>> THE BEARS ARE UNHAPPY, THE
BULLS ARE UNHAPPY EVERYBODY IS UNIVERSALLY UNHAPPY. >> FOLKS ARE GOING TO SAY IT'S
A TIM UP TO US DEBT CEILING. >> WE STILL LOOK FOR THE MARKET
TO PANIC A BIT MORE. >> I PUT IT IN THE 30-40% RANGE.
>> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE,
JONATHAN FERRO, AND LISA ABRAMOWICZ. JONATHAN: DEBT CEILING OPTIMISM.
WELCOME FROM NEW YORK CITY THIS MORNING GOOD MORNING FOR OUR
AUDIENCE WORLDWIDE THIS IS BLOOMBERG SURVEILLANCE
ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ.
WE HAVE SOME DEBT CEILING OPTIMISM. TOM:
I THINK IT'S MORE THAN THAT I THINK IT'S MORE THAN THE DEBT
CEILING THE PRESIDENT CANCELED THE TRIP HE IS IN JAPAN. IT'S THE DEBT CEILING OPTIMISM
BUT WHAT ELSE IS GOING ON THIS IS IMPORTANT.
OUR FIRST GUEST IS AN UNCONFIRMED BULL.
IT'S PERCOLATING. JONATHAN: I'M WITH YOU. TOM:
ALICIA LEVINE EVERYONE IS UNHAPPY, THAT'S THE TRICK. JONATHAN:
NIBBLING AWAY AT THE RATE CUTS THAT HAVE BEEN PRICED FOR THE
SECOND HALF. THE BUMPY ROAD TO ABSOLUTELY
NOWHERE. WEDNESDAY BIGGEST ONE-DAY GAIN
SINCE MAY 5 WHAT DOES THAT TELL YOU? LISA:
BUMPY ROAD TO NOWHERE, I WILL REPEAT WHAT YOU SAID.
THERE'S A LITTLE BUMP PERHAPS FOR THE DIRECTION PEOPLE
CALLING THIS A RISK RALLY RISKS ARE BEING TAKEN OFF THE TABLE,
POTENTIALLY, MAY BE. THE CATASTROPHIC POSSIBILITIES
AREN'T AS PRESENT AS THEY WERE PERHAPS A WEEK AGO. TOM:
ARE RATE CUTS BEING TAKEN OFF THE TABLE? JONATHAN:
SLIGHTLY BUT NOT ALL AT ONCE. TOM:
I DID FANCY BLOOMBERG ANALYSIS AND WE HAVE NOT BROKEN OUT IS
IT GOING TO BE BREAKOUT THURSDAY?
IT WAS NOT BREAKOUT WEDNESDAY. IT'S INTERESTING TO SEE.
IT'S LIKE WE ARE NOT THERE. SPX 4180. JONATHAN:
GREAT STORY YESTERDAY ON THE BLOOMBERG TO COVER THAT A
LITTLE BIT LATER THIS MORNING. JUST PUSHING IT OUT, CONSUMERS
STILL ROBUST LOOKING AT HOUSING DATA, RENTS IN NEW YORK CITY.
AWFUL. SO PUNCHY AT THE MOMENT. LISA: AWFUL. JONATHAN:
JUST NOT GOOD. [LAUGHTER] LISA:
ALL THE COMMERCIAL REAL ESTATE I'M KIDDING.
I MEAN, YES, THAT'S RIDICULOUS. THE MEDIAN OF $4000 IN NEW YORK
CITY. TOM: WE HAVE TO MOVE THE SHOW
FORWARD BUT 4000 TIMES 12'S 48000 AND THERE IS YOUR INCOME
YOU NEED TO RENT THE UNIT. THAT'S POST TAX.
IF YOU'RE SINGLE AND AT THE TEXAS TOGETHER IT'S LIKE OK.
JONATHAN: YOU WONDER WHY THEY GO DOWN TO
FLORIDA. LET'S GET TO YOUR PRICE ACTION
POSITIVE 0.2% ON THE S&P 500 YIELDS HIGHER BY A COUPLE OF
BASIS POINTS. 358, JUST A LIFT OVER THE LAST
WEEK MONDAY, TUESDAY, WEDNESDAY, THURSDAY YIELDS OF
EVERY SINGLE DAY ON THE FRONT END OF THIS CURVE. LISA:
HOW LONG CAN WE CONTINUE WITH THIS SINCE THE PERHAPS RATE
CUTS BEING TAKEN OFF THE TABLE, A GAS FIRM RETAIL SALES?
THEY GAINS IN THE STOCKS HAVE BEEN PRETTY RESILIENT WALMART
REPORTING EARNINGS AROUND 7:00 A.M. AND BEFORE THE OPEN DO THEY
CONFIRM THE SIGN THAT CONSUMERS ARE STILL SPENDING PERHAPS NOT
IN HOME KURDS -- HOME GOODS BUT OTHER AREAS. U.S. JOBLESS CLAIMS, EXISTING HOME
SALES LEADING INDEX REALLY CURIOUS TO SEE IF THE INITIAL
JOBLESS CLAIMS CONTINUE ON THE UPWARD TREND TODAY.
IT INCLUDES GOVERNOR PHILIP JEFFERSON.
THAT'S GOING TO BE ALONGSIDE FBI DIC CHAIR.
ALSO JANET YELLEN WILL BE TALKING LATER. JONATHAN: CHAIRMAN POWELL TOMORROW AS
WELL THAT MARATHON OF FED SPEAK SO FAR. WE ARE SO EXCITED.
HSBC HAS BEEN BULLISH THIS YEAR. MAX, GREAT TO CATCH UP WITH
YOU, SIR. TALK ABOUT THE SWEET SPOT WE
ARE IN. ARE WE SO IN THAT SWEET SPOT? >> GOOD MORNING. I THINK WE ARE.
I THINK WE ARE RIGHT IN THE MIDDLE OF THE SWEET SPOT.
WHEN WE LOOK AT SOME OF THE DATA YOU GUYS WERE JUST TALKING
ABOUT THE JOBLESS CLAIMS THEY WERE ON THE UPTREND IT TURNS OUT SOME OF THE DATA IS
PROBABLY WRONG BECAUSE OF THE DATA BREACH WE HAD IN
MASSACHUSETTS. THE JOBLESS CLAIMS ARE WORSE
THAN EXPECTED SO YOU ARE SORT OF IN THIS LIMBO WHERE THE DATA
IS NOT CLEAR-CUT FOR US THAT IS PERFECT IT'S A BIT OF FOOD FOR
THOUGHT THE RATE CUTS ARE NOT BEING PRICED OUT YET BECAUSE WE
IN PARTICULAR SEE 3% IN THE NEXT COUPLE OF MONTHS YOU GOT
MIXED DATA, BEATING EXPECTATIONS BUT NOT TOO MUCH
WHAT MORE DO I WANT? TOM: STEVE COHEN SHARES YOUR
OPTIMISM FOR YOU IT'S BASED AROUND HOW CORPORATIONS ARE
ADAPTING. WHAT LEADS TO YOUR OPTIMISM? >> I THINK THE AI THEME IN
PARTICULAR IF YOU LOOK AT ASIA IT'S A PRETTY BIG NAME AND WILL
PROBABLY CONTINUE. I THINK WHAT WE ARE SEEING IS
EVEN ASIDE FROM THE AI AND THE WHOLE STRUCTURE OF
TRANSFORMATION WHEN WE LOOK AT THE CORPORATE'S THINGS ARE
LOOKING MUCH BETTER THE ONLY THING WERE COMPANIES ARE
ACTUALLY RESPONDING LESS POSITIVELY ON AS IF THEY ARE
ASKED ABOUT EARNINGS COURSE ABOUT THE STUFF THEY ARE NOT IN
TOUCH DIRECTLY. IF THEY ARE ASKED ABOUT THE
GENERAL SORT OF TALK DOWN MACRO BACKDROP THAT SENTIMENT, THAT'S
BEEN DETERIORATING. WE HAVE SEEN THEM FOR QUITE A
WHILE ALREADY. TALKING ABOUT THEIR OWN
EARNINGS, THEIR OWN MARGINS, THE SENTIMENT OF THE STUFF THEY
ARE PRODUCING, THE STUFF THEY ARE DOING ON THEIR OWN THAT
SENTIMENT HAS ACTUALLY BEEN BRIGHTENING UP THROUGHOUT THE
ENTIRE YEAR IT'S JUST CONTINUING DURING THE REPORTING
SEASON AS WELL THE SENTIMENT ON THE STUFF THE GOT A HANDLE ON
THEMSELVES ON THEIR OWN STUFF THAT THEY'RE PRODUCING THEY
ACTUALLY FEEL QUITE POSITIVELY ABOUT THAT. LISA:
PEOPLE THAT ARE AROUND THIS RISK ON, RISK OFF.
OUR STOCKS RISKY? >> FROM A MULTI-ASSET
PERSPECTIVE IT IS STILL A HAVE OF ENVIRONMENT. WE ARE STILL IN AN ENVIRONMENT
WHERE IT'S EVERYTHING ON OR EVERYTHING OFF.
WE HAVE SEEN POST GAINS SINCE THE START OF THE YEAR EQUITIES
POST AGAIN, CREDIT, SO WE HAVE SEEN PRETTY BROAD-BASED GAINS
AND IN THAT REGARD I WOULD CALL THE TECH EITHER DEFENSIVELY OR
RESPONDING I WOULD CALL IT THE GAME ON EVERYTHING. AND WHY ISN'T EVERYTHING ON?
IT'S PRETTY SIMPLE BECAUSE ESSENTIALLY WE HAVE TO PRICE
THESE RATE CUTS IN. WE'VE GOT TO THINK OF THAT IS
NOT GOING OFF THE CURVE WE HAVE INFLATION HEADING FORWARD.
THE BIG DANGER I THINK WILL COME TOWARDS THE SECOND HALF OF
THE YEAR WHEN INFLATION WILL RE-ACCELERATE, WE SEE READ
ACCELERATING PAST 4% AND THE RATE CUTS HAVE TO BE PUSHED
BACK AGAIN. THEN IT WILL WORK THE OTHER WAY
AROUND IT WILL BE GEARED TOWARDS THE PLATE ON THE WAY
DOWN. LISA: IT CAN BE IN EVERYTHING OFF
KIND OF MOMENT ONCE AGAIN IS THIS THE NEW NORMAL 60/40 NOT
WORKING OR IS THIS A TEMPORARY ADJUSTMENT ON THE WAY TO
SOMETHING MORE NORMALIZED? >> IF WE ARE TALKING ABOUT THE
NEXT COUPLE OF MONTHS UNTIL THE END OF THE YEAR I THINK THAT IS
THE NEW NORMAL. I DON'T SEE THAT CHANGING IN
THE NEXT TWO OR THREE MONTHS. I WOULD GENUINELY HOPE, I WOULD
REALLY WISH I HAD THAT VARIOUS VIEW SO MANY PEOPLE ARE SHARING
RIGHT NOW BECAUSE THEN YOU COULD HAVE THE CLASSIC
RECESSION. YOU CAN SAY I WANT TO HAVE
DEFENSIVE'S, RIGHT, UTILITIES THE PROPHECIES AND THE CYCLE
ENDS, INFLATION IS KILLED WERE GOING TO START FROM SCRATCH,
RIGHT? THAT IS THE EASIEST SCENARIO.
THE ONE WE GOT FROM A MACRO PERSPECTIVE IS THAT IT'S GOING
TO BE A MUCH MORE PAINFULLY SLOW PROCESS.
THE NEXT YEAR, YEAR AND A HALF AND THAT FROM AN ASSET LOCATION
PERSPECTIVE SPEAKS FOR THAT SORT OF EVERYTHING ON AND
EVERYTHING OFF THOSE STEPS THE MUCH MORE THE NEW NORMAL AT
LEAST THE NEXT COUPLE OF MONTHS. JONATHAN:
MAX, WONDERFUL TO GET UP TO SPEED WITH YOU.
STAND BULLISH, THE SWEET SPOT. TWO YEARS REPRICED NOW FOR 16
THINKING ABOUT FOR 20 ON THE TWO-YEAR ALL OVER AGAIN. LISA:
BUT IT ISN'T TRADING LIKE A PENNY STOCK SO I GUESS YOU GET
THE SENSE THAT PEOPLE ARE SLOWLY ADJUSTING TO KNOW RATE
CUTS BUT NOT NECESSARILY THIS YEAR AT LEAST. IT ISN'T
NECESSARILY A WHOLESALE SUDDEN MOVE WHICH IS THE REASON PEOPLE
CAN ABSORB IT WITHOUT SOME MASSIVE SELLOFF. TOM:
SOME OF THE DATA ON THE BLOOMBERG THIS WAS THE OBVIOUS
LIKE THE TWO YEAR YIELD I THINK IS IMPORTANT.
ONE IS THE EURO YEN. THE ANSWER IS EURO YEN IS NOT
BROKEN OUT IT IS NOT BROKEN OUT. THE OTHER IS A THREE-MONTH
TENURE SPREAD. IT'S BIGGER INVERSION BUT AGAIN
IT HASN'T BROKEN OUT WE ARE NOT THERE TO THAT THERE OF A BREAK
OUT THIS THURSDAY. JONATHAN: THESE ARE REALLY SUBTLE THINGS.
FOR THE YEAR, THAT'S SOMETHING TO LOOK AT DISAPPOINTING DATA
OUT OF CHINA, EUROPE, THE EURO,. CLOSE TO 107. TOM: RATE DOWN THERE AND AS I LOOK
THIS MORNING FOR THE FIRST TIME 7.03 AND THAT'S MOVING, THAT'S
ACCELERATING. JONATHAN: WE GOT ALL THESE RATE CUT
PRICED FOR THE SECOND HALF. THE DATA KIND OF SHIFTED THE
OTHER WAY, TOM IS FULLY TAKEN FIRST POSITION JUST SLIGHTLY.
TOM: IT'S REALLY DECEPTIVE NOW. IT'S A SNOOZE BEST IT'S NOT
SURVEILLANCE SNOOZE BEST. JONATHAN:
DO YOU HAVE ANOTHER NUMBER THAT STARTS WITH THE FOUR?
WE TALKED ABOUT IT BRIEFLY. THE MEDIAN RENT IN MANHATTAN
$4241 8.1% HIGHER THAN A YEAR AGO. STILL CLIMBING.
STILL CLIMBING. EQUITY FUTURES ON THE S&P 500
JUST ABOUT POSITIVE. >> KEEPING YOU UP-TO-DATE WITH
NEWS FROM AROUND THE WORLD WITH FIRST WORD, I'M LISA MATEO.
PRESIDENT BIDEN AND OTHER GROUP OF SEVEN LEADERS HAVE THE --
BEGUN ARRIVING. RUSSIA WILL BE AT THE TOP OF
THE AGENDA. VLADIMIR PUTIN CONTINUES HIS
WERE IN UKRAINE AND POST-PANDEMIC CHINA IS
EXPANDING ECONOMIC AND STRATEGIC CLOUD.
CHINA'S PRESIDENT XI JINPING IS HOLDING HIS OWN SUMMIT THE TWO
DAY CHINA CENTRAL ASIA SUMMIT WILL ASSEMBLE THE LEADERS OF
AREAS AS A WAY OF REMINDING THE G7 OF CHINA'S INFLUENCE OUTSIDE
THE U.S. LED WORLD ORDER. HANG GARY WILL LOCK FURTHER AID
--HUNGARY WILL LOCK FURTHER AID TO UKRAINE.
ONE OF THE COMPLAINTS IS THAT UKRAINE SINGLED OUT THE LARGEST
BANK FOR DOING BUSINESS IN RUSSIA.
THERE'S GROWING SPECULATION THAT RON DESANTIS IS ABOUT TO
ANNOUNCE THAT HE’'S CHALLENGING DONALD TRUMP FOR THE REPUBLICAN
PRESIDENTIAL NOMINATION THE FLORIDA GOVERNOR'S MEETING IN
MIAMI NEXT WEEK. DONORS EXPECT TO MAKE
FUNDRAISING CALLS ON BEHALF OF DESANTIS.
DEUTSCHE BANK WILL PAY $75 MILLION TO SETTLE A LAWSUIT IN
THE U.S.. VICTIMS OF EPSTEIN'S SEXUAL
ABUSE ACCUSE THE GERMAN BANK OF FACILITATING HIS SEX
TRAFFICKING OPERATION. JP MORGAN FACES A SIMILAR SUIT.
GLOBAL NEWS 24 HOURS A DAY. POWERED BY MORE THAN 2700
JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M LISA MATEO AND THIS IS
BLOOMBERG. >> I'M CONFIDENT WE WILL GET
THE AGREEMENT ON THE BUDGET THAT AMERICA WILL NOT DEFAULT
AND EVERY LEADER IN THE ROOM UNDERSTANDS THE CONCEPT
CONSISTS OF FAILURE TO PAY OUR BILLS IT WOULD BE CATASTROPHIC
THE AMERICAN ECONOMY. >> I'M OPTIMISTIC ABOUT OUR
ABILITY TO WORK TOGETHER. I NEVER GIVE UP.
I HAVE THE GREAT PERSEVERANCE THAT WE WILL GET IT DONE.
JONATHAN: PRESIDENT BIDEN, SPEAKER
MCCARTHY PULLING THE SAME STRICT -- SCRIPT.
THE PROBLEMS AT THE WHITE HOUSE THAT EVERYBODY KNOWS ACCORDING
TO KEVIN MCCARTHY HOUSE SPEAKER. TOM:
CAN I HAVE A MOMENT OF SILENCE FOR CAPITOL HILL TEAM THEY HAVE
TO DEAL WITH THIS DAY AFTER DAY THEY GET THE PATIENCE TO DO
THIS. I DON'T KNOW WHAT HAPPENS WHAT
HAPPENS TODAY? NOTHING BECAUSE THE PRESIDENT
IS IN JAPAN. JONATHAN: PLAYING SNIPPETS LIKE THAT BUT
ULTIMATELY HAVE WE MOVED ON SUBSTANCE?
NO INDICATION OF THAT IT'S NICE THAT THEY ARE PLAYING NICE.
THAT'S GOOD BUT ULTIMATELY NO INDICATION THERE'S GOING TO BE
A DEAL ANYTIME SOON. TOM: THERE WILL BE SYMBOLISM ON
FRIDAY THE LAST OF OUR WORLD WAR II PRESIDENTS WILL VISIT IN
UP EMOTIONAL POINT FOR AMERICANS. ANNMARIE HORDERN JOINS US AT
THE BEGINNING OF THIS TRIP SHE IS AT HIROSHIMA GOOD MORNING TO
YOU AT THE 6:00 EVENING IN JAPAN WHAT IS THE PRESIDENT'S
SCHEDULE AS HE RESTS FOR A BUSY FRIDAY MORNING? >> THE PRESIDENT LANDED AND
IMMEDIATELY GOT TO WORK HE HAD A BILATERAL MEETING WITH THE
PRIME MINISTER OF JAPAN WHO OF COURSE THIS IS THOSE HOMETOWN
AND WHEN YOU TALK ABOUT THE HISTORICAL SIGNIFICANCE THE
JAPANESE WANT TO MAKE SURE THAT NUCLEAR NONPROLIFERATION IS ON
TOP OF THE AGENDA THE PRESIDENT PERSONALLY IS GOING TO HAVE ONE
FIT HERE IN JAPAN BUT REALLY ANOTHER IN WASHINGTON, D.C.
TO MAKE SURE HE CAN GET BACK FOR THE DEBT SELLING
NEGOTIATIONS IT'S GOING TO BE HEAVILY FOCUSED ON CHINA AS
WELL AS RUSSIA'S INVASION OF UKRAINE. TOM:
IS THIS THE NEW LEADER FOR JAPAN THAT IS A CONTINUATION OF
THE LDP LEADERS WE HAVE SEEN FOR SO MANY YEARS OR IS HE
MEETING NEW POLITICALLY VIGOROUS JAPAN? ANNEMARIE:
THIS IS A LEADER THAT HAS MEETING AT THE HIGHEST
SOMETHING I THINK PRESIDENT BIDEN WOULD BE ENVIOUS OF AS HE
IS SITTING DOWN WITH HIM THIS IS SOMEONE WHO YOU HAVE SEEN
RECENTLY WITH GROWTH NUMBERS OUT OF JAPAN THE BEST SINCE THE
1990'S AND ON TOP OF THAT THIS MORNING WHAT WE HAVE LEARNED
FROM THE PRIME MINISTER WHEN HE WAS SITTING DOWN WITH CHIP
CEO'S ONE OF THEM BEING MICRON AT HUGE U.S. COMPANY.
THEY HAVE A FACTORY RIGHT HERE IN HIROSHIMA AND THERE'S GOING
TO BE INCENTIVES FOR THEM TO COME TO JAPAN BUT THIS IS PART
OF WHAT THE UNITED STATES IS TRYING TO DO TO MAKE SURE THEY
CAN SHORE UP SUPPLY CHAINS OUTSIDE OF CHINA. LISA:
IT'S INTERESTING TO THINK ABOUT THE SPLIT SCREEN. MEETING AT THE SAME TIME AS
THIS PRECEDENTED? DO WE HAVE A SENSE OF SOME SORT
OF GATHERING THAT TRIES TO BASICALLY SHOW ITS SWAY WITH
THE WORLD AT THE SAME TIME THE G7 TALKS ABOUT HOW TO DEAL WITH
THE THREATS THAT HAVE EMERGED FROM THAT NATION? ANNEMARIE:
I THINK WHAT YOU SEE IS IS XI JINPING TRYING TO SHORE UP
OTHER COUNTRIES WHILE BIDEN AND OTHER WORLD LEADERS ARE LOOKING
TO THE GLOBAL SOUTH TO MAKE SURE THEY CAN KEEP THEM ON
BOARD NOT JUST BECAUSE OF THE STRUGGLES THEY HAVE IN TERMS OF
WHAT IS GOING ON WITH HIGHER INFLATION AND ENERGY COSTS WHEN
IT COMES TO AGRICULTURAL COSTS BUT ALSO TO MAKE SURE THEY ARE
LOOKING AT DEMOCRACIES WHAT THEY NEED HELP.
WHAT'S INTERESTING IS THAT THE SPLIT SCREEN THAT PROBABLY
MATTERS TO THE WHITE HOUSE BUT MATTERS TO MOSCOW.
VALLETTA MERE PATENT IS NOT THERE BUT THEY ARE MEETING WITH
THE CENTRAL ASIAN COUNTRIES THAT IS INCREDIBLY IMPORTANT
FOR XI JINPING TO MAKE SURE HE HAS GOOD TRADE TIES AND
INFLUENCE IN THESE CAPITALS. LISA:
THERE IS ALSO IN ISSUE OF WHAT HAPPENS WHEN PRESIDENT BIDEN
GOES BACK TO THE U.S. AND IT SKIPS A NUMBER OF STEPS
IN HIS TRIP. DOES THIS CHANGE THE U.S. IS PRESENT WHEN THE FOCUS IS ON
DOMESTIC ISSUES? ANNEMARIE:
THERE IS A TREMENDOUS AMOUNT OF ANGST RISE SET DOWN WITH
TREASURY SECRETARY YELLEN THIS WAS LOOMING LARGE OVER HER AND
FED CHAIR JAY POWELL WHO WAS THERE BECAUSE WHEN YOU TALK TO
OTHER FINANCE MINISTERS ON THE SIDELINES THEY WERE CONCERNED
ABOUT THE ECONOMIC RISKS EVEN THOUGH THEY WERE THERE TO TALK
ABOUT OTHER MATTERS MOST NOTABLY CHINA SO THIS IS
CERTAINLY SOMETHING THAT'S GOING TO WEIGH ON THE PRESIDENT
HE DOESN'T EXPECT THE DEAL BY THE TIME HE GETS HOME BUT HE
HAD TO CUT HIS TRIP SHORT HE WAS MAKING THIS HUGE TRIP AS
WELL TO PAPA NEW GUINEA. THE FIRST U.S.
PRESIDENT TO SET FOOT IN PAPA NEW GUINEA HE SENT HIS TOP
DIPLOMAT POTENTIALLY PEOPLE WERE TALKING ABOUT MAYBE
BEIJING WAS GOING TO TRY TO GO FOR SECURITY ALLIANCE THE WAY
YOU SUCH CHINA DO WITH THE SOLOMON ISLANDS AND THEN HE WAS
GOING TO MEET THE QUAD IN AUSTRALIA ALL OF THAT HAS BEEN
SCRAPPED SO THE CRITICISM WILL BE THAT DOMESTIC POLICY
POTENTIALLY AT LEAST THE CRITICS WILL SAY ARE
UNDERMINING FOREIGN POLICY AS THE U.S.
ESPECIALLY NOW IS TRYING TO SHORE UP ALLIANCES AS THEY LOOK
TO COUNTER BEIJING. JONATHAN: YOU KNOW WHAT THIS NEEDS?
ANALYSIS LET'S DO THIS THAT'S WHAT THE G7 NEEDS.
ANNEMARIE, THANK YOU. PRIME MINISTER'S PROBABLY GOT
THINGS TO SAY YOU JUST TWEETED AN AMAZING STAT IT TOOK UNTIL
THE 25TH MINUTE TO COMPLETE A PASS IN MANCHESTER CITIES HAVE
FOSUN AFTER GETTING CRUSHED. TOM:
THIS WAS THE MOST EXTRAORDINARY MATCH I'VE EVER SEEN WE HAVE
SEEN THIS IN COLLEGE WERE ONE TEAM DOMINANCE BUT I'VE NEVER
SEEN A PROFESSIONAL GAME WHERE ONE TEAM WAS ALMOST EXHAUSTED
BY DOMINATING FOR MINUTE AFTER MINUTE AFTER MINUTE AFTER
MINUTE. JONATHAN: NOT AT THAT LEVEL. NOT BY A TEAM I THINK IS
ELITIST I JUST SAT THERE ALMOST IN ALL OF IT. JUST FULL PRESSED.
COULDN'T GET OUT IN THE OTHER HALF. TOM:
THE COACH PUT THIS TOGETHER, RIGHT? JONATHAN:
MONEY ONLY GETS YOU SO FAR YOU HAVE TO GET THEM TO PLAY WITH
EACH OTHER AND HE SEEMS TO HAVE DONE THAT IN A BEAUTIFUL WAY.
THE TEAM SEEMS TO BE PICKING AT JUST THE RIGHT TIME.
IT'S PRETTY SPECIAL. TOM: ASKING FOR A FRIEND IS HE
AVAILABLE FOR THE TOTS? JONATHAN:
I DON'T THINK YOU HAVE THE BUDGET FOR THAT KIND OF COACH
BECAUSE HE'S GOING TO WANT TO SPEND A LOT OF MONEY TO STILL
HAVE THE TEAM. TOM: THE SUPERSTAR GUY, THE BLONDE?
JONATHAN: HOLLAND. TOM: HOLLAND. HE IS NOT CONSEQUENTIAL BECAUSE
THE OTHERS ARE SO GOOD. JONATHAN:
THESE MATCH OFFS ALL AROUND THE PITCH SO LET'S PICK OUT KYLE
WALKER WINS THAT EASY. TOM: I'M A BIG FAN. JONATHAN:
IT'S SUPER IMPRESSIVE. TOM: SO WHAT DO THEY DO NEXT?
JONATHAN: JUST TAKING IT? >> I WOULD NOT LIKE TO SEE MY
CITY GO AGAINST HIM. TOM: OR THE TOTS FOR THAT MATTER.
IT WAS JUST GREAT. I ENJOYED IT IMMENSELY THANK
YOU TO CBS FOR COVERING IT. JONATHAN:
THEY'VE DONE A REALLY GOOD JOB. TOM:
IT'S BETTER THAN SOME OF THE OTHER STUFF WE HAVE TO SEE.
JONATHAN: WE WON'T TALK ABOUT THAT.
WE WILL TALK ABOUT THIS A LITTLE LATER THIS MORNING.
EARNINGS FROM WALMART, WE WILL SEE THAT IN ABOUT 35 MINUTES
TIME. CHAIRMAN POWELL TOMORROW TONS
OF FED SPEAK THROUGH THIS MORNING THE BOND MARKET
REPRICING OFF THE BACKS OF THE NEXT STOP FOR THE DATA STORY IS
JOBLESS CLAIMS IN ABOUT TWO HOURS AND CLAIMS OVER THE LAST
FEW WEEKS CLIMBING HIGHER. LISA: GETTING THE SENSE THAT PERHAPS
THEY ARE GOING IN THE RIGHT DIRECTION. THE ISSUE NO POINT IS IT
SCREAMING CONVICTION ON EITHER SIDE SO YOU CONTINUE WITH THIS
RANGE OF POTENTIAL BOTH SIDES RISK THAT WE KEEP SEEING. TOM: STANDARD DEVIATIONS, 250 4000,
THAT'S MY STATISTIC. JONATHAN: I AGREE EQUITY MARKETS POSITIVE
BY 0.2% ON THE S&P 500 A LIFT IN THE EQUITY MARKET.
THE DATA PUSHING BACK JUST A LITTLE BIT AGAINST SOME OF THE >> LIVE FROM NEW YORK CITY
WELCOME TO THE PROGRAM HERE EYES SOME OF THE -- HERE IS
SOME OF THE PRICE ACTION CLOSE TO 0.2% ON THE S&P ON THE
NASDAQ UP BY 0.2 SENT AS WELL YESTERDAY THE BIGGEST ONE-DAY
GAIN SINCE MAY 5. WHICH FOLLOWED THE BIGGEST
ONE-DAY LOSS SINCE MAY 4 THE BUMPY ROAD TO NOWHERE CONTINUES
LET'S SEE IF HE CAN BREAK OUT OF THIS RANGE ON THE S&P 500
THE BOND MARKET REPRICING YIELDS HIGHER MONDAY, TUESDAY,
WEDNESDAY DOING IT AGAIN THURSDAY MORNING. GETTING IT CLOSER TO 420 THE
DATA COMING IN AND THE U.S. IS FAVOR PUSHING OUT A
RECESSION COST TO BORROW THE PHRASE OUT OF THE RATE CUTS
PRICE FOR THE SECOND HAVE SUPPLANTED BY FEDERAL RESERVE
SPEAK DETERMINED TO STAY THE COURSE. TOM:
AND DRIFT AWAY FROM THE RATE CUT DISCUSSION IT'S VERY
FLEXIBLE. RIGHT NOW AMERICAN ECONOMICS A
BRIEF WHAT HAS CHANGED? I'M FASCINATED NOT A LOOK BACK
TO Q1 BUT WHERE WE ARE RIGHT NOW ARE WE ABOVE 2% REAL GDP
GUESS FOR THE SECOND QUARTER? >> THANKS FOR HAVING ME ON THE
SHOW, TOM. NOT ABOUT 2% GDP OUR BASE CASE
IS WE STILL LIKE IT SLOW FROM Q1 WE TRACK GDP ON THE GILLER
BASIS BUT TO YOUR POINT WE ARE STARTING TO SEE SOME UPSIDE OF
COURSE VERY EARLY ON IN THE QUARTER IN TERMS OF THE DATA
THAT WE HAVE BUT WE GOT RETAIL SALES THIS WEEK WE GOT
INDUSTRIAL PRODUCTION ALL PRETTY STRICTLY PRINTS FROM
WHERE WE THOUGHT WE WOULD BE SO DEFINITELY MORE MOMENTUM IN THE
U.S. ECONOMY AND WE ARE EXPECTING.
TOM: OVERLAY INFLATION ON THAT IS
THAT THE WORD FOR THE FED SPEAK WAS IT TWO DAYS AGO?
14 TIMES I BELIEVE. WHEN YOU HAVE A STUBBORN
INFLATION AND YOUR OPTIMISM ON GDP DO YOU GET A NOMINAL GDP
THAT STILL SPRIGHTLY? NOMINAL GDP HASN'T COME IN, HAS
IT? >> NO, NOT YET. TO YOUR POINT I THINK WE ARE
EXPECTING THAT WE SHOULD SEE SOME PROGRESS ON INFLATION IN
THE COMING MONTHS. THE BUMP THAT WE HAD IN MARCH
AND APRIL FROM GOODS PRICES WE DON'T EXPECT THAT TO SUSTAIN WE
ARE SEEING SOME PRETTY GOOD NEWS IN THE HOUSING SECTOR
ALREADY IT'S A WAY TO SEE IF THAT CONTINUES.
I WE HAD A LITTLE BIT OF GOOD NEWS IN TERMS OF RENT INFLATION.
THAT SEEMS TO HAVE STEPPED DOWN FROM WHERE IT WAS.
ACTIVITY HAS BEEN HOLDING STRONG I THINK WE ARE GETTING
POCKETS OF GOOD NEWS AS FAR AS INFLATION DATA IS CONCERNED AND
I THINK THAT SOMETHING THAT WE WOULD BE WATCHING QUITE CLOSELY
GOING FORWARD. LISA: LET'S SAY WE DON'T GET SOME
SORT OF BANKING CRISIS AND THERE'S A SLOW GRIND, NOTHING
CATASTROPHIC, WE DON'T GET THE DEBT CEILING DEFAULT OR DEBACLE
OR WHATEVER YOU WANT TO CALL IT, ARE WE LOOKING AT A SOFT
LANDING? >> THAT'S, I THINK A POSSIBLE
PATH TO GET THERE. THERE ARE RISKS.
I THINK ONE OF THE RISKS IS ACTIVITY CONTINUES AT THIS PACE
THAT IT IS NOT ENOUGH PROGRESS FOR THE FED.
IF ACTIVITIES CONTINUE AT THIS PACE, LET'S SAY INFLATION ALSO
DOESN'T COME DONE AS MUCH AS THEY EXPECTED IT TO THAT'S THE
TRICKY SITUATION BUT AS YOU SAID EVERYTHING BACKS UP.
WHAT WE CALL A SLOW CRY TO INFLATION.
IT'S QUITE POSSIBLE THAT WE DON'T GET THE SOFT LANDING.
NO RISKS ON EITHER SIDE FISHER. LISA:
DOES A SOFT LANDING FACILITATE A SOFT LANDING FOR LONGER OR
DOES IT TAKE LONGER FOR INFLATION TO COME DOWN AND
EVERYTHING WILL COME BACK AND BE FINED WITHOUT THE MASSIVE
SWINGS IN THE ECONOMIC CONDITION THAT A LOT OF PEOPLE
ARE PREPARED FOR? >> I THINK IN TERMS OF HOW THAT
SOFT LANDING WOULD LIKE YOU WOULD DEFINITELY NEED A LOT OF
SOFTENING IN THE LABOR MARKET CONDITIONS SO YOU WILL NEED TO
SEE LABOR DEMAND COME UP YOU WILL NEED TO SEE WAGES STARTING
TO DECELERATE AND IN THAT WORLD ONE SITUATION WHERE INFLATION IS AROUND THE 3% HANDLE LET'S
SAY CORE CPI IS AROUND 3% LET'S WATCH AND SEE HOW THAT WORKS
ITS WAY. JONATHAN: FED SPEAK FOR THE DAY AHEAD
WELCOME TO THE PROGRAM THIS IS "BLOOMBERG SURVEILLANCE"
A LITTLE BIT LATER ON TODAY WE WILL HEAR FROM THE FED GOVERNOR.
TOMORROW A BIG DAY YOU WILL HEAR FROM BOWMAN AND CHAIRMAN
POWELL AS WELL THIS IS A BIG CONVERSATION ABOUT JOBLESS
CLAIMS AT THE MOMENT BREAKING OUT RECENTLY CLAIMS AT THE
MOMENT SITTING AT 250, 264. THIS IS WHAT BANK OF AMERICA
SAID RECENTLY THE RECENT RISE IN A NATIONAL JOBLESS CLAIMS
WAS LIKELY DUE TO A CLAIM IN MASSACHUSETTS THAT WAS NOT
REFLECTIVE OF INDIVIDUALS. THESE GUYS ARE REALLY DIGGING
INTO THE DATA. BASICALLY SINK EXCLUDING ASSETS
USE ITS TIMES HAVE MOVED SIDEWAYS AND CONTINUE TO POINT
TO LIMITED LAYOFFS. TOM: THE ANSWERS WE DON'T KNOW BUT
IN THEIR DEFENSE EVERY WEEK IT'S EITHER CALIFORNIA OR NORTH
DAKOTA OR IN THIS CASE IT'S MASSACHUSETTS.
IT'S ALWAYS LUMPY. I'VE ALWAYS GONE TO THE
FOUR-WEEK MOVING AVERAGE AND THE MOVING AVERAGES EARLY AS
FEBRUARY THIS YEAR WAS UNDER 200,000 AND IT'S COME UP
SPRIGHTLY AND MY TENSION POINT AS I MENTIONED EARLIER IS
254,000 FOUR-WEEK MOVING AVERAGE. JONATHAN:
I JUST WANTED TO BRING YOU INTO THE CONVERSATION WHAT IS YOUR
READ ON WHAT IS HAPPENING WITH JOBLESS CLAIMS IS THERE A
SIGNAL THERE OR NOT? >> THERE IS SOME SIGNAL FROM
THAT BUT TO YOUR POINT WE FOUND SOMETHING SIMILAR WHEN WE
LOOKED AT LAST WEEK'S CLAIMS AND A LOT OF THAT DID COME FROM
TWO STATES CALIFORNIA AND MASSACHUSETTS AND WASN'T
ENTIRELY CLEAR AND SO WE WEREN'T READY TO TAKE SIGNALS
FROM THAT. TO YOUR POINT, CLAIMS HAVE BEEN
CRAWLING HIGHER PERHAPS EVEN NOT AT A PACE THAT ONE WOULD
EXPECT IT TO AND IT TODAY'S DATA WOULD BE INTERESTING TO
WATCH. THE DATA WE GET WOULD BE BEFORE
THE RATE -- PAYROLL. SO IT WOULD CARRY A BETTER
SIGNAL AS TO WHAT'S HAPPENING ON THE LABOR MARKET. OUR EXPECTATION IS FOR 215,000
SO NOT VERY HIGH COMPARED TO WHERE WE WERE A MONTH AGO BUT
DEFINITELY MOVING THAT DIRECTION. JONATHAN:
GREAT TO CATCH UP. THE LATEST DATA IN AMERICA A
LITTLE BIT LATER THIS MORNING. JOBLESS CLAIMS COMING OUT A
LITTLE LATER THIS MORNING. TOM: I DON'T THINK YOU'RE GOING TO
HEAR MUCH FROM MASSACHUSETTS ON THIS CLAIM. THE BOSTON RED SOX. ALREADY THE CLAIMS. LAST PLACE,
LET'S GO. JONATHAN: IT'S THAT BAD ALREADY? TOM:
MAY IS DEEP IN THIS SEASON FOR A RED SOX FAN. IT'S A VERY STRONG DIVISION YOU
KNOW HOW THERE'S DIFFERENT DIVISIONS?
THE DIVISION THEY ARE USED WITH TAMPA BAY AND THE DREADED NEW
YORK YANKEES. JONATHAN: I SAW THE CONTROVERSY WITH
KAREN JUDGE. DID YOU SEE THAT? TOM: YEAH. JONATHAN:
THEY SUGGESTED MAYBE HE WAS CHEATING WHICH SHE HAS PUSHED
BACK AGGRESSIVELY AGAINST. TOM: THERE IS A LITTLE CONTROVERSY
THERE. I'M GOING TO CUT HIM SOME SLACK. JONATHAN: WE HAVE A GREAT GUEST. TOM:
WE ARE GOING TO GO TO ANNMARIE HORDERN IN JAPAN AND WITH HER
IS ADMIRAL JOHN KIRBY. COORDINATOR FOR STRATEGIC
COMMUNICATIONS FOR AMERICA AT THE G7 MEETINGS. ANNEMARIE: HE'S ON THE GROUND LESS THAN
FOUR HOURS AND ADMIRAL KIRBY IS JOINING BLOOMBERG FIRST HERE AS
HE LANDS WITH THE PRESIDENT FOR THIS IMPORTANT G7 SUMMIT BUT OF
COURSE THE PRESIDENT IS SCRUBBING THE REMAINDER OF THE
FOREIGN TRIP HE WAS SUPPOSED TO HAVE. HOW MUCH DO YOU THINK THE DOMESTIC POLICY CONCERNS ARE
UNDERMINING THE FOREIGN POLICY GOALS OF THIS ADMINISTRATION? >> IS NOT ABOUT UNDERMINING THE
FOREIGN POLICY GOALS THE PRESIDENT HAS REVITALIZED, HE
PUT A LOT OF ENERGY IN THIS PART OF THE WORLD.
HERE WE ARE IN JAPAN FOR THE G7. JUST A FEW WEEKS AGO IN SAN
DIEGO WE WERE STANDING NEXT TO THE PRIME MINISTER TO UNVEIL
THE NEXT PHASE OF THE AGREEMENT AND OF COURSE HE HAD A CHANCE
TO MEET WITH ALL THE PACIFIC ISLAND LEADERS AT THE WHITE
HOUSE LAST YEAR WE WILL DO ANOTHER ONE HERE IN THE NEAR
FUTURE. WE HAVE INVESTED A LOT OF TIME
AND ENERGY INTO THIS PARTICULAR PART OF THE WORLD AND TODAY'S
VISIT, THIS G7 I THINK IS FURTHER PROOF OF THAT.
ANNEMARIE: THE PRESIDENT LOVES TO USE
THESE MOMENTS AS THE G7. HE LIKES TO REMIND THE WORLD
AMERICA IS BACK HE TRIES TO DRAW PARALLELS WHAT'S GOING ON
IN TERMS OF BEIJING, WHAT HAPPENS IN RUSSIA HOW HARD IS
IT FOR HIM TO DELIVER THAT MESSAGE TO OTHER LEADERS WHEN
HE WAS SUPPOSED TO BE THE FIRST U.S. PRESIDENT TO GO TO PAPA NEW
GUINEA, HE WAS SUPPOSED TO MEET THE QUAD IN AUSTRALIA AND THIS
IS WHERE HE WANTS TO SPEND HIS TIME? >> THE PRESIDENT KNOWS AND SO
DO THESE LEADERS LEADERS OF DEMOCRATIC NATIONS. IF YOU DON'T TAKE CARE OF THE
NATION'S DEBT, IF YOU ALLOW THE UNITED STATES TO DEFAULT,
VIRTUALLY NOTHING ELSE MATTERS IN TERMS OF WHAT YOU'RE TRYING
TO DO AROUND THE WORLD. I HEARD COMMENTS BY ANALYSTS
ABOUT CREDIBILITY IS SUFFERING BECAUSE WE ARE NOT GOING ON TO
OTHER STOPS BUT THE CREDIBILITY REALLY SUFFERS IF WE END UP,
YOU KNOW, BEING A DEBTOR NATION. ANNEMARIE:
THAT'S THE MESSAGE I GOT FROM THE FOREIGN MINISTERS. >> IT SUFFERS SO THE PRESIDENT
IS DOING THE RIGHT THING HERE. THE G7 IS IMPORTANT, A LOT OF
THINGS TO DISCUSS WHY WE ARE HERE.
WE CAN RESCHEDULE THE TRIP TO AUSTRALIA AND PAPA NEW GUINEA
YOU CAN'T RESCHEDULE THE LOOMING DEBT CEILING DEADLINE.
THAT IS A HARD FIX THING AND WE HAVE TO MAKE SURE WE GET THESE
NEGOTIATIONS THROUGH. ANNEMARIE: HE SHOULD HAVE BEEN SPEAKING TO
SPEAKER MCCARTHY EARLIER SO HE DIDN'T HAVE TO CANCEL HIS
FOREIGN TRIP BUT DO YOU THINK THE PRESIDENT WILL BE ABLE TO
SAY TO LEADERS THE U.S. WILL NOT DEFAULT ON HIS DEBT? >> THE PRESIDENT IS OPTIMISTIC.
HE SAID THAT BEFORE HE LEFT. THAT'S WHY WE ARE GOING HOME A
LITTLE EARLY SO HE CAN MAKE SURE THE CONGRESS DOES ITS JOB.
TALKING TO SPEAKER MCCARTHY, NOT DEFAULTING AS A
CONGRESSIONAL DUTY. IT'S IN THE CONSTITUTION.
THERE DOESN'T NEED TO BE NEGOTIATIONS OVER THE DEBT.
THE PRESIDENT IS WILLING TO SIT DOWN AND TALK TO SPEAKER
MCCARTHY ABOUT THE BUDGET AND APPROPRIATIONS AND WE WILL DO
THAT. WHEN IT COMES TO RAISING THE
DEBT CEILING, THAT IS SOMETHING THAT HAS BEEN DONE 78 TIMES
UNDER DEMOCRATIC AND REPUBLICAN ADMINISTRATIONS WITHOUT
NEGOTIATIONS, WITHOUT HAVING TO HAVE AN ARGUMENT ABOUT IT.
THERE'S NO REASON FOR I MEAN THE ARGUMENT THAT WE SHOULD
HAVE TALKED TO X NUMBER OF DAYS AGO THIS IS A CONGRESSIONAL
DUTY THEY SHOULD SIMPLY JUST DO THEIR JOB. EMORY: -- ANNEMARIE:
THIS IS SOMETHING WE WILL WATCH CLOSELY.
ONE OF THE BIG ELEPHANTS IN THE BROOM IS GOING TO BE CHINA.
ALSO THE PAPA NEW GUINEA TRIP WAS ABOUT DETERRING BEIJING IS
THERE CONCERN FROM THE WHITE HOUSE THAT POTENTIALLY WHEN IT
COMES TO PAPA NEW GUINEA THAT BEIJING IS TRYING TO DO A
SECURITY AGREEMENT LIKE THEY DID WITH THE SOLOMON ISLANDS?
HOW CONCERNED IS IT THAT THE COUNTRIES ARE ON BOARD WITH
WHAT THE U.S. IS DOING? >> IT WAS ABOUT REVITALIZING,
REINVIGORATING OUR VAST NETWORKS OF ALLIANCES. A NETWORK CHINA CAN'T EVEN GET
CLOSE TO MATCHING. A LOT OF PEOPLE DON'T REALIZE
THAT THERE IS A LOT OF NETWORK AND PARTNERSHIPS AND ALLIANCES
HERE WE ARE TRYING TO BOLSTER. WE WILL STILL HAVE DISCUSSIONS
AND DELIVERABLES YOU WILL SEE THAT EVEN THOUGH WE ARE NOT
MAKING THAT STOP YOU WILL SEE THEM MOVE FORWARD I CAN'T SPEAK
TO WHAT CHINA IS DOING WITH EACH INDIVIDUAL PACIFIC ISLAND
NATION THEY HAVE USED A MIX OF INTIMIDATION AND COERCION,
ECONOMIC AND SECURITY WISE TO TRY TO HAVE THEIR WAY IN THIS
PART OF THE WORLD. WE ARE NOT ASKING COUNTRIES TO
CHOOSE BETWEEN THE UNITED STATES AND CHINA.
THEY GET TO DECIDE WITH THEIR BILATERAL RELATIONSHIPS LOOK
LIKE AND WITH THE ASSOCIATION LOOKS LIKE.
WHAT WE ARE DOING IS TRYING TO SHOW IN A DEMONSTRABLE WAY THAT
THE UNITED STATES IS A RELIABLE, STABLE, CREDIBLE
PARTNER AND TO GIVE PEOPLE ALTERNATIVES TO THE COERCION IN
THE INTIMIDATION THAT THE CHINESE ATTEMPT TO DEMONSTRATE.
ANNEMARIE: HOW CLOSE ARE G7 LEADERS
ALIGNED ON THIS POINT TO MAKE SURE THEY ARE DE-RISKING FROM
CHINA? MOST NOTABLY I'M THINKING ABOUT
EUROPE AFTER HIS VISIT WHERE HE SAID EUROPE HAS STRATEGIC
AUTONOMY WHEN IT COMES TO CHINA. >> CHINA IS GOING TO BE KEY ON
THE AGENDA HERE AND I THINK YOU WILL SEE THE G7 LEADERS ALL
SPEAK WITH ONE VOICE. ABOUT THE CHALLENGES THAT CHINA
POSES HERE IN THE INDO-PACIFIC AND AROUND THE WORLD BUT ALSO
WHAT SOME OF THE OPPORTUNITIES ARE AS THE G7 NATIONS ARE TO
COMPETE, TO COMPETE FAIRLY BUT TO COMPETE WELL. ANNEMARIE:
BESIDES BROAD STROKES OF WORDS WILL THERE BE ANY ACTION
VIS-À-VIS CHINA AND THE G7? >> I'M NOT GOING TO GET AHEAD
OF THE DISCUSSIONS. THE LEADERS WILL ABSOLUTELY
SPEND QUITE A BIT OF TIME HERE AS YOU WOULD EXPECT THEY WOULD
CERTAINLY HER IN JAPAN TALKING ABOUT THE CHALLENGES THE PRC
REPRESENTS. I'M CONVINCED YOU WILL SEE AT
THE END OF THOSE DISCUSSIONS I WILL SPEAK WITH ONE VOICE ABOUT
HOW WE NEED TO TREAT THAT PARTICULAR COMPETITION NOT JUST
FROM A SECURITY PERSPECTIVE BUT FROM A DIPLOMATIC PERSPECTIVE.
ANNEMARIE: THANK YOU SO MUCH FOR JOINING
BLOOMBERG TV THAT WAS THE NATIONAL SECURITY COUNCIL AND
STRATEGIC COMMUNICATIONS DIRECTOR. JONATHAN:
SPENT MOST OF THAT TRAVELING FROM THE AIRPORT.
GREAT WORK IS ALWAYS LOOKING FORWARD TO COVERAGE FOR THE G7.
TOM: HE WANTS TO GO TO WITH THE
ADMINISTRATION WHICH IS REAFFIRMATION OF AMERICA THIS
WAS BLOWN UP. A JOINT BLOW UP BY TWO
PRESIDENTIAL CANDIDATES MR. TRUMP AND MS. CLINTON FORMER
SECRETARY OF STATE DECIDED WE CAN'T DO TRADE WITH THE PACIFIC
RIM THAT WAS SORT OF THE POLITICS EIGHT YEARS AGO.
NOW WE HAVE THE ESTABLISHMENT OF FOR MILITARY BASES.
HOW MANY PEOPLE WATCHING TODAY WHERE PAPA NEW GUINEA IS ON A
MAP? IT'S ON THE SOUTH SHORE AND BUMPS UP AGAINST CHINA AND THE
CHINA SEA. THAT'S THE CHURNING HERE
BENEATH THE HEADLINES. JONATHAN: VERY SERIOUS ISSUES WHICH FUNNY
AND HAVE FEEL LIKE A DISTRACTION GIVEN WHAT'S
HAPPENING IN AMERICA AT THE MOMENT AND THE FACT THE
PRESIDENT IS ABROAD WHEN AT HOME THERE ARE THESE
NEGOTIATIONS ONGOING ABOUT THE DEBT CEILING WHAT WAS THE
PHRASE THAT KIRBY USE THEIR? WE DON'T WANT TO BE A DEADBEAT
NATION? TOM: THAT'S PERCOLATING. JONATHAN:
HAVE TO RESET THINGS FOR YOU IF YOU ARE TUNING AND MARKETS
SLIGHTLY POSITIVE. YIELDS SHAPING UP AS FOLLOWS ON
A 10 YEAR BY THREE BASIS POINTS HIGHER, 360 LET'S CALL IT ON
THE TENURE I THINK WE CAN CALL IT THAT. TO YEAR, 417. TOM:
KILLING ME RIGHT NOW, FOLKS. IT'S WELL UNDERSTOOD I COULD
NEVER BUY ANY FINANCIAL SECURITIES.
THAT'S PART OF MY AGREEMENT WITH BLOOMBERG AND IT'S KILLING
ME RIGHT NOW ON THE DOUBLE WE ARE SEEING IN SOME OF THESE
REGIONAL BANK STOCKS. GERARD CASSIDY JOINS US RIGHT
NOW WITH RBC CAPITAL MARKETS. WHAT ARE YOUR COLLEAGUES IN
CRIME BASICALLY AS A DOUBLE PRICE TARGET ON THESE BANKS.
IS THAT TOO OPTIMISTIC? DO YOU HAVE A DOUBLE PRICE
TARGET ON SOME OF THESE SELECTED REGIONAL BANKS? >> TOM, WE DO.
I'M NOT PERMITTED TO BUY ANY FINANCIAL STOCKS EITHER AND IT
KILLS YOU ESPECIALLY WITH THE PREFERREDS WITH THE YIELDS THEY
ARE OFFERING BUT THE STOCKS CAME DOWN TO SUCH OF THE LEVEL
AS A RESULT OF THE MARCH MADNESS AND THE DISRUPTION OF
THE MARKET. I THINK IT WAS OVERDONE AND YOU
SAW YESTERDAY IN PARTICULAR MANY STOCKS UP 5, 6, EVEN 10%.
THE NAMES, IT WAS DONE TO THE DOWNSIDE. TOM:
IS IT ALL CLEAR ON THIS THURSDAY MORNING? >> THE SHORT ANSWER IS, YES.
I WOULD JUST REFINE THAT TO SAY ALL CLEAR ON A DEPOSIT FLIGHT
FOR THE PROBLEMS WE SAW IN MARCH IT'S AN ALL CLEAR NOW THE
BANKS ALWAYS HAVE CHALLENGES LIKE ANY INDUSTRY SO WE GO INTO
AN ECONOMIC RECESSION IN THE NEXT 3-6 MONTHS EVEN THOUGH IT
IS IN ADVANCE REAL GDP NUMBER CAME IN AT 2.9% FOR THIS
QUARTER WHICH IS A SURPRISE TO THE UPSIDE.
IF WE HAVE A SLOWDOWN OR RECESSION THERE WILL BE
CHALLENGES FOR THE BANKS BUT BASED ON THE PROBLEMS WE JUST
CAME THROUGH I WOULD SAY IT'S AN ALL CLEAR. LISA:
WHAT DOES AN CLEAR MEAN? DOES IT MEAN SOMETHING DEEPER
IN TERMS OF NOT NECESSARILY AN ACCELERATION IN SOLVENCY'S IN
THIS REGION? >> I WOULD SAY IT'S THE LATTER
POINT WHEN YOU THINK ABOUT WHAT'S GOING ON IN MARCH AND
DEPOSIT CHALLENGES DURING THE WEEK OF MARCH WHAT WAS IT 10TH
OR 11TH? IT WAS QUITE FRIGHTENING FOR A
NUMBER OF INVESTORS. WE JUST DON'T SEE THAT
HAPPENING BECAUSE THOSE THREE BANK FAILURES WERE
IDIOSYNCRATIC. THEY WERE VERY UNUSUAL.
IT WAS BUSINESS MODELS VERSUS REGULAR BANKS AND WE DON'T SEE
THAT TYPE OF PROBLEM GOING FORWARD. LISA:
WE WILL GET A SLEW OF FED SPEAK TODAY BUT THEY ASSESS THE
ECONOMIC SCENARIO. THE NEXT MOST MEETING WE WERE
LIKELY TO GET AN UPWARD FOR REVISION TO GROWTH BY THE
FEDERAL RESERVE OFFICIALS HOW MUCH OF THAT IS FILLED BY THE
IDEA THAT THESE REGIONAL BANKS ONCE THOUGHT AS COOPERATORS AND
A TRYING TO BRING DOWN INFLATION MAYBE WON'T BE SUCH
COOPERATORS AND WILL CONTINUE TO EXPAND ONE'S MUCH MORE THAN
PEOPLE PREVIOUSLY EXPECTED? >> YOU SAID IT WILL, CONTINUED
THEIR FUNCTION. THANKS ARE IN THE BUSINESS TO
LEND. THE RISKS OF LENDING VERSUS THE
QUALITY OF THE APPLICANT AND AS YOU SAW IN THE SENIOR LOAN
OFFICER SURVEY WHICH WE CHATTED ABOUT A WEEK AGO OR SO.
THE DEMAND FOR COMMERCIAL REAL ESTATE LOANS IS DOWN QUITE A
BIT SO WITH THIS ECONOMY IF IT STARTS TO SHOW SIGNS OF BETTER
STRENGTH AND THE DEMAND STARTS TO COME BACK THE BANKS WILL BE
LENDING THE REAL RISK TO THE BANK IS THAT THEY CANNOT GET
INFLATION UNDER CONTROL AND WE HAVE THE FED FUNDS RATE CLOSE
TO 7%. LISA: WHAT ABOUT THE REGULATORY
OVERHANG? WE WILL HEAR FROM MICHAEL BAR
AND THE FDIC CHAIR HOW MUCH ARE YOU WILLING -- SEEING WILLING
TO REGULATE FURTHER? >> I THINK YOU WILL DEFINITELY
SEEM REGULATORY CHANGE AS A RESULT OF WHAT HAPPENS IN MARCH.
WE ANTICIPATE THERE WILL BE NEGOTIATIONS GOING ON WITH THE
LARGE BANKS TO MAKE SURE IT'S NOT A KNEE-JERK REACTION TO
WHAT HAPPENED. I DO EXPECT IT WILL TAKE SOME
TIME AS VICE-CHAIRMAN BAR HAS POINTED OUT.
WE EXPECT THERE WILL BE A POLICY UP FOR DEBATE BY THE END
OF THE YEAR. PROBABLY PUT INTO IMPLEMENTATION BY THE SECOND
HALF OF NEXT YEAR AND IT GOES LIVE PROBABLY IN 2025.
WE HAVE TO MAKE SURE IT'S NOT A KNEE-JERK REACTION TO WHAT
HAPPENED IN MARCH. TOM: MR. CASSIDY, YOU'RE SINGLE BEST
BUY THIS MORNING TO TAKE ADVANTAGE OF THE SILLINESS? >> I WOULD SAY IN THE REGIONAL
SPACE WE WOULD HAVE TO GO WITH THE ONE BASED OUT OF CINCINNATI.
IT'S A VERY WELL-MANAGED BANK UNDER THE LEADERSHIP OF TIM
SPENCE. LONGER-TERM, YOU ARE FAMILIAR
WITH ON SHORING AND WHAT'S GOING ON IN THE STATE OF OHIO
IT'S THE CENTER OF THAT. THAT'S A LONG-TERM ECONOMIC
DRIVER. PEOPLE IN HUNTINGTON ARE BASED
IN OHIO. JONATHAN: WHAT AN INTERESTING CALL TO
LEAVE IT ON. CONNECTED TO THIS CONVERSATION
IS IT THE NEXT SHOE TO DROP? COMMERCIAL REAL ESTATE?
PRICES FALLING FOR THE FIRST TIME IN A DECADE. LESS THAN 1% DECLINE BUT
NOTABLE NEVERTHELESS LED BY DROPS IN MULTI FAMILY
RESIDENCES AND OFFICE BUILDINGS. THE ANALYSTS THINK LOTS MORE
PRICE DECLINES ARE COMING. THIS WAS PICKED UP BY THE
FEDERAL RESERVE THE VICE CHAIR FOR SUPERVISION OF THE FEDERAL
RESERVE, MR. MICHAEL BAR HAS TALKED ABOUT THIS AS WELL.
MAJOR FOCUS FOR YOU AND OTHER PEOPLE AS WELL. TOM: I GOT A LOT OF HUMILITY HERE MY
ONLY SOLUTION IS TO READ EVERY SINGLE ARTICLE I CAN, SOMETIMES
SKIMMING THEM, WHAT WAS FOR FIVE YEARS AGO AND WHAT THE
EXIT VALUATION IS AND I THINK THE OPERATIVE NUMBER IS MORE
THAN A THIRD. IF IT'S A BOND YOU ARE AT 100
AND YOU ARE MOVING OUT AT 70 OR 60 OR THE AND ITS PROPERTY
AFTER PROPERTY EVEN AWAY FROM THE ONES WE KNOW ARE
TRAUMATIZED. JONATHAN: THE SIZE OF THE DECLINE THIS
MORNING IS NOT NOTABLE. IT'S THE DECLINE ITSELF.
WE JUST HAVEN'T HAD ONE FOR SO LONG. LISA: WHICH IS NOTABLE. THIS IS AN AREA THAT HASN'T
BEEN STRESS TESTED. I HAVE TO SAY, IF YOU TAKE A
LOOK AT VALUATIONS THE SECONDARY MARKET HAS BEEN
SUBSTANTIAL. DECLINES IN COMMERCIAL REAL
ESTATE HOW MUCH IS ALREADY PRICED IN AND ANTICIPATED BY A
LOT OF INVESTORS? THIS IS REALLY THE ISSUE WITH
THESE MARKETS. IT'S NOT LIKE THE THREATS ARE
UNKNOWN TO PEOPLE AND THAT'S THE REASON IT'S NOT GOING TO BE
THE BOGEYMAN PEOPLE EXPECTED. JONATHAN:
MIGHT BE A SUBTLE DIFFERENCE THERE, TOM. TOM:
I GET MY AMATEUR TICKETS TODAY. I'M TOLD IT'S LIKE FIRST-CLASS
OFF LAST DECADE HI DON 52% AND THAT'S, I'M TOLD THE VALLEY OF
IT ALL. CRANES IS DOING A GREAT JOB.
JONATHAN: WHAT IS CRANES LIKE? TOM: IT'S A REALLY IMPORTANT
QUESTION. NOT EVERY DAY, EVERY THREE DAYS
THERE'S A TRANSACTION MAY BE A SMALL BUILDING IN BROOKLYN MAY
BE SOMETHING IN CINCINNATI IT JUST WALKS YOU THROUGH ONE
GIVEN REAL ESTATE TRANSACTION AND SOMEONE LIKE THEY WERE
SELLING IT FOR 70 MILLION AND SOME ARE A LOT WORSE THAN THAT.
JONATHAN: YOU WANT TO TALK ABOUT RESIDENTIAL REAL QUICKLY? TOM:
THIS IS COMMERCIAL. JONATHAN:
THESE NUMBERS THIS MORNING. A MEDIAN 3500 IN BROOKLYN, UP
ALMOST 15%. THAT IS RENT IN BROOKLYN. TOM:
WE DID THIS ON THE BRAKE TAKE THE RENT CHRIS IT UP ONE YEAR
AND IT'S ABOUT A 30 YEAR INCOME IS RATIONAL THAT IS 154,000
DOLLARS A YEAR YOU HAVE TO HAVE IN MANHATTAN. LISA:
HOW MUCH IS IT BASICALLY PEOPLE ARE PRICED OUT OF BUYING OR
THEY DON'T WANT TO TAKE OUT A MORTGAGE AT THIS KIND OF RATES
SO THEY ARE GOING INTO RENTING AND THAT PUSHES THAT THE PRINTS
BECAUSE YOU HAVE PEOPLE WHO WOULD BE BUYING GOING INTO THAT
MARKET AND IT'S CREATING A VICIOUS CIRCLE. JONATHAN:
THIS IS A CONVERSATION WE HAD THIS WEEK, IF YOU HAVE TO GO TO
THE OFFICE AND LIVE CLOSE TO MANHATTAN, THAT'S WHERE YOU PAY
IT. TOM: WHAT ABOUT SOUTH DAKOTA YOU GET
TO A POINT WHERE EVERYBODY EXITS. JONATHAN: TOTALLY. WE WILL CONTINUE THIS
CONVERSATION AND THEN SOME NEWS ON DEUTSCHE BANK. >> THE BEARS ARE UNHAPPY.
THE BULLS ARE UNHAPPY. EVERYONE IS UNIVERSALLY UNHAPPY.
>> FOLKS ARE PRICING -- IS GOING TO BE A TUMULTUOUS DEBT
CEILING. >> WE WAIT FOR THE MARKET TO
PANIC MORE. >> I WOULD PUT A HIKE IN JUNE
OR JULY. KIND OF THE 30% OR 40% RANGE.
JONATHAN: LIVE FROM NEW YORK CITY, GOOD
MORNING. THIS IS "BLOOMBERG SURVEILLANCE." YOUR EQUITY MARKET NOT DOING
MUCH OF THIS MORNING. WAITING FOR NUMBERS FROM
WALMART IS TO PUT TOGETHER EARNINGS FOR RETAIL THIS WEEK
FROM TARGET, HOME DEPOT, AND WALMART ANY MOMENT. TOM:
IT IS THE MOST OPTIMISTIC THURSDAY WE HAVE HAD IN AGES.
IT IS PERCOLATING. WHAT YOU THINK DEBT CEILING?
TARGET? JONATHAN: DEBT CEILING OPTIMISM.
WHATEVER THAT IS. WHAT IS THAT? TOM:
I LIKE WHAT KIRBY SAID WE DID IT MANY TIMES. JONATHAN:
WE GET NUMBERS FROM WALMART. ADJUSTED EPS A RANGE OF 610-6
20. THE PREVIOUS RANGE 590-600 FIVE. ESTIMATE WAS 614.
THE STOCK IS HIGHER IN PREMARKET. LISA: TOTAL U.S. COMP SALES X GAS UP 7.3% VERSUS
ESTIMATE OF 5.8%. ACROSS THE BOARD BEATING AND
FULL-YEAR ADJUSTED EPS COMING ABOVE I -- EXPECTED
EXCITATIONS. THEY SPENT THE REST OF THE YEAR
TO PICK UP. IT IS CONFIRMING THE VIEW THAT
THERE IS MORE STRENGTH IN THE CONSUMER.
PERHAPS MORE STRENGTH IN THE ECONOMY AND GOES TO THE
QUESTION OF TAKING OFF LISTEL RISK OF HAVING A SOFT LANDING
BE MORE OF A BASE CASE. TOM: SIX POINT SEVEN SAME-STORE
SALES NOMINAL GDP EQUIVALENT THAT THE NOMINAL GDP MAY STAY
ELEVATED AND WHETHER YOU BELIEVE IN NOMINAL OR REAL, THE
WIND BEHIND YOU, SELL BOOK. -- SELL VOTE. I GET SO SEASICK.
I GET ON AND I LAY DOWN. POINT A TO POINT B I AM LAYING
DOWN. JONATHAN: I DO NOT SEE YOU JUMPING FROM
SIDE TO SIDE DOING THINK WITH THE SAILS. WALMART IN THE PREMARKET HIGHER
BY MORE THAN 2% RAISING THE OUTLOOK.
ELSEWHERE IN EQUITY MARKET ON S&P 500, OAKLEY'S FIRM OR BY
.25% -- EQUITIES FARMER BY .25%. 3.59 ON THE 10 YEAR. EVERY SINGLE DAY THIS WEEK
YIELDS APPROACHING 420. 4.17 ON THE TWO YEAR. TOM: STANDARD DEVIATIONS WERE NOT UP
TO BRINK -- BREAK OUT. IT A BREAKOUT THURSDAY? WILL THEY BE RECALLED FRIDAY?
-- BREAKOUT FRIDAY? JONATHAN: WE FOUND A BULL.
SHE JOINS US AROUND THE TABLE. BARBARA REINHARD. GOOD MORNING.
YOU ARE BULLISH. WHY? BARBARA:
INFLATION IS STILL GOING IN THE RIGHT DIRECTION.
VIOLENCE ARE SUPPORTIVE BUT OFFER THEIR HIGHS -- YIELDS ARE
OFFER THEIR HIGHS. WE THINK IT IS GOING TO BE --
ECONOMIC DATA IS SLOWING ENOUGH THAT THE FED IS ABLE TO TAKE
THEIR FOOT OFF OF THE BRAKES AND MAYBE TAKE A BREAK OR A
PAUSE IN HIKING CYCLE. THAT IS A GOOD TAILWIND FOR THE
EQUITY MARKET. LISA: YOU HAVE BEEN ON THE U.S.
OVER THE REST OF THE WORLD. THAT IS STARTING TO SHIFT
AROUND THE MARGINS. WHAT GIVES YOU CONFIDENCE OF
STAYING POWER AND YOU WILL BE ABLE TO SAY I WAS RIGHT ALL
ALONG? BARBARA: WE NEVER SAY THAT.
I THINK THAT WE THE U.S. HAS GOOD QUALITIES TO IT.
FEDERAL RESERVE WAS ONE OF THE FIRST CENTRAL BANKS TO START
RAISING INTEREST RATES. INFLATION IN U.S.
PEAKED A NUMBER OF MONTHS AGO. IT IS ON RIGHT TRAJECTORY. IN EUROPE -- A LOT ABOUT NEWS
HAVE BEEN IN THE PRICE IN FOUR QUARTER OF LAST YEAR.
A LOT OF THINGS DID NOT HAPPEN. THE DISASTER SCENARIO DID NOT
HAPPEN. YOU NEED THINGS TO GO IN RIGHT
DIRECTION FOR EUROPE TO WORK. FUND MANAGERS PUTTING ASSETS
OUT THERE. WE ARE SEEING ASSET ALLOCATORS
PUT MONEY OVERSEAS. THAT IS WHEN THE DATA HAS TO
BREAK YOUR WAY. IF YOU THINK U.S.
HAS AN INFLATION PROBLEM, EUROPE HAS A MUCH BIGGER ONE
AND A CENTRAL BANK AS MUCH FURTHER BEHIND THE CURVE THEN
THE U.S. WE THINK THE U.S. IS LIKELY TO OUTPACE THE REST
OF THE WORLD. TOM: LET'S BE BLUNT.
HOW DOES THE DOLLAR FOLD INTO THAT?
NO ONE IS LOOKING FOR RESILIENT OR STRONG DOLLAR. DXY 103 LEVEL.
ALL OF A SUDDEN RESILIENT DOLLAR.
IS THAT A PART OF THE AMERICAN FIRST STORE? BARBARA: THE VISIBILITY YOU HAVE ON THE
U.S. IS QUITE GOOD. U.S. CONSUMER HOLDING IN WELL EVEN
IN THE FACE OF JOB OPENINGS COMING DOWN AND REBALANCING IN
LABOR MARKET. U.S. HAS MORE STRENGTH TO IT. TOM: THEY GO WE OWN 85% OF OUR
PORTFOLIOS. WHAT ELSE DO WE DO?
WE OWN APPLE. WHAT DO WE DO AFTER APPLE?
BARBARA: WE USE ARE RELATIVELY GOOD NEWS
ON THE DEBT CEILING YESTERDAY, YOU SAW OTHER PARTS OF THE
MARKET THAT NOT DONE WELL START TO PICK UP.
EVEN REAL ESTATE INVESTMENT TRUSTS DID A BIT BETTER. TOM:
EXXON IS A MID-CAP. BARBARA:
IF YOU IS A BROADENING OF THE LEADERSHIP THAT IS A GOOD THING
BUT JEFF HAD A NARROW LEADERSHIP ACROSS THE GLOBE. WHAT IS BEEN DOING GOOD -- WELL
U.S. TECH AND EUROPEAN LUXURY GOODS.
SEEING A BROADENING OUT OF THE STRENGTH OF THE MARKET IS A
GOOD SIGN. JONATHAN: DO YOU EXPECT THAT TO CONTINUE?
BARBARA: WE HOPE SO. INFLATION DATA IS LIKELY TO GO
OUR WAY IN U.S. AND WE SEE POTENTIALLY GETTING
THROUGH THE DEBT CEILING PROBLEM IS GOOD. IF THE U.S. ECONOMY TENDS TO BE TOO STRONG
OR INFLATION DATA STARTS TO BREAK HIGHER, THAT GOES IN THE
FACE OF HOW WE ARE POSITION IN PORTFOLIOS.
WE THINK FOR THE NEXT COUPLE OF MONTHS THINGS GO OUR WAY.
JONATHAN: WE KNOW THE TRADES -- ARE LEAD
IN THE OTHER DIRECTION? BARBARA: YOU HAVE TO BE BRAVE TO BY THE
BANKS AT THIS POINT. WE ARE TOP DOWN SOME NOT MAKING
EXECUTIVE DECISIONS. WE THINK U.S.
IS PUBLISHED ON THIS PLACE. -- THE STRONGEST PLACE.
THE ONLY OTHER PLACE I WOULD THINK ABOUT ALLOCATING TO MIGHT
BE PARTS OF JAPAN BECAUSE IT LOOKS LIKE IT IS SO CHEAP AND
IS A BIG BENEFIT TO IT FROM THE CURRENCY AT THIS POINT.
FOR US, THE U.S. IS THE PLACE TO BE. LISA: MAT CABINET WAS SAYING IT IS
NOT A SECULAR MARKET, IT IS WHY ASSET ALLOCATORS ARE TEARING
THEIR HAIR OUT RIGHT NOW. ARE YOU FINDING IT IS THE SAME
THING BUT IT IS COUNTRY SPECIFIC?
EVERYTHING ON IN THAT REGION. BARBARA:
I THINK IS MORE REGIONAL THAN SPECIFIC COUNTRIES.
THESE MARKETS CAN BE VERY THIN. WE HAVE NARROWED LEADERSHIP,
YOU HAVE TO BE ON THE RIGHT SIDE OF EVERYTHING.
IT'S DIFFICULT TO GO IN RISK ON AND RISK OFF POSITIONS.
YOU HAVE TO PICK WHERE YOU SEE THE BEST VISIBILITY AND THE
BEST VISIBILITY FOR OUR PART IS IN U.S. LISA:
IS BIG TECH NECESSARY PLAY WITHIN THAT?
YOU HAVE TO WRITE BIG TECH WAVE AND THAT IS WHAT IS GOING TO
DISTINGUISH U.S. FROM THE REST OF THE WORLD.
BARBARA: WE THINK BIG TECH DID A COUPLE
OF THINGS RIGHT. LAST YEAR LAYOFF HEADLINES WERE
IN BIG TECH FIRMS. BIG TECH TOOK A BIG VIEW IN TRYING TO
RIGHT SIDE SOME OF THEIR COST MEASUREMENTS FOR DIFFICULT
INVESTMENT ENVIRONMENT. THEY TOOK THE MEDICINE EARLY
AND THEY HAVE THE BENEFIT AI BIG BOOM GOING ON NOW.
COULD IT TAKE TAKE A BREATHER? ABSOLUTELY.
BUT THE BEST PART OF IT IS A DYNAMIC ARE STRONGER THAN THE
REST OF IT BECAUSE THEY TOOK THEIR MEDICINE LAST YEAR. TOM:
I'M LOOKING AT SMALL-CAP UNITEDHEALTH GROUP AND EVERYONE
KEEPS TALKING MEDICINE, MEDICAL. IS THAT A PART OF AN AMERICAN
PLAY? BARBARA: SMALL CAPS HAVE BEEN BEATEN
DOWN POST SVB. YOU PROBABLY NEED TO GET SOME
OF THESE RECESSION FEARS OFF OF THE TABLE IN TO GO LONG SMALL
CAPS. TOM: WHAT ABOUT ACROSS MID AND LARGE
CAPS? BARBARA: I CANNOT TALK SECTORS. TOM:
YOU CANNOT TALK SECTORS? BARBARA:
WE INVEST MORE SO IN TOP-DOWN GLOBAL MACRO.
I CANNOT TALK UNITED. I CAN TALK HEALTH CARE,
UTILITIES. TOM: TALK TO ME ABOUT MEDICINE
HEALTH CARE. BARBARA:
LOOK AT THE COVER OF THE FINANCIAL TIMES.
THIS MORNING IT WAS ABOUT RIGHTSIZING PENSIONS BECAUSE
YOU HAVE AN AGING POPULATION. IT IS NOT HEALTH CARE, I DO NOT
KNOW WHERE IT IS. JONATHAN: THERE YOU GO.
SHE ANSWERED YOUR QUESTIONS. BARBARA, YOU ARE GREAT. LISA:
TOUGH CROWD. JONATHAN: U.S. OVER THE REST OF THE WORLD.
THERE YOU GO. PUSHING BACK AGAINST THE
CONSENSUS OUT THERE WHICH IS BEEN A GLOOMY.
LVMH, LUXURY PLAYERS IN EUROPE UP 30%. APPLE UP 30% THIS YEAR.
THAT IS WHERE THE GAINS HAVE BEEN. TOM:
I DO NOT UNDERSTAND IT. HOW MANY PEOPLE OUT THERE CAN
DO LUXURY? THE ANSWER IS IT IS USUALLY
ASPIRATIONAL. PEOPLE ARE GOING TO DO IT.
THAT'S WHAT THEY'RE GOING TO DIE. JONATHAN:
AND LVMH IS GOING TO KEEP BUYING EVERYONE ELSE. LISA:
ALSO CHINA PLAY. LUXURY HAS BEEN A WAY TO PLAY
CHINA REOPENING WITHOUT HAVING TO BUY THE EMERGING MARKETS.
JONATHAN: PHYSICALLY FOR THAT COMPANY --
PARTICULARLY FOR THAT COMPANY. LISA: I WE BAKED IN THE CHINA
REOPENING? -- HAVE A REBATE THE CHINA
REOPENING? JONATHAN: BASED ON THE DATA, IT FEELS
THAT WAY. JIM BEYONCA JOINS US IN 50
MINUTES TIME. FROM NEW YORK, THIS IS
BLOOMBERG. LISA: KEEPING YOU UP-TO-DATE WITH
NEWS AROUND THE WORLD. WITH THE FIRST WORD, I AM LISA
MATEO. PRESIDENT BIDEN AND OTHER GROUPS OF SEVEN LEADERS HAVE
BEGUN ARRIVING IN JAPAN FOR THEIR SUMMIT.
CHINA AND RUSSIA WILL BE TOP PROBLEMS. RUSSIAN PRESIDENT
CONTINUES HIS WAR IN UKRAINE AND POST-PANDEMIC CHINA
EXPANDING ITS ECONOMIC AND STRATEGIC CLOUD.
CHINA'S PRESIDENT XI JINPING HOLDING HIS OWN SUMMIT.
THE TODAY CENTRAL ASIA SUMMIT WILL ASSEMBLE LEADERS.
IT IS XI JINPING WAY OF REMINDING THE G7 OF CHINA'S
INFLUENCE OUTSIDE OF THE U.S. WORLD ORDER.
GROWING SPECULATION THAT RON DESANTIS IS ABOUT TO ANNOUNCE
HE IS CHALLENGING DONALD TRUMP FOR THE REPUBLICAN PRESIDENTIAL
NOMINATION. THE FORD THE GOVERNOR IS
SUMMONING FINANCIAL BACKERS FOR MEETING IN MIAMI NEXT WEEK.
WHILE THEY ARE THEY DONORS EXPECT TO MAKE FUNDRAISING
CALLS ABOUT RON DESANTIS. SUCH A LAND 1.5 BILLION DOLLARS
IN INCENTIVE FOR JAPAN'S GOVERNMENT.
IT WILL HELP THE COMPANY MAKE NEXT GENERATION MEMORY CHIP'S
THERE. IT WILL INSTALL ADVANCED CHIPMAKING EQUIPMENT AT ITS
FACILITY IN HIROSHIMA. JAPAN HAS BEEN TRYING TO
INCREASE PRODUCTION ON SEMICONDUCTORS.
IN U.K., BT GROUP PLANS TO CUT ITS WORKFORCE BY UP TO 42% BY
THE END OF THE DECADE. THAT'S WHEN THE COUNTRY'S
LARGEST NETWORK OPERATOR COMPLETE IS NATIONWIDE
FIBER-OPTIC ROLLOUT. HE SAYS THE NUMBER OF EMPLOYEES
AND CONTRACTORS WOULD FALL FROM 130,000 TO AS FEW AS 75,000.
GLOBAL NEWS POWERED BY MORE THAN 2700 JOURNALISTS AND
ANALYSTS IN OVER 120 COUNTRIES. THIS IS BLOOMBERG. >> THE PRESIDENT KNOWS AND SO
DO THE LEADERS, LEADERS OF DEMOCRATIC NATIONS, THAT IF YOU
DO NOT TAKE CARE OTHER NATIONS THAT, IF YOU ALLOW THE UNITED
STATES TO DEFAULT, VIRTUALLY, NOTHING ELSE MATTERS IN WHAT
YOU ARE TRYING TO DO AROUND THE WORLD. JONATHAN:
JOHN KIRBY CATCHING UP WITH BLOOMBERG OVER THE G7 IN JAPAN.
FORGET HAPPY TALK. THE MOOD MUSIC.
LET'S TALK ABOUT THE NUMBERS. TREASURY CASH BALANCE $94.6
BILLION AS OF MAY 16. THAT IS UP FROM DAY BEFORE BUT
COMPARED TO $114 BILLION AT THE END OF LAST WEEK.
THAT IS COME DOWN A FAIR AMOUNT. THAT IS WHAT WE ARE WATCHING.
TOM: COMING DOWN AND MOVING QUICKER.
87 BILLION DOWN FROM $90 BILLION NUMBER. THE ADULTS ARE TELLING US $87
BILLION IS BORDERLINE KEEP THE GOVERNMENT OPEN. JONATHAN:
EVERYONE SAYING THE SAME THING. WE DO NOT DEFAULT.
PRESIDENT BIDEN SAYING I'M CONFIDENT WE WILL GET IN
AGREEMENT ON THE BUDGET. JAMIE DIMON MET WITH CHUCK
SCHUMER. THIS IS A QUOTE FROM HIM, U.S.
SHOULD NOT AND PROBABLY WILL NOT DEFAULT. THAT HIGHLY -- HARDLY FILLS YOU
WITH CONFIDENCE. LISA: THE FACT WE ARE HAVING THIS
DISCUSSION AND NORMALIZING IS RIDICULOUS.
THE FEELING THAT YOU HAVE BROADLY WITHIN THE BUSINESS
COMMUNITY AS WELL BEYOND. HERE'S A QUESTION.
YES, GET PAST THE EXERCISE BUT WHAT ARE THE CONSEQUENCES OF
FUNDING MECHANISMS IN REDUCE PHYSICAL RESPONSE? TOM:
ANNMARIE HORDERN WITH US RIGHT NOW. TALK TO HER OWN DEAD AND
RUNNING OUT OF MONEY IN WASHINGTON. -- ON DEBT AND RUNNING OUT OF
MONEY IN WASHINGTON. THIS IS OUR LAST WORLD WAR II
PRESIDENT AND HE ATTENDS SPECIFIC ROOM AND ALL OF THIS -- PACIFIC RIM NOW THIS IS A
BACK DROP EIGHT YEARS AGO. WHAT IS THE WIDEN STRATEGY
BEFORE WE TALK ABOUT THE BIDEN DEFICIT STRATEGY? ANNMARIE:
TODAY THEY ARE ALMOST LINKED BECAUSE A PART OF THE STRATEGY
OF THIS FOREIGN TRIP IS NOT JUST TO BE HERE AT THE G7 BUT
ALSO TO GO TO PAPUA NEW GUINEA. THIS IS A COUNTRY THAT U.S.
IS COURTING BUT ALSO BEIJING IS COURTING.
AND TO GO TO AUSTRALIA TO MEET WITH THE QUAD.
HE HAD TO CANCEL THIS BECAUSE THE DOMESTIC ISSUES BACK HOME
BECAUSE HE WANTS TO BE HOME BY SUNDAY TO MAKE SURE NEXT WEEK
HE CAN BE THERE TO GET THIS OVER THE FINISH LINE.
I SEE THESE STORIES TOGETHER. BUT A BIRDS EYE VIEW OF WHAT
UNITED STATES IS TRYING TO DO IN ASIA-PACIFIC IS WHAT THEY
WOULD NOW CALL DE-RISKING NOT DE COUPLING.
MAKING SURE THEY ARE BUILDING THESE ALLIANCES IN ASIA-PACIFIC.
THEY WANT TO TALK ABOUT ECONOMIC COERCION WHEN IT COMES
TO CHINA. IS A? ARE THEY GOING TO PUT DETAILS
TO IT -- IS A JUST LANGUAGE? ARE THEY GOING TO JUST PUT
DETAILS TO IT? THEY WANT TO DO IN MULTILATERAL
FORM. IT IS INTERESTING TO SEE HOW
EUROPEANS PLAY WITH THE UNITED STATES WHEN IT COMES TO BEIJING.
TOM: WHEN THE PRESIDENT GETS HOME,
THERE IS THE DRAMA OF GLAMOUR OF THE G7 AND HANGING OUT WITH
ANNMARIE HORTON. THEY GET BACK TO BORING
WASHINGTON COME OFF OF THE PLANE AND THE RISK WITH THE
REPUBLICANS -- DERISK WITH REPUBLICANS.
HOW WOULD THE PRESIDENT DE-RISK WITH SPEAKER MCCARTHY? ANNMARIE:
HE'S TRYING TO DO IT NOW BY CUTTING HIS TRIP SHORT AND
MAKING SURE HE IS GETTING HOME. MCCARTHY IS WINNING -- ALMOST
WINNING WHEN IT COMES TO PUBLIC OPINION.
SAYING WHY THE PRESIDENT TRAVELING, WHY DID THE
PRESIDENT MEET WITH ME SOONER THAT HE WOULD NOT HAVE HAD TO
CANCEL THE TRIP. WANT TO MAKE SURE THEY CAN GET
THIS DONE BEFORE JUNE 1. KIRBY SAYING FOREIGN LEADERS DO
NOT WANT TO SEE A DEFAULT IN UNITED STATES.
THAT WOULD UNDERMINE THE ENTIRE GLOBAL FINANCIAL SYSTEM. THE PRESIDENT HAS AIDS UPDATING
HIM IN WASHINGTON AND HE'S GOING TO HAVE TO GO HOME AND
SEAL THE DEAL. BUT NEGOTIATIONS ARE HAPPENING.
THEY HAVE NARROWED BUT WE STILL DO NOT HAVE A FIRM DEAL THAT
WERE GOING TO SEE PAST CONGRESS AT THIS MOMENT.
THERE IS WORK BEST NEEDS TO BE DONE ON THE DECK NEGOTIATIONS.
LISA: WE'RE GETTING CONTOURS OF WHAT
THE DEAL MIGHT LOOK LIKE AND WORK REQUIREMENTS ARE LOOMING
LARGE OVER EVERYTHING. CAN YOU GIVE US A SENSE OF WHAT
DEMOCRATIC PUSHBACK IS AND WHERE THIS IS? ANNMARIE:
THE PRESIDENT SPOKE ABOUT THIS BEFORE HE LEFT FOR THE G7 AND
HE SEEMED TO BE AGAINST WORK REQUIREMENTS WHEN IT COMES TO
ACCESS TO HEALTH CARE AND HEALTH INSURANCE.
BUT DID NOT TALK ABOUT OTHERS LIKE POTENTIALLY GROCERIES.
THERE MAY BE WIGGLE ROOM WHEN IT COMES TO WORK REQUIREMENTS
OUTSIDE OF THE MEDICAL SPACE. THAT IS ONE AREA WE ARE
WATCHING. THE OTHER THINK REPUBLICANS
DIGGING IN THEIR HILLS WHEN IT COMES TO UNSPENT COVID FUNDS,
ENERGY PERMITTING. THERE'S GOING TO BE A LOT
REPUBLICANS ARE TRYING TO GET THE DEMOCRATS TO CAVE IN ON
BECAUSE AT THE MOMENT THE ONLY BILL THAT IS PASSED ONE PART OF
CONGRESS IN THE HOUSE SPEAKER MCCARTHY'S BILL.
THAT RAISE THE DEBT CEILING'S BOOK COMES WITH MEASURES
DEMOCRATS SAY ARE ACCORDION. LISA:
WE HAVE BEEN TALKING ABOUT THE MOOD MUSIC IMPROVING.
THE PEOPLE THAT KNOW ABOUT NEGOTIATIONS, DO THEY SINCE
THERE HAS BEEN A SHIFT? ANNMARIE:
I THINK IT IS IMPORTANT WHEN LEADERS COME OUT AND THEY SAY
WILL NOT DEFAULT. THAT DOES MEAN THEY WANT TO GET
TO THIS FINISH LINE. I THINK A NUMBER OF INDIVIDUALS
AND YOU HEAR FROM INDIVIDUALS OF CONGRESS TALK ABOUT THAT NOT
JUST DEMOCRATS ARE TAKING NOTICE BUT THE WHITE HOUSE IS
TAKEN NOTICE THAT A SPEAKER MCCARTHY, EVERYONE POINTING AT
SOMEONE WHO WILL NOT BE ABLE TO HOLD HIS PARTY TOGETHER BECAUSE
OF THE 15 ROUNDABOUTS HE NEEDED TO BECOME SPEAKER, AND I THINK
A LOT OF PEOPLE ARE LOOKING AT HIM AND SAY HE HAS BEEN ABLE TO
HOLD HIS CONFERENCE TOGETHER. HE HAS A GREAT DEAL OF LEVERAGE
IN THE NEGOTIATIONS WHICH IS WHY I THINK THEY ARE FEELING
TOUGH AT THE MOMENT. BUT THE NEGOTIATIONS HAVE
NARROWED. THE PRESIDENT CUT HIS TRIP
SHORT. THE WHITE HOUSE IS DETERMINED
TO GET A DEAL DONE. JONATHAN: THERE IS NOT HOPE. THANK YOU.
-- THERE IS THAT HOPE. THANK YOU.
THE PRESIDENT WILL RETURN. THERE WILL BE HOPE OUT THERE
STILL. WE KEEP BUILDING ON THIS BUT
ULTIMATELY YOU WANT TO HEAR REAL FUNDAMENTAL PROGRESS
INSTEAD OF THINGS ARE GOING TO BE OK, WERE NOT GOING TO
DEFAULT. LISA: WHICH IS WHY PEOPLE HAVE NOT
TAKEN IT OFF ON THE TABLE BECAUSE THEY KNOW HOW THINGS GO
IN WASHINGTON. BUT AT THE SAME TIME WHAT NEXT?
DO I ABOUT HOW WE FUND THIS? POSSIBLY, CHINA U.S.?
THESE ARE THE ISSUES PEOPLE ARE LOOKING AT RIGHT NOW NOT
GETTING THE ALL CLEAR SIGNAL. TOM:
LOOK AT WHERE WE ARE NOT WANT TO GO BACK TO FUNDAMENTAL MACRO.
THIS WHOLE SHELL GAME IS BASED OFF REDUCE -- THERE IS A RAGING
DEBATE IN ECONOMICS BUT TO BE CONTINUE FORWARD LOW INTEREST
RATE, LOW FED RATE REGIME THAT CAN KEEP THE DEFICIT SHALL GIVE
GOING OR IS IT A WHOLE NEW WORD WE HAVE THINGS TO WORRY ABOUT.
RATE OF CHANGE ON INTEREST RATES. JONATHAN:
HOW WE FOUND IN U.S. ECONOMY? TOM:
I THINK PEOPLE WOULD'VE SAVED MOVE FROM NOMINAL ANALYSIS TO
REAL ANALYSIS AND WHEN INFLATION COMES DOWN, LET'S SAY
YOU GET THIS INFLATION NOMINAL GDP COMES DOWN THE WATER MOVING
AT -- NOMINAL GDP AND WILL BE INTERESTING TO SEE AS WE HAVE
DISINFLATION WHICH WAY THE AMBIGUITY CUTS. JONATHAN:
WALMART IS DOING WELL. A LIFT TO THEIR OUTLOOK.
THE AVERAGE TICKET IS UP. TRANSACTIONS ARE HIGHER.
WALMART IS DOING WELL. LISA: IT IS GOOD FOR THE ECONOMY.
IT MEANS PEOPLE ARE DOWNSHIFTING TO WALMART AND
THAT'S REALLY THE ISSUE PEOPLE TALK ABOUT. TOM:
WE CAN GET MEMBERS OF THE WATSON FAMILY ON.
TALK UP THE FUTURE OF WALMART. JONATHAN: WE SHOULD DO THAT.
WHOLE PAYCHECK IS GETTING TOO EXPENSIVE.
IT IS LIKE TWO PAYCHECKS NOW. JONATHAN:
EQUITIES ABOUT POSITIVE ON THE S&P. TOM:
I WENT TO WHOLE FOODS AND PAID MORE THAN I'VE EVER PAID BEFORE.
THAT IS INFLATION. JONATHAN: IT IS RIDICULOUS.
HOW EXPENSIVE THINGS ARE. LISA: THE PROBLEM IS TO EAT HEALTHY
IS SO MUCH MORE EXPENSIVE AND IT IS A HUGE ISSUE BECAUSE HOW
DO YOU FEED A FAMILY IN HEALTHY MANNER IF YOU ARE A CONSTRAINT
THE PAYCHECK FRONT. JONATHAN: YOU SIT DOWN FOR A BOX OF
CEREAL WHICH I BELIEVE HIS CATTLE FEED FOR HUMANS. LISA: DID YOU SEE THE JANUARY
SEINFELD SATURDAY NIGHT LIVE? DOING NIGHTLY NEWS WHERE HE
SAID SOMETHING IS COMING UP FROM IS GOING TO KILL YOU, IT
IS IN YOUR HOUSEHOLD. SERIAL. JONATHAN:
LET'S GET TO THE BOND MARKET. YIELDS HIGHER A COUPLE OF BASIS
POINTS. UP AGAIN THIS MORNING GOING
INTO CLAIMS AN HOUR FROM NOW. 4.18 ON THE TWO YEAR.
10 YEAR YIELD WE ARE HIGHER THREE BASIS POINTS.
I JUST GOT THIS IMAGE NOW. SOMEONE SITTING DOWN WITH THE
CEREAL WATCHING THIS. AS HE, EURO A TOUCH WEAKER --
IN THE FX MARKET, EURO A TOUCH WEAKER.
THE SLOW GRIND CHIPPING AWAY AT THE DOLLAR STORY. TOM:
107 HANDLE. HOW DESIST IS THAT FROM 105 --
DISTANT IS THAT FROM ONE TO FIVE? JONATHAN:
THE DATA IS GOING IN THAT DIRECTION. NOT ALL AT ONCE. BUT SLOWLY CHIPPING AWAY. LISA:
HOW MUCH DOES IT UP AND THE BEST WE ARE MOST -- THAT WERE
THE MOST POPULAR IN FIRST HALF OF THE YEAR?
WE ARE TALKING ABOUT CEREAL BECAUSE OF WALMART.
IT HAD BETTER THAN EXPECTED EARNINGS INTO SHARES UP ALMOST
2% DUE IN PART WITH THEIR GROCERY BUSINESS.
HOW MUCH ARE PEOPLE GOING THERE RATHER THAN WHOLE FOODS, WHOLE
PAYCHECK BECAUSE OF HOW EXPENSIVE THINGS ARE GETTING. IS IT GOOD OR BAD NEWS FOR THE
U.S. ECONOMY? WE HAVE SEEN UPSIDE BEATS IN
MANY OF THE RETAILERS. CISCO A DIFFERENT STORY.
THOUGH SHARES SIGNIFICANTLY LOWER.
THEY SAID THERE WAS A SHARP DECLINE IN ORDERS IN THE PAST
QUARTERS THAT OFFSET POSITIVE SALES FORECASTS.
PEOPLE LOOKING AT THE MAN AND I SEEING GET THERE.
WESTERN ALLIANCE IS INTERESTING. I KNOW I WOULD THE SERRATED FOR
QUOTING THE PERCENT CHANGE -- EVISCERATED FOR PUTTING PERCENT
CHANGE. JONATHAN: NO ONE IS GOING TO SAY A THINK.
LISA: MOVING FORWARD, YESTERDAY REGIONAL BANK STOCKS HAD THEIR
STRONGEST RALLY IN TWO YEARS YESTERDAY AND ALL IT TOOK WAS
WESTERN ALLIANCE COMING OUT SAYING WE HAVE DEPOSITS AND
EVERYONE IS LIKE IT IS OVER. JONATHAN: RELIEF RALLY, SQUEEZE.
JUST GOT THIS FROM A TERMINAL SUBSCRIBER.
THEY SAID, IF CATTLE FEED HAD MARSHMALLOWS THE CATTLE WOULD
BE HAPPIER. [LAUGHTER] LISA: I GREW UP WITH THAT.
IF YOU EAT LUCKY CHARMS, YOU HAVE TO EAT THE OATS FIRST. TOM:
I LIKE THE NUTRITION THINGS. WALMART TO ADD ON, FROOT LOOPS
-- HAVE YOU EVER HAD THEM? JONATHAN: SURE. TOM: 24% OF YOUR DAILY SUGARS IN 12
OUNCE. JONATHAN: THAT IS A THING.
IT DRIVES ME NUTS. TOM: IAN LINCOLN GETS UP IN THE
MORNING AND'S EIGHTH FROOT LOOPS AND HE IS 24% OF HIS
DAILY SUGARS RIGHT NOW. WHAT YOU DO WITH YOUR BEVERAGE
OF CHOICE LATE AT NIGHT? JONATHAN:
ORANGE JUICE AND FROOT LOOPS. LISA: [LAUGHTER] I LOVE THIS. HE'S WORRIED ABOUT TAKING TOO
MUCH SUGAR IN THE MORNING AND TAKE IT FOR THE EVENING.
JONATHAN: THIS IS WHAT IAN HAS TO SAY ON
THE FEDERAL RESERVE. INCOME EVENTS BE CONSISTENT
WITH COMMITTEE CONTEMPLATING A CAUSE -- PAUSE IN JUNE.
ALLOW CYCLICAL STEEPENING OF THE CURVE TO COMMENCE. THE -- THERE CONTEMPLATING THE
CAUSE, NOT COMMITTED TO ONE AND THEY ARE GOING SOME WAY MAKING
THE EFFORT TO REMAIN OPEN TO THE IDEA THEY MIGHT HIKE AGAIN.
TOM: IAN LINCOLN JOINS US NOW. IF YOU GET A PAUSE IN THE
ECONOMY, IS IT SYMMETRIC AND HOW DOES A BOND MARKET REACT TO
ISOMETRIC VIEW OF A PAUSE? >> ISOMETRIC VIEW OF A PAUSE IS
PRECISELY WHAT THE FED IS TRYING TO COMMUNICATE .
EVERYONE BELIEVED ONCE YOU HIT A PAUSE IT WAS TERMINAL.
THE NEXT MOVE WOULD BE A RATE CUT.
WE CAN SEE THAT ITS PRICE IN THE BOND MARKET AT THIS POINT
WE HAVE 50 BASIS POINTS OF CUTS BY THE END OF THE YEAR SUGGESTS
THE MARKET IS NOT BELIEVE -- DOES BELIEVE IN ASYMMETRY DOES
NOT BELIEVE PAUSE IS JUST A PAUSE. JONATHAN:
PRESIDENT MASTER HAD THIS TO SAY SHE DID NOT BELIEVE IT IS
PROBABLE THE NEXT MOVE IS A CUT OR A HIGH LEANING INTO THE IDEA
THE NEXT MOVE COULD BE A HIKE. DO NOT SHARE THAT VIEW? IAN:
I DO NOT SEE WE SEE A HIGH. THE FED IS AT TERMINAL.
I'M SYMPATHETIC TO THE FED LOOKING AT THE FUTURES MARKET
IS SAYING WE WANT TO REMAIN ON HOLD WHILE INTO 2024 AND TO
AVOID MARKET DISRUPTION BETWEEN NOW AND THE END OF THE YEAR.
LET'S CONVINCE THEM MARKET THERE IS ENERGY AROUND TERMINAL.
JONATHAN: WHAT IS ON YOUR DASHBOARD THAT
GIVES YOU EVIDENCE THAT WE ARE AT TERMINAL AND THIS IS THE
RIGHT PLACE TO BE? IAN: THE ONE PIECE OF DATA THAT WE
ARE LOOKING AT THAT IS CONVINCING HIS CORE SERVICES
CPI AND RENT. THE FED IS TOLD US TO LOOK AT
THAT MEASURE AS X SHELTER BUT THAT INCLUDES HOTEL COMPONENT
SO THE REAL CORE SERVICE NUMBER IS .1. JONATHAN:
CAN YOU EXPLAIN WHAT THAT MEANS? IAN: ALL WE'VE DONE IS LOOKED AT
REAL INFLATION LOOKS LIKE EXCLUDING WHAT IT COST TO LIVE
AT HOME AND THAT IS HOW THE FED HAS TOLD US TO VIEW THE FORWARD
TRAJECTORY OVERLIES INFLATION. LISA: WHERE IS WALMART ON THE
DASHBOARD OF YOURS? IAN: THE EARLIER OBSERVATION
REGARDING ROTATION OUT OF HIGHER AND RETAILERS INTO
WALMART IS A TYPICAL END OF THE CYCLE TRANSITION.
IT RESONATES WHEN WE THINK ABOUT THE FACT THAT REAL WAGES
HAVE FAILED TO KEEP UP WITH INFLATION.
REAL PURCHASING POWER HAS THE CLIENT OVER THE COURSE OF THE
LAST 24 MONTHS -- DECLINED THE LAST 24 MONTHS. TOM:
INFLATION COMES DOWN COMING TO BE LOWER WAGES?
IT IS NEVER HAPPENED. WAGES STAY UP AND REAL WAGES
ARE PRETTY GOOD IF INFLATION COMES DOWN. LISA:
IT IS THE PACE OF WAGE INCREASES AND WHETHER THEY CAN
GO UP AT THE SAME LEVEL. TO BUILD WITH RESPECT TO THE
CONSUMER AND RESILIENCE AND DOWNSHIFTING, WHAT WE HAVE
HEARD THIS MORNING, WHAT WE ARE HEARING FROM MORGAN STANLEY IS
THE IDEA OF A SOFT LANDING AND IT IS BECOMING MORE LIKELY AS
WE DO GET A SLOW GRIND LOWER, ARE YOU IN THAT CAMP?
ARE YOU GROWING ACCUSTOMED TO A THIS TIME IS DIFFERENT FEEL?
IAN: IT IS USEFUL TO ADD TO THE CONTACTS THAT HARD LANDING'S
AND SOFT LANDINGS LOOK AT THE SAME IN THE BEGINNING AND IT IS
NOT UNTIL YOU HIT AN INFLECTION POINT PEOPLE LOOK BACK AND SAY
THAT WAS A HARD LANDING AND THE INFLECTION WE ARE LOOKING FOR
COMES IN THE FORM OF THE JOBS MARKET.
THE FED HAS TOLD US THEY ARE EXPECTING ON THE PLUMMET RATE
WILL END -- UNEMPLOYMENT RATE WILL END AT 4.8%.
THAT IS UNLIKELY TO HAPPEN THIS ANYTIME ON THE PLUMMET RATE IS
MORE THAN THREE TIMES A PERCENT OFF CYCLE LOW TO MAKE SPIKES BY
300 BASIS POINTS. THAT MEANS ONCE THE INFLECTION
HITS WERE GOING TO SEE COMPANIES SNOWBALLING SAYING MY
COMPETITORS LAYING PEOPLE OFF, I'M GOING TO DO THE SAME.
THAT IS WHERE WE END UP AT A 5% UNEMPLOYMENT RATE.
THAT IS GOING TO GET THE FED TO MOVE. TOM:
I NEED TO BUY SOME FROOT LOOPS AT WALMART. TO DO THAT I HAVE TO A DURATION
CALL, WHAT IS YOUR DURATION CALL? IAN: AT THIS MOMENT, WE ARE
INTERESTED IN 533 STEEPENING. WE GOT ABOUT 40 BASIS POINTS.
WE ARE NOW BACK BELOW 27. A MOVE TO 50 OR 55 BASIS POINTS.
TOM: BY A LOT OF FROOT LOOPS. JONATHAN:
WHAT IS IT ABOUT A FIVE-YEAR CURVE? IAN:
FIVE-YEAR GETS US TO THE CURRENT CYCLE, THROUGH A PERIOD
WHERE THE FED EMPHASIZES RETAINING TERMINAL FOR AN
EXTENDED PERIOD OF TIME AND THE MARKET IS CONTENT TO LOOK AT
WHAT HAPPENS WHEN THE FED, EVEN IF IT IS A SOFT LANDING,
STUDIES THE CUT RATES AND EMBEDDED IN THAT IS THE IDEA OF
FED WILL BE SUCCESSFUL IN BRINGING DOWN FORD INFLATION
EXPECTATIONS. THE FIVE-YEAR SECTOR AT 360
STARTS TO LOOK CHEAP. JONATHAN: IMPLIED BY THE CALL IS THE IDEA
WE GO BACK TO LOW NEUTRAL RATES. IAN: YEAH.
IMPLIED BY OUR FORWARD FORECAST IN THE ENVIRONMENT IS THE
ASSUMPTION THAT IF INFLATION IS STRUCTURALLY HIGHER, IS ONLY
STRUCTURALLY HIGHER FOR A SPECIFIC.
-- PERIOD OF TIME AND AS LONG AS THE FED IS COMMITTED TO TWO
INFLATION TARGET THEY GIVE US TO A LOWER RATE ENVIRONMENT
GOING FORWARD. JONATHAN: INTERESTING CALL. THANK YOU.
IAN THERE. A LOT OF ASSUMPTIONS BAIT INTO
THAT. TOM: IT IS NOT JUST TO 10 SPREAD,
THERE IS INFORMATION IN DIFFERENT -- AND FOCUS ON
T-BILL SPREAD, THREE-MONTH 10 YEAR.
BUT HE HAS SIX OF THEM TATTOOED ON HIS LEFT ARM. JONATHAN: T-BILLS ARE A MESS ARE ARE THEY?
LISA: DEVIN REACTING THE MOST TO DEBT
CEILING DEBACLE -- THEY HAVE BEEN REACTING THE MOST DEBT
CEILING DEBACLE. WHAT HAPPENS IF THE ISSUE MORE
T-BILLS IN RESPONSE TO MECHANISMS? JONATHAN: I THINK WE ARE DONE.
LISA: WE ARE NEVER DONE. TOM:
FROOT LOOPS HAVE RED AND YELLOW FOOD COLORING IN IT.
MY SISTER LIVED ON FROOT LOOPS FOR FOUR YEARS.
THAT WAS A MAJOR FOOD GROUP. JONATHAN:
JOE FELT MEANT JOINS US SHORTLY ON THE RETAIL SEGMENT -- JOE
FELDMAN JOINS US SHORTLY ON THE RETAIL SEGMENT. LISA:
KEEPING YOU UP-TO-DATE WITH NEWS AROUND THE WORLD.
WITH THE FIRST WORD, I AM LISA MATEO.
WALMART RAISING ITS ANNUAL PROFIT FORECAST AFTER POSTING
BETTER THAN EXPECTED FIRST QUARTER.
COMPARABLE SALES EASILY BEAT WALL STREET ESTIMATES STILL
WALMART EXPECT SHOPPERS TO REMAIN UNDER PRESSURE THIS YEAR.
PRESIDENT BIDEN IN JAPAN FOR A GROUP OF SEVEN SUMMIT.
LEADERS HAVE A NUMBER OF CHALLENGES AHEAD OF THEM
INCLUDING HOW TO LISTEN NATIONS OUTSIDE OF THE GROUP AS MANY
COUNTRIES HAVE RESISTED SANCTIONS ON RUSSIA TO THE
PRESSURES ON THEIR ECONOMIES. ALSO THE QUESTION OF HOW TO
HANDLE CHINA AND IS PERCEIVED ECONOMIC CONVERSION.
CHINA KICK OFF EUROPEAN TOUR AIMED AT GREENPEACE IN WAR
BETWEEN RUSSIA AND UKRAINE. TOP DIPLOMAT MET WITH VOLODYMYR
ZELENSKYY. TOLD HIM AND A NEW WAR WILL
REQUIRE ALL PARTIES TO BUILD UP TRUST. UKRAINE SAYS IT WILL NOT
ACCEPT PROPOSALS THAT INCLUDE LOSS OF TERRITORY.
PRESIDENT BIDEN HOPES TO BE REELECTED BY DEFENDING HIS
VICTORIES IN 2010 HE BOUGHT A -- BATTLEGROUND STATES. CAMPAIGN MANAGER JULIE SHAW
THIS ARGUED THAT DEMOCRATS SHRINKING THEIR HAND WITH THE
PERFORMANCE AND MIDTERM RACES AND THIS YEAR'S SPECIAL
ELECTIONS. GLOBAL NEWS POWERED BY MORE
THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. THIS IS BLOOMBERG. ♪ >> COMPANIES PASSING ON THE
COST TO THE CUSTOMERS AND THEN USING THAT AS A COVER STORY TO
CONVINCE THE CUSTOMERS TO ACCEPT THE PROFIT MARGIN
EXPANSION. IT IS NOT EVERYWHERE BUT
CERTAIN SECTORS AND ABLE EXPAND THEIR MARGINS BUT WE ARE
STARTING TO SEE THE CONSUMER FIGHT BACK. JONATHAN: WHEN THE BEST INDICATORS IN
ECONOMICS -- ONE OF THE BEST COMMUNICATORS IN ECONOMICS.
ALWAYS DRESSES IT UP NICELY WITH DIFFERENT STORIES. TOM:
IT IS A LEGACY. UBS DID THIS.
JONATHAN ANDERSON WHO OWNS THE HIGH GROUND ON THE STUDY OF
CHINA. THE HERITAGE OF THE UNION BANK
SWITZERLAND WAS WRAPPED AROUND JOHN ANDERSON, GEORGE MAGNUSON,
THE YOUNG KID DONOVAN DOING SMART 15 PAGE AND SAY AND HE
READ HIM. JONATHAN: GEORGE TRANSITION TO THE GUY ON
CHINA. TOM: I READ HIS LAST BOOK COVER TO
COVER. WHAT WAS THAT? JONATHAN: RED FLAGS. TOM: YEAH.
OTHER FIRMS HAVE A DIFFERENT CHARACTER.
THEY HAVE CHARACTER AND A STYLE AND PAULA DONOVAN HER VISITING
AT UBS. JONATHAN: LET'S TALK ABOUT RETAIL BRIEFLY.
THE STOCK IS UP. THEY RAISE THEIR OUTLOOK.
WE SAW A LITTLE BIT OF THAT FROM TARGET AS WELL BUT THEY
COMMITTED TO THE FULL YEAR OUTLOOK.
A LIST FOR WALMART, 152 IN THE PREMARKET. LISA:
IT IS A THEME WE KEEP SEEING. RESILIENCE AND ABILITY TO PASS
ALONG PRICE INCREASES FAR BEYOND THE INPUT PRICE SHOW. WALMART UNDERLYING STRENGTH
FEELING POTENTIALLY FUTURE SALES. JONATHAN:
HOW MUCH OF THIS IS TRADING DOWN FROM ELSEWHERE? TOM:
I LIKE WHAT IAN SAID. IT HAPPENS ALL THE TIME.
THINGS GET TOUGH AND FOR A LOT OF AMERICANS IT IS TOUGH RIGHT
NOW AND PEOPLE TRADED DOWN. TO GET HIS PERSPECTIVE, JOE
FELDMAN. LET'S GET THEM FRONT OF YOUR
RESEARCH. DO YOU CHANGE YOUR VIEW ON
WALMART WITH THIS OPTIMISM WE ARE GETTING IN THE LAST HOUR?
JOE: I DO NOT THINK SO. I THINK YOU WANT TO STAKE IN
WALMART WITH THE ENVIRONMENT WE ARE IN.
WE ARE HEARING FROM OTHER RETAILERS THERE IS MORE
CONCERNED ABOUT THE ECONOMY. TOUGHER TIMES, WALMART TENDS TO
SHINE. TOM: DANA WAS LEGENDARY. 12 YEARS OLD SOMEONE CALLED
SHOPLIFTING THEY HAD TO BABYSIT DANA. ON THE SHRINK, THAT THAT WE SAW
WITH TARGET YESTERDAY, IS THERE SHRINK AT WALMART? JOE: YES.
ABSOLUTELY. THEY'RE NOT CARTED OUT THE SAME
WAY TARGET HAS BUT ALL THE RETAILERS ARE DEALING WITH THE
SHRINK ISSUE, THEFT, ORGANIZED CRIME.
I THINK IT IS A BIG PART OF THE EQUATION FOR A LOT OF THE
RETAILERS. IT IS A BIG NUMBER. MAY BE LESS OF THE PERCENTAGE
OF OVERALL TOTAL SALES FOR WALMART WITH THE DOLLAR AMOUNT
MIGHT BE MUCH HIGHER AT WALMART RELATIVE TO TARGET.
THIS IS A CROSS RETAIL. THE RETAILERS NEED TO WORK WITH
LOCAL AUTHORITIES TO FIND WAYS TO STOP THIS. THE CURRENT WAY TO DO IT IS
LOCKED DOWN A LOT OF PRODUCT IN THE STORE AND IT MAKES NOT A
GREAT SHOPPING EXPERIENCE FOR CONSUMERS.
IT FEELS UNCOMFORTABLE FOR THOSE NOT THERE FOR THAT. LISA: PUTTING THAT ASIDE AND IT WILL
BE A POLICY CONSIDERATION GOING FORWARD, THERE'S A QUESTION OF
WHAT PERIOD WE ARE IN. WHAT TIMES ARE WE IN?
ARE THEY WANT STRENGTH WITH THE CONSUMER HAVING SPENDING POWER
OR NOT? JOE: IT HAS BEEN VERY CONFUSING.
WE ARE GETTING MIXED SIGNALS. WE BELIEVE THE CONSUMER IS
STRONGER THAN MOST BELIEVE. YOU ARE SEEING SPENDING ON
CONSUMABLES, HOUSEHOLD ESSENTIALS, BASIC ITEMS, PEOPLE
KEEPING THEIR FOOD ON THE TABLE AND HOUSE RUNNING.
AT THE SAME TIME, YOU CONTINUE TO SEE INCREASES IN SALES AND A
OUT, ENTERTAINMENT, GOING TO SPORTING EVENTS, TRAVEL.
SERVICE ORIENTED ECONOMY IS STILL DOING FAIRLY WELL.
I DO THINK WE SEE SPENDING SLOW A BIT BROADLY SPEAKING BUT
THOSE POCKETS OF THE ECONOMY RIGHT NOW SORT OF INDICATE THE
CONSUMER STILL HAS MONEY TO SPEND. I AGREE THEY'RE NOT SPENDING ON
DISCRETIONARY GOODS. I THINK YOU SEE MORE OF THE
SAME. YOU CAN START TO PARSE IT OUT
BY INCOME LEVEL WHERE THE HIGHER INCOME PEOPLE, THE ONE
SPENDING ONLY SERVICES, LOW TO MIDDLE INCOME FOCUS ON GETTING
FOOD ON THE TABLE. LISA: IN WALMART'S EARNINGS, IS A
MICROCOSM OF THE BROADER STORY ON A LOT OF FRONTS.
YOU HAVE PEOPLE DOWNSHIFTING GROCERY AND GROCERY DOES
ACCOUNT FOR CERTIFICATE AMOUNT OF VOLUME OF THE PROFIT COMES
FROM THE OTHER AREAS AND YOU CAN SEE THE MARGIN IS EXPANDING
THEIR LIKE AT OTHER COMPANIES. THE INPUT PRICES THEY
EXPERIENCE CAN PASS IT OFF -- ALONG AND CONSUMERS WILL KEEP
BUYING AND MORE THAN EXPECTED. HOW LONG CAN THIS LAST?
THEY INCREASE THEIR PROFIT MARGINS EXPECT THE CONSUMER
WILL EAT THE PRICE INCREASE? JOE: I THINK WHAT WE'RE SEEING
PROFIT MARGIN INCREASE FROM WALMART AND SOME OF THE OTHERS,
IT RELATES TO GREATER EFFICIENCIES AND GETTING BETTER
LEVERAGE. IF YOU LOOK AT COMPARISONS FROM
A YEAR AGO, SUPPLY CHAIN COST WERE THROUGH THE ROOF.
THOSE ARE COME DOWN SIGNIFICANTLY. AS FAR AS FOOD AND CONSUMABLES
AND BASICS, WALMART PASSES THINGS THROUGH PRETTY QUICKLY. AS PRICES MODERATING, THERE
PASSING THAT THROUGH. TOM:
CFA101, SINGLE-DIGIT GDP GROWTH WERE BRINGING PENNIES DOWN TO
THE BOTTOM LINE AND I'M ENJOYING A FORWARD VIEW ON
WALMART OF 24 MULTIPLE, YOU GOT TO BE KIDDING ME.
WITH GREAT RESPECT, HOW DO YOU AND DANA ADAPT TO A 24 MULTIPLE
THE BIGGEST AIRCRAFT CARRIER IN THE WATER GOING TO THE WATER AT
FOUR KNOTS? JOE: IT IS A BIG AIRCRAFT CARRIER
BECOMING SLEEKER. THEY ARE DOING MORE WITH
HIGHER-MARGIN BUSINESSES, ADVERTISING ONLINE.
THEY ARE MEETING IN THE MIDDLE WITH AMAZON.
THINK ABOUT THE EVALUATION AMAZON TRADES AT.
WALMART HAS GOTTEN MORE EFFICIENT WITH THEIR ONLINE
BUSINESS. THEY HAVE A MARKETPLACE VERY
MUCH LIKE AMAZON WHICH IS HIGHLY PROFITABLE.
THEY HAVE MORE THIRD-PARTY SELLERS COME ON.
THERE IS A LOT WALMART IS DOING TO BORROW FROM AMAZON PLAYBOOK
THAT WOULD ARGUE THEY ARE BECOMING A MORE DOMINANT AND
MORE IMPORTANT RETAILER, BUILDING THEIR ECOSYSTEM IS
MORE PROFITABLE WAYS. AND WARRANT A HIGHER VALUATION.
JONATHAN: WE HAVE TO LEAVE IT THERE.
THANK YOU. WALMART UP BY 1.8% AFTER
RAISING THEIR OUTLOOK. AVERAGE TICKET INCREASE,
TRANSACTION HIGHER. EVERYTHING OK ON THAT FRONT OF
THIS MORNING. THIS ACIDITY JUST PUBLISHING
AGAIN THIS MORNING, -- SINCE HE PUBLISHING AGAIN THIS MORNING,
A HIGH PROFITABILITY IS RISING AS Q2 GDP GROWTH LOOK STRONGER
THAN Q1. DO NOT KNOW HOW MANY OF YOU SAW
THIS YESTERDAY BUT ATLANTA FED GDP FORECAST IS NOW SHY OF 3%,
2.9%. TOM: I DO NOT THINK IT IS A SMALL
MATTER AND HE BACK TO THE LEGACY OF THE SHOW AS WE HEAR
PEOPLE TALK RECESSION OR WHAT 18 MONTHS?
WERE GOING TO GET DOUBLE BACK TO BACK 2%.
SIX MOST OF 2% GROWTH. LISA:
THE PROBLEM IS THE RESPONSE FUNCTION TO THAT, WE DO NOT
HAVE CLARITY. WE DO NOT KNOW HOW MUCH IT ENDS
UP IN TELL RISK OF RESEARCHERS IN INFLATION AND CAUSE --
CAUSES HIGH RATES. SHE CAME AND -- SHE CAME OUT
AND SAID IT WILL BE AGAINST OUR POSITIONING BECAUSE WE WERE NOT
ANTICIPATING THAT. NOBODY WAS. JONATHAN:
LET'S SEE WHAT CLAIMS BRINK. TOM: JUNE 2, JOBS DAY. WHAT ARE YOU GOING TO DO WITH
UNEMPLOYMENT RATE, 3.4%? WE ARE MILES FROM 3.8 PERCENT.
WE ARE MILES FROM THAT. JONATHAN:
THERE IS A BELIEF THEY PAUSE IN JUNE STILL.
WE HAD THAT CONVERSATION ON THIS PROGRAM THAT MORNING.
BUT YOU ASKED THE RIGHT QUESTION THAT MORNING, WHAT
KIND OF DATA WOULD IT TAKE TO REINTRODUCE THE PROSPECT OF A
REAL MOVE IN JUNE? ALICIA LEVINE WAS GREAT
YESTERDAY. IF THOSE LIKE THEY ARE
ATTENDING BUT ULTIMATELY IT IS LIVE.
THE KIND OF JOB NUMBER WOULD YOU NEED IN EARLY JUNE? >> CERTAIN SECTORS YOU'RE
GETTING EXPANSION OF PROFIT MARGIN, WHICH HAS LED TO THE
INFLATION WE HAD OVER THE LAST FEW MONTHS >> THE MESSAGE FROM
EARNINGS SEASON IS THERE IS INFLATION IN THE SYSTEM. >> INFLATION HAS COME DOWN.
HAS IT COME DOWN NEARLY AS QUICKLY AS THE CENTRAL BANK
WOULD LIKE TO SEE? NO. >> ONCE THE FED STOPS EASING,
WE WILL SEE THE STRENGTH RETURN. >> WE HAVE THIS CHILL, COOL
DUCK HANGING OUT ON THE SURFACE PADDLING UNDERNEATH AND THAT IS
EQUITY VOLATILITY BIT. ANNOUNCER:
THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO,
AND LISA ABRAMOWICZ. TOM: GOOD MORNING. WE ARE ON RADIO AND TELEVISION,
PADDLING THE DUCK AND THE DUCT THIS MORNING IS A DUCK OF
OPTIMISM. OPTIMISM IN THE AIR. JONATHAN: THAT'S INTERESTING.
IS THAT WE WANT TO SAY? TOM: IT IS. JONATHAN:
IT HAS BEEN A BUMPY ROAD. NO WAY WE TALKED ABOUT THESE
NUMBERS A FEW TIMES THAT TUESDAY WE HAD THE BIGGEST
ONE-DAY LAW SINCE MAY 4 AND THEN WEDNESDAY WE HAD THE
BIGGEST ONE-DAY GAIN SINCE MAY 5. HERE WE ARE ON THE S&P,
STRUGGLING TO BREAK OUT OF A RANGE.
THE ECONOMIC DATA, ABOUT 29 MINUTES FROM NOW, WE LOOK AT
JOBLESS CLAIMS. 264 IS THE PREVIOUS NUMBER, 251 IS THE
ESTIMATE IN OUR SURVEY AND LET'S SEE IF THAT COMES BACK.
-- COMES BACK DOWN. THAT IS THE THEME THE LAST
COUPLE DAYS. BLOOMBERG DID A WONDERFUL JOB
OF OUTLINING THE STORY OF THE MOMENT, RECESSION, RECESSION,
THEN LET'S PUSH THAT FURTHER. TOM:
THERE'S ALSO THIS GLOOM ABOUT WHAT WILL HAPPEN, THE WORLD
WILL COME TO AN END. I THINK THERE'S A CONSENSUS
VIEW THAT EARNINGS FOR THE FIRST QUARTER WILL WRAP UP
RETAIL NOW. WALMART, IT IS THE RIGHT
PHRASE, BETTER THAN GOOD? LISA: IT'S BETTER THAN EXPECTED, ANY
UPGRADE TO THEIR FORECAST BUT NOT JUST WALMART, BED, BATH &
BEYOND, WHICH HAS BEEN LEFT FOR DEAD.
QUITE LITERALLY LEFT FOR DEAD. THEY WERE SUPPOSED TO GO
BANKRUPT AND GETS OLD OFTEN LIQUIDATED AND THEY BEAT
EXPECTATIONS AND UPGRADED THEIR FORECAST. IT IS EVERYONE. AT
WHAT POINT ARE WE LOOKING AT PERHAPS HAS WE WERE TALKING
ABOUT YESTERDAY THE LAG EFFECTS OF THE FED HIKING CYCLE BUT THE
LAG AFFECTS OF THE STIMULUS INJECTED INTO THE SYSTEM DURING
THE PANDEMIC. TOM: SUMMARIZE FOR ME.
THE WORLD-FAMOUS CLAIM AND ALL THAT. JONATHAN:
WHAT I HEARD FROM HIM IS SIMPLY HE SHARES THE IDEA OF THE IMF,
WHICH IS RATES GO BACK TO PRE-PANDEMIC LEVELS.
THAT IS EMBEDDED IN HIS CALL THAT YOU GETS A FIVE YEAR AND
30 YEAR. HE WANTS TO TAKE OUT THE FO OF
THE FED WHICH IS WHAT HE WANTS TO STOP AT THE FIVE YEAR AND
LOOK AT FIVE YEAR, 30 YEAR STATEMENT BECAUSE ULTIMATELY HE
THINKS OVER THAT TIMELINE IN FIVE YEARS OUT, RATES WILL GO
BACK TO WHERE THEY WERE. TOM: THIS IS A HUGELY IMPORTANT
THEME AND THE BLOOMBERG TOTAL RETURN INDEX, AGGREGATE INDEX,
-17% WE'VE NEVER SEEN IN OUR LIFETIME.
THE ADULTS ARE NOT LOOKING AT THREE MONTHS PAPER BECAUSE THE
DEBT CEILING. THEY ARE HAVING THE COURAGE TO
LOOK OUT AND BET ON DURATION. LISA:
YOU ASKED FOR GOOD QUESTION EARLIER, HAVE WE FOUND THE
TERMINAL RATE? HAVE WE FOUND WHAT THE NEW R
START IS WHERE WE HAVE THE NEW OPTIMAL FED FUNDS RATE?
AND WE DON'T KNOW. THIS IS THE BIG QUESTION MARK
BECAUSE WE DON'T KNOW IF THIS ECONOMY IS RESPONDING OR
SLOWING ENOUGH TO A 5% FED FUNDS RATE.
WHAT DOES THAT TELL YOU ABOUT WHERE THE MUTUAL RATE SHOULD BE?
TOM: .6 MINUTES AWAY, IS MCKEE WITH
US TODAY? JONATHAN: HE IS WITH US IN NEW YORK. TOM:
TWO YEAR YIELD, 4.18% UP FROM 3.85%. JONATHAN:
GETTING CLOSER TO 4.25% -- 4.2%. LET'S GET TO JIM BIANCO,
PRESIDENT OF BIANCO RESEARCH. GOOD TO SEE YOU. JIM:
GOOD TO SEE YOU IN PERSON. JONATHAN:
ARE WE MISTAKING INFLATION FOR RETAIL SALES? JIM:
I THINK WE ARE. IF WE LOOK AT RETAIL SALES AND
GAINS -- BECAUSE WE LOOK AT IT NOMINALLY AND IF YOU TAKE OUT
INFLATION, WE HAVE NOT DONE ANYTHING WITH RETAIL SALES IN
TWO YEARS. HAVE BEEN TRENDING SIDEWAYS.
WHEN YOU SEE .4% GAIN APRIL, WE ALSO HAD OR -- .4% GAIN IN
INFLATION. IT WAS ALSO THE PRICE INCREASE
AND WE WERE SAYING THAT WAS THE INCREASE OF RETAIL SALES.
BUT TO NET THERE WAS NO NEW UNITS PURCHASED.
IF YOU LOOK AT THINGS LIKE UPS AND STUFF, THEY ARE TELLING YOU
UNIT SALES HAVE BEEN STAGNANT AS WELL. JONATHAN:
SO WHEN YOU LOOK AT THE TEMPERATURE OR TAKE THE
TEMPERATURE OF THE U.S. ECONOMY, WHAT DO YOU FIND? JIM:
I THINK WE ARE BACK TO WHERE WE WERE PRE-SILICA AND VALLEY
BECAUSE PRE-SILICA AND VALLEY -- SILICON VALLEY, PRE-SILICON
VALLEY, WE WERE TALKING ABOUT 6% FUNDS RATE BECAUSE THE
ECONOMY WAS -- REMEMBER THE PHRASE NO LANDING?
WE WERE BACK TO NO LANDING. SO WE ARE KIND OF BACK TO THAT
MENTALITY BUT WE STILL HAVE THIS OVERHANG COMING, AND THAT
IS WHAT ABOUT THIS BANK, WHAT ABOUT THE BANKING SYSTEM, WHAT
ABOUT WHEN WE GET THE DEBT CEILING RESOLVED AND $1
TRILLION OF TREASURY BILLS WILL BE ISSUED THAT WILL SUCK
RESERVES OUT OF THE SYSTEM? DOES THAT DRAG THE ECONOMY DOWN
LATER THIS YEAR? BUT NOT NOW? RIGHT NOW IT FEELS -- IT HAS
THIS FEEL OF EARLY MARCH. TOM: THE CHART OF THE WEEK WITHOUT
QUESTION IS WHAT JOHN WAS TALKING ABOUT, RETAIL SALES
GOING UP, THE LUXURY THAT JOHN TALKS ABOUT, AND THE ACTUAL
INFLATION-ADJUSTED RETAIL SALES ARE FLAT.
BUT CORPORATIONS THINK OF THE NOMINAL SPACE.
ARE YOU SAYING CLAYTON UP ON THE STOCK MARKET? JIM: NO.
I THINK I WAS TRY TO SAY WITH THE CHART IS THAT WHEN PEOPLE
LOOK AT RETAIL SALES AND GAUGE THE HEALTH OF THE CONSUMER, ON
A UNIT BASIS OR AFTER INFLATION BASIS, THEY ARE NOT MAKING ANY
ROUND. THEY ARE BUYING THE SAME THINGS
FOR THE SAME PRICE. TOM: BY JIM BEYONCA SAYS LIGHT ON
SOX, ARE YOU SAYING THAT? JIM: I'M NOT NECESSARILY SAYING
THAT, I'M AGGRESSIVELY NEUTRAL ON STOCKS.
I THINK THEY WILL TURN SIDEWAYS. MY BIGGER THEME TOM:
MY DIVERSE -- MY DIVORCE LAWYERS SAY THAT. JIM:
I THINK WE'RE GOING TO SOMETHING LIKE THE 1980'S AND
1990'S, A ROTATIONAL TYPE OF MARKET.
IT IS NOT SO MUCH IS THE S&P GOING TO GO UP OR WHICH SECTORS
WILL PERFORM? WHAT YOU SEE THE TAR OVER THE
LAST YEAR, IF YOU LOOK AT A CHART LAST YEAR IT HAS GONE
SIDEWAYS. IT WAS THE SAME PLACE MAIL LAST
YEAR, LAST FALL, AND IT IS IN JANUARY, THE SAME POINT IT WAS
IN WE MEANDER SIDEWAYS. IT DOES NOT GO UP OR DOWN, EVEN YESTERDAY'S BIG RALLY TOOK US
TO THE HIGHEST RALLIES WE'VE SEEN IN A WEEK.
THERE'S REALLY NO TREND. LISA: DOES THIS ACCOUNT FOR RECESSION
OR IS THAT BASICALLY INCREASINGLY NOT OFF THE TABLE
BUT LOOKING LESS LIKELY? JIM: I DO NOT THINK IT IS LOOKING
LESS LIKELY. IT IS NOT EVIDENT NOW.
ASK ME IN THE FOURTH QUARTER WHERE ARE WE WITH THE BANKING
SITUATION. IF THE BANK WALK, LET ME DEFINE
THAT -- PEOPLE ARE SAYING I WILL TAKE MY MONEY OUT OF A ONE
BASIS POINT YIELDING CHASE ACCOUNT AND PUT IT INTO A 4.8%
YIELDING CHASE MONEY MARKET FUND AND IF HUNDREDS OF
BILLIONS OR ANOTHER TRILLION DOLLARS COMES OUT OF THE
BANKING SYSTEM, LITTLE BY LITTLE BY THE FOURTH QUARTER,
WE COULD HAVE A CREDIT CRUNCH ON OUR HANDS AND THEN TALKING
ABOUT A SIGNIFICANT SLOWDOWN IN THE ECONOMY.
WE DO NOT HAVE THAT IN MAY. WHAT WE HAVE A SOMETHING THAT
LOOKS MORE LIKE MARCH. A LOT OF PEOPLE ARE TRYING TO
DISMISS WHAT HAS BEEN HAPPENING WITH THE BANKING SITUATION AND
PINKING IT IS NOT A BIG PROBLEM. WE ARE NOT THERE YET.
I THINK THERE ARE CHAPTERS TO BE WRITTEN IN THAT STORY.
JONATHAN: IF SAID THAT ABOUT EARLY MARCH,
LET'S CALL IT 90 BASIS POINTS SOUTH OF WHAT WE WERE IN EARLY
MARCH. CHAIRMAN POWELL WAS OPEN ON THE
DOOR TO 50 BASIS POINT HIKES AND FED FUNDS.
HOW ARE YOU THINKING ABOUT FED FUNDS IN THE PATH OF THE
FEDERAL RESERVE GIVEN WHAT YOU SAID? JIM:
LET ME THROW IN ANOTHER NUANCE. I THINK INFLATION WILL BOTTOM
FOR THE YEAR WITHIN THE NEXT 60 DAYS BECAUSE THERE'S A GIGANTIC
BASE EFFECT COMING WITH DEFLATION NUMBERS -- THE
INFLATION NUMBERS. LAST YEAR MAY WAS .9, LAST YEAR
JUNE WAS 1.2. WHEN WE TAKE THE NUMBERS, WE
REPLACE THEM WITH A .4, WHICH IS WHAT WE AVERAGE, WE SHOULD
BE IN THE LOW THREES BY JULY AND THAT SHOULD BE THE LOW OF
THE YEAR AND START DRIFTING HIGHER.
I THINK WHAT CHAIRMAN POWELL WILL LOOK AT IS HE HAS DONE, HE
BASICALLY IS HIGHER FOR LONGER, AT 5%, AND NOTHING SHORT OF A
FULL-BLOWN RECESSION I THINK WILL GET HIM TO CUT RATES.
JONATHAN: DO THINK WE WILL SLOWLY CHIP
AWAY AT WHAT IS PRICED IN THIS MARKET OR DO WE DO THAT I AT
ONCE -- DO THAT ONCE? JIM: I THINK WE WILL SLOWLY CHIP
AWAY. I THINK WE WILL FIND THAT THE
MAJORITY OF JOB CREATION IN HIS COUNTRY'S COMPANIES OF LESS
THAN 500 EMPLOYEES. THOSE COMPANIES DO RELY ON
SMALL AND MEDIUM BANKS. THE SMALL AND MEDIUM BANKS ARE
IMPAIRED IN ANY WAY TO GIVE THEM FINANCIAL SERVICES OR
LOANS, THAT WILL BE THE CHIPPING AWAY AT WHAT WE WILL
SEE WITH THE ECONOMY AS IT SLOWS.
THEY WILL BE IMPAIRED BECAUSE THERE DEPOSIT BASE, THEY ARE
UNSURE ABOUT. IT IS GOING TO MONEY MARKET
FUNDS AND THEY'RE NOT QUITE SURE WHAT THEIR LENDING
CAPACITY WILL BE OR THE PROFITABILITY. LISA:
THIS IS WHAT OXFORD ECONOMIC SAID, THEY SAY THEY BELIEVE THE
BANKING TURMOIL BEGINS PERHAPS A PROLONGED DOWNTURN, AKIN TO
WHAT WE SAW WITH THE CRISIS IN THE 1980'S.
DOES THAT BRING INFLATION ITSELF DOWN TO THE ULTRA LOW WE
SAW PRE-PANDEMIC? DO YOU AGREE WITH IAN LYNGEN
TEETH. JIM: HE'S A FRIEND AND I WILL
DIVERGE A LITTLE BIT. I THINK WE ARE IN A NEW
POST-PANDEMIC ECONOMY WHICH MEANS WE ARE IN A HIGHER
INFLATION ENVIRONMENT THEN WE WERE PRE-PANDEMIC, A 3% MAYBE
4% INFLATION ENVIRONMENT. AS WE GO FORWARD, WE WILL LEARN
THERE'S A DIFFERENT ECONOMY THAN IT WAS SAY 2019.
IT HAS MORE FRICTIONS, AND IT HAS MORE PRICING PROBLEMS THEN
WE HAVE SEEN BEFORE. EVENTUALLY WE WILL RESTRUCTURE
THE ECONOMY AND BRING THAT INFLATION OUT BUT THAT WILL
TAKE YEARS. JONATHAN: YOU WILL BE WITHOUT -- TOM:
YOU'LL BE WITH US FOR THIS HALF-HOUR. WE LOST LUCAS, TRULY A GIANT OF
RATIONAL EXPECTATION OF QUESTION MODERN ECONOMICS.
THE SINGLE MOST IMPORTANT ECONOMIST OF THE MODERN AGE.
HE WANTED US TO BE RATIONAL. OUT OF THE PANDEMIC, ARE WE
RATIONAL IN OUR EXPECTATIONS OR ARE WE MAKING IT UP AS WE GO?
THERE IS VERY LITTLE THEORY GOING ON. JIM:
I THINK WE ARE VERY RATIONAL. I THINK WHAT WE'RE DOING WITH
THE BANKS IS RATIONAL. I THINK THERE ARE ATTITUDES
ABOUT WORKING REMOTE ARE SOMEWHAT RATIONAL AS WELL.
WE NEEDED A CATALYST IN ORDER TO MAYBE MAKE US ACT ON THAT
RATIONALITY AND THE CATALYST WAS SENDING EVERYONE HOME FOR
YEAR AND THEY KIND OF REASSESS WHAT THEY WANTED TO DO BUT WAS
AFRAID TO DO. I THINK WE ARE. JONATHAN:
WHO HAS IT RIGHT, BLACKROCK GETTING BACK INTO THE OFFICE OR
DEUTSCHE BANK LOOKING TO CUT OFF SPACE BY 40%? TOM:
THAT'S THE QUESTION OF THE DAY. JIM:
I THINK THE BLACKROCK RESUMES ARE GOING TO DEUTSCHE BANK
RIGHT NOW. [LAUGHTER] THAT WILL BE THE BIG PUSH PULL
BETWEEN THE FIRMS. IS THERE A COMPETITIVE ADVANTAGE BY
THROWING THAT OUT THERE, THAT WE HAVE REMOTE WORK AND THEY
WANT YOU BACK IN THE OFFICE FOUR DAYS A WEEK? JONATHAN:
THEY HAVE THIS HYBRID MODEL AT DEUTSCHE BANK MEANING YOU HAVE
TO COME TO THE OFFICE OR RATHER YOU GO HOME THREE DAYS OF
HOME-OFFICE PER WEEK. TWO THIRDS OF EMPLOYEES HAVE
REGISTERED FOR THAT HYBRID WORK MODEL.
TWO THIRDS, MEANING THEY COULD SLICE OFF A SPACE BY SOMETHING
LIKE 40%. TOM: I HAVE NO IDEA WHERE WE ARE
GOING. LISA: IT ALL CHANGES WHEN THE LABOR
MARKET CHANGES. IF IT DOES NOT GET LOOSER, YOU
WILL HAVE THIS SAME CALCULUS. JONATHAN:
JIM BIANCO ON THE DEBT CEILING COMING UP NEXT. ♪ >> KEEPING YOU UP-TO-DATE
WITH NEWS FROM AROUND THE WORLD WITH THE FIRST WORD, I AM LISA
MATEO. WALMART IS RAISING ITS ANNUAL
PROFIT FORECAST AFTER POSTING BETTER-THAN-EXPECTED EARNINGS
IN THE FIRST QUARTER. COMPARABLE SALES EASILY BEAT
WALL STREET ESTIMATES. WALMART EXPECTS SHOPPERS TO
REMAIN UNDER PRESSURE THIS YEAR. PRESIDENT BIDEN IS IN JAPAN FOR
THE GROUP OF SEVEN SUMMIT. FRIDAY IN HIROSHIMA, LEADERS
HAVE A NUMBER OF CHALLENGES, INCLUDING HOW TO ENLIST NATIONS
OUTSIDE OF THE GROUP AS MANY COUNTRIES RESISTED SANCTIONS ON
RUSSIA DUE TO PRESSURES ON THEIR OWN ECONOMIES.
THERE'S ALSO THE QUESTION OF HOW TO HANDLE CHINA, WHICH IS
PERCEIVED ECONOMIC COERCION. CHINA'S PRESIDENT, XI JINPING,
IS HOLDING HIS OWN SUMMIT. THE TWO DAY CHINA SUMMIT WILL A
SOME OF THE LEADERS OF CAUSE ASKED ON, TURKMENISTAN, AND
OTHERS. IT IS HIS WAY OF REMINDING THE
G7 OF CHINA'S INFLUENCE OUTSIDE OF THE U.S.-LED WORLD ORDER.
THE STATE OF MONTANA HAS NOW BANNED TIKTOK.
THAT SETS UP THE FIRST LEGAL AND LOGISTICAL TEST FOR BROADER
EFFORTS IN THE U.S. TO RESTRICT THE WIDELY POPULAR
SHARING APP. THE MONTANA LAW PROHIBITS APP
STORES FROM OFFERING THE APP STORES OF THE STATE BUT
ENFORCING THE RESTRICT AND'S FOR CURRENT TIKTOK USERS COULD
BE MORE COMPLEX. GLOBAL NEWS, POWERED BY MORE
THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES.
I'M LISA MATEO. THIS IS BLOOMBERG. ♪ >> IS THE PERFECT GOLDILOCKS
BACKDROP WHERE IT IS A BIT OF FOOD FOR THOUGHT FOR THE BEARS.
THE RATE CUTS ARE NOT BEING PRICE OUT YET BECAUSE WE
PARTICULARLY SEE U.S. HEADLINE INFLATION GOING TO
WEAR 3% IN THE NEXT COUPLE MONTHS.
SO YOU HAVE MIXED DATA, DATA ON AGGREGATE BEATING EXPECTATIONS
BUT NOT TOO MUCH. INFLATION [INDISCERNIBLE]
JONATHAN: HE'S STILL BULLISH, THE CHIEF
STRATEGIST AT HSBC. YOUR MARKET IS POSITIVE, JUST
ABOUT, BY .1%. YIELDS HIGHER BY ABOUT THREE
BASIS POINTS. LET'S CALL IT 360 ON A 10 YEAR.
ON A TWO-YEAR, YOU CAN CALL IT ALMOST 420.
YIELDS ARE HIGHER BY A COUPLE BASIS POINTS ON A TWO-YEAR.
4.176%. LET'S CALL IT 10 MINUTES AWAY
FROM THE JOBLESS CLAIMS NUMBER, 30 MINUTES AWAY. TOM:
WE WILL BE WATCHING. I DON'T KNOW IF THE WALMART CEO
IS WATCHING. I HAVE THIS HEADLINE AND I
DON'T KNOW WHAT IT MEANS. WALMART CEO SEES INFLECTION IN
ROI IN COMING QUARTERS. JONATHAN:
HE WANT ME TO TRANSLATE? TOM: TRANSLATE. JONATHAN: HE ALSO SAYS THIS, SCIENTISTS
STRESS CONSUMERS BELOW THE SURFACE AND I THINK THAT IS
THAT MORE IMPORTANT PIECE OF THIS RIGHT NOW. TOM: I THINK SO.
JONATHAN: SO POTENTIALLY FROM ELSEWHERE,
THE FACT THAT AVERAGE TRANSACTION AT WALMART IS UP
AND MORE SHOPPERS ARE COMING IN FROM WHERE? THAT.
IS THE TRADE ON STORY. LISA: BASICALLY PEOPLE WITH HIGHER
INCOMES GOING TO A PLACE WITH LOWER PRICES BECAUSE THEY
CANNOT AFFORD WHAT THEY ARE BEING CHARGED AT OTHER
ESTABLISHMENTS THAT WE WILL NOT NAME OR MAYBE WE WILL FOR THE
REST OF THE SHOW. TOM: RED AND GREEN ON THE SCREEN,
FUTURES UP FIVE. THE PERSON WHO DOES GIVE ME
INFORMATION IS JIM BIANCO FROM BEYONCA RESEARCHERS -- FROM
BEYONCA RESEARCH -- BIANCO RESEARCH.
JUST THE BIBLE ON SOME OF THE FEARS HERE, HOW FEARFUL OF YOU
ARE THE DEBT DEBATE? JIM: THERE ARE TWO TYPES OF PEOPLE
WHEN YOU TALK ABOUT THE FED DEBATE, THERE ARE THOSE PUTTING
IN THE BLOOMBERG TERMS ANNMARIE HORDERN WOULD INTERVIEW AND
TELL YOU THERE'S A 40% TO 50% CHANCE WE DEFAULT AND THE WALL
STREET WILL TELL YOU 3% TO 4% CHANCE TO DEFAULT.
I AM PROBABLY IN THE 3% TO 4% CHANCE WE WILL SEE DEFAULT.
WE WILL SEE A LOT OF POLITICAL THEATER AND I THINK WHAT THE
MARKETS HEARD FROM SPEAKER MCCARTHY THE OTHER DAY WAS THAT
THE PRESIDENT HAS APPOINTED SOMEONE TO NEGOTIATE WITH HIM
SO THAT MEANS WE WILL GET A DEAL AND I THINK THAT A DEAL IS
LARGELY EXPECTED IN THE MARKET, AND IF THERE WAS NOT A DEAL,
THAT WOULD BE THE SURPRISE. JONATHAN:
SO THERE IS A MARKET CALLED TO MAKE IN THAT.
WHAT IS YOUR MARKET CALL AROUND THE STORY? JIM:
AROUND THE DEBT CEILING? JONATHAN:
IF YOU BELIEVE IT IS NOT PRICE, YOU ALSO ACKNOWLEDGE TO SOME
DEGREE THERE IS RISK. JIM: THERE IS. JONATHAN:
WHERE DO YOU THINK IT IS? JIM: I THINK THE RISK IS IN THE
SHORT-TERM BILL MARKET. I THINK THAT RISK IS
POTENTIALLY IN THE BANKING SYSTEM. REMEMBER THE TREASURY BILLS,
TREASURY SECURITIES ARE USED AS RESERVES.
THAT'S A FANCY WAY TO SAY THEY ARE ANOTHER FORM OF MONEY.
AND IF WE WERE TO DEFAULT ON THOSE, WE WOULD THROW THE
BANKING SYSTEM INTO COMPLETE CHAOS BECAUSE THE RESERVES THEY
USE WOULD NO LONGER BE WORTH ANYTHING, AT LEAST FOR THE DAY
OR TWO OR THREE OR HOWEVER LONG WE DID NOT PAY THEM.
THAT IS THE RISK YOU WOULD FACE IF WE WERE TO HAVE A DEFAULT. THERE IS A RISK OUT THERE RIGHT
NOW THAT, IF THIS NEGOTIATION FALLS APART, I DO NOT THINK IT
WILL, BUT THAT IS YOUR RISK. SO YOU HAVE TO USE A FANCY
RISK, -- FANCY WORD, ASYMMETRIC RISK.
IF THERE'S A DEAL THERE WILL BE LITTLE MOVE IN THE MARKET.
IF THERE IS NOT A DEAL, WE WILL HAVE TO REPRICE THE MARKETS.
JONATHAN: WHERE THERE IS A PROBLEM, THE
FED HAS A SOLUTION TYPICALLY. DO THEY HAVE A SOLUTION? JIM:
I DON'T THINK THEY DO, NOR DO I THINK THEY SHOULD.
THIS IS A POLITICAL ISSUE. WE ELECTED CONGRESSMAN AND
SENATORS TO REPRESENT US AND IF THEY ARE, IN THEIR INFANT MEANT
-- INFINITE WISDOM, REPRESENT US BY DEFAULTING ON THE DEBT -- >> IF THAT BECOMES A MARKET
FUNCTIONING ISSUE, DOESN'T THE FED HAVE A ROLE TO PLAY? JIM:
TO SOME EXTENT. YOU HAVE TO BE CAREFUL YOU ARE
NOT UNDOING THE WILL OF CONGRESS.
THAT IS WHY I THINK THIS WILL GET RESOLVED BECAUSE IT IS ALL
ON CONGRESS IF THIS HAPPENS IF WE HAVE A DEBT DEFAULT.
IT IS NOT ON THE FED FOR MITIGATING IT. LISA:
WHEN IS THE NEXT CRISIS IF THIS GETS OFF THE TABLE?
WHAT DO PEOPLE FOCUS ON THE? JIM:
I THINK WE GO BACK TO FOCUSING ON THE BANKING CRISIS AND
FOCUSING ON THE SENIOR LOAN OFFICER SURVEY.
DO WE SEE LENDING TIGHTEN AND CONTINUE TO TIGHTEN, AND WE SEE
PROBLEMS METASTASIZE BECAUSE LENDING IS GOING TO CONTINUE TO
TIGHTEN? I THINK THE OTHER ONE WOULD BE,
GOING WITH MY FORECAST, DO WE SEE A BOTTOM IN INFLATION THE
SUMMER? THEN DOES THE FED COME UP SHORT
OF THEIR TARGET, AND DOES ALL OF THE TALK OF CUTS IN THE
FUNDS RAISED BY THE END OF THE YEAR GO AWAY? LISA:
DO YOU FEEL LIKE PEOPLE ARE EXHAUSTED BY THE PESSIMISM,
THAT THEY HAVE HEARD THE SKY IS FALLING FOR SO LONG AND IT HAS
NOT HAPPENED THAT THEY ARE TUNING IT OUT AND SAYING YOU
HAVE BEEN WRONG, WHICH IS BASICALLY THE MESSAGING I KEEP
HEARING. HOW MUCH IS THAT PREVAILING?
JIM: I THINK IT IS PREVAILING QUITE
A BIT. IT GOES BACK TO THE PANDEMIC
WHERE WE HAVE THE ULTIMATE PESSIMISM.
WE ARE ALL GOING TO DIE. THAT IS WHAT WE HAD FOR THE
PANDEMIC. THEN WE ALL DID NOT DIE SO THEN
WE HAVE RECOVERED FROM THAT. SO THERE'S A LOT OF FRUSTRATION.
I WILL GO BACK TO WHAT I SAID EARLIER, THE MARKETS HAVE NOT
DONE ANYTHING. SO NO ONE IS RIGHT AND NO ONE
IS WRONG. THE OPTIMISTS ARE STILL WAITING
FOR THE BREAKOUT AND PESSIMISTS ARE STILL WAITING FOR THE
BREAKDOWN. THIS JUST CONTINUES AND
FRUSTRATION BUILDS. LISA: IF THERE IS NO DEBT CEILING
DEFAULT, WE HAVE THAT SENSE BY THE NEXT FED MEETING, AND WE DO
NOT HAVE A SENSE OF ONGOING STRESS COMING TO A HEAD IN THE
BANKING SYSTEM, HOW MUCH OF A DISRUPTIVE FORCE WITH THE FED
BE IF THEY DID HIKE RATES AT THE JUNE MEETING? I JIM:
THINK THEY WOULD BE A HUGELY DISRUPTIVE FORCE IF THEY
CONTINUED TO HIKE RATES. THEY WOULD EXACERBATE THE BANK
WALK. THIS IS BECOMING THE NATIONAL
PASTIME, PULL OUT YOUR PHONE AND BRAG ABOUT YOUR MONEY
MARKET PHONE. IT IS NO LONGER ABOUT A MEME
STOCK ANYMORE. THAT WOULD JUST EXACERBATE THAT.
HIGHER RATES WILL THEN FILTER THROUGH IN THE ECONOMY.
I'M FOR ONE THAT THINKS THE RATES MATTER.
I KNOW THAT'S A WILD THOUGHT, BUT IF THE FED WANTS TO RAISE
RATES, IT WILL REALLY HURT THE ECONOMY. JONATHAN:
IS THAT -- TOM: IS THAT A MODEL ON A 6% MONEY
MARKET FUND? LISA: LINDSAY PA SO WAS TALKING ABOUT
A 6% FED FUNDS RATE ON THE TABLE EVEN THOUGH EVERYONE TOOK
THAT OFF. TOM: IT HAS WORKED OUT WELL.
WE HAD A TWO AND 20 PAYOUT LAST YEAR AND I DON'T THINK WE WILL
DO THIS YOU. YOU ARE A CMT, RALPH WAS ON THE
SHOW AND SAID OCTOBER WAS THE SPX BEAR MARKET LOW.
WE ARE UP 14% SPX OFF THE LOW. THAT TO ME -- NOBODY IS TALKING
ABOUT THIS. A LOT OF PEOPLE MISSED THIS
LIFT, DIDN'T THEY? JIM: YES. WE WERE SIX MONTHS AND 14% OFF
OF THE LOW BUT IF YOU WANTED TO BACK UP AND LOOK AT THE JANUARY
HI, WE HAVE ONLY RETRACED HALF. TOM:
DON'T GIVE ME THIS TECHNICAL ANALYSIS TOUGH, GO WITH THE
STORY. JIM: THE MARKET HAS LIFTED OFF THE
LOW BUT IT IS STILL WELL AWAY FROM THE HIGHS AND IT HAS BEEN
MEANDERING SIDEWAYS. SO I SEE A MARKET WITHOUT A
CONCLUSION RIGHT NOW IN TERMS OF THE SITE, WAITING TO SEE
WHAT COMES NEXT. TOM:
THIS WAS A TEXTBOOK WRITTEN IN 1947, HE READ MAGGIE AND IT
SAYS SUPPORT RESISTANCE. BOTTOM LINE, YOU CAN MAKE UP
ANY STORY YOU WANT. I HAVE THE STORY COMING FROM
THE OCTOBER LOW AND THE SMART GUYS LIKE YOU HAVE TO BRING A
BACK FURTHER AND IT IS NOT THAT GLORIOUS OF A STORY. JIM:
TECHNICAL ANALYSIS OF STOCK TRENDS BY JOHN MACKEY. JONATHAN:
MY FAVORITE STORY, I COULD GET BEHIND THIS BILL IN WASHINGTON,
D.C., THE NO PAY FOR CONGRESS DURING DEFAULT SHUTDOWN ACT.
[LAUGHTER] DOESN'T THAT SOUND GREAT?
AWESOME. TOM: WHO IS THE SPONSOR? JONATHAN:
REPRESENT OF ABIGAIL SPANBERGER. AND A REPUBLICAN FROM
PENNSYLVANIA. LOVE THAT. THIS IS WHAT MBC SAYS, A
BIPARTISAN BILL SAID TO BE UNVEILED TODAY WILL BLOCK
MEMBERS OF CONGRESS FROM GETTING PAID IF THE U.S.
ENTERS DEBT DEFAULT OR GOVERNMENT SHUTS DOWN AND WE
ARE ALL ON BOARD WHICH MEANS ONE THING, IF WE ARE ON BOARD,
THEY ARE CERTAINLY DOWN IN CONGRESS. LISA:
THIS IS REVENGE OF THE CENTRISTS AND REVENGE OF THE
GUYS, WHAT ARE WE DOING HERE? TRYING TO GAIN POLITICAL POINTS
IN HOLDING THE U.S. FUTURE IN HAND. JONATHAN:
CAN YOU GET BEHIND THAT? JIM: OF COURSE I CAN.
I THINK WE SHOULD GO WHEN WE HAD THE DEBT CEILING AND
RETROACTIVELY STOP PAYING SINCE JANUARY.
PAY THEM IN JANUARY 1 TWO BILLS. LISA:
WOULD YOU DO THAT THE LEADERS? JONATHAN: IN THE U.S.
DEBT CRISIS, THEY SHOULD HAVE BEEN PAID IN BTP'S AND GREEN
DEBT. PAY THE GERMAN POLITICIANS.
LISA: IN GREEN DEBT? [LAUGHTER] TOM: THE MOST IMPORTANT -- AND SHE
WON HER PRIMARY 50% TO 40%. SHE IS IN THE MIDDLE AND THAT
IS WHAT THE MIDDLE OF AMERICA'S THINKING. JONATHAN:
JIM, LOVETT, JIM BIANCO. JEFFREY SHERMAN, DOUBLING
CAPITAL, JOBLESS CLAIMS WITH MICHAEL MCKEE UP NEXT. TOM: "BLOOMBERG SURVEILLANCE,"
GOOD MORNING TO LISA ABRAMOWICZ AND JONATHAN KEENE.
TOM KEENE, PREPARING FOR ANOTHER HOUR TO MOVE FORWARD
THROUGH THE MORNING. DOUBT LITTLE NEGATIVE, THIS
EASED UP A LITTLE BIT, THE ENTHUSIASM SEEM EARLIER -- SEEN
EARLIER IN THE MORNING AND ENTHUSIASM NOW GOES TO THE
ECONOMIC DATA. THERE IS EXISTING HOME SALES AT
10:00, BUT BEFORE THAT, THE PHILADELPHIA FED BUSINESS
OUTLOOK, TOP OF MCKEE'S LIST, FORGET ABOUT CLAIMS FIRST.
MICHAEL: IT WOULD BE GREAT IF CLAIMS
CAME OUT. 242,000, WHICH IS DOWN FROM THE
ORIGINALLY REPORTED 264,000. WE WILL GET THE REVISION IN A
MOMENT THE DEATHLY GOING IN THE OPPOSITE DIRECTION.
REMEMBER LAST WEEK WE HAD A JUMP IN CLAIMS AND THEN IT WAS
REPORTED A LOT OF THAT CAME FROM FRAUD IN ON IMPLEMENT
INSURANCE FILINGS IN MASSACHUSETTS.
SO THAT MAY HAVE GONE AWAY AND THAT MAY HAVE ACCOUNTED FOR
THIS BIG DROP DURING THE MONTH. THE FOUR-WEEK MOVING AVERAGE,
WHICH WOULD STILL BE INCORPORATED LAST WEEK,
CONTINUING CLAIMS 1,799,000, BUT THAT IS DOWN FROM THE PRIOR
WEEK AS WELL. AT THIS POINT, WE ARE NOT
SEEING REAL CHANGE IN JOBLESS CLAIMS THAT WOULD HAVE
SOMETHING FOR THE LABOR MARKET. PHILADELPHIA FED IS OUT AS TOM
MENTIONED. IT IS -10.4 AND THAT IS UP FROM
-31.3. EARLIER THIS WEEK WE HAD THE
EMPIRE INDEX JUST ABSOLUTELY COLLAPSE.
PEOPLE WERE WORRIED ABOUT WHAT THAT WOULD MEAN FOR ISM BUT NOW
IT LOOKS LIKE THE PHILADELPHIA FED IS GOING IN THE OTHER
DIRECTION, WHAT EVERYBODY WANTS TO KNOW IS THE PRICES PAID
INDEX, 10.9 FOR THE PHILADELPHIA FED. TOM:
POSITIVE 10.9? MICHAEL: POSITIVE 10.9.
THAT IS NOT GOING IN THE RIGHT DIRECTION WHICH WILL SET US UP
FOR THE FED WILL THEY OR WILL THEY NOT DEBATE IN JUNE. PRICES AT -7% VERSUS -3.3%.
PEOPLE PAYING FOR MATERIALS AND NOT AT THIS POINT GETTING THAT
BACK. FINALLY THE EMPLOYMENT INDEX,
-8.6 VERSUS -.2%, SO IT LOOKS LIKE THE IMPLEMENT SITUATION
DETERIORATING A LITTLE BIT IN THE PHILADELPHIA FED DISTRICT.
TOM: AN EVENTFUL WEEK TO SAY THE LEAST. CONGRATULATIONS ON
TALKING TO WHAT WAS AT 32 FED SPEAKERS? >> SOMETHING LIKE THAT. I WAS TOLD BY -- IN HAVE ELLEN
COMING ON, I WAS TOLD BY SETH CARPENTER, COHEAD OF -- TOM:
CARPENTER HAD THE GOLF TRIP. MICHAEL:
HE SAID TO SAY HELLO TO HER AND THANK YOU FOR THE ADVICE ON THE
SUNSCREEN. TOM: 4.20, WE HAVE TO LOOK AT THE
YIELD AT FIVE BASIS POINTS FROM 386, 387 OVER THE LAST COUPLE
DAYS TO MUCH HIGHER TO YOUR YIELD SPACE. LISA:
WE WERE LOOKING FRONT IMPLEMENT CLAIMS TO KEEP RISING.
THEY ARE GOING IN THE OPPOSITE DIRECTION.
IS THIS ENOUGH FOR THE FED TO HIKE FURTHER?
THAT IS WHAT I THINK A MARCUS PLANE WITH AN NOT ONLY THAT BUT
HOW MUCH DOES THIS KEEP THEM FROM CUTTING RATES?
YOU CAN SEE THAT IN THE FED FUNDS FUTURES NOW THE IDEA OF
CREEPING HIGHER. THE IDEA THAT PERHAPS THERE'S A
GREATER PROBABILITY THE FED REMAINS ON HOLD. TOM:
WHEN THE PIERCING NOTES OF THE AIR HAS BEEN OUT OF THIS
PANDEMIC WHERE THERE WAS A BELIEF IN TRANSITORY AND ONE
DAY THE CHIEF U.S. ECONOMIST AT MORGAN STANLEY
SAID I'M WRONG, MAYBE IT IS NOT TRANSITORY AND SOMETHING NEW
AND DIFFERENT, ELLENS EGNER JOINS US NOW.
ON FROM A TRANSITORY ECONOMICS AND IN YOUR NOTE TODAY, YOU ARE
FRAMING OUT A NEW JOB ECONOMY. WE ARE IN A $250,000 RUN RATE,
A NONFARM PAYROLLS, AND YOU HAVE A STUNNING OBSERVATION OF
A PATH TO 40,000 NONFARM PAYROLLS.
HOW CLOSE ARE WE TO THAT? >> I THINK WE CAN HIT THAT LATE
SUMMER, TOM. YOU WANT TO ASSUME THINGS ARE
LINEAR, WHICH THEY ARE NEVER LINEAR.
IF YOU LOOK AT THE SLOWDOWN WE HAVE HAD AN PROJECT THAT
FORWARD AND SAY KNOWING NOTHING ELSE, LET'S ASSUME THAT
CONTINUES, YOU WOULD BE DOWN BELOW 100,000 WITHIN A COUPLE
BREATHS. WE SEE A SLOWING PATH FOR JOB
GAINS HERE BUT WE DO NOT SEE A CLIFF.
I THINK THAT IS IMPORTANT. CLAIMS ARE LOW, COMPANIES ARE
STILL DOING MORE LABOR HOARDING THAN THEY ARE LAYING OFF.
WE SEE AN EMPLOYMENT GAP THAT NEEDS TO GET FILLED, SO I THINK
THERE IS A LOT OF SUPPORT HERE THAT LET'S BE REALISTIC, THINGS
ARE SLOWING. THIS IS NOT A CLIFF WE ARE
HEADED TOWARD. FOR JOB GAINS. TOM:
THIS IS THE CONUNDRUM FOR YOU, ME, AND JOHN INTO MAY, JUNE,
AND JULY. WE DON'T HAVE A CLUE AS ELLEN
MENTIONS THE LINEAR FLOWS ON LABOR. NO CLUE. LISA:
GIVEN THE FACT IT IS SLOW, HOW DOES THE FED RESPOND TO A SLOW
BIRTH? GIVEN THE FACT THEY ARE CONTINUING TO SAY INFLATION IS
THE PREEMINENT CONCERN AND INFLATION HAS BEEN STICKY.
CAN THEY AFFORD TO NOT HIKE RATES AGAIN IF WE CONTINUE TO
SEE JUST A SLOW GRIND LOWER BUT NOT THAT QUICKLY AND INFLATION
HIGHER? ELLEN: SO IT IS A GOOD QUESTION.
INFLATION IS MOVING IN THE RIGHT DIRECTION BUT VERY
STUBBORNLY SO. IT HAS NOT MOVED DOWN CLEARLY
AND CONVINCINGLY AS CHAIR POWELL WANTED.
BUT THAT WAS NOT A PREREQUISITE TO THEM STOPPING HIKING.
THAT WAS A PREREQUISITE TO WHEN THEY MAKE ADJUSTMENTS TO SAY
NORMALIZING POLICIES, INFLATION HAS COME DOWN A LOT.
WE THINK THEY ARE AT THE POINT WHERE YES, IT IS ARGUABLE ON
THE FED WHETHER THEY ARE IN RESTRICTED TERRITORY, HOW FAR
ARE THEY IN, ARE THEY CLOSE ENOUGH?
WE THINK THEY ARE CLOSE ENOUGH, BUT THE ARGUMENTS OR POINTS YOU
MAKE WOULD SUGGEST YOU NEED TO KEEP THAT PEAK GREAT THERE FOR
QUITE SOME TIME. I THINK THAT IS THE ARGUMENT
THE FED WILL LEAN ON, THAT AS INFLATION COMES DOWN, BUT THEY
ARE HOLDING RATES HIGH, POLICY ACTUALLY MAINTAINS ITS
RESTRICTIVE TERRITORY AND GETS EVEN MORE RESTRICTIVE
THROUGHOUT THE YEAR. I THINK THAT IS WHAT
POLICYMAKERS ULTIMATELY WILL LEAN ON. LISA:
WE WERE TALKING ABOUT THIS EARLIER AND TOM ASKED A
QUESTION OF DO WE KNOW WHAT THE NEW NEUTRAL IS?
DO WE HAVE A SENSE OF WHAT IT TAKES TO TAKE THE MOMENTUM OUT
OF AN ECONOMY THAT HAS DEFIED ALL EXPECTATIONS THAT WERE
INCREDIBLY GLOOMY INTO THE YEAR. WHAT IS YOUR VIEW?
DO WE HAVE A BETTER SENSE OF WHAT THE NEUTRAL RATE IS? ELLEN:
I WOULD SAY THERE IS -- VERY CYNICAL OF ME TO SAY NEUTRAL
DOES NOT EXIST. WE ARE NEVER NEUTRAL, WE PASS IT UP AND IN
HINDSIGHT, WHETHER YOU ARE AT NEUTRAL, ABOVE OR BELOW IT, WE
ARE ALWAYS LOOKING FOR THESE FICTITIOUS MEASUREMENTS OR
GOALS. WHAT THE FED DOES KNOW OR CAN
SEE IS THINGS ARE SLOWING. WE THINK THEY WILL BE VERY SLOW
IN THE MIDDLE TWO QUARTERS OF THIS YEAR.
THAT IS AN ECONOMY WITH A BACKDROP OF BANKING PRESSURES,
OF FINANCIAL CONDITIONS THAT YOU MIGHT NOT WANT TO PUSH IT
FURTHER. BUT YOU WANT TO MAINTAIN THE
OPTION TO HIKE AGAIN IF YOU NEED TO.
I THINK THAT IS SOMETHING THAT WE HAVE TO CONSIDER.
THERE ARE TWO SIDED RISKS AFTER THE PAUSE HERE. TOM:
I'M GONNA RIP UP THE SCRIPT, DON'T PANIC WITH ME HERE, AND
WE TALK TO ELLEN ZENTNER , FOREIGN-EXCHANGE STRATEGIST. A
EURO-DOLLAR, SOLID 110 FOREVER BRINGS THEIR ONE AWAY TO A
WEAKER EURO, 107 .99 RIGHT NOW ON EURO-DOLLAR.
TO ME, THE GREAT UNSPOKEN ALONG WITH YOUR IDEA OF NFP UNDER
100,000 IS RESILIENT TO STRONGER DOLLAR.
DOVETAIL THAT INTO YOUR CALL, DO WE GET A RESILIENT DOLLAR
AGAIN WITH THE CERTITUDE OUT THERE, THE CONSENSUS OF DOLLAR
WEAKNESS? ELLEN: I THINK THAT CURRENCY MOVEMENTS
ARE VERY IMPORTANT AND WHERE STRATEGISTS ARE, SHORTER-TERM
TACTICAL -- TACTICALLY ON THE DOLLAR MATTER A GOOD DEAL.
BUT I THINK THERE WILL BE A REALIZATION HERE THAT THE
ECONOMY IS NOT COLLAPSING. IN FACT, A REALIZATION THAT WE
THINK THE FED HAS CAUSED HERE BUT THERE ARE MYRIAD OPTIONS
FOR POLICY AFTER THAT. IT IS VERY EASY TO GET
INFLATION DOWN FROM SEVEN TO SET -- 7% TO 4%.
IT'S DIFFICULT TO GET 4% DOWN TO 2%.
THAT MIGHT TAKE MORE WORK FROM THE FED AFTER THEY PAUSE.
I THINK IT IS MORE OF THE REALIZATION CREEPING IN THAN --
THAT 5.1% IS THE PEAK NOW BUT THEY MAY HAVE TO MOVE HIGHER AT
SOME POINT. TOM: TO ME, THIS IS SO IMPORTANT,
DOVETAILING AND WHAT ELLEN SAID, THE IDEA OF THE AS
SYMMETRIC CALL, DO YOU GET A SYMMETRIC CALL WHERE YOU GET
RATES UP OR THE ZENTNER PAUSE AND WE DON'T UNDERSTAND THE
DURATION OF THE PAUSE. AND THAT IS WHERE YOU USE THE
DOLLAR DYNAMIC TO COME IN. LISA: AND WE HAVE THE SENSE THAT
YOU'RE A PERHAPS HAVE SEEN THE BULK OF THE GAINS AND THERE ARE
SIGNS THE TRADE IS NOT DOING AS WELL AS THE RESILIENCE OF THE
U.S. ECONOMY. TO THAT POINT, WE WERE TALKING
WITH JIM BEYONCA OF THE UNCLE RESEARCH -- JIM BIANCO OF
BIANCO RESEARCH AND HE WAS TALKING ABOUT THE BANKING
CRISIS THAT HAS NOT MATERIALIZED AND HE SAID IT IS
TOO SOON TO SAY ALL CLEAR. DO YOU AGREE WITH THIS IDEA OF
BANK WALK, OF ASSETS TIPTOEING OUT THE DOOR OVER A LONGER
PERIOD OF TIME OR AKIN TO THE 1980'S CRISIS THAT HAS NOT
FULLY TRANSPIRED? ELLEN: SO I THINK WE HAVE HAD A SHOCK
TO THE SYSTEM. THAT TAKES TIME TO FLOW THROUGH
YOUR IT I DO NOT THINK THIS IS A CREDIT CRUNCH WHERE WE HAVE
JUST CHOKED OFF THE FLOW CREDIT TO THE ECONOMY BUT IT IS A
CLEAR CREDIT TO THE ECONOMY AND IT IS COMING FROM A DROP IN
LOAN DEMAND. SO I AGREE THAT WE CANNOT
ASSUME WE ARE PAST THESE PEOPLE'S LURKING AROUND THE
CORNER BUT I THINK ONE OF THE DIFFICULT THINGS HERE, WHICH IS
VERY DIFFICULT FROM THE 80'S -- DIFFERENT FROM THE 80'S, BANKS
ARE HAVING TO CONTEND WITH SENTIMENT.
THINK OF A BANK THAT HAD AN EQUITY EVENT, EQUITY INVESTOR
DOES NOT WHEN OWN THE STOCK, SO THE STOCK GOES DOWN AND, LIKE
CLOCKWORK, IN DAYS, OUTFLOWS OF DEPOSITS BECAUSE YOU ARE
SUSPICIOUS OF IS THAT BANK WHERE I AM HOLDING MY MONEY
SAFE? IT IS A SENTIMENT. THEN YOU HAVE BANK RUNS THAT
MOVE AT THE SPEED OF LIGHT THAT ARE ELECTRONIC NOW.
SO THIS IS ALL SOMETHING THE BANKING SYSTEM HAS TO CONTEND
WITH AND I THINK WE -- THINK WILL CONTINUE TO WEIGH ON
CREDIT AVAILABILITY AND LENDING FOR SOME TIME. LISA:
WHEN YOU TALK ABOUT THE BANK WALK AND LATER THIS YEAR, DOES
IT BECOME THAT MUCH MORE PRONOUNCED AS A RESULT OF THE
FED REMAINING ON HOLD, IF THE ECONOMY IS SLOWING IN A
COMMENSURATE LEVEL? BASICALLY THE RELATIVE YIELD
YOU GET ON THE T-BILLS, IS THAT MUCH BETTER? ELLEN:
SO I THINK FOR BANKS IT COMES DOWN TO LIQUIDITY.
AND YOU CAN LOOK AT IT ONE WAY AND SAY BANKS ARE ACCESSING THE
FACILITY THE FED HAS PUT IN PLACE OR THEY MIGHT BE
ACCESSING THE DISCOUNT WINDOW BUT ULTIMATELY THE OTHER SIDE
IS THE WAY I WANT TO LOOK AT IT, THAT IS A GOOD THING.
THANKS NEED LIQUIDITY AND ARE ACCESSING IT.
THAT ALONE WILL HELP BANKS WORK THROUGH THIS. TOM:
ONE FINAL QUESTION. THERE IS A GUY NAME GORMAN, I
THINK HIS NAME IS JAMES GORMAN AND HE SET A NUMBER OF MONTHS
AGO SOMETHING LIKE -- AND HE SAID IT WITH THE ACCENT HE'S
GOT -- THE AUSTRALIAN THING GOING -- HE SAID, WITH SOME
THEORY, IF THEY CAN EAT IN A RESTAURANT AND SOLO, THEY CAN
COME TO WORK. I'M FASCINATED WHEN YOU SEE
NATIONWIDE ON BACK TO WORK. IT IS A BIG DEBATE IN MANHATTAN
BUT ARE WE GOING TO GO BACK TO WORK IN AMERICA? ELLEN:
SO WE ARE GOING BACK TO WORK. I THINK WHEN I HAVE TRAVELED
AROUND THE COUNTRY I FIND A GOOD DEAL OF REGIONAL
DIFFERENCES IN TERMS OF PEOPLE THAT ARE BACK TO WORK
FULL-TIME, ALMOST FULL-TIME. WHY DOES THIS NEED TO BE A
WORRY? OFFICE SPACE FOR COMMERCIAL
REAL ESTATE IS WORKING THROUGH PROBLEMS RESIZING.
IT IS MORE OF A TEAR BE AND HERE SEE MARKET RATHER THAN A TEAR A PROBLEM == TIER B AND
TIER C RATHER THAN A TIER A PROJECT. IT NEEDS TO CONNECT.
TOM: CM IN THE RESTAURANT, TRY TO
IGNORE HIM IF WE CAN. ELLEN ZENTNER WORKING FOR THE
JAMES GORMAN. COMING UP, LEAN FORWARD ON THE
MEDIA ON THE CHANGES IN HOLLYWOOD.
JESSICA BRIEF WILL JOIN US WITH BANK OF AMERICA.
SHE IS DEFINITIVE ON HOLLYWOOD. THIS IS BLOOMBERG, GOOD MORNING.
♪ LISA: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD
WITH THE FIRST WORK, I'M LISA MATEO.
PRESIDENT BIDEN AND OTHER GROUP LEADERS HAVE ARRIVED IN JAPAN
FOR THEIR SUMMIT. CHINA AND RUSSIA WILL BE THE
PROBLEMS AT THE TOP OF THEIR AGENDA STARTING FRIDAY.
THE RUSSIAN PRESIDENT CONTINUES HIS WAR IN UKRAINE AND A
POST-PANDEMIC CHINA IS EXPANDING ITS ECONOMIC AND
STRATEGIC CLOUD. CHINA HAS KICKED OFF A EUROPEAN
TOUR, BROKERING PEACE IN THE WAR BETWEEN RUSSIA AND UKRAINE.
A CHINESE DIPLOMAT MET WITH THE UKRAINIAN PRESIDENT THIS WEEK
AND HE TOLD ZELINSKI ENDING THE WAR WOULD REQUIRE ALL PARTIES
TO BUILD UP TRUST. UKRAINE SAID IT WILL NOT ACCEPT PROPOSALS
THAT INCLUDE THE LOSS OF TERRITORY.
PRESIDENT BIDEN HOPES TO BE REELECTED NEXT YEAR BY
DEFENDING HIS VICTORIES IN 2020 BATTLEGROUND STATES.
HE ALSO WANTS TO EXPAND THE MAP INTO STATES LIKE NORTH CAROLINA
AND FLORIDA. IN MEMO OBTAINED BY BLOOMBERG
NEWS, CAMPAIGN MANAGER JULIE CHAVEZ RODRIGUEZ ARGUED
DEMOCRATS STRENGTHEN THEIR HAND WITH THEIR PERFORMANCE IN
MIDTERM RACES AND IN THIS YEAR'S SPECIAL ELECTIONS.
GLOBAL NEWS, POWERED BY MORE THAN 2700 JOURNALISTS AND
ANALYSTS IN OVER 120 COUNTRIES. I AM LISA MATEO.
THIS IS BLOOMBERG. ♪ >> WE'VE GOT A LOT OF WORK TO
DO TO DEVELOP SUPPORT ADVERTISERS FOR ROLLING OUT
THINGS LIKE MEASUREMENT AND VERIFICATION, LONGER ROADMAP WE
HAVE TO GO THROUGH THERE, LOOKING AT ADVERTISERS AND
MEMBERS TO TRY THINGS AND THEN LET THEM TELL US WHAT IS THERE
NOT. SO GETTING CERTAIN SIZE AND
SCALE THAT SHIFTS HOW ADVERTISERS THINK ABOUT US.
JONATHAN: GREG PETERS WITH NETFLIX, ALL I
KNOW A SCIENTIFIC RESEARCH, NETFLIX IS ON THE KEYNOTE,
THERE ARE 14 STREAMERS AND THAT IS THE ONE THAT GETS THE MOST
FACETIME. LISA: WHAT IS THE SHOW? TOM:
IT VARIES. THERE IS LIKE ADAMS FAMILY
REDUX, IT HAS BEEN SUCCESSFUL. THEY HAVE BEEN ON A ROLL ON A
CREATIVE BASIS TO SAY THE LEAST. FOR GLOBAL WALL STREET
AND PARTICULARLY THOSE FOCUSING ON WHAT WE CONSUME AT HOME, SHE
IS DEFINITIVE, JESSICA REEVE EHRLICH JOINS US, SEEDIER MEDIA
ANALYST AT BANK OF AMERICA. FORGET THE TITLING, HERE'S THE
BOTTOM LINE, SHE HAD TO GET A RESTRUCTURED ON THE LIVING ROOM
AND ALL BECAUSE 14 TIMES SHE HAS TAKEN HOME A TROPHY OF
INSTITUTIONAL INVESTOR. YOU NEED TO FOCUS ON, I DON'T
KNOW ANYBODY THAT HAS EVER DONE THAT.
JESSICA, HONORED TO HAVE YOU WITH US.
IN THE OLD DAYS, YOU WOULD WANDER TO CAPITAL GARDEN TRUST,
GUARDIAN TRUST, TALK TO GORDON, THINK ABOUT COMCAST, WHAT ARE
THEY GOING TO DO WITH FREE CASH FLOW? IT HAS ALL BEEN BLOWN UP.
HOLLYWOOD IS A TRAIN WRECK. WHERE IS THE OPPORTUNITY? >> I THINK YOU GUYS HIT THE
NAIL ON THE HEAD WITH THAT NETFLIX CLIP.
THEY WILL CLEARLY TAKE SHARE. THERE IS NOT EVEN A QUESTION.
THE ENGAGEMENT ON THEIR PLATFORM, THEY ARE BEGINNING TO
ROLL OUT ADVERTISING. IT WILL BE UNCLUTTERED, SO FOUR
TO FIVE MINUTES IN OUR, WITH A HIGHLY ENGAGED AUDIENCE,
RELATIVELY YOUNG, ADDRESSABLE, TARGETED, SO THERE IS A VERY
LONG RUNWAY HERE. I WOULD SAY IF YOU STEP BACK ON
ADVERTISING VIDEO ON DEMAND IN GENERAL IS WHERE THE SHARE
GAINS WILL BE. FLICKS IS GOING TO BE A WINNER
OVER THE NEXT THREE TO FIVE YEARS BUT SO WILL SOME OTHER
COMPANIES. WARNER BROS. DISCOVERY SEEMS TO BE VERY
WELL-POSITIONED AND ARE ROLLING OUT THAT NEXT WEEK, MAY 20
THIRD. DISNEY'S PLATFORM WILL GET
BIGGER SO THERE ARE SOME MAJOR THINGS IN THIS AREA. TOM:
TO GO TO THE CURRENT CHITCHAT, THE UPFRONTS JUST HAPPENED AND
THIS IS WHERE EVERYBODY ROLLS OUT STARS AND SMILES.
YOU HAVE SEEN SO MANY OF THEM IT IS LIKE NO BIG DEAL.
HOW DID WARNER BROS. DISCOVERY DUE IN AN UPFRONT,
FACETIME OF THE MATING OF THOSE TWO DINOSAURS?
HOW DO THEY DO IN IDENTIFYING A NEW W VD? JESSICA:
I THOUGHT THEY DID A GREAT JOB. IT WAS THEIR SECOND YEAR,
SECOND UPFRONT WITH THE COMPANY AND THEY HAD ALL OF THEIR
MANAGEMENT TEAM AND OF COURSE NOBODY HAD TALENT THIS YEAR
BECAUSE THE WGA STRIKE, BUT THEY DID A GREAT JOB. THEY DID A GREAT SELLING PITCH,
WHY ADVERTISERS SHOULD COME TO THEM. THEIR PRODUCT IS BROAD AND
DEEP. THEY HAVE THE BEST LIBRARY.
IT IS A BIG LIBRARY BUT THE BEST LIBRARY AND THEY HAVE A
LOT OF ORIGINALS PEOPLE LOOK FORWARD TO. TOM:
WILL WE SEE A MEETING OF STREAMERS?
I THINK IT WAS IN VARIETY, I LOOKED AT A PERCENTAGE OF
PEOPLE GETTING EYEBALL TIME WITH LISA'S KIDS AND THERE IS
LIKE NETFLIX AND THAT AND ALL OF THE OTHERS ARE BEHIND.
DID THEY HAVE TO MERGE TO SURVIVE? JESSICA:
YEAH, I THINK NETFLIX IS SO FAR AHEAD OF EVERYBODY ELSE THAT
THERE IS NO COMPETITION ENOUGH COMPARISON.
THEY ARE ENGAGED -- THEIR ENGAGEMENT IS HUMONGOUS. THEIR PLAYERS ARE WARNER BROS.,
DISCOVERY, DISNEY, NOT SAYING WARNER BROS., DISCOVERY CAN'T
GET BIGGER, THEY CAN. THE OTHER PLAYERS, OUR VIEW IS
THERE WILL BE CONSOLIDATION. LISA:
THERE'S A VIEW ON THE CONSUMER AS WELL, THAT THE STATE OF THE
U.S. CONSUMER, HOW MUCH PUSHBACK IS
ON CRACKING DOWN ON PASS AND THIS CONCEPT OF PEOPLE
CONTINUALLY WILLING TO PAY MORE TO SOME OF THE SERVICES EVEN AT
A TIME OF POTENTIALLY CONSTRAINED INCOME? JESSICA:
WHAT'S INTERESTING IS NETFLIX IS NOT RAISING PRICES THIS YEAR.
THERE REVENUE DRIVER WILL BE TO CRACKDOWN ON PASSWORD SHARING.
THEY HAVE A RELATIVELY LOW COST OFFER, FOR $6.99, YOU CAN TAKE
NETFLIX AND GET TWO STREAMS, DOWNLOAD HIGH QUALITY SO THEY
CAN IMPROVE THE PRODUCT THEY ARE OFFERING AS LONG AS YOU GET
ON AND PAY, IT IS NINE THOSE $.99 FOR THE LOWEST PRICE.
$6.99 FOR ALL OF THAT CONTENT IS FAIRLY COMPELLING AND IF
THEY CRACKDOWN IN THE U.S., WHEN THEY CRACKDOWN THIS
QUARTER, IF YOU ARE A PASSWORD BORROWER, NOT PAYING FOR YOUR
OWN, YOU WILL BE CUT OFF, SO DO YOU WANT TO PAY SEVEN DOLLARS
PER MONTH TO GET THE CONTENT OR GO SOMEWHERE ELSE WHICH IS
MARKED OFFENSIVE? LISA: IT'S ON PSYCH ONE OF THOSE ADS,
IT'S ONLY $6.99 BUT WAIT, YOU GET ADVERTISEMENTS.
I WONDER IF THE MARGINAL INCOME WILL COME FROM ADVERTISING AND
ADVERTISERS WILL FLOCK TO THE PLATFORMS AND CONSUMERS, AS
THEY BUMP AGAINST THE PRICE PRESSURES AND PASSWORD SHARING
CRACKDOWNS WILL BE WILLING TO ACCEPT ADVERTISING THAT
INITIALLY THEY WERE NOT. JESSICA:
WHILE THERE IS RESISTANCE TO ADVERTISING, THANKS TO NETFLIX,
THE REALITY IS IT DOES PAY FOR A LOT, AND THESE ARE HIGHLY
ENGAGED CONSUMERS, SO AS CONSUMERS MOVE TO STREAMING OR
DIGITAL, THE ADVERTISERS HAVE TO FOLLOW. FOR CONSUMERS, IT IS
UNCLUTTERED. ON TV WE GET 15 PLUS MINUTES
PER HOUR. ON STREAMING, IT IS BASICALLY
FOUR TO FIVE MINUTES, DEPENDING ON THE STREAMER, BUT WITH
NETFLIX, WARNER BROS., DISCOVERY, AND DISNEY, IT WILL
BE IN THAT ZONE. AS FAR AS TARGETED ADVERTISING,
I THINK CONSUMERS -- TOM: I JUST DID A 25 YOUR SURVEY AND
THIS IS THE FIRST TIME JESSICA REIF EHRLICH WON THE
INSTITUTIONAL INVESTORS AWARD AND I DID A REGRESSION IN
NETFLIX AND THEY ARE DOWN ALMOST TWO STANDARD DEVIATIONS
FROM THE GLORY DAYS. TO GET TO THE CENTER TENDENCY,
LISA, NETFLIX GOES UP 145%. , IS THAT THE VISION YOU HAVE
-- JESSICA REIF EHRLICH, IS THAT THE VISION YOU HAVE OF
NETLIST HAVING A DOUBLE CAPABILITY? JESSICA:
IT DEPENDS ON THE TIMEFRAME BUT YES. IF YOU HAVE A MULTI-YOUR
TIMEFRAME, THIS IS IT. EVEN IN THE NEAR TERM WE LOVE
IT BUT YES, THIS IS A STOCK THAT CAN -- THERE ARE TWO MAJOR
OBVIOUS DRIVERS, PASSWORD SHARING CRACKDOWN, WHICH WILL
BE A HUGE DRIVER NEXT, AND ADVERTISING WHICH WILL BE A
THREE TO FIVE YEAR DRIVER AND NOT TO MENTION THEIR CONTENT
HAS BEEN OFF OF THE CHARTS. LITERALLY THEY DOMINATE. LISA:
THANK YOU SO MUCH. -- TOM: THANK YOU SO MUCH.
JESSICA REIF EHRLICH WITH BANK OF AMERICA.
THAT IS SCOPE AND SCALE AND ADULTS AND SELL SIDE, LIKE BETH
LATELY OR AT HSBC OR JESSICA THERE, ICONIC.
THERE SCALE IS THEY'RE NOT LOOKING SIX MONTHS OUT, SHE IS
LOOKING AT NETFLIX AS AN EXTRAPOLATION OUT 12 MONTHS,
THREE YEARS, FIVE YEARS AND LIKE MICHAEL NATHANSON SAID,
NATHANSON ALL OF A SUDDEN THESE TRY NORMA'S STOCKS ARE LIKE
DOUBLE IF YOU BELIEVE IN THE STORY.
I'M NOT ADVOCATING THAT BUT THAT IS THE SCOPE AND SCALE.
LISA: THERE'S BEEN A MASSIVE TRANSPORTATION --
TRANSFORMATION NO DOUBT IN TERMS OF CUTTING AND THE WAY
PEOPLE CONSUME MEDIA. IT WAS EXPEDITED DURING THE
PANDEMIC, BUT AS WE SAID ALOUD, IT IS CLEAR THERE ARE
STRUCTURAL SHIFTS AND WHO IS THE WINNER AND LOSER WILL
BECOME APPARENT AS WE MOVE FORWARD. TOM:
DON'T YOU JUST LOOK AT WHAT IS GOING ON IN YOUR HOUSE?
THAT IS WHAT I DO. LISA: I TRY NOT TO. [LAUGHTER]
I TRY NOT TO KNOW, ESPECIALLY AS THEY CONTINUE WITH THEIR
SCREENS. TOM: I GET THE DISNEY PLUS, THE
YOUNG KIDS AND ALL OF THAT, AND WE DO NOT HAVE LIKE PINEAPPLES
WATCHING DISNEY PLUS 20 47, ONE OF OUR FRIENDS, DAUGHTERS
RATHER. WHEN I WALK BY IT IS NETFLIX.
LISA: LORI LOGAN WAS SPEAKING AT THE
DALLAS FEDERAL RESERVE AND SAID THE CURRENT DATA DOES NOT
JUSTIFY A PAUSE. THIS SEEMS TO BE A GROWING
FEELING AMONG A CERTAIN COHORT ON THE FEDERAL RESERVE, PERHAPS
PUSHBACK AGAINST THE RATE CUTS PRICE INTO THE MARKET.
BUT YOU ARE SEEING THE GRIND HIGHER IN THE TWO YEAR YIELD
NOW FOUR .23%, BUT HOW MUCH THEY ARE SEEING -- 2.43%, BUT
NOW THEY ARE SEEING THAT THE ECONOMY IS NOT DOING SO BADLY,
RETAILERS ARE DOING FINE AND THERE IS A STORY THEY CANNOT
LEAN AGAINST BUT THEY SAY WHAT ABOUT THE BANKS? TOM:TOM: THE VANILLA SPREAD, WE TALKED
ABOUT THE DIFFERENT COMPARISON OF YIELDS AND IN THE TWOS AND
TENS. THE DIFFERENCE BETWEEN THE TWO
YEAR THAT LISA WAS MENTIONING AND BENCHMARK 10-YEAR NOTE,
CRITICALLY IT GOES THROUGH 60 BASIS POINTS OF INVERSION, -61.
I HAVE NOT ON THE TECHNICAL WORK BUT I REFER TO PRE-MS. RON
THAT AMONG OTHERS. BUT YOU GO THROUGH THE
BENCHMARK, THE REAL YIELD OF FOUR BASIS POINTS, 1.3%, MAYBE
NOT A BREAKOUT BUT NEVERTHELESS THIS IS PERCOLATING.
I WOULD ALSO MENTION AWAY FROM THE CHINA GLOOM AND THAT, WE
WERE WAXING PHILOSOPHICAL ABOUT WEST MEDIA AT A NICE LITTLE
LISA: LIFT AS WELL. LISA:JOBLESS CLAIMS ARE NOT TAKING UP, THEY
WENT FROM 206 TO 4000 THE PRIOR WEEK TO 202,000 -- 242,000.
A DOWNSIDE SURPRISE IN THE LABOR MARKET THAT IS SUPPOSED
TO LOOSEN. TOM: THE DEBT CEILING AS PART OF THE
TOPIC IN JAPAN, ANNMARIE HORDERN IS WITH THE PRESIDENT
IN JAPAN FOR THE G7 MEETINGS. THAT THE BAIT CONTINUES AND THE
SENATOR FROM ARIZONA WILL DO
