'Bloomberg Surveillance' Full Show 05/12/2021

over the next couple of months we will see significantly stronger inflation the consumer is still seeing spending in excess of what would be considered a normalized pace of spend this summer is going to be huge people are going to spend and the bounce back in oil demand is probably going to be significantly more than people have been expecting certainly some commodity prices are just completely out of control it's almost hyperbolic we are now at the point where supply is extremely low inventory is extremely low and demands roaring so prices are extraordinarily volatile this is bloomberg surveillance with tom keane jonathan farrow and lisa abramowitz it is cpi wednesday from new york city for our audience worldwide good morning good morning this is bloomberg surveillance alongside tom keane i'm jonathan farrow lisa abramowitz is out of the building she'll be back on monday tom can we call it cpi wednesday yeah i guess we can and it's a big deal it's a bigger deal this time around than maybe in the recent weeks is it like jobs day friday last time is it like retail sales coming up friday maybe not but john there is a mystery to it around better data on european gdp you used the s word a little bit earlier this morning tom stagflation it's one of the outcomes it comes out of the equity sweat that's out there right now you know john i've been really upset about crush let's bring it up right now crush dow down 1.6 percent yeah standard and poor's crushed i say down two percent nasdaq 100 call it down 5 but john it's a pullback and it's like that lingering fear gdp maybe not there with this rising inflation you saw john hatzius say uh maybe not i hear you upside risk to inflation downside risk to growth maybe relative to expectations i'm with you this time yesterday we were blaming pretty much everything on inflation and then at the closed what was that about bottom of the pile tom financials energy yeah it was an odd day what was that about very odd day and what i noticed was nasdaq 100 coming on at the end of the day i really don't have a good feeling here right now i got nasdaq 100 down 6 tenths of a percent small caps down a stick right now that gets my attention but john it's just it's a jumble maybe it's jumble wednesday jumbo wednesday everything you look at speaks to strong demand and a problem on the supply side did you see the small business survey that came out yesterday morning tom economy absolutely and this is important folks john and i go blather blather blather michael mckee actually works at this he's got a real job and mckee really cares john farrow about job openings and they were a boom are you implying we don't have real jobs no we don't have real jobs jeff we get to come in and we're wearing ties today an uproar yesterday when we were with when we were tireless with the hot seats i feel better like this maybe they should come off at 8 35 five minutes after the print of inflation wednesday yeah maybe futures this morning down 14 on the s p 500 41.32 i'll do my non-job we're down a third of one percent in a bond market yields come in a basis point 161 at 12 a little bit of supply later 40-yard billion of 10-year notes coming to market a little bit later this afternoon in the fx market euro week euro dollar 121.33 and just to add fuel to the commodity debate the inflation debate wti 65 71 up seven tenths of one percent tom we've got a gasoline shortage so let's discuss it just briefly a lot of people on wall street of course will wait for this number to come out at 8 30 eastern for many other people in this country their experience of inflation is not a cpi print on a wednesday morning at 8 30 eastern time tom their experience of inflation is what happens every day when they go to the fuel pump when they go to the grocery store when they go to buy everyday items when they pay the rent when they try and buy a house yeah they do i mean it's out there and gas is part of it and there's a lot of rationalization by fancy people and students and ties that it doesn't matter but it does matter john i have to point out the 10-year real yield continues to break down this is a huge backstory this week about the inflation-adjusted yields just aren't happening they're going to new negative numbers mr dubby with a new bloomberg piece this morning tom suggested i missed this can go higher nominal yields can go under estimating the path of short-term interest rates over the next several years and for that matter yields can and should go higher yeah it's an important statement it's something to theme about here as we go to retail sales on friday but on inflation wednesday i mean what series are you going to look at john there's like 14 flavors of inflation i think most people go to court strip out food strip out energy the estimate at the moment times 2.3 percent from a previous 1.6 percent oh no you covered year on year on the headline number that's a 3.6 versus a previous reader 2.6 number one thing we learned yesterday john inflation was pricing power among selected corporations and a lot of people i heard alluding to the idea big tech microsoft and the rest they have pricing power let's bring in harm band health shall we have kill university economics professor formerly of woody credit grady catch up harmed as always 8 30 eastern time that's when we get the cpi print harm how are you interpreting the incoming data what are you looking for yeah good morning first of all i have no tie either i apologize but i remember carry on yeah you know it is it is really as you as you both uh talked about earlier the market is right now obsessed with inflation everybody's talking how about higher inflation and then we have a report coming out today which will show higher inflation because we have a base effect you know last year exactly a year ago april 2020 the covet caused a big drop in the cpi the cbi x food energy that base effect is now getting out of the system so this is why we get what john talked earlier about the big jump in the headline numbers so i do think actually the market will because it's looking for higher inflation we'll also have a look at the the rise in the headline figure to a 3.6 percent because that year-over-year spike is the biggest in i think 10 years so you know i think this will make headlines and it will corroborate the market notion that that inflation is is spiking and it you know all the the inflation dangers are materializing let's pick up one dilemma right now home just to jump in and look at the labor market job openings yesterday absolutely surge in america to records then you look at small business surveys coming in in america here's one a record 44 of respondents said they were unable to fill positions 31 said they boosted worker compensation so harm just as a little case study right now that job openings issue the problem on the supply side is it an issue solved by time or by higher prices no it's solved by better education right so it's it doesn't go away by by by time and um you know we have been looking at these numbers and we to be honest we i i have been using this time series always as a reason that wages will go up and rise stronger and and to be honest it has not really materialized in the past and i'm not quite sure that it will materialize in the future but taking a step back i mean you mentioned the word stagflation there may be a little bit of the latter part i.e inflation but i think there's no doubt that there will be no stack so the u.s economy will grow strongly if it's six seven percent we don't we don't know you know it also depends a little bit on the quarterly pattern but the numbers are strong and the economy will will be will grow at a very strong pace so and this is all corroborated i just don't think it will lead to sustained higher inflation so i'm more with the feds thinking that it will be a temporary inherent john just in the last hour nabarro over at citigroup reaffirms the resilience of the united kingdom economy and goldman sachs really in the last 15 minutes readjust 2021 uk gdp uh ever higher as well harm bundles when you're in union credit you glen you uh gained worldwide fame with an essay on riyadh saudi arabia and the price of oil we've now got gasoline moving up brent crude back to 70. do you see oil as part of the inflation discussion sure and as i said i mean the market wants higher inflation right now i mean doesn't know wanted but this is what it focuses on and then of course as i said you have for april the stronger numbers the base effect then we coming into may we have gasoline shortages and as we all know that boosts headline inflation and it trickles also um through to some of the core cpi numbers um so usually the the core cpi is also positively affected when gasoline prices go up so yeah so this debate will stay with us also when the main members come out part of your job at unit credit i know you don't have to do it in the ivory tower of kill university but part of your job was to link this into market performance for our viewers and listeners how do you link inflation worries on inflation wednesday into what the stock market's going to do what's your correlation there if there is one well the well the correlation is probably if the stock market thinks that higher inflation leads to higher interest rates then the stock market doesn't like it on the other hand of course gradually higher prices should be good for the stock market because because gradually rising price also means as you mentioned earlier higher pricing power and that increases the top line so but but i mean when we see the sell-off we i think we must not take it out of the overall context stock markets are in my personal view very expensive and i know tom you like statistical numbers i'm looking at the s s p to nominal gdp ratio i always call it the economist's pe ratio this has been three standard deviations above the long term average comparison during the 2000 bubble during the dot-com bubble it was two standard deviations so stock markets are just very expensive relative to the economy and if we then see a couple of days or so of a sell-off maybe we must not take it out john isn't it john it's just fabulous to have our first guest of the morning talking standard deviations i just love that the former economist from mooney credit under stocks tom that's what i'm enjoying about this the academic just loosening up a little bit and going into the studio you imagine being in his classroom do you realize all of his students own bitcoin i'm sure they do harm we got to leave it there no i know i hope they don't i mean that has not changed they're going to have you got to comment on bitcoin too home we got to leave it there got to run i'm van holds there kill university don't be a stranger thank you very much in the last couple of weeks a big story has been developing politically speaking arkansas north dakota south carolina montana iowa now missouri tennessee joining tom a club of republican governors to suspend get rid of the additional 300 of unemployment benefits that you receive in the united states of america i say it's a political decision it will have economic consequences john i said this before and i'll review it once more the university of chicago has done brilliant brilliant brilliant work on this the new york times did a huge layout on it a year ago or so and the answer is you're absolutely right there are selected states where clearly that unemployment aid really stops job formation but there are just as many other states where that's not true how do you partition them clearly it's been a failure of politics then lewis fed president jim bullard actually raised that in a cnn that was quite interesting actually tom he raised the fact that maybe using one blunt taller fiscal policy without looking at the respect of rural areas and each and every economy in each state has a different experience 3.7 governor reynolds pointed to a 3.7 unemployment rate tom yeah 1.7 it's exceptionally low out there and those the viewers and listeners in urban areas where there's higher unemployment i mean we talked to stiglitz the other day about is gary indiana they're not at 3.7 and they need that unemployment aid so what happens in the next couple of months in these states do you start to see those job openings get filled more quickly or does it have adverse effects because a child i want to be more optimistic you're going to have growth come in growth's going to slap in and then the growth debate q3 q4 imagine inflation wednesday john in november cpi wednesday inflation wednesday how are we going to brand this i don't know we got to see what i'm going to do with thursday i don't know todd's thursday thursday it works that's very you thank you the big four meeting the president of the united states down in washington dc a little bit later today we'll catch up with the team down in washington in just a moment equity futures 41 39 on the s p from new york city this is bloomberg [Music] with the first one news i'm richard gupta colonial pipeline says it will know by late today whether it's safe to restart gasoline and diesel flows they've been unhauled since hackers targeted that giant pipeline last week fuel shortages have spread quickly across the southern and the eastern u.s energy secretary jennifer granholm says even if colonial can restart today it will take days to ramp up operations israel stepped up its attacks on the hamas ruled gaza strip overnight rocket squads in gaza fired a barrage at central israel early today while israeli warplanes pounded gaza with dozens of airstrikes at least 35 people have been killed in gaza five in died in israel it appears to be the most serious escalation since a 2014 war in gaza and donald trump's former acting defense secretary says there was a reason he was concerned about sending troops to protect the capital before the january 6 riot christopher miller will tell a house committee today he thought the deployment would heighten speculation about a military coup he'll testify that he didn't think the military should have played a major role in enforcing the law that day it's another tax defeat for european union competition chief margaret festia amazon has won a court fight over the eu's 303 million dollar tax bill the eu general court ruled today that amazon did not get special treatment from luxembourg's tax authority last year apple successfully challenged a record 15.8 billion dollar eu tax order global news 24 hours a day on air and on bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm richard gupta this is bloomberg the fifth view is if we tighten and the stock market goes down to some subsequent period of time that will tighten financial conditions and we may then not have to tighten monetary policy quite as much but you know they agree that markets are frothy but they're looking through that they're determined to keep rates low until they actually get a lot more people back to work that was bill dudley of bloomberg opinion from new york city this morning good morning alongside tom keane i'm jonathan ferro lisa will be back with us next week here's the price action this wednesday morning going into a cpi print just a couple of hours away equity futures down 10 on the s p we decline a quarter of one percent i was expecting that in the bond market yields come in almost the basis point the 10-year in focus a little bit later on 41 billion dollars of 10-year notes already coming to market is that treasury it's a fair bit isn't it tom a little bit more supply later in the fx market euro dollar 121.34 we decline a tenth of one percent and crude just to stay on top of the commodity story up eight tenths of one percent on wti just south of 66 at 65.82 in the good news of europe i want to know my benchmark the 20-year swiss full faith and credit to a positive .091 that's a huge deal and a huge vote on european growth over the last number of days right now in washington john wants to talk about the things that are serious right now but there is a parlor game known as the future of the republican party emily wilkins joins us now bloomberg soap opera reporter emily uh ms chaney i guess is out today from wyoming this has been widely reported but we've got the republican party where we've got 100 republicans i love this phrase planning to threaten what in god's name is plan to threaten what can the republican establishment allah congresswoman cheney actually do against the group of trump i mean that's kind of the big question right now because if you look at where republican voters are and voters are the ones at the end of the day who ultimately have the power the voters are still with trump we saw a reuters poll last month showing that 81 percent of republican voters still approve of trump 55 percent believe hit that the 2020 election was stolen and should have been won by president by former president trump and so you still have the voters going with trump and lawmakers like house minority leader kevin mccarthy know where those guards are and he knows what he needs to do to win in 2022. what is the power of the traditional republican establishment i don't detect denny i mean things have shifted dramatically within the republican party after the rise of trump to the party and yes you still have individuals like liz chaney you still have individuals like adam kinzinger you still have groups out there that are backing and supporting those sort of main street republicans and conservative values but for the most part at the national uh national level the calculation has been made that if republicans want to win they need to keep trump on board and i know john you want to get to inflation and the talk that's out there but you know you see little inner nicene warfare where stephanie murphy of florida is going after marco rubio seat i mean all of these are little battles john to begin 2022. the battle in front of us today though is a meeting with a big four in the white house emily can you sort of describe what to expect from that a little bit later yeah we're going to be seeing the four top leaders in congress uh that is uh senator mitch mcconnell senator chuck schumer and the house speaker nancy pelosi and the republican leader in the house kevin mccarthy go ahead and sit down with president biden this is actually going to be the first time uh that mccarthy and biden actually sit down together and chat since biden became president and it's sort of seen as this big move for potential bipartisanship the question of course can something get done on that infrastructure package that president biden is pushing he'll need leadership to get buy-in for this if he wants to pass a bill in a bipartisan manner through congress so this is going to be a clue is congress going to wind up trying to take a bipartisan track with the infrastructure component of this bill or are democrats just going to say after this meeting you know what we tried it doesn't look like we're going to have republicans coming along with us and we need to start moving through reconciliation which will substantially change what can or cannot be in an infrastructure package before we turn to a critical foreign policy issue that's been brewing and really flared up in the last 24 hours just finally on the domestic issue i count seven republican governors now arkansas north dakota south carolina montana iowa missouri tennessee stepping up in the past week to effectively end or declare the end at some point in the next month the additional 300 of unemployment insurance emily i keep asking the administration have you spoken to these governors whether it's secretary walsh whether it was jared bernstein yesterday they would say no but someone internally has has the president it's not clear has the president spoken to these governors about the decisions they're making we don't have any indication at this point that president biden has spoken with these governors but we are starting to see more movement on this in congress you saw yesterday senator roger marshall of kansas introduced a bill to end these benefits and you saw 10 of his colleagues sign on to that legislation with him the issue is that what you hear from president biden and what you hear from democrats is that they don't believe that the weak jobs numbers that we saw last month are a result of these unemployment benefits being so high they say that what that actually is is because it's a lack of child care for families who you know they can't return to the workforce because their kids still aren't back in school as well as general concerns about people worried about their health worried that if they go back they could still potentially catch coronavirus emily for all of us whatever our age there's an architecture of our history with the lavon it could be the bombings in beirut years ago it could be 1967. frame where we are at this moment with palestine in israel in the uh a headline out moments ago of the president's consideration of another envoy i mean there has always been a lot of partisanship and a lot of tension around the palestinian israeli issue i mean you've seen lawmakers repeatedly weigh in on it over the years it's very divided between republicans and democrats i think at this point we're we've continued to see that pattern develop in congress sort of as far as where the lines fall and who is pushing for what uh and so i think at this point we're going to at this point continue to see more of the same even as violence in the area continues to ramp up emily it's going to catch up emily wilkins there dan in washington dc of bloomberg government tom the israeli military saying a thousand rockets have been fired from the palestinian enclave and i think this has been described quite widely as some of the the bloodiest battles we've seen at least since 2014. well the marketers seem to go back seven years as you say john but really the market's to go back forever and with the administration change to me the greatest mystery and i'm looking at this is an amateur from a distance but john the greatest mystery for me is the relationship of the president of the united states with the israeli government with the turmoil there of the domestic election i'm curious how that relationship frames out after what we saw with trump and netanyahu would you be comfortable characterizing this as the first big foreign policy test of this administration in terms of smoke bombs pain agony and death absolutely john but his card is full his dance card is full worldwide you alluded to that headline that crossed a couple of minutes ago it comes from axios president biden weighing sending an envoy to israel for de-escalation efforts and de-escalation the calls coming from all sides at the moment tom it's coming from all sides you know the united kingdom away and we've all seen the ballet before but the number one ballet is to stop the carnage and as you say it's not a question of one shot here one shot there it seems like overnight there were many different fronts to this new war yep and as the headlines crossed we'll keep you on top of the news flow here at bloomberg from new york city alongside tom keane i'm jonathan ferro it's the price action as we count you down to a cpi report in the united states of america equity futures 41 37 on the s p 500 declining two tenths of one percent let's call it a quarter one percent lower in the bond market yields coming a full basis point now 1.612 on a us 10 year from new york this is bloomberg surveillance [Music] what a messy couple of days in this market some price action looking for a narrative you know how it works secondly futures down about 10 on the s p 500. we declined about a quarter of one percent two hours away from a cpi report in america it is cpi wednesday nasdaq 100 futures coming in about a half you're under performance on the russell right now tom we're down one full percentage point let's get to the bond market an upgrade from on the s p 500 from 42 to 45 hours brian upgrading energy to tom we'll talk about energy a little bit later 10 year yields right now 160 12. coming in about a basis point about 233 on 30s in about a basis point there as well some stability over the last couple of days after we gapped aggressively lower in friday's session here's the story though the big debate right now in the united states and worldwide we don't have a demand problem we have a supply problem and capturing that perfectly yesterday was this switch at the board job openings in america 8.12 million from seven and a half in a previous chart on radio that's the most important chart job a record yep it's a record and the big debate right now is what will solve that gap between demand and supply that charge john i did some research yesterday on this house at mcdonald's and they made very clear to me they could serve more people they're packed and they're just starving for labor yep and i don't think they're alone and i don't believe you're a mcdonald's either were you really a mcdonald's were you really i'm not going to go with that i don't believe you were there i've seen you there once it's around the corner from here mcdonald's around the corner from here leave me alone what did you get i got nothing i got i just walked in to do a label lobster risotto okay good morning amaranth it's a great restaurant carry on carry on are you done i'm done thank you john farrow with the data there and on inflation wednesday seriously folks we're seeing incredible nuance in the yield market right now you don't know what to do in the equity market i don't know what to do john doesn't know what to do eric freeman has a very nuanced view with u.s bank asset management and their chief investment officer eric good morning i love love love your research and i want to start with just a simple call as john just framed with and brian belski catching up with you you're at 4 600 up 11 i want to focus on just up 11 from here are you lonely or do you think a lot of people have that view good morning tom we are a little lonely here and i think that the next couple quarters really test that 4 600 number for us i think the one thing that's really positive is the momentum that came out of this past quarter's earnings lots of upside surprises on both revenue as well as earnings so we think there is some scope for some upside revisions but that transition from q2 to q3 would be really important i mean what's so important here folks is it's so cold at colgate university in the winter that everybody studies statistics to stay warm eric i love in your note you talk about in-sample volatility that's a fancy phrase for the internal dynamics of the market right now what does in-sample volatility tell you about being a bull the biggest thing tom is the composition of the market is changing and it is at the margin right now but to your point earlier from an earlier segment the the composition if you will in terms of the reopening trade versus more of the let's call it steady state winners of technology and healthcare those are things we're really engaging so if you look for example at the uk which jonathan of course knows better than i do that you know the the compelling reopening is occurring and the question is will investors continually pay for what feels like a fairly well-known story which is reopening is going to happen on a more gradual basis so we do think that this shift back and forth across sectors is normal although for the last couple of months it's been uh you know maybe a little abnormal so we think this is probably a dip that's worth buying uh but we should probably see a little more volatility before getting more excited we've caught up with a lot of people eric that have talked to us about staples pricing power go to staples btig morgan stanley others as well in the mix too do you share that view we do we think jonathan in fact a really good conversation you had yesterday was on technology their ability to maintain that pricing power we think that there may be some substitution effects at the lower end of staples but if you look at technology what cfos will spend on repeatedly unlikely to have a lot of a lot of substitution so we think that inelasticity will persist and so that really leads us to think that technology is worth looking at here given some that ongoing pricing power in tech as well as some select staples names as well what's really surprised me over the last several weeks are the obsessive talking points around inflation and tk i'm sure you've got a view on this as well we've almost disregarded what happened with margins through q1 margins were fantastic despite the fact there was price pressure because some of these companies eric got to pass on the cost eric jump in here but john my number one number one number one point is corporations adjust that's my number one they didn't adjust now eric i think the question is whether they can repeat the act in q2 q3 q4 whether there is some margin risk i think so jonathan if you look at especially capex trends which we think will pick up that's something that will start flowing through the income statement if people are anticipating consumer spending not just in the u.s but also this glide path globally and not that we want to have one more case of covid but as we've seen a gradual reopening whether that's in the continent whether it's in the uk ultimately india latin america that could provide a really diet for uh for capex to persist that could also challenge margins so we do think that margins have some pressure we'll see if investors keep paying up for it we think that they will eric i want to talk about use of cash i'm beginning to see the articles percolate in of what lisa john and i have talked about which is you know what they're going to buy back shares give me your view of the rest of the year and in the next year use of this titanic profit that corporations are seeing they've only got one path a cap actually i get it but then we're going to see share buybacks as we've never seen before we've got a really large capital markets business thomas we're talking to that team that cfos are are really thinking about being more aggressive in terms of m a and also continuing with sheer buybacks so that um you know funding is not an issue people have no problems raising capital there's lots of places where they can find it so that's going to be likely something we see continuing again will likely be an ongoing bid to underlying equities but don't expect that trend to roll over any time john did you get your 40-year amazon piece did that trade happen i didn't at 95 basis points over i wasn't in time did pimco pushed you aside that two-year piece though at 10 basis points over treasuries wasn't that something eric is amazing we've just had an eight-minute conversation almost on the market and we haven't talked about the fed forgive me can we talk about the fed does any of this play into the way you think about the equity market eric going through summer no it does and jonathan to your point from your tweet this morning that people like richard clare to speaking people like leo brainerd these are our stories that we're going to keep following and paying attention to because at the margin there seems to be some very modest cracks in the foundation of we're not even thinking about thinking about raising rates so we see some more conversations develop about that inflationary pressure which we can't again we think it will be more transitory but we can't bypass the fact that the fed may lose patience and in fact may change right so that's something we're very much paying close attention to eric i want to go right to fear 101. i mean this is the reality there's a lot of people that feel they haven't participated in this bull market they don't own the big tech etc where do you place fresh capital now if you've missed out and you know you want to get on board but you're scared stiff it's probably two places we prioritize tom number one would be domestic mid caps it really sits in that middle point if you will between momentum small as well as large cap which of course has done very well so that tends to be a very under love and underfollowed part of the u.s equity market we'd be buyers there for those that want to scale into pieces within the fixed income market we still think that these are things you can actually own these aren't esoteric parts of the market so things like non-agency mortgages those are spots where we still think you can capture some yield and um and not take on too much portfolio risk those would be two areas we pay close attention to we also think again over time that the ongoing bid from cfos for technology will persist so as that continues to to struggle that's a spot that investors can start picking away at love that great to catch up eric friedman there u.s bank investment officer on the fed speak rich clara to the vice chair a little bit later we're here from rosengren we'll hear from bostik and i believe one more harker a little bit later what are they going to say about inflation i mean i guess they wait it's inflationary how they respond to it yeah john help me with football right now it's like the end of the season most of the leagues is like which league do you want to do no but there's different leagues i can't keep track of the league's job but neither cannot look it's simple american league national league okay that's baseball football's not soccer's not like that yeah how how late are we in the season like we're here we've got two three games left in most leagues across europe two or three relegations dealt with in the uk now we've got to focus on those top four spots manchester city have won the league who qualifies for the champions league will liverpool miss out big question serie a in italy will ronaldo and juventus miss out on a place in a champions league that's the race right there in a really tight race in spain with athletico madrid leading the way god you like maria today oh it's it's it's far better than this than me now look we're really we really are focused on diversity here in abramow it's front ran us before she went away on her sabbatical what did lisa say abramovitz went out and hired an arsenal supporter for our team did she clear this through you i have not heard about this i have not heard about an arsenal i thought she was an arsenal supporter yeah that's why what do you think she's doing here she's hiring us who's the arsenal supporter we have maxwell in london who i'm told is an arsenal supporter i mean this is an american it's not supposed to happen very cool after the super league this should not happen is maxwell listening today i have no idea i have no idea because i have no idea what you're talking about do you want to talk about the market we got i guess so but we got an arsenal supporter i'm not happy okay we can move on the market the future's negative so we can talk about cpi tom we could talk about that massive monster job openings figure in america yeah let's start taking a pic on radio folks the chardonnays is the chart of the moment john's 100 correct on that john moonshot covers it just how of the pan it's a true moon shot and i don't know email us in folks we're living it in new york city do you think this is something we solve with time just several months or is this an educational issue like han van holtz was talking about is this a price issue a labor market price issue a ui issue it's a natural disaster issue we're coming out of a natural disaster but what's fascinating here john is what is the power of labor to demand a higher wages that's a mystery anybody who says they got a theory i'm not interested we need to observe what wages and benefits do particularly in the i'd say the three or four lowest deciles out there i think it's pretty clear that the economics profession nailed the demand pitcher really got a decent gauge of demand yes and has really struggled to understand whether supply can meet it yeah it can be that way and with commodities look at copper today i mean even copper had another lift today transitory i've heard that once in 40 minutes i know you're impressed going into an inflation number at 8 30 eastern time you're going to hear that number a whole lot more throughout the wednesday and that word repeatedly transitory in your equity market 4137 on the s p 500 we declined two tenths of one percent with tom keane jonathan to lisa brown was who we have we have no idea where she is she's gonna be back on monday with the first word news i'm ricky gupta the white house is facing rising pressure over gasoline shortages caused by the shutdown of that giant pipeline the epa has waived requirements across 12 states and washington dc to help bring more fuel to areas normally supplied by the colonial pipeline north carolina and virginia declared states of emergency as gas stations ran dry more than a hundred republicans reportedly are threatening to leave and form a third party a statement is expected to take aim at former president trump stranglehold on the gop the new york times says the group is headed by miles taylor a former trump era official who wrote a book blasting the administration taylor says those who will sign a statement include former governors lawmakers and cabinet secretaries reuters says for former governors tom ridge of pennsylvania and christine todd whitman of new jersey will sign it in the uk prime minister boris johnson indicates that an investigation into his government's handling of the pandemic will be set up within a year the government has been criticized for a number of things including waiting too long to impose lockdowns but johnson is now riding high after a vaccine rollout that has already administered doses of more than 50 million people global news 24 hours today on air and on bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm ruska gupta this is bloomberg [Music] every country in the world is now looking to us to provide for their lack of capacity to produce and or have vaccines i'm not going to shortcut the united states of america i promise you we're going to have enough vaccine for every single american but we are going to be engaged in working with other countries america first but we will help the rest of the world the message from the president of the united states from new york city this morning good morning alongside tom keane i'm jonathan ferro here's the price action this wednesday morning going into an important inflation print a little bit later 8 30 eastern time at a cpi wednesday in your bond market yields coming in a basis point to 160 94 on tens euro dollar 121 29 we're coming down about a tenth of one percent there just a touch of euro weakness a little bit of commodity strength the 66 handle yes 66 and about 5 cents tom by one full percentage point the s p 500 down around about a third of one percent i use on commodities as a proxy folks looney this is dollar canada usd cad 120 88 to see it break down to 119 would be a big deal we're not there yet as john mentioned as the president mentions it's a global pandemic the u.s on the road to recovery maybe not lauren sauer joins with johns hopkins here and lauren we noticed overnight out in san diego the wonderful padres their superstar tatis and also will myers out with covid they have three other players in contract tracing they have five of their on-field players out of commission how do you have an athletic team with five people out in the song and dance that we're gonna fill the baseball park in this case petco field yeah i think that um what that shows is that covet is still among us and we still have to be very very careful we're seeing that that even though we're seeing these drops in cases across the country there are pockets especially where people are less have less vaccination rates and and in those areas people are still highly susceptible okay this is really really important folks i'm going to stop the show because john farrell's been way out front on this lauren if i'm walking down the street should i have a mask on as a courtesy to others and also because i need it because of covid or are we really where we can go mask free we are confused yeah the cdc is saying that outside you can be mask-free um you know it's up to your personal level of comfort but it's safe to be mask-free outside and so where you want to see people wearing those masks is when you're close to other people where you're indoors particularly in places where the backs the ventilation is not great or if you are outdoors in places where you're really in close quarters with people so if you're sitting really close to people if you're in an area that's partially sheltered if you're in one of those little tents that people have set up in places that don't have good air flow so so the the outside mask free is all about the airflow but tom something you just said was important and that's why people are confused is it social etiquette or is it science yeah which one is it because the science according to lauren sauer is that you don't have to wear one outdoor and we keep sort of blurring the lines between ethics science and social etiquette lauren i don't think that's helpful what's your view yeah i i totally understand that i mean i think it's a mix of all three like you said um i think the science is evolving and so that's what's really hard to message right now right so we're learning more about masking we have not been a culture that masks um there's a lot of great scientists who are working on this right now where is where is sort of that line that everyone's looking for but it is blurry right so um it's it it is an area where you want to see if you're in close quarters you wear masks because a we do believe it keeps you safer and b it may keep someone else safer if you happen to be exposed or have the virus and you're going to be close to them outside i think it is safe i think we've all sort of agreed that it is safe if you're spaced out to not wear masks and that's what the science says so far we talked about this recently and i'd love your view on it because a lot of people wrote in when we started asking the question the goal posts seem to have moved from protecting the most vulnerable in society to now achieving some kind of herd immunity and getting 70 percent of the country with at least one one dose of the vaccine lauren why have the goal post moved over the last 12 months i think the biggest piece is because we have vaccine available um and so we have we have targeted our most vulnerable people in the community to get vaccine first as we were scaling up ramping up production production is higher now and we continue to improve production so that we can not only target more broadly across our whole country but also support global efforts to improve vaccination but but i think it's less that the goal posts have moved and more that the um the goals gotten bigger and so it's always nice when the goal is bigger because it means you've had successes to to get to that point but we're still targeting our most vulnerable communities and especially those who have not been able to access vaccine yet and there's a lot of work in that space being done but the goal has definitely gotten bigger more vaccine in more arms more broadly across the country and across the world very quickly then let's circle around to the padres again tonight coarse field denver padres rockies 5 000 people whatever in the stands would you wear a mask i think if it would depend on how crowded the concessions and and you know the beer line is the beer i would never i think i probably i probably would wear a mask in the concession area um any place where i felt that it wasn't comfortable in the restrooms but again you know if you're outside and you're feeling safe that that is a space where as long as you're socially distance and you feel like you can keep that space between people it's one thing if you feel like you can't i would put that mask on lauren have you ever had three two beer coors three two beer what is sweet soup what is this from my childhood this was the worst beer ever it was before light beers and it was like some over from prohibition or whatever and you guys are like it's like bad light it's like worse it's like watered down bud light like natty light do they do that in britain john what bad light no like yeah and like lighter than cold bud like something else but i can't talk about that on there can i yeah but like one of the great things of america's coors 3-2 beer went away okay well lauren's never had so thank you yeah that's good lord lines up at the concession stand for beer don't even listen to a wall absolutely lauren sarah johns hopkins tks if you sit in the seats that mean you have to go to the concession sand for a pint we need kurt gardiner to help me spray narragansett lager beer or perroni you tried peroni tom no no no no red sox baseball we don't have a parent i've got peroni i like peyronie i have pepperoni it's san carlos this la dee da we recommended that i don't know it's like it's like actually real food and good morning to san carlo she can have a perroni afterwards we should maybe we should go thursday instead of friday where the real yield occupies your time john are you looking at the real yield i mean i'm sorry as a data point today on inflation wednesday i'm sorry the real yield how the real yield moves at 8 30 is a big deal i couldn't agree more let's get serious the cpi print 8 30 eastern time the countdown continues alongside tom keane i'm jonathan ferro one of us might have had a peyronie already it's not me you do the maths futures down four tenths of one percent on the s p 500 say good morning to all of you watching at the 16 in boulder colorado where they still serve of course in the fx market euro dollar 120 124 what is that beer well it was like prohibition it was like lighter than like it was they still do it no they got rid of it it was terrific okay one place they got rid of it this is when nixon was president go the next couple of months we will see significantly stronger inflation the consumer is still seeing spending in excess of what would be considered a normalized pace of spend this summer is going to be huge people are going to spend and the bounce back in oil demand is probably going to be significantly more than people have been expecting certainly some commodity prices are just completely out of control it's almost hyperbolic we are now at the point where supply is extremely low inventories are extremely low and demands roaring so prices are extraordinarily volatile this is bloomberg surveillance with tom keane jonathan farrell and lisa abramowitz cpi 90 minutes away from new york city for our audience worldwide good morning good morning this is bloomberg surveillance live on tv and radio alongside tom keane i'm jonathan ferro lisa abramowicz is out of the building tom equity future's down four tenths of one percent on the s p 500 it is cpi wednesday the data yeah 8 30 eastern i i don't like the phrase cpi wednesday but let's be clear folks this is a big deal particularly dovetailed in with retail sales on friday john it's a give and take between price change and the good feeling of this economy i would suggest john we see a good feeling for gdp why don't you like the phrase what's wrong with that i just you know i don't like it bannering economic data you know what are we going to have to call it payroll's friday because it's like a huge deal i'll go with that as a one-off inventory thursday we can do that we can do job claims thursday morning if you really want to i don't think that's appropriate i'd rather stick with cpi wednesday and payroll friday i think that's going to be the data point empire stayed in the next several months let's get serious just for a moment in the last 24 hours demand solid we've seen that in job openings can supply meet it and what happens to prices is price the solution for that gap between demand and supply in the price of questions the pricing power debate that we started yesterday john you've got to believe that's a debate through the summer as well how did corporation adjust to this robert shiffman moments ago at bloomberg intelligence reaffirming amazon and their credit quality after that 18 billion dollar deal where you got the 40-year piece basically the treasury curve isn't it at 10 basis points over the two-year tom it's a government basis full faith in credit can agree more yeah i mean that's all there is uh troy you know there's so many things to talk about john but i want to circle back to the gloom of brexit you lived it you led our coverage there and guess what citigroup calls the united kingdom economy resilient pmi is north of 60 this recovery is just starting this recovery in america is just starting to the vaccine roll out there has been really terrific as it has been in the u.s too but europe's catching up and for that matter time i think europe's coming together in a way that wasn't expected maybe several months back and that's making more people bullish on the cyclical story we all use the bloomberg terminal differently i've got my own setup john's got his what i look at is a euro proxy is german swiss excuse me swiss 20 or i should say a positive .088 that's a litmus paper john of this kind of feeling in europe the german 10 is getting close to zero getting closer to zero back to levels we haven't seen negative 0.18 20 20. decent move higher on the german tenure yielding yesterday's session here's the move this morning here's your price section we'll start with a bond market shall we 10 supply coming a little bit later in a treasury market for the 10-year piece the 10-year maturity right now yields in a basis point at 1.612 in the equity market down 4 10 to 1 on the s p to 41.29 we're down to 17 points on the s p 500 an upgrade from in the last 24 hours brian bowsky going to 4 500 tom from 4200 and a tidy upgrade to energy in the mix as well we're seeing a lot of that and it comes around as you mentioned in the last hour john margin resilience observed as it would 80 90 percent of earnings coming in yes it's about revenues but as david constance said on amazon a few days ago looked down at with the fangs at cash flow look down at margins look down at the quality of capex and investment and that's where you get people going from 3 800 to 4 000 maybe they're going from 4 200 to 4 600. let's bring in matt maddie right now military back chief market strategist matt the data 8 30 eastern time do you think we're still underestimating the price pressure that's building in this country i definitely do i mean one of the things well one thing that i do we do need to be a little careful of is that you know a lot of these commodities are getting incredibly overbought i mean lumber is it came down pretty hard yesterday but the copper and some of these things so they probably going to come down at some point on a purely technical basis kind of the way interest rates did in april only on a technical basis and so that might give some people some relief that geez inflation is really not a big deal uh but i totally do disagree with that that will be a head fake if it does happens because inflation has to do nothing but go higher i mean you look at what happened uh before the pandemic we had record levels of debt around the world not just here in the us but around the world since then the debt has just exploded even higher when we have a situation like that you only have uh two ways out i mean it's default uh or you have or you can inflate your way out the fed knows this you don't want the force as bad as deflation can be uh defaults much worse and so those who are thinking that inflation is going to be transitory i don't think is uh are right i think inflation is going to be with us for a while it may not be 1970 style but it's going to be higher and then and therefore rates are going to move on a simple one then matt how are your position for it well i mean first of all you got to uh you know you've got to play for uh the the the investments that are going to do well with higher interest rates i mean uh the one of the things i mean i turned bullish on the bank stocks from financials in general but mostly on the bank stocks back in in october because i saw the rise in interest rates and it's it's continuing even more than i thought it would uh you know obviously it's changed i've changed my view and i continue to say uh to to feel good about that i also see again uh by if we don't get a pullback in the in the commodities uh i do think you'll that would be a great opportunity to buy but especially in the energy names again this is another group we hear certain people just turning positive uh some big names big houses on the street just turning positive on the group now i mean i turned positive back in october and it just shows that there's still a lot of people have not moved into that area uh now again i don't think oil is going to come down because it's not overbought as much as some other commodities but it's going to be i think you know it's going to be important to be do the right place matt does rising inflation cause equity market instability you know it's got to at some point because interest rates are going to move up i mean it's a long-term interest rates i mean you know we saw what bill dudley has talked about uh on bloomberg the bloomberg op-ed piece the market's not pricing in for these higher interest rates and uh i mean we saw in 2018 it was at that time it had to do with short-term interest rates you know said oh don't worry interest rates are really really low uh the higher interest rates really won't make a big difference until it did and it finally did it at one point the same thing is going to happen with long-term interest rates you probably when you get above two percent that might be two of a round number maybe has to be a little bit higher than that at some point it's going to have an impact man i want you know good morning vietnam i want to go back to vietnam the 1960s and into the 1970s where we had horrific inflation gyrations walter heller and you know all that and and the dow was john i got to quote the dow i'm sorry because this is the benchmark but essentially the dow pivoted around 900 through that whole period is what we don't see coming is not the up up up or the down down down but we get range range range i think that could be very well be the case because the fed is still providing a certain amount of liquidity and even though they're going to taper back uh and as they keep telling us hey we have the tools if things get get really bad uh but i think they want higher uh inflation and that they they're going to be uh you know providing a safety net it's just going to be a little bit lower than the marketplace and and therefore as you say with this sideways market it's going to be much more important investors do are good at stock picking and group picking uh not just buying you know the s p 500 etf and and you know going to bed so matt when you and the team get together and you talk about the us dollar what does that conversation sound like at the moment well the one thing about about the dollar is it's still a very crowded trade i mean that being the short dollar trade uh it's nowhere near as crowded as it was at the very beginning uh at the very beginning of the year when everybody was saying that the dollar has to go lower and of course it did nothing but rise in the first quarter uh but it's still a crowded trade uh fundamentally uh we have to know that you know obviously this this whole issue with the the the climbing the fiscal side of things it means that the dollar should and almost certainly will head lower over the longer term right now though and it's at a key level here on a technical basis and around that 90 level if we if we get below it's a little below 90 is the march lows you get below that then then it's it's katie bar the door it's going to be a big problem but uh near term i'm not as sure as a lot of people are that the dollar is going to break down from here it could surprise a lot of people and that could be another reason why i think uh uh you know these commodities will will see a bit of a correction so is it fair to say that unlike the other inflation easters out there who like the trip abroad international equities you don't share that view map based on what you just said about the dollar yes that's true i mean one of the things that we got to be careful though is again short-term trading versus long-term investments uh over you know we got to take these opportunities so uh when when the commodities pull back when the dollar bounces take advantage of that uh to go back into some of the commodities go back into some of the emerging markets i think that's going to be a surprising play on a longer term basis uh so people investors really have to say nimble right now interesting mali there miller type the chief market strategist thank you matt and appreciate the down reference too tom it's important just to fit that no but but john this is serious we make jokes about it we're doing yeah chelsea arsenal this afternoon oh yeah that's serious it could be a pause to reflect maybe that's where abramowicz is over at that moment can you acknowledge that given the increased importance of passive investing over the last several decades tom that quoting the dow is like oh yeah offering the score on a game that no one's playing we do the no i do not agree with that we do the benchmark for a zillion years the spx is a dramatically superior but who is this benchmark for now society in the american society sultans not boston consulting not cambridge associates and the rest of them using it as a benchmark within buy side and institutional but just in a general statement in society you wake up you're in the uber you sort of are always where's the doubt so you're doing this for the people i'm doing the people you're doing it for the people i'm doing i'm please i'm pleased with it can i point out john that one of the things that's really important here is we've forgotten what a range is yeah in range bound and there was the very ill-named carter malays and where we just went flat for x number of years and i mentioned 65 to 75 with a big drop off there and john i'm sure you've got british benchmarks as well what if we're slipping into a three five year range well tom you raised a really important point and i had this conversation with lisa emsbo mattingly of fidelity and ceviche subramania with bank of america at a conference that dean kerner had put on yesterday and it was a thoroughly enjoyable conversation you were not invited i was and when it came down to this we asked the question just explored it just to think about it thought exercise we've got used to this idea of zero rates and rates low for longer being great for markets and i wonder where that idea comes from because that wasn't necessarily the case at times in japan yeah it wasn't necessarily the case at times in europe too and i wonder if we have to test that theory right here in the states as well i would go to philip correa the giant of pioneer who said the white lights of inflation help a lot of people out and that's where we're heading if it's moderate and and doesn't jump up that's the fear here john on mclady inflecion nice so much better in french future's down 15 on the s p we're negative a third of one percent from new york city this morning good morning alongside tom keane i'm jonathan ferro on radio on tv this is bloomberg with the first word news i'm richard gupta colonial pipeline says it will know by late today whether it's safe to restart gasoline and diesel flows they've been on hold since hackers targeted that giant pipeline last week fuel shortages have spread quickly across the southern and the eastern u.s energy secretary jennifer granholm says even if colonial can restart today it will take days to ramp up operations israel stepped up his attacks on the hamas ruled gaza strip overnight rocket squads in gaza fired a barrage of central israel early today whilst israeli warplanes pounded gaza with dozens of airstrikes according to al jazeera the death toll in gaza has risen to 48. more than 300 are said to be wounded five people have been killed in israel donald trump's grip on the republican party will tighten today house republicans are expected to oust representative liz cheney from her leadership post since cheney has persistently rebutted the former president's false claims that the 2020 election was stolen it's another tax defeat for european union competition chief margaret vestaia mamazon has won a court fight over the eu's 303 million dollar tax bill the eu general court ruled today that amazon did not get special treatment from luxembourg's tax authority last year apple successfully challenged a record 15.8 billion dollar eu tax order and the u.s has agreed to remove china's xiaomi from a trump administration blacklist that could have restricted american investment in the smartphone maker xiaomi had sued the u.s government after the pentagon issued an order designating the firm as a chinese military company global news 24 hours a day on air and on bloomberg quick take i'm rich kagupta this is bloomberg this is a classical missing markets problem even the most mainstream economics recognizes that when a market is missing there's a role for the federal government to come in and fix that externality and here the negative externality is a barrier to work for people who want to get into the labor market so this is just a very simple solution to a market failure i got you sounds good jordan how are you i'm good john how are you okay mate thanks for being with us sure thanks for having me on that's all right gonna be back in a couple of minutes time great this your first time on the show i think i did one a while ago but it's certainly been a while okay well the way it works we'll come in with a bit of sound i'll pick up i'll hit the market i'll go to tk and then i'll ask you about arsenal football tk's going to come in and ask you a question that you might i just want to get back in a stadium tom we should do that next season we should just go to milan for the weekend it was a topic john i i had a long discussion about it last night and we should do the don't get me going i'm from the winkler school of vision on that yeah we should be in a stadium i told them put me and vivian on the balcony of the peace hotel in shanghai on the 70th anniversary of the communist party everyone in the world would have wanted to be a guest on that show we would have got kishore mabubani we would have got um you know name the china experts everybody would have wanted to participate in that just to be honest that kind of vision and we can do it in milan i just want to watch the game yeah i know you want to watch the game but you got to make a vision statement you know you get the you fee you know you know these soccer p you get the guy that owns you venice who owns you venice like nelly the and yeti family yeah you get one of them on whatever i don't know get ronaldo on this is a classical missing markets problem even the most mainstream economics recognizes that when a market is missing there's a role for the federal government to come in and fix that externality and here the negative externality is a barrier to work for people who want to get into the labor market so this is just a very simple solution to a market failure that was jared bernstein the member of the white house council of economic advisers on child care in the united states of america from new york city this morning good morning alongside tom keane i'm jonathan ferro lisa abramowicz is out of the building she'll be back with us on monday a well-earned rest through the whole week in your equity market 41.26 on the s p 500 down around about a half of one percent one hour 12 minutes from now at cpi in america going into that yields come in almost a basis point at 161.47 crude is firmer up one percent on wti to a 66 handle 66 dollars and around about three cents and in the fx market euro dollar declining two tenths of one percent to 121 and about 26 121 26 there tom one hour 12 minutes away from your cpi print well lots going on today and of course we're looking at inflation is really the theme of the moment but there's so many other themes including how the political landscape of america folds into our economics our finance our investment jordan fabian our white house reporter joins us this morning jordan i want to go high above cayuga's waters to cornell and the sprawl of the history that you studied in ithaca where's the republican party right now from where you sit at the democratic white house where does the republican party sit as it looks back to 1860 and indeed 1856. well i i think what the democratic white house would say is they've come a long way since then and not in a good way they're still consumed with infighting over the 2020 election and president trump's baseless accusations of fraud and today you know today where a key inflation report will be coming out that could have a lot of say on the direction of joe biden's agenda they're going to be having a vote to oust liz cheney as one of their leaders in the house of representatives over this dispute so a lot of republicans are concerned that there could too consume within fighting and not consumed enough with uh combating joe biden's agenda define for our international audience the smallness of the republican party right now are they so large that they're small as they're 49 of america are they lesser than that or are they growing and shrinking ever more and more which is it well despite their weakness in washington right now they still have what what i would think is is a decent base of support i mean the president uh president trump won 74 million votes in 2020 you know joe biden despite having good ratings on his response to the coronavirus pandemic still only has about a 55 to 60 approval rating that's pretty low in historical terms for a president this early on in his first year so yes i i think that they are still you know viable party going forward yeah despite all of the handwriting here in washington how linked is the president is democratic party i think your observation on the polling of the president has been under-reported is really important right now what is his linkage to capitol hill and frankly to the voters of the democratic party well i would say that joe biden's forte is his links to capitol hill he was in the senate for 30 years he has relationships with many of the folks there and he's having a lot of them in this week to try to uh you know twist their arms uh you know control them to get on board with his infrastructure plan and he can rely on a deep wealth relationships there uh with regard to the base of his party you know there was a split in the primary the democratic primary elections between the ascendant left wing of his party and and him which is coming from the more establishment wing but so far the progressives have been very happy with what he's done so far so he's been able to keep them at they keep the peace so to say in the democratic house but we'll see how long that lasts we've heard a lot about this relationship that the president has with congressional leadership jordan on both sides of the aisle i just wonder if this is the real test now whether he's got to demonstrate that it's effective that relationship can actually generate some results that's certainly a test john is that does this long-standing relationship with mitch mcconnell the senate leader in particular who has a lot of power given the 50-50 split in that chamber you can joe biden convince mitch mcconnell to go along with some kind of infrastructure package i think there's a realization that this sweeping package that costs over two trillion dollars that president biden has proposed is going to get paired down or broken up into pieces in some way but can he get mitch mcconnell to go along with at least one piece of that to get another achievement under his belt that's going to be the test that is going to be underway in the next few months here we've seen a lot of blood being shed over in israel and we have to pivot from the domestic story over to the international one right now in the middle east jordan what is the president's position right now and what is this administration said about what is happening between israel right now and hamas the bottom line for the binding administration with this situation is de-escalation that's what they've called for on both sides uh both the israelis and the palestinians to de-escalate the violence the in the broad scheme of things i think the biden administration would like to focus on china uh the asia pacific and not necessarily the middle east they're trying to withdraw back the u.s presence there you look at their withdrawal of troops from afghanistan but this conflict has forced this issue back onto their agenda and it's going to be a headache for the biden administration no doubt and also an impediment to some of their longer term goals like reviving the iran nuclear deal if this violence continues jordan fabian there of bloomberg our white house reporter down in washington dc the kind of story that pops up now again tom but we haven't talked about in a major way i think since 2014 we touched on that a little bit earlier on this morning it's certainly front page news once more well it's front page news and all that but then it folds into the markets as well i mean the politics of the moment is a mess and as i said john i saw a shift last weekend where we're really starting to focus on lining up 2022. again i mentioned marco rubio in florida with a present battle maybe with the democratic party in what's supposed to be a trump uh state but i would fold it john right over to what for me on inflation wednesday is the biggest mystery which is the strength of gdp 8 30 eastern let me ask you this just quickly tom at 8 30 eastern when that number drops how do you think this administration spins it we know how the federal reserve is looking to spin this number what is the administration they're going to spin it to continue to provide support to an america that's not participating in a 10 gdp economy that's how they're gonna spin it and everyone including the haves agree there's a part of america that's not participating pick a republican state right now and there's a good chance that governor there's a good chance that that governor right now is ending the additional ui unemployment insurance how does that play out what are the consequences of that in the next couple of months it plays out to further polarity in america as other states choose not to do that and its uneven recovery you know i think john the nirvana is to get back to february before the pandemic which was essentially an idea of low unemployment the concept of fully employed america every report i read as we are nowhere near that as chairman powell has stated and quite frankly others have stated it plays into the political argument that republicans have been pushing that the relief package of the democrats was simply too much and too broad and that what we face now is higher prices because of that now i know that's an economically flawed argument let's be clear about that we can talk about that and pick holes in it for as long as we like that's the political debate and i just wonder how the electorate picks up well i'm going to give you one frame on inflation wednesday what if inflation comes in lighter than expected i'm not predicting that but how does this market react to imagine you get a nice move in the nasdaq that would be my guess you know that would be my guess one reason to stay tuned and also into the nine o'clock hour look for the open today thank you it's john furrier 60 minutes away from the inflation data in the united states of america on radio on tv this is bloomberg surveillance 60 minutes away from a cpi report in the united states of america live on tv and radio is the price action going into that the s p 500 41 29 and down 17 we declined four tenths of one percent the nasdaq down six tenths the small caps under performing we dropped by more than one full percentage point the most brian bowski upgrading things on the s p to 4 500 from 42 not alone in the last couple of weeks we've seen that repeatedly jonathan golub top of the pile looking for 4 600 on the s p within that upgrade though an upgrade to energy and a downgrade to staples bear in mind others are bullish staples btig morgan stanley believing that that's where the pricing power is brian bowsky suggests that the higher commodity prices long energy the higher input costs for staples that's going to weigh on things that's where the debate is switch up the board yesterday was fascinating when equities did badly what did everyone say it's about inflation fears this is how we closed energy down two and a half percent banks down one point three percent if i showed you that yesterday morning we would have been talking about inflation fears precisely tom why was the nasdaq ripping back what happened to the inflation i think there's a huge bull component out there pushing against the gloom i'm with you i think it's priced looking for a narrative and the narrative didn't fit the price at the end of the day yeah i got the connection let's finish on this then in a bond market twos tens thirties we're getting going this morning this is all right isn't it two-year yield unchanged from the jobs day friday ten year at 160 165 if you want your range tom 175 the high end to the close at the end of march 146. oh i thought you meant the dollar session i don't do the dow i do the bond market this is for serious people let's be clear about that your 30-year yield 233.65 we come in a basis point i think i'm done tom are you done no i'm not done core cpi 1.6 to 2.3 that's the key thing which way does core tip from the survey of 2.3 percent how does this market trade off the back of it exactly to the number thank you tom roman you've got some stocks chris good morning put us out of our pain i do uh well the fixation still remains of course on that cpi report tom you did bring up sort of the i guess you can call it the rally if you will in the nasdaq yesterday it closed down flat on the day but it was the out performer it was interesting to see what move you had amazons you had adobes you had a lot of those names moving a little bit higher and getting bid but you had a lot of other stocks that really got left behind including microsoft apple tesla and some of those names the question is what is really being priced into this market and more importantly what is really being bid into this market if it is just a matter of profit taking a rotation then maybe there's not really any concern if there is a little bit more worry about some of those price pressures and whether they are starting to trickle in and start to erode away some of that growth and that growthiness that we've seen in these stocks then that could be a concern microsoft down here in the pre-market by about five tenths of a percent similar story for apple and a similar story for tesla you flip up the board and you talk about risk sentiment you take a look at some of the ipos that we've had over the last 12 months here some of those ipos are actually doing pretty well we got earnings out of upstart holdings big fintech company there and unity software which makes software for video games both of those companies not only reporting good earnings but reporting very strong guidance as well you're seeing that rewarded here in the pre-market with upstart holdings up about 20 percent unity software up about six percent then the flip side of that is you have names like lemonade the big online insurance company they're down six percent seven percent here in the pre-market also on an earnings story here when you put all this together it really comes down to whether you buy into the growth narrative the economic growth narrative i just say that macro economic growth narrative and whether you are truly worried about inflation and about the fed moving faster than anticipated and to me the gdp adjustments we see remain off wednesday inflation and friday retail sales will be fascinating to say the least right now this is a joy for john and i to bring in terry weissman with us out of vessel and harvard terry weissman iconic on emerging markets at bear stearns long ago and most importantly he is the director of global currencies and interest rates for the crew at 50 martin place in sydney australia with macquarie and we're thrilled he could join us right now with a real touch of this economics but also it is linked to the commodity boom does inflation cause commodities or is a commodity boom going to cause the inflation to come terry you know it could be two ways um one of the aspects of inflation that i think is driving the commodity boom is just public policy right you have uh quite a lot of of an imperative around the world to move towards a green economy and that's clearly causing some commodity prices to go up so here the the the the causality runs from public policy to commodities but you also have to take into account that the rising commodities whether it's speculative or not is going to put pressure on things that have nothing to do with that green economy if copper prices go up home prices can go up as a result because of the cost push inflation so it runs two ways um and and i suspect that there is a little bit of a speculative element in some of the commodity prices that have seen a big increase recently but more so iron than copper let's say right that's right where i wanted to go terry when you talk to the commodity experts at macquarie and truly folks they are australian experts how does iron ore dynamics filter into a more developed world inflation wednesday not too much because because iron goes into steel and steel is really a construction material it's not a something that's really prevalent that much in the consumer basket but i will tell you this mcquarrie's view on iron is not positive we see a lot of the run-up recently as having been caused by hoarding on the part of chinese steel mills who are worried the chinese in the second half of this year chinese policy makers will come down hard on the steel mills because of environmental issues and that they will do that by restricting iron imports in the second half and as a result steel mills are hoarding iron now ahead of that and obviously hedging against future price increases but that's not really a demand-based story as much as it is a story about fear of of import controls and fever restrictions copper as i mentioned is a different story that is that is purely structurally demand driven people are excited about the the implications for copper demand coming from green economy imperatives terry what's china's role in all of this if you showed me a chart of china's credit impulse i might have made a different decision on the direction of travel that we're seeing across some of these markets what is china's role in this cycle well normally china's role is as a commodity uh uh uh importer and demander and and of course the credit cycle is hugely important to determining how much uh credit is being is being directed towards construction towards infrastructure uh uh in china so credit normally plays a strong role but all i'm saying is that this time around and maybe the reason you're seeing this divergence between credit growth and commodity prices is because in the case of some commodities what's being driven is not structural that what's driving is not structural demand coming out of china or certainly not the outlook for stronger structural demand china after all may be moving towards monitoring tightening in the latter part of this year but might be moving these commands instead is concern about restrictions on the use of them later or the import of them later i should say and as a result is hoarding today very different story very different dynamic let's say than what we normally get out of china where credit drives the commodity price cycle when you look at market-based inflation expectations at the moment terry let's turn the two stories together to what degree do you think they're being influenced by what we're seeing in the commodity market not that much i i you know to some extent we talk about consumer prices here um and the price of a house does not figure into the consumer price index but figures into the consumer price index is the service price of renting a house let's say or the owner equivalent rent that's not affected too much by the price of a home so i don't think commodities themselves not certainly not those those those basic metal commodities are having that much of an impact on cpi no i think what's happening or for that matter expectations i think what's driving inflation expectations is somewhat different it's it's a fed that has been uh politically inclined to be to sound very dovish and therefore fuel inflation expectations higher and of course we have everything pertaining to the demand impulse around the world coming from public policy more spending in the u.s respectively more in europe i think that's fueling a little bit the inflation expectation increase that we've seen recently terry the vice chairman i believe speaks at 9 00 a.m uh wall street time can they shock the market or can they actually have a dialogue the next 90 days where we ease our way towards the beginning of a discussion of less accommodation so they can ease into it and can they do that not today not today just because i said that they can ease into it doesn't mean they're going to ease into it today i think this is too soon even if the cpi print comes out high let's say on a headline base of 3.7 or 3.8 it's way too early for the fed to make a determination as to whether or not the increase in inflation is permanent or temporary and the reason is because we know that a lot of it's driven by supply shocks and the market has a way of addressing those supply shocks ultimately with more supply and as a result i don't think the fed is going to say today i don't think richard clara is going to say today that it's time for the fed to talk about tapering by august maybe i think by august they'll have eased their way into it in part because by august the economy will be better it'll be a more synchronized global recovery as well potentially there'll be more some more pressure as a result of that on some basic goods not necessarily copper and iron but others and i think at that point they can talk about the need uh to have a discussion about tapering and then the countdown begins but today is too early terry gotta catch up as always terry wiseman there one of macquarie on currencies commodities and rates as well vice chair clarendon 9 a.m eastern time it's 30 minutes after the cpi print in america we will hear from the advice chair giving a virtual speech to the national association for business economics tom maybe you'll get questions as well they won't be as rude as the questions you gave them the last time we talked to them i mean you know it's going to be those direct questions pretty well i thought he took him very well so yeah you know it was good practice before this speech john you know i look at inflationary coletti that was italian inflation wednesday thank you and i'm sorry but u.s inflation redowns across italy across france as well and there's going to be a global reaction to what we see here in 50 minutes and a conversation we'll have in markets will be different to the conversation that policymakers have there is a difference between looking at the moment we're in yeah and a policymaker is focused on the destination the direction of travel and the moment is where this market's heading and this is great that we have all these different guests i mean i thought wiseman was brilliant there on iron ore i mean there it is moving higher is it a market phenomenon and he says no it's about the chinese government and their state-owned enterprises in the commodity market and also tom the secular influence as well let's move away from fossil fuels too that's playing a huge role in some of the price action i i nailed i'm macri in french merkel how do you say wednesday and i think you know that too say it again merkel lady i think you nailed that too miracles right i love doing european languages with you in the morning well i'm saying that inflation wednesday has a european are you actually calling it inflation wednesday now we're calling no i'm not i was ordered three times who ordered you two i i don't know you know one of our handlers 8 30 eastern jason furman is going to join us too the harvard university professor and former chairman of the council of economic advisers during the obama administration to get his response tom to that inflation print when it drops it's an important conversation linking policy into the markets it is wednesday and we have some inflation data you can call it whatever you like equity futures down 16 on the s p 500 we're down four tenths of one percent your yield is unchanged on a ten year at one sixty one eighty three and in the commodity market wti has a 66 handle at sixty six dollars and around about twenty cents we advance one point three nine percent we are heard on bloomberg radio scene on bloomberg tv this is bloomberg surveillance with the first word news i'm richard gupta the white house is facing rising pressure over gasoline shortages caused by the shutdown of that giant pipeline the epa's wage requirements across 12 states and washington dc to help bring more fuel to areas normally supplied by the colonial pipeline north carolina and virginia declared states of emergency as gas stations ran dry meanwhile the international energy agency said the supply gut created by the global pandemic has cleared surplus oil inventories in developed nations are now just a small fraction of what they were when demand collapsed last year the iea does see one temporary setback though demand has been hurt due to the resurgence of cobid in india more fallout from that fight over fishing between the uk and france bloomberg has learned that french officials want to prevent british financial firms from gaining access to the european single market it's trying to pressure the british government into honoring its post-brexit commitments on fishing rights and toyota has come roaring back the world's largest automaker has unveiled a 2.3 billion dollar share buyback and expects return to pre-pandemic profits in the current fiscal year toyota has been able to pull ahead of the pack it straightened out its supply chain and ramped up production to meet rising demand germany's commerce bank posted a surprise profit in the first quarter plus it upgraded its full-year revenue outlook that's a boost for ceo manfred north after he unveiled a turnaround plan to increase profits comets bank's revenue soared 35 in the first quarter the bank profited from strong trading and investment bank conditions global news 24 hours a day on air and on bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm richard gupta this is bloomberg [Music] fed is said that they're going to be very slow to raise interest rates they're not going to begin to raise interest rates until they get to full employment two percent inflation and they're confident that inflation's gonna go above two percent so we know that's going to take a while to convince some of that once they start however they're gonna be late and they're going to have to catch up and so this can be a period of slow and then it's going to be a period of fast that's bill duntley the bloomberg opinion columnist the former federal reserve bank of new york president from new york city this morning good morning alongside tom keane i'm jonathan ferro lisa is out of the building getting a well-earned break she'll be back with us on monday from new york here's your price action going into the cpi data at 8 30 eastern time 748 equities 41 32 and down a third of one percent and off 13 points let's call it 14 points lower on the s p 500 a bit softer in the bond market just a touch firmer let's call it that yields lower just a nudge 6183 tom there's nudges and touches john but don't you agree with me the market's really sending some signals here uh 45 minutes away i mean we're pretty muted going into an important number yeah the data in about 42 minutes yeah speaking of bill dudley tom just quickly out with the bloomberg opinion columnist column this morning with the following line and it stands out in its own paragraph too i think markets are severely underestimating how much that yield is likely to rise in the coming years this piece goes together what he was talking about yesterday which is once we start raising interest rates in america it will take a while but when we do start to increase rates it's going to happen more quickly and the rate that we hit will be higher than this market expects to the 10-year us treasury note part of the foundation of global finance yields helps determine the cost of mortgages the value of u.s stocks and how much the u.s government must pay to service its growing debt i think markets are severely underestimating as john as you say how much that yield is likely to rise we thank president dudley for his help with bloomberg opinion right now our help with kit jukes he's the society general and chief foreign exchange strategist kid i want to go first to the inflation of the moment what is the signal from the foreign exchange market that you see as we worry about the rate of change of rising prices um i think we we worry at anything that sends the world into a risk-off tail spin because you get a high enough number to really make people shift from transient so oops help um the fed is going to be you know walked off its first so anything that makes it look as if the fed's going to have to change its story he is capable of giving the dollar a bid on himself known but it it's it would take a pretty big shock but that that we are a follower in that sense that the stuff that hurts that helps the dollar hurts equities and um and sends the curve flatter and then bond land right kid uh we've been looking at europe today a viewer from the philippines emails in and says what about implazio miracules which i think is inflation wednesday because i can't speak a word of filipino and and the truth is that's a good example kit of a 12 appreciation in the filipino peso over the last three four five years does em shift off what we see with rising inflation in the u.s um it does they import some inflation so you know look the the em countries if you generalize so the the most developing the least developed the biggest share of their cpi is made up of raw materials goods commodities the stuff where we've seen the price rises be the most important so they take they take that hit um that that hit hardest the the saving grace for a lot of them is that their currencies um have not been falling in in the last 12 months so much because they weren't starting from the dramatically kind of overvalued levels that we had um 10 years ago so so they they have they haven't they've had a bit more of a cushion to avoid anything really bad happening but um but they are there's no doubt you know these are the places where we don't talk about rent we don't talk about services inflation it's raw materials commodity prices feed more more directly into it and and oil is a big deal okay what was your reaction to the bill dantly piece um i just listened to it i watched it i watched it on it from a treadmill yesterday afternoon um and i thought to myself you know this idea so you know the idea of having a peak that goes higher than the last one by a margin and that we we've we've lost touch it sits really badly with me partly because the last time that we had a peak in rates that was above the one before it uh is in is in 2000 okay and that by the way it broke a pattern because since my career started you know the the 85 the 84 peak was high uh then then the next one was lower the one at the beginning in the middle of the 90s was lower uh and then we came down in the 2008 peak and then we came down and there's a reason for that the debt level right the way through the system goes up and up and up the average credit rating of companies goes down and down and down we all reorganize ourselves mortgage rates go down and people's salary multiple they need to pay to buy a house or an apartment goes up and so we all get used to lower rates so if you get a situation where we think that we're going to get higher higher rates than that isn't currently priced in the economy grinds to a halt in the equity market falls off the edge of a cliff so it doesn't happen and that's how it works and and the reason is if you know bill dudley says that the fed is going to need to go above neutral how far you can go above neutral has got to be a function of how far you went below neutral and how long you stayed there we we've had good reasons to go a long way below neutral this time but now that we're here i don't think we can go above neutral in in that sense i would be amazed i would i would have a side bet with bill about about the peak in fed funds it's not going to be far above two and a half percent well it sounds like you're doing that right now the diminishing tolerance of a global economy the us economy to higher interest rates seems to be the argument that you're making kit there's two pieces to bill's argument though one is going through neutral the other piece of it is the speed at which we get back to neutral kit if we stay at these levels for a long period of time and then when we get lift off do you have a little bit more comfort with the idea that the move towards neutral would be quicker than what we saw in the previous cycle yes i mean because if you took the last two cycles we the fed moved faster in 2000 and in 2004 five six then they moved in 2000 after after the table tantrum um definitely moved quicker and and it's fair to say that that that cycle um i wouldn't hold up as an example of a great cycle because we you know we we ended the economic cycle with an exploding credit bubble so um we don't want to do that again so but yeah i think there is a there is a case for going faster to neutral and hopefully if you go faster to neutral if you if you managing the messaging right uh you don't have to go further than that when you don't blow up the equity market but again we're not starting from from where you you'd want to and we've just we're here because we have to be but okay always good to hear from you sir kit jukes there of seokjen the chief fx strategist a bit of a debate there on expectations over the path to short-term interest rates with bill dudley running a really interesting couple of pieces on bloomberg opinion in the last couple of days tommy you're familiar with the jones act the boats that have to be owned operated by americans american companies to transport whatever you want to transport from one port in america to another that becomes a little bit more critical as we have a gasoline shortage this from the department of homeland security standing ready to review any temporary jones act waiver request from companies that demonstrate there is not sufficient capacity on jones and qualified vessels to carry fuel to the affected region the effective region right now of course being the east coast yeah this is a huge political football in america a little bit of inside baseball there as well we've got much more coming up john what are we 35 minutes away 35 minutes away from cpi up next alicia levine of bmy melon from new york city this morning good morning alongside tom keane i'm jonathan ferro this is bloomberg surveillance on this cpi wednesday yields 161.65 unchanged your equity market down a third of one percent the s p 500 41 33. [Music] over the next couple of months we will see significantly stronger inflation the consumers still seeing spending in excess of what would be considered a normalized pace of spend this summer is going to be huge people are going to spend and the bounce back in oil demand is probably going to be significantly more than people have been expecting certainly some commodity prices are just completely out of control it's almost hyperbolic we are now at the point where supply is extremely low inventories are extremely low and demands roaring so prices are extraordinarily volatile this is bloomberg surveillance with tom keane jonathan farrell and lisa abramowitz good morning everyone jonathan farrell lisa bramletts and tom keen on radio on television worldwide we welcome you to bloomberg surveillance an eventful hour jason furman to join us later in the hour we'll look at goldman sachs commodities alicia levine on the american regime change here in moments and john it all centers around what every listener and every viewer knows prices are going up 8 30 eastern time we're set to see that again the cpi report just around the corner your number year on year to look for 3.6 that's the estimate in our survey from 2.6 previously strip out food energy the estimates as follows two point three percent up from one point six percent and first of all tom we look at the market reaction and then second how the fed responds vice chair clarida with a timely speech line yes for nine eastern wonder how the language is going to change in that off what we're going to see in 29 minutes john i love the tension that we observe from kitchuks of sakgen with the former president of the new york fed and it's a legitimate debate about the rate of change of prices increasing well bill dudley believes that the fed will do what it says it's going to do which is keep rates unchanged for a long time his argument and i think it's fair to characterize it this way is that when they lift off it's going to be quicker than you think and they're going to go through neutral and higher than you expect so fed funds could peak in his view maybe with a forehand door kit pushes back against that because every single decade we've seen every single cycle with the exception of maybe one for the last several decades we've added more debt and our tolerance for higher interest rates has declined and the peak in the fed fund rate has as well will that change this time around there's a great chart from credit suisse years ago from the wonderful dominic constable on that of all the inflation worries that have been out there the inflationista uh that are out there and they've been wrong wrong well maybe now is where we see a different time john help me with a data check here i'm going to look at futures a little bit soggy here but i don't have the equity panic that we've had the last couple days nevertheless nasdaq down half a percent uh down negative 86 s p negative 12. the vix does a little bit better all in all 22.12 john real yields i'm focused well let's talk about the bond market panic that lasted about five minutes on friday they saw a low of 146 on tens right now 161 the high 174 from the back end of march on a closing basis we've been pretty stable in and around this 160 number with the exception of friday's price section i do wonder how we'll move around a print that comes in 27 minutes yeah and you wonder john let's frame this right now if we get above two whatever that number is 2.3 encore or whatever we get a higher inflation rate versus the shock of inflation subdued relatively how do you think we'll see this the intuitive move the one that would make sense just as a guess would be high yields at the long end reflecting that upside surprise on inflation from the equity composition standpoint if it's an upside surprise you'd expect the nasdaq to underperform in that environment and i would just say reverse engineer it whether that moves proportionally symmetrically i'm not so sure if there's some asymmetric risk around this as well we had that going into the payrolls report right it was a view that big downside surprise would generate a bigger move yields lower than big upside surprise yields higher i wonder if the same is true a little bit later this morning we're all markets markets marcus john i'm going to go to the real economy like jason furman jobs formation and that you wonder if a little bit of rising inflation finally helps people in a booming gdp economy eight percent whatever the number is so that's attention folks as we go here 25 minutes from now on the financial aspects and the asset aspects the real economy aspects knowing better to dovetail those two together than alicia levine of b and y melon always writing smart and what's so important about alicia levine is really looking almost at a strategic basis of where we are given this rising inflation you talk about a regime change alicia in america describe that right so look we think that when the new administration came in it was really focused on main street versus wall street and i think the policies that have flowed from the fiscal side and frankly to the monetary side really are creating that so as you've said all morning you know a little bit of inflation is actually quite positive for main street you get higher wages you get some pricing power you know you get assets moving higher and in the real economy that's not such a bad thing it tends to be terrible for equity markets particularly in the long duration assets as we've seen in the last couple of days where where the tantrum really was in the equity market and not in the bond market the equity market is telling you that their inflation fee is all over the place for investors so look we think there is a regime change so higher growth higher inflation that doesn't mean you know terrible inflation it does mean though that higher than it was in the post global financial crisis and therefore higher rates eventually but right now we're see we're thinking we think it's sustainable we don't think this is a sugar high okay it's very clear it's not a sugar high it's literally a regime change you've got fancy degrees you're expert at the mathematics of the financial system and you and me what in common is we started out dishwashing you had a love affair with a hobart dishwashing machine at a camp years and years ago let's talk about the real world effects of this inflation in the old days that meant rising wages do you fold that into your strategy or is this time different from when you were running a hobart so so those were great days and actually i didn't get paid at all so yes there's inflation for those jobs but look there is clearly supply constraints in the labor market as well which is what we learned on friday wages are going higher and they're going higher because we don't have as much slack in the labor force overall even if you strip out the extra unemployment benefits which of course are a downward pressure on labor coming into the market but if you think about the expedited retirement in the boomers the 55 and above you think about the fact that two million women have simply dropped out of the labor force probably because schools are not open by the time those schools open you know it's been 18 months that people are disassociated from the labor force very hard to get back into the same job so we think participation will be lower slack is lower and wages will be higher you know as we saw with jolts yesterday there are 8.1 million jobs available ostensibly the same number of jobs as those who do not have jobs today that did february 2020 something's wrong right some there's a mismatch so there's a skills mismatch and there's a need to pay labor higher and i do think that the fiscal policy that's been enacted has conditioned people frankly to want more and to expect more we've just spent 850 billion dollars from january 1st in 2021 as the economy is reopening directly into households directly into bank accounts more than we and we spent that was 600 billion last year when the economy was closed and we're expecting another 400 billion by early september all that is going to create upward pressure on wages next logical question then what does that mean for margin to leisure and what are the sectors that you would avoid right look i think i think the rotation that came became apparent in the fall last year still plays out right so you know commodities materials industrials financials and energy are really the sectors that benefit from higher inflation and that's where we would be very hard to ignore your profitable tech you know the future is digital you have to be there we just think that that those that sector probably underperforms a bit and we do think that speculative tech you know those companies that we know and love and are valued on revenue and not earnings will really suffer here and we would stay away from those we just think it's a long-term secular change in where rates are going where yields are going and where expectations are going so i think the cyclical trade will have legs and we'll have legs for longer we saw a ton of companies in the first quarter raising prices png kimberly clark others as well alicia there's a nice little debate debate playing out on the south side at the moment on staples btig on the one side on the other btig likes the pricing power bmo's worried about the input costs where are you in the team on staples i like staples simply because they've underperformed so woefully that it's just a good it's not a bad place to come in here they do have pricing power i think households are con are becoming conditioned to paying it frankly because there's so much extra liquidity in the household sector right you're not getting pushback so therefore those price changes will be sticky if you add to that that the sector has completely underperformed as the here and now looks better than worrying about the future three years from now i think it's not a bad place to add to staples here you know you want to add when it seems like the wrong thing to do so it seems like the wrong yeah there you go i mean we like we've learned this right how many times do we have to be hit over the head and so i actually do like staples that reason i think this pricing power will be very sticky but when you raise wages you don't lower them when you raise prices you don't lower them get comfortable feeling uncomfortable that's a life lesson isn't it alicia thank you alicia levine bmy mellon investment management your yield right now i know you like the real wheel term on a 10-year negative 91 basis points and we're at the point where you know i mean that frank gets a better number than an hour ago and we'll see what happens here i don't know what the equity markets are going to link in here in 20 minutes at time as well john i want to do some housekeeping here with the ft summing it up nicely and that is blackrock john i think this is really fascinating they've improved a lot they've been approved for a license with a singapore sovereign wealth fund and a chinese massive bank to do wealth management in china i believe out of hong kong lawrence fink commenting on that to the financial time but john that's one of those little tea leaves of life goes on according to a statement delivered today blackrock's ccb wealth management limited granted a license by the china banking and insurance regulatory commission to start its asset management business in the nation there you go the company 50.1 owned by blackrock 40 by ccb wealth management it's just one of those whispers john you know in the blur of all that we look at where we'll look back in six months and say asia tom we're getting back to business and let's be clear about something else too the conversation we just had about markets is radically different to the conversation you will have on the very same theme with policy makers because they've got to look at where this is going they've got to look at the path the moment and not just the destination well in the inequalities here this inflation i mean it's on all prices but boy does inflation him or a huge part of america that's not you know not getting the stock market right the report 18 minutes away in new york city this morning good morning alongside tom keane i'm jonathan ferro equity futures only s p we're down 12. we declined a third of one percent on radio on tv this is bloomberg [Music] with the first word news i'm rick gupta colonial pipeline says it will know by late today whether it's safe to restart gasoline and diesel flows they've been on hold since hackers targeted that giant pipeline last week fuel shortages have spread quickly across the southern and the eastern u.s energy secretary jennifer granham says even if colonial can restart today it will take days to ramp up operations israel stepped up its attacks on the hamas ruled gaza strip overnight rocket squads in gaza fired a barrage at central israel early today while israeli warplanes pounded gaza with dozens of airstrikes according to al jazeera the death toll in gaza has risen to 48 more than 300 are said to be wounded five people in israel have been killed donald trump's grip on the republican party will tighten today house republicans are expected to oust representative liz cheney from her leadership post she has persistently rebutted the former president's false claims that the 2020 election was stolen and we'll fall out from that fight over fishing between the uk and france bloomberg has learned that french officials want to prevent british financial firms from gaining access to the european single market is trying to pressure the british government into honoring its post-brexit commitments on fishing rights global news 24 hours a day on air and on bloomberg quick take powered by more than 2 700 journalists and analysts in more than 120 countries i'm rick gupta this is bloomberg prices are extraordinarily volatile copper is heading in that direction uh with inventories declining quickly and also moving into demand ratio uh well as oil um primarily is still still very well supplied opec is holding that capacity so we are still uh trying to figure out what to do with all those spare barrels that was francisco blodge who made some headlines over at bank of america when we spoke to him earlier this week looking for 13k on copper and maybe 20k at some point over the next couple of years yes really take a listen to that conversation from new york alongside tom keane yeah i'm jonathan ferro tom i went through the price action going into this cpi report 12 minutes away future's down 11 on the s p would decline a third of one percent 41.35 on the s p 500 nasdaq futures just a little bit softer we take some weight off the nasdaq 100 yields unchanged on 10s 161.65 euro dollar 1216 we come in about a quarter of one percent and the commodity market crude with a lift tom timely wti 66 15 we advance a little more than one percent we're going to squeeze this in right now before the inflation report and jason furman with us for a lengthy conversation afterwards on energy as we talked to francisco blanche or say ed morris at citigroup or jeffrey curry at goldman sachs his colleague in energy research damien kovalin joins us now uh with mathematics out of echo central paris and of course operations research at berkeley let's talk about the game theory of the moment damien berkeley leads in game theory as well what is the push-pull of oil right now given a recovering super boom for the developed world hi everyone so i think the issue today in oil is still the success inventory and excess spare capacity but importantly in a matter of months this will dramatically change we're on this cusp of a meaningful increase in oil demand as the world reopens and supply just won't be able to keep up so inventories will draw down sharply they're already mostly normalized so we'll have a tight physical market and opec will need to bring barrels through the rest of this year and next year erasing spare capacity so you know the market has rallied somewhat year today but do you think there's another meaningful leg higher here and the somewhat is critical and if you do a set of outcomes you've got this scenario this you do six eight scenarios give us uh not a single estimate of what brent crude will be at but the set of choices you have of where brent crude is a year from now so our forecast is 75 dollars the risks around that of course first and foremost is vaccine inefficiency potentially on significant new variants you know that is an environment where the demand recovery is slower you still get under investment on the supply side but it's a more progressive rally we'd still think price is above 70. um you know the risk then could also be that the demand recovery is even larger than we expect right we expect jet to take quite some time to recover em demand to be more of a 2022 story i mean once vaccination logistics are in place they're scalable right so we've learned that in europe in the u.s you know you could also see upside surprises in demand at which point you know this lack of spare capacity becomes quite problematic iran's a bit of a swing factor if iran's not back fully next year then we're talking 85 and above brent prices but importantly in most of those cases because we're seeing binding under investment because we're still seeing sequential demand recovery next year's prices will be higher than today's spot price do you see discipline in the old patch damien i think that's a very important takeaway from the u.s earnings releases just now you know producers pretty much all of them beat on revenues yet none of them translate that in more spending so you know if anything in fact guidance is a touch lower than we expected for production so that discipline seems to be in place equity investors still reluctant to invest but getting more comfortable you know i think that's the right messaging for producers to stick to discipline and really create shareholder values what does that mean i mean opec doesn't have to fear that a potential significant shale ramp up that means a tight physical market normalized and spare capacity and as i said sustain higher prices going forward the epicenter of this call then is this demand shock and you and jeff curry have been talking about this for a while now and what i've always enjoyed about the research of yourself and jeff is that you're always talking about the character of the commodity market the energy market compared to say equities and why we can't price in this demand shock you expect right now damian can you run us through that yeah that's essential let me give you one example if you look at say airline stocks in the us they're back to pre-covet level jet demand in the u.s is only halfway back to its pre-covet levels the commodity has to reflect that right if jet price had recovered we'd be swimming in jet without the needed demand and so commodity markets are real assets and the price today's mismatch between demand and supply so demand rising next month is very important to next month rally in commodity prices but you couldn't have priced that two months ago now furthermore and i think that's a critical one we're learning across commodities this year is once inventories are low the commodities have to reflect that scarcity right it's lumber it's eel it's iron ore it's corn you know it's retail gasoline and the east coast that's what the next few months in commodities are likely to deliver damian shell in technology came to the rescue i'm going to use a phrase i heard from the economist lawrence kudlow a few years ago at bear stearns which is focus on the lifting cost is there something out there in technology to help us with the lifting cost out five years from now or is the technology miracle over so you know the easy gains are definitely behind us in terms of technology now you know producers are always investing further digitalization maybe that next source of improvements but keep in mind right you've also had very low activity until now so that's further depressed cost as we saw in the 2000 cycle you know ultimately you under invest in services and you get input cost inflation second and i think that's unique to shale and why share was so different to other commodities when you thought about cost you also had to think about financing costs right you know shale producers pretty much through 2017 benefited from very very low cost of capital whether it was on the high yield debt side on the equity side which meant that you know they're actually operating below their pure technological cost structure now opec was helping opel was taking out the downside risk to oil prices so you're further operating on a truncated perception of risk that's over right and that's the key to shell going forward sure it's short cycle probably can get a bit better but getting that external financing is much more expensive today and after last year's experience you cannot really bank on opec being there to always support prices so your risks are higher and your cost of capital is higher it changes the reaction function of shale creating this tighter market going forward damian it's good to see you let's get you back soon damian kovalen there the goldman sachs head of energy research on crude with bren at 6933 wti 6609 tom what was that beer called again what was it like what was it cause three two three two huge response what they said yeah you know huge things but they can smaller but the price is the same and therefore there is no no no no no no no this was like probably like if you're 21 you could drink real beer but if you were younger you weren't responsible enough oh you had coffee you drink real beers so it's called have not one tea well it was like called three two beer which is a percentage of alcohol and the problem was this was during vietnam when we had 18 year olds on aircraft carriers you know really in harm's way so it was ridiculous coming up ridiculous jason furman harvard university professor you learned something about economic policy that's why i asked thank you furman may hang up the phone i imagine he'll want to talk about something else the cpi report in america just around the corner the only one in the building who knows what coors 3-2 is your 10-year 162 your equity market down a third of one percent of 41.33 on radio on tv cpi next this is [Music] bloomberg we are 10 seconds away from the cpi report in the united states of america with futures slightly negative on the s p we are down by a third of one percent on a nasdaq off by five tenths of one percent your bond market unchanged it's 8 30 eastern here's mike mckee as we wait for the numbers well john uh this is the inflation that you're looking for and it comes in hotter than anticipated cpi on a month-over-month basis up eight tenths of a percent the forecast was for a two-tenths gain that pushes the year-over-year cpi to 4.2 percent uh that's much faster of course than the 2.6 that we saw in march and the 3.6 that was anticipated let's take a look at the core rate up nine tenths of a percent there's the one that's going to worry wall street uh the forecast was for three tenths it's three times the amount in march and on a year-over-year basis we're up to three percent on the core the estimate uh 2.3 percent for the month so a lot of inflation let me uh i'll look at i'm sure you want to look at the market reaction i will look at the breakdown of the cpi here my car look at the price section right now the nasdaq down down hard off by 1.65 on the nasdaq 100 the s p coming in 1.1 this is the story we were talking about if you've got an upside surprise it's going to hit the nasdaq harder yield tire in the belly of the curve on a five year up two basis points on a ten year up about two basis points as well at the very long end by about a half a basis support in the third year and basically unchanged on twos so it's an upside surprise tom and after an upside surprise what you get you get high yield through the belly of the curve we'll have this conversation what about what it means for short rates in just a moment but the nasdaq lower the s p 500 lower too i want to stay in the markets here before we get to dr fuhrman but john what i would really point out here is this is different than jobs friday we saw a market adjustment jobs friday and then a quick recalculation based on that historic report this is a reset john that we're seeing right now well before we get into levels relative to what we expected it's positive negative surprise that matters to markets in the near term tom we've had an upside surprise on inflation and a downside surprise on some of the data on payrolls that's not exactly the greatest mix for risk assets still following us in the markets the dow down near 200 points spx down 38 vix out two points michael mckee what's your observation well it's kind of interesting uh tom and john because we're looking at energy prices they're down on the month overall energy down a tenth motor fueled down 1.3 gasoline down 1.4 so it's not the kind of gasoline story that a lot of people thought it might be where we're seeing some increases is in apparel up three tenths of eight percent uh new vehicles are up half a percent and of course used cars we've been talking about this for a long time on the month so your report there right now is used cars up ten percent uh used cars are up ten percent uh and uh tom you can go sell that old fliver that you've been driving around yeah the nashville we also not selling we also get a little bit of inflation in shelter uh as rent prices go up a four tenths increase in shelter but uh owner's equivalent rent the way they calculate home prices only up two tenths of a percent and that has been the story uh apparel up three tenths of a percent the last three months they were down with this higher inflation the wage the real wage goes down and we see that on the bloomberg terminal here do you can you ascertain with the market data the economic data rather what wages are doing well it's kind of hard now because we got all of the base effects mixed up in all of this and last year's impact uh i will have to take it apart a little bit more to figure out exactly what's happening but as you mentioned average real average uh earnings on a year-over-year basis weekly earnings down 1.4 percent and average hourly earnings down 3.7 percent when you account for inflation at this point and john markets deteriorate further it's another big miss for the economics community isn't it a big big miss the immediate estimate going into this was three point six percent the headline number coming in year over year four point two percent we have a move lower just to bounce off session lows on the nasdaq 100 still down one point four percent on the nasdaq 100 on the s p 500 off by nine cents of one percent i just go through the bond market for you quickly tom because we had an initial break lower break higher rather in treasury yields it hasn't stuck that hard your ten year yield up about a basis point your five year up two or three they're not major moves in a bond market let's be clear about that tom just on a nominal yield focusing on the nominal yield here the 10 years up about a basis point call it two the five years up about three yeah it is i mean in the the yield space and uh again i'm going to go back to real yields john where you've got a higher less negative real yield here and we're going to recalibrate through this but i'm not sure what we recalibrate too other than the observation john which our listeners and viewers know there's inflation this market's having a very different conversation to the conversation that academics and policymakers are having at the moment in 25 minutes time do you think the script has changed for vice chair clarida oh come on he's got to address this do you think he's going to address this he'll address it do you think anything's changed substantially for the vice chairman of the federal reserve after that inflation print we'll talk to dr firmino quickly john one more observation please nasdaq gets hit hardest that was anticipated i have to say in the bond market if you told me we'd have an upside surprise this big i'd have expected a bigger move than the one we've got on the screen so far 164 on 10. 164 on 10 the 2-year yield gives me a figure 1.1.15 rather to 0.16 right now an extensive conversation with jason furman of harvard university and of course his public service to the nation with the council of economic advisors uh jason wonderful to have you with us at this moment you're going to tell me as a public policy type that we need to see more data that we need to see two or three months data does president biden and others wait for that data or must they adjust to this report look i think the main people who need to adjust to this report adjust to the jobs report we got last year is the federal reserve the other part of it is looking at what we can do in our economy to address the biggest thing we have which is a constraint on supply we need more supply shots and arms are doing a lot my guess is there's a lot more people working in may than in april but when you take this plus the jobs report on friday plus the totality of the data we have a very different picture of the economy right now than a lot of people held a week ago it's a different picture of the economy vice chairman claredo will speak here and i believe 24 minutes does he adjust is there one word or one sentence that will begin a tone of a federal reserve shifting their language i don't know i mean they're very big on this being transitory a lot of this is transitory we saw a 10 increase in the used cars and trucks market in april okay but jason jason i don't want to interrupt you but i'm looking at rentals in new york city that are not transitory as michael mckee just mentioned higher rents are real not transitory oh i agree i was going to say you are going to be able to point to things that are transitory i think your best guess has to be that this isn't entirely transitory the fed and others have rested a lot on inflation expectations being anchored this is the type of thing that's going to start to move those inflation expectations so yes i think the problem is you can point to all sorts of territory things strip all of those out add in what we know about how much demand we have in our economy how little supply we still have uh you know i think this this bears some caution and should change the way people are thinking about the economy jason what do you think that means for the relief package we passed just a couple of months ago when larry summers and others including olivia blanchard came out and said it was too big for the moment we're in do you think this is evidence of that oh it's definitely too big for the moment i don't know any economist that was recommending something the size that what was done um the question is how big the downside was i i wouldn't leap to a judgment yet on the basis of april this is one month's data the data are obviously extremely noisy we knew as the economy reopened there would be all sorts of patches along the way rough patches along the way but you know i think there's a you know a certain amount to that logic and let's try to do what we can to make it not true how do we make uh larry's prediction not true uh we increase labor supply and the fed is a little bit more cautious to help keep inflation inflation anchored jason can i get your thoughts then on what happened on friday when we saw that big miss and we talked about the supply side story and the mismatch between demand and supply and then maybe prices would need to adjust arguably as you've pointed out we saw that in wages already and we could see that a whole lot more in months to come some governors of republican states have decided that they need to remove the additional ui the unemployment insurance that was offered by the federal government and the package that was delivered recently do you think that's the right decision to fill that gap yeah so the big miss on friday was wages the expectation for wages was 0.0 percent the actual number was 0.7 even that actual number understated what actually happened because of composition effects the real number is probably more like 0.9 percent um either way that's the fastest wage growth we've had since the 1980s so you're not looking at you know one isolated data point or unused truck this is everywhere around us um if i were in a state with a 3.5 unemployment rate i'd be thinking seriously about whether um paying people more to not work than to work was a good thing to continue doing jason lost for words there are you in agreement with republican governors then in places like arkansas iowa montana south carolina you know it depends on where you are in the virus it depends on where you are in your unemployment rate but by certainly by june july august of this year i don't think we need the same ui system we had in january in january it made sense 3 000 people were dying a day we did we wanted to give people an option other than work and support them in that option in an increasingly hot labor market for a lot of states it may not make sense it may not make sense in the same way so i think they should be taking a hard look at it uh dr fuhrman i just did a study here thank you john for extending that out because i was working the bloomberg terminal uh jason i did a standard deviation study on a monthly basis of core cpi back to the time of paul volcker maybe around 1990 i can find a jump condition in core cpi like we see now we do interview after interview where experts like you say it's about the jump that we see in inflation right now we're seeing a jump that i would suggest is near original how do should we respond to that yeah uh i mean the economy is going to do weird things we saw a collapse that was um you know historic last year in prices we're seeing some of what we're seeing now is the unwinding of that some of what we're seeing is different sectors come back at different paces so i wouldn't leap all the way to where you know we're not worried about inflation now we're worried about hyperinflation it's going to be 0.9 every month from now on but you know what i'm saying is just a recalibration of views discount the data a lot because of the weirdness don't discount the data all the way you should update your views so let's recap the data right now jason stay close one year i just want to go through the price section the s p 500 did decline off the back of that upside surprise we bounced off the lows we're down seven tenths of one percent similar move on the nasdaq the nasdaq rocketing lower and then bouncing back just a little bit still negative one point three percent into the bond market you'd expect to sell off you've got one a mild one yield tyre through the belly of the curve the five year up about three babies john yield has not moved at all essentially at all it's well contained 164 164 the lows of friday 146 then a huge bounce higher off the back of that and we think about the higher the recent range 174 at the close of march at the end of march on a closing basis so with some way off that two basis points higher on the day mike mckee the data comes in for the economics community it is another monster miss on wall street together with that payroll report well yes but i'm going to give all of my compatriots on wall street a pass i'd expect that mike of course very hard to do when you have this kind of base effect changes i mean we're looking at things like men's apparel was up 1.3 percent during the month and a year ago it was uh up just uh uh one percent so there's no real change there how do you know what's going to happen but apparel overall is up three percent it was up 1.9 last year so you think things are going to go one way and they end up going another and it's kind of hard to tell with the data this volatile though tk i think it raises some questions about markets and how you trade the incoming data how sensitive will markets be to incoming data of the data sets this volatile and this hard to forecast well we heard that from dr fuhrman i mean the cliche is to go to a three-month moving average but john i i am really taken given it's a natural disaster the pandemic i get the originality of it you look at core cpi and the jump up is well outside to standard deviations on a monthly basis that's a ginormous move that's a i learned ginormous from furman well let's reset so just quickly before i have to run how do you think that meeting in the white house changes later between the big four and the president of the united states with this inflation data this morning now every single market participant every economist will come on the show today and talk about it only being one data point but that's the data point i imagine that the republicans will be talking about all day going into that meeting in the white house yeah the meeting is there and that's a political discussion it'll be emotional like gasoline and all that i'm way more interested in people like jason furman and i would go to the vice chairman where particularly if he does q a john that will be fascinating we get the q a in about 15 minutes today okay jason just a final one from me before i have to run your view on that how the federal reserve will talk about this when we hear from the vice chair in about 15 minutes what would you anticipate what you'd expect them to say in the coming weeks off the back of this data i would expect them to make very little in the way of adjustment i would expect them to emphasize this is transitory some of the quirkish parts of this like um used cars and the like i'd love to see them tilt a notch towards concern about inflation but i think they'll mostly uh be doing more to explain this away than to express any concerns about it okay i've got to run i'm going to catch up with chris romani a little bit later that's good and then i'm going to catch up with saban zappa as well from salkjet i'm going to do that in about 15 minutes time that dialogue will continue through the morning here and again if you're joining us a real shock i'm going to use the word shock as we see too inflation because of the shock of this report we had eight nine ten themes to speak to jason furman about with harvard university always interesting but we've really got to stay here i think on price change jason furman let's do a little bit of a history lesson of the shock here and i went back to 1990 neil duda talks about the biggest one-month gain since june of 2009 dr fuhrman take us back to the 60s and robert samuelson at the washington post has written about this the time of walter heller what did they do in the 60s about the inflation shock and should should we use that as a template first of all they did a lot of emphasizing one-time factors and micro stories you know there's this segment is doing this that segment is doing that um and they missed the bigger macro forces what was going on with fiscal and monetary policy so number one is look at the macro don't do each try to explain away each one of them might grow lesson two though which i think is a good one for us it took years and years and years of a policy change to get us to the place we were at in the late 60s we've just been through a freakish pandemic we've just been through a highly unusual period of policy i don't expect policy uh two i don't think there's been a huge regime change i think we'll go back to the old regime and this should hopefully all stay under control as a result but we do need to get back to a little bit more of the old regime for that to work we certainly heard that from jan hatsey as yesterday folks of goldman sachs then i look at what wages will do and there's that phrase from ancient history uh jason furman cost push inflation i don't observe that anywhere am i wrong are we gonna redox the 60s and 70s i should say and cost push inflation where we have to whip inflation now i mean we just saw that in april wages were up by about 0.7 0.9 depending on how you look at the number uh prices were up by that same amount but you know again i mean we obviously don't want to read too much into any one data point but unless people start heading back to work in bigger numbers we're going to have concerns now that should happen should happen no later than september when uh unemployment insurance expires but you know it needs to happen jason fuhrman thank you so much greatly appreciate it with harvard university and of course the peterson institute as well on the bond market i thought john firo was absolutely dead on about 1.64 uh percent rounded up maybe 1.65 a three basis point move seems contained ira jersey is our expert at bloomberg intelligence on fixed income on the dynamics of full faith and credit at the very short market and again out at the 10-year space jason what does it signal that the 10-year seems somewhat contained excuse me ira what is it signal hey tom um yeah i think it's contained in part because everyone knows that this number was going to be crazy volatile it was you know how big was the bounce back going to be given the base effects i think people are looking through that but you know when you look at the dynamics of what is causing that three-ish basis point sell-off in the 10-year it's coming mostly from break even so it's mainly from people thinking that maybe inflation will be higher we're now approaching 2.6 uh inflation expectations over the next 10 years and you know that would be not unprecedented but you'd have to go back to the 19 early 1990s to that get that kind of year-on-year inflation for uh for several years so i i think you know the market is pricing for this or pricing a little bit more but but we're probably nearing fully priced yeah i think it's some at some point in the near future i was channeling i was doing a chart in the bloomberg as you were speaking of uh the yield of the 10-year back to volcker back to 1990 and i ran the regression and granted we've broken out a little bit can you say we have broken the great disinflation the great moderation well i don't know if we've broken the great moderation but i do think that long-term downtrend is is probably over i do think we've reached the lower bound and i think at this point where we're going to be searching within this cycle for what might be you know the longer term 10 20 year top in in yields which is probably below four percent i don't think we'll we're going to see any kind of inflation any kind of inflation or or growth or dynamic that are going to cause uh treasury yields to go above four percent unless we do something silly like um you know talk about not paying our bills not uh you know with with uh um some kind of default probability otherwise you know we're likely contained um uh in in terms of yields and and tom you know i want to bring up a little fact here um you know bacon prices were up 10 last month uh year on year but but egg prices were down nine percent so don't worry about the price of your breakfast for now very good hybrid jersey too short a visit thank you so much and he will write this morning on what we see from vice chairman claret and of course off this report as well michael mckee is doing what michael mckee does best really diving into what is a wide set of data what's what's the thing that sticks out you mentioned cars used cars but what's the thing well a lot of it seems to be the reopening uh prices we're looking at things like used cars were up 10 as you mentioned car rental up 10.1 percent airfares up 10.2 percent lodging uh hotels and motels 7.6 so you can understand where some of these price pressures are coming from these are people who had no business for the past year or so and their prices are firming up a little bit um televisions were up 3.1 percent as uh the surveillance simulcast starts to come together it is it is it's a natural body but just to follow on ira jersey don't worry about breakfast he's right about the numbers there but do worry about your next trip to fenway because uh hot dog prices are up 2.7 that's a large gain and sporting event tickets up 10.1 all that is wisdom and it's affecting all of our viewers and listeners but to me the the really salient point is is do elites like richard clarida do they digest that data and do they understand that effect on the public or am i going to get a columbia university dissertation from the professor today they understand but remember he is uh he he i'm sure wrote his speech before the numbers came out oh they have to adjust once well he is he is sitting down with ellen zentner and she will be asking questions she'll grow up she's brutal she will grow but i i you know i think jason was right there's nothing there's no advantage to the fed in panicking or saying anything beyond this is transitory at this point because they got to take apart the numbers there are a lot of base effects we have to see what happens from here on do we see these prices continuing to rise this is critic i don't worry on time riley help me out here this is critical mike if prices go up a big amount and then they go level is that something the fed adjusts to i mean we all get rising and lowering but what if we get pandemic up and then a new leveling of the price level for a year or two well that's fine with the fed because then inflation isn't accelerating and that's what they're worried about they want inflation to rise at a two percent little bit above two percent rate uh for the next year or so and then to settle in at two percent so if they get something like that that's exactly the kind of they can stop that can they control they can't control it as alan greenspan once said you know using monetary policy to do this is like operating on someone with an axe uh it's very difficult but they're going to aim to do their best with it and this doesn't change the narrative for the fed because they're looking at this going yep that's exactly it now let's take it apart let's look at the individual components let's figure out our airfare is going to rise 10 every month probably not that's my point they'll go level yeah we're out of time uh and we will continue michael mckee i know will drive forward the conversation with various parties including john farrell here through the morning to bring you up to date and i really think this is important jobs day with all the focus and yes it was an historic jobs day this is an extraordinary statement on price change this goes back to my ute if you will with arthur burns and moves that weren't measured where there was a real ability to control inflation i'm not suggesting we're there but certainly we see a jump as i mentioned on core inflation where i can't find an analog back to 1990 and i love what neil doubt at renaissance capital points out of a lift here that we haven't seen since 2009 or 2008 you heard professor fuhrman push that aside as jan hatzius did yesterday of goldman sachs and say transitory seems to be the word of the moment what is not transitory is our need to do a data check and we will do that s p futures negative 29 dow futures were negative i think 200 at one point now negative 1 17 the market moderates the vix 23.06 out of good stick 1.22 points the bond market there we have a now full 165 prints so critically as john mentioned with the leap we had a higher yield and now we have an ever higher yield as well i'm waiting for 70 on brent crude we're not there yet there's so much to talk about please stay with us through the morning on bloomberg radio and bloomberg television good morning [Music] you

Channel: Bloomberg Television

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Length: 144min 8sec (8648 seconds)

Published: Wed May 12 2021