SCRUTINIZE EVERY LAST BIT OF
DATA TO SEE WHAT IS GOING ON. MONETARY POLICY WORKS.
FIRST POLICY TOOLS, THEN FINANCIAL MARKETS, THAN THE
REAL ECONOMY, AND THEN INFLATION.
THEY HAVE TO SCAN WITH WHATEVER HIGH-FREQUENCY DATA THEY CAN
CONJURE UP EACH OF THOSE DIFFERENT LINKS IN THE CHAIN TO
SEE IF THEY'RE GETTING TRACTION WITH THEIR POLICY TIGHTENING
AND IF THAT IS LEADING TO LOWER INFLATION. IT IS A TOUGH JOB.
JONATHAN: ALWAYS GOOD TO HAVE YOU.
HERE'S ANOTHER ONE FROM GOLDMAN SACHS AND THE CHIEF EXECUTIVE
OFFICER DAVID SOLOMON, IN A PHONE INTERVIEW WITH SONALI
BASAK IN THE LAST 24 HOURS. "WE HAVE TO GET RID OF
INFLATION. INFLATION IS PUNITIVE,
ESPECIALLY ON THOSE LIVING WITH WEEK, PAYCHECK-TO-PAYCHECK. ." TALKING ABOUT RECESSION RISK,
REFLECTING ABOUT IT IN THE RESEARCH DEPARTMENT. TOM:
I THINK IT IS GREAT THAT THESE CEOS ARE TALKING UP THE
MACROECONOMIC STUFF ARE I WANT TO KNOW WHAT HE'S GOING TO DO
ON THE BOND DESK, WHERE PRICE DOWN, YIELD UP.
I'M FASCINATED HOW GLOBAL WALL STREET MANAGES THIS MOTHER OF
ALL BOND BEAR MARKETS. JONATHAN: ONE THING HE SAID ON SPREADS,
TUMULT AND CREDIT SPREADS WOULD BE CONCERNING. ARE WE THERE YET?
TOM: YES, I DO THINK WE ARE THERE
YET RIGHT NOW. JONATHAN: USING WE ARE HERE. TOM: I THINK THE PRICE DECLINE LOG,
BLOOMBERG TOTAL RETURN AGGREGATE, ANY CREDIT SERIES
YOU WANT IS JAW-DROPPING. JONATHAN:
WE ARE ADJUSTING TO RATES, AND I KNOW YOU CAN BUILD ON THAT.
IS THAT CONCERNING IN AND OF ITSELF FOR THE FEDERAL RESERVE?
HAVE WE SEEN A DISLOCATION IN SPREADS, LIQUIDITY?
CAN COMPANIES STILL COME TO MARKET AND RAISE MONEY? LISA:
PELOTON CAN JUST RAISE A LOAN WITH A PRETTY RISKY BUSINESS
MODEL AT THIS POINT. IF YOU TOOK A LOOK AT SPREADS,
THEY ARE WELL WITHIN NORMS THAT ARE NOT SCARY FOR THE FED AREA
HE BORE STARTING TO WIDEN OUT. THIS IS WHAT COULD POTENTIALLY
TRIGGER THE FED PUT. IT IS NOT THERE YET, WHICH
MEANS THEY'RE GOING TO KEEP HIKING RATES.
THE FLIPSIDE OF THAT, THE BANK CEOS ARE WATCHING EXECS IT THE
FED IS WATCHING AS WELL. JONATHAN:
IT IS NOT DECEMBER 2018 YET. FUTURES DONE 0.8% ON THE --
FEATURES DOWN 0.8% ON THE S&P. LOOKING FORWARD TO CATCHING UP
WITH EVERCORE AND JAY PELOSKY. ALL OF THAT IN THE NEXT HOUR ON
BLOOMBERG TV. RITIKA: KEEPING YOU UP TO DATE WITH
NEWS FROM AROUND THE WORLD, WITH THE FIRST WORD, I'M RITIKA
GUPTA. SHARES OF TARGET FELL MORE THAN
20% IN EARLY TRADING. THE DISCOUNT RETAILER CREDITS
PROFIT OUTLOOK, SAYING SURGING COSTS DURING THE FIRST QUARTER
SHOWS LITTLE SIGN OF GOING AWAY SOON. ADDITIONAL HITS CAME FROM HIGHER PAY FOR WAREHOUSE
WORKERS AND MARKDOWNS DRIVEN BY OVERSTOCKED INVENTORY.
GOLDMAN SACHS CEO DAVID SOLOMON SAYS CLIENTS HAVE PAIRED FOR A
DECLINE IN ASSET PRICES. SOLOMON TOLD SONALI BASAK WHAT
HE BECAUSE EXTREMELY PUNITIVE INFLATION IS CREATING A TAX ON
THE ECONOMY. HE SEES A 30% CHANCE OF
RECESSION IN THE U.S. OVER THE NEXT 12 TO 24 MONTHS.
BLOOMBERG HAS LEARNED THE U.S. IS FORCING WALL STREET ACTS TO
SEARCH MORE THAN 100 PERSONAL MOBILE PHONES CARRIED BY TOP
TRADERS AND DEALMAKERS, THE LARGEST EVER INVESTIGATION INTO
SECRET MESSAGING ON PLATFORMS SUCH AS WHATSAPP.
THE SEC WILL DECIDE WHO TO PUNISH FOR FAILING TO PRESERVE
MESSAGES VIA UNAPPROVED PLATFORMS. THE EU IS
CONSIDERING WHETHER TO USE PROCEEDS RUSSIAN OLIGARCHS TO
HELP REBUILD UKRAINE. THE EU WILL ALSO PROPOSE
ISSUING JOINT DEBT. UKRAINE'S FOREIGN MINISTER
DMYTRO KULEBA TOLD HIS COUNTERPARTS THAT
RECONSTRUCTION BILL COULD REACH OVER $1 TRILLION.
THE BOARD OF TWITTER PLANS TO ENFORCE ITS $44 BILLION
AGREEMENT TO BE BOUGHT BY LEN MUSK.
DIRECTORS VOTED UNANIMOUSLY TO RECOMMEND THAT SHAREHOLDERS
APPROVE MUSK'S BID. ALMOST $16 HIGHER THAN WHERE
THE STOCK CLOSED OUT ON TUESDAY. HE BOARD STATEMENT CAME AS MUSK
APPEARS TO BE MANEUVERING TO DITCH OR RENEGOTIATE HIS OFFER. >> PUTIN'S WAR IS HEAVILY
DISRUPTING THE GLOBAL ENERGY MARKET. IT SHOWS ON ONE HAND HOW
DEPENDENT WE ARE ON IMPORTED FOSSIL FUELS.
WE MUST NOW REDUCE AS SOON AS POSSIBLE OUR DEPENDENCY ON
RUSSIAN FOSSIL FUEL. TOM: MS. VON DER LEYEN, WHO IS
REALLY QUITE SOMETHING. WE HAVE SPOKEN TO HER NUMEROUS
TIMES AT DAVOS. SHE IS ENCYCLOPEDIC ON THE
GERMAN MILITARY, AND OF COURSE, THE DUTIES OF BRUSSELS AS WELL.
WE WILL GET TO THAT IN THE MOMENT.
RIGHT NOW, KRITI GUPTA WITH A CHART. KRITI:
WE'VE GOT TO TALK ABOUT THESE RECORD HIGH GASOLINE PRICES.
I BELIEVE SIX DOLLARS IN CALIFORNIA, FIVE DOLLARS IN
HAWAII, AND IT IS NOT JUST THE OVER 100 DOLLARS WE'LL PRICES
USE YOUNG YOUR SCREEN. IT IS ABOUT REFINING MARGINS
AND TO KILL HER. STICK WITH ME HERE.
ESSENTIALLY THREE BARRELS OF WTI CRUDE TO BARRELS OF
GASOLINE AND ONE BARREL OF DISTILLATES WHICH IS JESUS OR
JET FUEL. -- WHICH IS DIESEL OR JET FUEL.
WHAT THIS SHOWS IS THIS MAJOR JUMP LAST WEEK, COMING DOWN A
LITTLE BIT, BUT $50, THAT IS THE MARGIN FOR REFINING OR GET
ONE OF THE BIG QUESTIONS IS CAN ONE OF THESE AMERICAN REFINERS
THEY DO GET THEIR HANDS ON CRUDE, DO THEY HAVE THE
CAPACITY TO TURN IT INTO GASOLINE?
IT IS REALLY THAT CONCERN THAT IS PARTIALLY DRIVING UP THE
PRICE. TOM: FOR THE 12 PEOPLE THAT JUST
DROVE OFF THE GARDEN STATE PARKWAY BY SOME REFINERY IN NEW
JERSEY, IS IT DONE? IS THERE ANY INCENTIVE WITH
THIS RECORD MARGIN TO MAKE THE DISTILLATES, MAKE THE STUFF WE
USE? KRITI: RIGHT NOW IT FEELS IT IS VERY
TOUGH TO DO THAT. TOM: LET'S GO TO JAVIER BLAS WITH
HIS TRUE GLOBAL EXPERTISE. I WANT TO TALK ABOUT CHINA.
I GUESS THEY ARE COMING OFF LOCKDOWN. WHEN YOU LOOK AT BLAS
ECONOMICS, WHAT DOES IT MEAN IF CHINA COMES OFF LOCKDOWN?
JAVIER: IT MEANS HIGHER PRICES. RETAIL PRICES FOR GASOLINE, IT
IS BECAUSE CHINA HAS NOT YET OPENED UP. CHINA IS A LOT
MORE FOR CRUDE OIL AND GASOLINE WORLDWIDE AND IT NEEDS HIGHER.
THERE'S JUST SIMPLY NOT ENOUGH FOR EVERYONE, SO THEY PRICE HAS
TO KILL SOME DEMAND. IF CHINA COMES BACK, I'M AFRAID
WE ARE GOING TO SEE HIGHER PRICES. FOR THE BEGINNING OF THE SUMMER
SEASON, IT IS GOING TO BE VERY PAINFUL. LISA:
WHAT ARE YOU LOOKING AT IN TERMS OF POTENTIAL PRICES?
WE ARE SEEING REFINERIES NOT KEEP PACE AT ALL, WHICH SEEMS
TO BE THE REAL BIG ISSUE, NOT JUST CRUDE PRICES. JAVIER:
YOU ARE ABSOLUTELY RIGHT. THE PRICES I'M LOOKING IS
FORGET ABOUT THE WTI PRICE. IF YOU LOOK AT WTI, WE ARE
WONDERED $15. IF YOU LOOK AT THE HOME SALE
MARKET FOR REFINED PRODUCT, GASOLINE, DIESEL, AND JET FUEL,
WE ARE SOMEWHERE BETWEEN $170 AND $270 A BARREL.
DEPENDS ON WHETHER YOU ARE LOOKING AT GASOLINE OR DIESEL. WE START TO SEE SOME DEMAND
DESTRUCTION COME PARTICULARLY IN EMERGING MARKETS, AND WE ARE
BEGINNING TO SEE THAT. THE KEY QUESTION IS PEOPLE
REALLY WANT TO TRAVEL. THIS IS THE FIRST SUMMER, THE
FIRST SPRING OF TRAVELING AFTER COVID-19, SO I THINK THAT WHILE
WE SEE PRICES MAY NEED TO GO HIGHER TO DESTROY DEMAND, JUST
BECAUSE THERE IS AN APPETITE FOR TRAVELING AFTER TWO YEARS,
BASICALLY STAYING AT HOME. LISA: BUT WILL IT TAKE FOR REFINERS
TO ACTUALLY JUST REFINE MORE? AT WHAT POINT DOES THE
SUPPLY-SIDE RESPOND? JAVIER: THE REFINERS IN THE UNITED
STATES ARE WORKING ALMOST AS HARD AS THEY CAN.
WE HAVE SEEN OPERATING RATES ALREADY IN THE GULF OF MEXICO
AROUND 90%, WHICH IS VERY HIGH FOR THIS TIME OF YEAR.
WE HAVE SEEN LOWER OPERATING RATES BECAUSE THEY ARE DOING
SEASONAL MAINTENANCE, SO I'M NOT EXPECT THE REFINERS ARE
WORKING HARDER THAN THEY ARE. ANY EXECUTIVE TODAY IS TRYING
TO RUN THEIR ENDS AS HARD AS THEY CAN BECAUSE THE PROFIT
MARGIN YOU COULD MAKE, I DON'T THINK ANYONE IN THE AMERICAN
REFINING INDUSTRY HAS EVER DREAMED TO SEE THE 321 REFINING
MARKET NORTH OF $50 A BARREL. I'M NOT EXPECT THAT REFINERS
CAN DO MORE, SO WE NEED TO BRING DEMAND DOWN, AND THE ONLY
WAY IS THROUGH HIGHER PRICES. TOM:
MY AMATEUR TAKE IS THE SPREAD BETWEEN WEST TEXAS INTERMEDIATE
AND BRENT IS FOUR DOLLARS, FIVE DOLLARS, SIX DOLLARS.
RIGHT NOW AMERICAN OIL IS $.70 MORE EXPENSIVE THAN BRENT CRUDE.
WHY, AND WHICH ONE MOVES BACK TO NORMAL? JAVIER:
I THINK WE WILL SEE AT SOME POINT BRENT COMING ABOVE WTI
AGAIN COME ABOUT MOMENT WE ARE SEEING AMERICAN REFINERS BUYING
AS MUCH AS THEY CAN BECAUSE THEY CAN MAKE MONEY REFINING
THAT GROWTH, AND THAT IS WHY WE SEE SO MUCH PRESSURE ON WTI.
IT IS PRESSURE FROM THE REFINERS , AND A HUGE REFINING
MARKET. LISA: MEANWHILE, TONY BLINKEN
RETURNING FROM HIS TRIP TO ABU DHABI.
WHAT DO YOU THINK THE ASK IS FROM THE U.S.
FROM 1-800 CALL ABU DHABI? JAVIER:
THEY HAVE BEEN ASKING I WOULD DOUBLE HE AND RIYADH -- ASKING
ABU DHABI AND RIYADH FOR MORE OIL, BUT THE POLICIES ALSO HAVE
THEIR OWN ASKS. NEITHER IS BLINKING, NEITHER
GIVING UP ON THAT PARTICULAR REQUEST, AND WE HAVE SEEN OPEC
PRODUCTION INCREASING VERY SLOWLY.
BUT EVEN MORE SAUDI AND UAE OIL IN THE MARKET, THOSE BARRELS
NEED TO BE REFINED, AND THE BOTTLENECK RIGHT NOW IS ON THE
REFINING SECTOR. MORE OPEC OIL WILL HELP, BUT IT
WILL NOT BRING GASOLINE PRICES FOR CONSUMERS IMMEDIATELY DOWN.
TOM: A CHART I HAVE OF SAUDI LITE,
IT GOES BACK TO THE 1950'S. IT SPANS DANIEL JUERGEN'S THE
PRIZE. WE WERE ALL HUMBLED IN 1986.
IS SAUDI GOING TO CRUSH OIL AGAIN IF THEY HAVE TO BREAK
OPEC? JAVIER: IF THEY HAVE TO, THEY WILL DO
IT. THEY HAVE DEMONSTRATED TIME AFTER TIME THAT THEY ARE
WILLING TO DO WHATEVER IS NEEDED TO KEEP CONTROL OF THE
MARKET. THE POSITION RIGHT NOW IS THAT
SAUDI ARABIA, PRODUCTION IS APPROACHING ALL-TIME HIGH. MOST LIKELY, ON AVERAGE, 2022
IS GOING TO MATCH THE HIGHEST EVER SAUDI OIL PRODUCTION.
WE HAVE HAD THE ABILITY TO REALLY BE IN COMMAND OF THIS
MARKET. IF THE ECONOMY IS DOWN AT THE
BEGINNING OF 2023, THEY CAN CUT PRODUCTION WAS NO PROBLEM AND
CONTROL PRICES. THERE'S NOT MUCH THEY CAN DO
RIGHT NOW ON THE UPSIDE, I'M AFRAID. TOM:
WONDERFUL TO VISIT WITH YOU, AS ALWAYS.
HIS WONDERFUL BOOK OUT ON OIL TRADING AS WELL. WHAT A DAY.
I DON'T KNOW WHERE TO BEGIN. LISA:
THIS IS A GREAT STORY TO REALLY END ON, PERHAPS NOT SO GREAT
FROM PEOPLE FILLING UP THEIR TANKS.
BUILD ON WHAT HOBBY OR WAS TALKING ABOUT, REACHING THE
HIGHEST ON RECORD IN THE UNITED STATES, AT LEAST AT A NOMINAL
LEVEL, $4.57. HOW HIGH COULD IT GO?
HOW HIGH DOES THIS CRIMP PEOPLE'S BUDGETS PLACES LIKE
TARGET AND WALMART AND AFFECT THE PRICING POWER OF THESE
RETAILERS? TOM: THAT IS THE AAA AVERAGE PRICE
COMING SITTING SHEEP -- PRICE, INCLUDING CHEAP FUEL.
