Fed Day | Bloomberg Surveillance 06/14/23

>> WE THINK WE ARE SITTING TOWARDS THE TOP END OF A VERY STRONG RALLY. >> THE FED HAS PLAYED SIGNIFICANT INROADS IN THE BATTLE AGAINST INFLATION. >> I THINK THAT THE FED HASN'T DONE AND I DON'T THINK IT WILL CUT RATES QUICKLY. >> IF I WERE A MEMBER OF THE FOMC, I WOULD VOTE FOR WAIT AND WATCH. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOVITZ. JON: GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO ALONGSIDE TOM KEENE AND LISA ARE FROM OF THE -- AND LISA ABRAMOWICZ. THIS HIKING CYCLE STARTED ON MARCH 16TH, 2022 AND THE THAT DAY CLOSED AT 4357. TOM: YOU WILL PAUSE AND TRY TO FIGURE OUT WHAT THE MARKETS ARE SIGNALING. IT IS AMBIGUITY FED DAY. I CAN'T FIGURE OUT WHAT THE MARKETS ARE SIGNALING IN TERMS OF CONVENTIONAL LANGUAGE. PEOPLE ARE TELLING ME THIS WILL BE US NEWS FAST IN MY RADAR IS UP AND USUALLY WHEN IT IS A SNOOZE FEST -- JON: THINK ABOUT WHAT WE HAVE THROWN IN THE EQUITY MARKET, 500 BASIS POINTS OF HIKES, THREE BANK FAILURES IN THE USA. WE HAVE COVERED IT ALL. LISA: THIS BEGAN ON MARCH 2022, ARE YOU THE END? WILL THE SIGNAL THE END OF THE RATE HIKING CYCLE AND THAT IS WHAT PEOPLE ARE WONDERING. WE HAVEN'T SEEN IT YET GIVEN THE FACT THAT EQUITY MARKETS ARE HIGHER. DO WE START TO GET THE SLOW BLEED THAT WAS INTENDED ALL ALONG? TOM: NICK THE WHISPER AT WALL STREET JOURNAL HAS A CHART ON AN CALCULUS BASIS. WE HAVE GONE UP AT A CMIS AND ELEVATED RAPIDITY OF YIELD CURVE INCREASE. WE HAVEN'T EVEN TURNED AROUND. WE NEED THREE MEETINGS TO GET THAT VECTOR THAT IS A LEGITIMATE'S. -- LEGITIMATE PAUSE. JON: YOU THINK ABOUT WHEN THE HIKING STARTER -- CYCLE STARTED, AND APRIL 2022, THAT IS THE LAST TIME WE HAD A DOWNSIDE SUPPLIES ON THE PAYROLL REPORT. LISA: WHAT IS INTERESTING IS THE SHIFT IN INFLATION DYNAMICS. IT WAS THE FACT THAT PEOPLE HAD MONEY AND WANTED TO BUY STUFF AND IT HAS MOVED TO THE LATE MARKET AND THAT SEEMS TO BE THE THING YOU ONLY FROM ECONOMISTS, BUT FROM OTHER PEOPLE WHO PUT A PAPER ON THIS. HOW DO YOU END UP WITH A SOFT LANDING IF YOU NEED TO SEE THE DIANA RIGG SOME IN THE LABOR MARKET COOLDOWN -- THE DYNAMISM IN THE LATE MARKET COOLDOWN? JON: IT DOESN'T SOUND VERY PROFESSIONAL. WE ARE SKIPPING TODAY'S MEETING. TOM: THIS IS A SERIOUS QUESTION. THIS IS FINANCIAL MEDIA TALK. FORGET ABOUT IT. JON: IS THERE TALK. -- IT IS THERE TALK. TOM: I JUST CARES ABOUT WHAT HAPPENS IN THE MEETING AND THE PRESS CONFERENCE AND WE ARE HAVING A HEALTHY DISCUSSION ABOUT THAT SYMMETRIC OR ASYMMETRIC EFFECTS OF STOPPING. SOMEONE FROM DEUTSCHE BANK SAID, IF THEY PAUSE, IT IS A VECTOR TOUR OF RATE INCREASES. OTHERS DISAGREE. JON: TODAY IS A THREE-PART ACT TO GET THE STATEMENT. YOU GET THE PROJECTIONS AND NEW'S CONFERENCE WITH CHAIRMAN POWELL. YOUR EQUITY MARKET LOOKS LIKE ON THE S&P 500, POSITIVE. UP BY 0.1%. THE BOND MARKET YIELDS IS UNCHANGED. 3.8075. LISA: A LITTLE BIT, -- BIT OF CALM. THIS IS THE STUFF PRICES AND NOT NECESSARILY THE SERVICES PRICES BUT THE MANUFACTURING INPUTS. HOW MUCH DOES IT DECELERATE AND DOESN'T MATTER BECAUSE PEOPLE ARE LOOKING AT PASSES. 2:00 P.M. IS THE FOMC DECISION. YOU WERE TALKING EARLIER ABOUT THE POTENTIAL FOR DISSENT ON THE MARKETS -- MARGINS AS WELL AS POTENTIALLY A SHIFT ON THE DOT. WILL THEY SIGNAL HIGHER FOR LONGER AND A SLOWER BE -- BLEED IN THE ECONOMY AND AT 1:30 P.M., WE WILL KICK OFF OUR SPECIAL COVERAGE THAT WILL CONTINUE UNTIL AFTER THE PRESS CONFERENCE. JON: THE TEAM DID A FANTASTIC DECISION GUIDE. TOM: I WOULD HAVE NEVER GUESSED THAT. I THINK THE BRITISH DO IT BETTER. JON: PLENTY OF FED PRESIDENTS HAVE DISSENTED. THE BOARD DOES THE SAME THING. TOM: I THINK THE BRITISH DO THIS BETTER AND IT IS GREAT TO KNOW THAT CATHERINE MANZO ON FIRE. WITH U.K. GROWTH, IT SURPRISED IN THE U.K. PEOPLE ARE SAYING UNITED KEY GET TRUMPFLATION IN ORDER LIKE GENIUSES -- SAYING THAT UNITED KINGDOM, GET YOUR INFLATION IN ORDER, LOOK LIKE GENIUSES. MARVIN: I THINK THE MARKET HAS IT RIGHT AND THEY WERE -- WILL SKIP WHETHER OR NOT, THE TERM THEY USE, IT IS UP FOR TO -- DEBATE BUT THEY CANNOT SIGNAL THEY ARE DONE. THEY WOULD DO A HAWKISH SKIP, WHICH MEANS THE DOTS WILL INCREASE AND PROBABLY THE PACE OF DECLINE GOING TO NEXT YEAR IS GOING TO SHIFT. TOM: WITH ALL THIS AMBIGUITY IN WHAT IS DEEMED TO BE US NEWS FAST TODAY, WHY -- A SNOOZE FEST TODAY, LIZA STOCKMARKET -- WHY IS THE STOCK MARKET GOING UP UP UP? MARVIN: THE MARKET MAYBE TAKING A VIEW THAT THE FED HAS A CHANCE TO PAUSE. THEY ULTIMATELY FEEL THAT POLICY IS RESTRICTIVE ENOUGH. I THINK THAT THE LIQUIDITY ESCUTCHEON WHICH IS FALLING INTO THE BACKGROUND IS HELPING RISK ASSETS AT THIS POINT. POST DEBT CEILING, YOU HAD A LOT OF LIQUIDITY INTO THE MARKET AS THIS REVERSE REPO FACILITY HAS GONE DOWN AND IT COULD GIVE A FALSE SENSE OF SECURITY GIVEN THE LIQUIDITY HAS TO FIND A HOME. LISA: YOU SET A CREDIT SITUATION AND I AM STRUCK BY THE FACT THAT THE FED SEEMS CONCERNED ABOUT THE LINGERING ISSUES IN THE BANKING SYSTEM WHEREAS MARKETS HAVE MOVED ON. IS THAT WHAT IS GOING ON? MARVIN: CERTAINLY, THE DYNAMICS AROUND CONCERN WITH THE BANKING SYSTEM REMAIN OUT THERE. THEY ARE A LITTLE BIT IN THE BACKGROUND BUT THE WORST CASE AROUND SYSTEMIC RISK IS PAST BUT THE FED CONTINUES TO BE CONCERNED WE WILL GET SIGNIFICANT CREDIT TIGHTENING BECAUSE OF THE DEPOSIT SITUATION THAT EXISTS BETWEEN BANKS AND MONEY MANAGEMENT FUNDS. LISA: AS WE SHOULD FORWARD, HOW WILL THEY SIGNAL THEIR DESIRE TO SEE UNEMPLOYMENT RATES GO UP MATERIALLY, THAT THEY NEED TO SEE THE PAIN IN THE LABOR MARKET MUCH MORE? MARVIN: IT IS HIGHER FOR LONGER. I THINK THEY WILL TRY TO SIGNAL THEY ARE NOT TAKING ABOUT THE NEXT STAGE OF THIS WHICH IS THE REDUCTION PROCESS. THEY WERE PROBABLY TRY TO DO AS MUCH SIGNALING AS THEY CAN WITHIN THE DOTS BUT RAISING THE UNEMPLOYMENT EXPECTATIONS. I SHOULD SAY LOWERING UNEMPLOYMENT EXPECTATIONS INTO NEXT YEAR WILL ALSO SAY THAT WORK IS NOT DONE. TOM: I LOOK AT THE DUAL MANDATE OF THE FED AND WE ARE IN A COMFORTABLE PLACE TO SAY THAT THEY SCHOOLED UP BOTH MANDATES AND THE CHALLENGES OF INFLATION GUESSTIMATES. THEY HAVE SCREWED UP THE IDEA THAT THE JOB MARKET WILL SOFT IT. -- SOFT AND --SOFTEN. MARVIN: THE CREDIBILITY ASPECT OF THE FORECASTING AND YOU WERE TALKING ABOUT JUST HOW MANY OPINIONS OUT THERE ARE AT THE MARKET IN THE SAME AMOUNT OF OPINIONS ARE OUT THERE WITH THE FED. I THINK THEY ARE GOING THROUGH THIS WEEK BY WEEK AND HOPING THE DATA MOVES IN THEIR DIRECTION AND THERE ARE SIGNS THAT IT MIGHT BUT THE NUMBERS MEANT -- REMAIN A CHALLENGE. MARVIN: --TOM: MIKE MCKEE SAYS WE HAVE A AND INFLATION REPORT AND MY CONCERN THEY ARE JUST WAITING FOR DATA AND THE INFLATION REPORT. TO ME, THEY ARE WIDELY DATA DEPENDENT. DO YOU AGREE WITH THAT? MARVIN: YES AND THEY DO NOT SEEM TO REALLY HAVE A GOOD HANDLE ON HOW TO APPROACH POLICY, GIVEN THEIR UNCERTAINTY WITH THE DATA SO THEY ARE FORECASTING -- THEIR FORECASTING ABILITY IS TAKING A HIT. THEY WILL SAY THINGS ARE NOT DONE AND THE MARKET WILL CONTINUE ALONG THE PATH THAT THEY ARE DONE BECAUSE THEY ARE REALLY NOT SIGNALING WHAT THE RESPONSE MECHANISM IS SUPPOSED TO BE. JON: DO YOU THINK CHAIRMAN POWELL WOULD WELCOME SOME DISSENT WITH THAT IN MIND? MARVIN: NO. I DON'T THINK SO. I THINK THAT THEY ARE TRYING TO SEND THIS MESSAGE THAT THEY ARE ON TOP OF THINGS AND INFLATION WILL MOVE IN THE RIGHT DIRECTION. I THINK THEY WILL GET DISSENT OUT OF THE REGIONAL BOARD, FROM THE REGIONAL PRESIDENT, BUT AT THE BOARD LEVEL, THEY HAVE A WORKING HARD TO MAKE SURE THEY HAVE A UNIFIED MESSAGE. JON: IF YOU THINK ABOUT IT, THEY DON'T HIKE TODAY BUT THEY SIGNAL TO THE MARKET AND MARKETED -- MARKET PARTICIPANTS THAT THEY WILL HIKE AGAIN, MAYBE SOME DISSENT FROM SOMEWHERE MIGHT BE WELCOME. LISA: I WOULD AGREE WITH THAT, WHAT CREDIBILITY DO THEY HAVE THAT THEY WILL HIKE AGAIN? CAN THEY REALLY SIGNAL A HAWKISH SKIP IF EVERYONE IS SAYING, IF YOU SEE THE NEED FOR ANOTHER RATE HIKE -- JON: LET'S WALK THROUGH THIS TOGETHER. 2023, THEY HAVE THE UNEMPLOYMENT RATE IN THE CURRENT FORECAST AT THE END OF THE YEAR AT 4.5%. PC INFLATION 3.3% AND THEY HAVE FED FUNDS NATION WHERE WE ARE NOW. WHAT NEEDS TO CHANGE? TOM: NOTHING WILL CHANGE EXCEPT WITHIN THE PRESS CONFERENCE. PEOPLE ALL RIGHT, IT WILL BE AS AMBIGUOUS AS POSSIBLE. I PREDICT WE WILL SEE MORE BRITAIN STATEMENTS TO ANSWERS TO QUESTIONS THAT WE HAVE EVER SEEN BEFORE. JON: IF I ASKED THIS QUESTION 12 MONTHS AGO, I HAVE A FEELING THAT WE WILL HAVE A DIFFERENT ANSWER. THIS CHAIRMAN POWELL CARE -- JUST CHAIRMAN POWELL -- JUST CHAIRMAN POWELL CARE ABOUT THE RAKE? -- EQUITY MARKET RANK? JON: I DON'T THINK THEY CARE -- TOM: I DON'T THINK THEY CARE. ED: -- A LOT OF PEOPLE --LISA: A LOT OF PEOPLE, ONE PERSON PUT OUT A REPORT THAT SAYS WE SEE A RECESSION BUT AI CAN BE A GAME CHANGER. HOW DO FED FIFTH -- -- OFFICIALS WAIT ON THAT? TOM: IF WE GUESS THAT AI IS OVERRATED, JOHN'S QUESTIONS IS REPORT -- IMPORTANT. GIVEN THE POST-PANDEMIC AMBIGUITY RIGHT NOW, I THINK THAT IS THE HONEST OF ODD FED MEETINGS --THE ODDEST OF ODD THAT MEETINGS -- FED MEETINGS. JON: IF YOU GOT MONEY ON THE RIGHT HERE, YOU ARE WRITING A WAVE. LISA: YOU CAN SAY IT IS A SAFE BET THAT IS OVERWEIGHTED IF YOU ARE NOT IN IT BUT IF YOU ARE IN IT AND IN -- A BUSINESS ADVISOR, IT IS HARD TO HEAR THE SAME THING FROM THEM. TOM: I GO BACK TO PROCTER & GAMBLE, GO TO COLD LAKE -- COLGATE, JUST TO SEE THE MARKET. I DON'T EVEN KNOW WHAT TO DO WITH THAT AND WE HEARD THAT FROM DAVID COSTNER WHERE HE IS REPOSSESSED -- REASSESSING WITH GOLDMAN SACHS. A LOT OF PEOPLE DON'T BELIEVE IN 4500 SPX AND HE IS DOING AT -- THAT AT MULTIPLE EXPANSION. JON: LET'S SQUEEZE IN THE SINGLE NAME, WE WILL TALK ABOUT TESLA, THE THIRD TIME IN TWO MONTHS, PRICES UP. TO $50 ON THE MODEL WHY -- $250 DOLLARS ON THE MODEL Y. >> THIS IS CALLED ALEXION INTERFERENCE AND YET ANOTHER ATTEMPT TO RAKE AND STEAL A PRESIDENTIAL ELECTION. I WILL APPOINT A REAL SPECIAL PROSECUTOR TO GO AFTER THE MOST CORRUPT PRESIDENT IN THE HISTORY OF THE UNITED STATES OF AMERICA, JOE BIDEN. THEY ARE NOT COMING AFTER ME, THEY'RE COMING AFTER YOU AND I HAPPEN TO BE STANDING IN THEIR WAY. JON: FORMER PRESIDENT DONALD TRUMP FIGHTING BACK AFTER THE PLEAD NOT GUILTY TO THE CHARGES OF LEGEND MISHANDLING OF CLASSIFIED DOCUMENTS AFTER APPEARING IN COURT IN MIAMI. FROM NEW YORK CITY, THIS MORNING. A FEDERAL DESERVE DECISION LATER THIS AFTERNOON AND GOING INTO THE FOUR DAY WINNING STREAK ON THE S&P 500 AND LOOKING TO ADD WEIGHT TO THE RALLY. EQUITY FUTURES ON THE S&P SLIGHTLY POSITIVE. BONHOMIE. -- BOND MARKETS DOING NOTHING. WILL -- ARE YOU BLAMING THE U.K.? BIG MOVES IN YIELD --GILTS. TOM: I AM GLAD YOU'RE BRINGING THIS UP. IT IS OFF THE RADAR, YOU'RE, YEN AT 1.51. WE HAVE A STRONG EURO IN A WEEK JAPAN -- AND A WEEK JAPAN. THERE IS A SET OF TENSIONS GOING INTO THIS MEETING. JON: THE FEDERAL RESERVE, WE HAVE TO TALK ABOUT THAT, THE PROSPECT OF STIMULUS OUT OF CHINA AND MAYBE WE GET DIVERGENCE IN A CENTRAL BANKS BUT ANYONE THAT TRIES TO PAUSE, THINKING OF THE RBA AND BANK OF CANADA, THEY HAVE STARTED HIKING AGAIN. THE END OF 21, IT CAME OUT AT 10 OR 15 BASIS POINTS AND I REMEMBER PICKING UP THE PHONE AND YOU SAID JOHN, THE YEAR IS OVER AND I SAID IT IS INTERESTING TO SEE HOW FAR THEY CAN GO. TOM: WE ARE AT RESTRICTIVE. WHAT LEVEL OF RESTRICTIVE IS A DEBATE. IT IS A LOT HEAVIER DISCUSSION, BOTH WAYS AT RESTRICTIVE BENNETT WAS AT SOME FORM OF ACCOMMODATIVE. I WILL GO TO THE BLOOMBERG FINANCIAL CONDITIONS INDEX AND IT IS ABOVE ZERO. THAT IS ACCOMMODATIVE AND NOT WHAT CHAIRMAN POWELL DESIRED A YEAR AGO. JACKSON HOLE DESIRED A NEGATIVE STATISTIC ON BOTH BLOOMBERG FINANCIAL CONDITIONS INDEX. JON: THE U.K. AND U.S. AND EUROPE, IF YOU GO BACK A YEAR AND TALK ABOUT THE HIKING CYCLE THAT WILL BE IN THE FUTURE AND ASK PEOPLE HOW MUCH DAMAGE WOULD BE DONE TO THE LABOR MARKETS, WILL BE WAY OFF FROM WHAT IS DEVELOPING -- HAPPENED LAST YEAR -- OVER THE LAST YEAR. TOM: THANKS TO KAILEY LEINZ OF THESE -- WITH THESE -- THE COVERAGE ON THE HISTORIC EVENTS. WHAT DO I LOOK AT GIVEN ALL OF THIS AND I WANT TO KNOW WHAT ACTUAL LAWYERS THINK, WHATEVER THE POLITICS IS, I DON'T CARE. THAT IS NOT OUR JOB BUT I WANT TO KNOW WHAT LAWYERS THINK AND I GO TO LAW FAIR, PEOPLE HAVE MORTARS AND I HAVE A BEAUTIFUL ESSAY HERE. ON ALL THE CROSSCURRENTS GOING ON IN THE LAST 24 HOURS, AND THEY LOOK DOWN TO DISCRETE CRIMES AGAINST TWO INDIVIDUALS, THAT IS ALL THE ALLEGATIONS AND WHAT WE WILL SEE PLAY OUT OVER MONTHS. THEY STATES IN A SINGLE SENTENCE, THIS IS A BIG DEAL. IT IS A BIG DEAL FOR THE NATION. HOW IS THIS BEING TAKEN IN LONDON AND I AM FASCINATING. THE PEOPLE CARE ABOUT THESE HISTORIC MOMENTS IN MIAMI OR IS IT OFF THE RADAR? >> IT IS AN FRIDAY WAS A'S INTENTIONAL DAY BECAUSE THERE WAS A MIRROR -- MIRROR IMAGE FINDINGS BUT EVERYONE IS LOOKING AT THE U.S. WITH A SLIGHT FEELING OF DREAD AS TO WHAT MIGHT, NEXT. IT HAS BEEN A HISTORIC MOMENT FOR TRANSATLANTIC COOPERATION WITH THE U.S. LEADING ON THAT AND THERE WAS SOME FOREIGN POLICY NATIONAL SECURITY ISSUE AND LOOMING AT THE FRONT OF YOU AND IN THE REARVIEW MIRROR IS WHAT WILL HAPPEN WITH DONALD TRUMP AND THE REPUBLICAN AND WHAT IS COMING NEXT IN 2020 -- TOM: WE HAVE TECHNICAL DIFFICULTIES THERE. WE HAD TO FEED EVER CHANGING AND WE WILL LET OUR TEAM WORK ON THAT AND WE WILL PICK IT UP. WHAT HER SKILL IS IS TO TAKE THE DYNAMIC OF THE UNITED STATES AND SAY, WHAT DO THEY THINK IN ENGLAND AND CHINA AND THE ONLY WORD I CAN COME UP WITH IS FURTHER LACK OF CROSS -- CONFIDENCE IN WHO AND WHAT THE AMERICAN PRODUCTION SHOULD BE. JON: THERE MEANT TO BE AN EXAMPLE FOR THE REST OF THE AMERICAN WORLD -- DEVELOPING WORLD. WHAT DOES THAT U.N. THINK ABOUT THIS AFTER THE U.S. HAS PREACHED AND TOLD THEM WHAT THEY SHOULD OR SHOULD NOT DO AND IT PLAYS OUT IN THIS FASHION. IT IS SERIOUS AND WE HAVE A DECENT UNDERSTANDING WHAT THE PRESIDENT LABELED WILL BE. HE IS IN CAMPAIGN MODE. THEY ARE SINGING HAPPY BIRTHDAY. HE GETS TO CONVEY TO THE GENERAL PUBLIC HOW WELL SUPPORTED AND LOVED HE IS IN PLACES LIKE FLORIDA. TOM: THIS IS CRITICAL BECAUSE YOU ARE DEAD ON AND WHAT IS IMPORTANT IS THAT THIS HAS BEEN A PROVEN AND SUCCESSFUL MESSAGE. AND A PATH FOR A BRIGHT -- A GUY WHO INCREASED HIS VOTES FROM 2016 TO 2020. HE IS BACK ON PATH. JON: WHO IS TO SAY IT WON'T BE ASKED -- SUCCESSFUL AGAIN? AS WE DISCUSSED OVER THE NEXT YEAR, IT IS VERY DIFFERENT WINNING A PRIMARY AND A GENERAL. LISA: IT IS DIFFERENT WHEN THE WORLD HAS CHANGED AND TOPPLED -- TUCKER CARSON PUT OUT A TWITTER POST YESTERDAY TALKING ABOUT THE EVILS OF THE ESTABLISHMENT, FOREIGN POLICY AND BEYOND AND ELON MUSK WE TWEETED IT. HOW DOES THAT CHANGE THE DYNAMIC FOR THE U.S. AT A POTENTIALLY FRAUGHT MOMENT INTERNATIONALLY AND DOMESTICALLY? TOM: DOMESTICALLY, IT IS THE MIDDLE. TO YOUR POINT, WE HAVE CONFIDENCE -- REMEMBER THE PHOTOGRAPH OF PRESIDENT TRUMP WITH THE GA, THEY ARE STANDING THERE? ALL LEANING OVER AND THAT IS THE REDUX WE WILL SEE. I BELIEVE WE HAVE THE DOCTOR BACK WITH US AGAIN. IT WILL BE A LONG AND DRAWN OUT PROCESS. HOW SHOULD AUDIENCE INTERPRET THE WEEKS, THE SLOW-MOTION PROCESS TO COME? LESLIE: IT WILL BE LONG AND DRAWN OUT AND IT DEPENDS ON THE PRETRIAL PHASE AND HOW LONG AND DRAWN OUT IT IS AND THE BIG QUESTION IS FOR THE REPUBLICAN PARTY AND ALL OF THOSE WHO QUIETLY WAITING TO SEE WHETHER DONALD TRUMP CAN STAY THE COURSE FOR THIS OR WHETHER THERE WILL BE AN OPENING MOMENT WHERE SOME PEOPLE WHO WOULD LIKE TO PUT THEIR HATS IN THE RING AND PEOPLE WOULD LIKE TO NOT PUT THEIR HEADS IN THE RING BUT DON'T WANT TO ENDORSE TRUMP. I DON'T SEE AN ALTERNATIVE. I THINK, HOW LONG -- JON: OUR APOLOGIES FOR THE TECHNICAL PROBLEMS. A GOOD FRIEND OF THE PROGRAM. TK, I THINK WE UNDERSTAND HOW THE CAMPAIGN WILL SHAPE UP NOW. THERE ARE LEGAL ISSUES, NOT JUST THEATER. YOU DON'T UNDERSTAND HOW THE LEGAL ISSUES WILL PLAY OUT IN MIAMI. TOM: IT IS EASY TO HAVE AN OPINION AND THE MANDATE, THAT HERITAGE OF BLOOMBERG NEWS AND BLOOMBERG SURVEILLANCE IS REALLY TRYING TO NOT CONVEY AN ANGLE. THE ONE ANGLE I WOULD SAY IS LET THE LAW WORK OUT. IT IS SOMETHING THAT CAN BE BIPARTISAN. LISA: THAT IS. --PURE AND UNREALISTIC DURING A POLITICAL CYCLE. I AM CURIOUS ABOUT THE EVOLUTION OF THE OTHER POTENTIAL REPUBLICAN NOMINEES AND EVOLUTION OF THEIR VIEWS. CHRIS CHRISTIE'S JOB, HE IS GETTING PAID BY FUNDRAISERS TO BE THE ATTACK DOG ON THE FORMER PRESIDENT. TOM: I AM WILLING TO SAY AT DINNER, I WAS TALKING TO AFTERTHOUGHT AND THAT WAS THE TOPIC OF CONVERSATION, SHE SAID THAT HAS HE LOST WEIGHT, AND I SAID YET -- YES. THIS IS THE KIND OF DEBATE THAT WE WOULD ENGAGE IN A NORMAL ENVIRONMENT. SHE THREW A ROLL AT ME. [LAUGHTER] JON: DINNER AT YOUR HOUSE SOUNDS GREAT. JON: LIVE FROM NEW YORK CITY, WELCOME TO THE PROGRAM. WE ARE SEVERAL HOURS AWAY FROM A CHAIRMAN POWELL RATE DECISION AT THE FEDERAL RESERVE, 10 EXECUTIVE INTEREST RATE HIKES FROM THE COMMITTEE AND THEY MAY SKIP JUNE. EQUITY FUTURES OF S&P 500 SLIGHTLY POSITIVE. THE LONGEST SINCE APRIL, THE S&P 500 AT THE HIGHEST GOING ALL THE WAY BACK TO APRIL OF LAST YEAR. THINK ABOUT LAST -- WHERE WE WERE LAST TIME DEFENDANT MAKE -- LAST TIME THE FED MET. EQUITIES HAVE BEEN HIGHER SINCE THE FED LESS TIGHTENING AND THE BOND MARKET YIELDS HAVE BEEN HIGHER, THE TWO YEAR ON VETERAN -- DAY, MAY 3, CLOSED THE DAY AT 3.80 IN RIGHT NOW AT 4.6 625, 86 BASIS POINT MOVE. THE DOLLAR IS STRONGER, EURO-DOLLAR NORTH OF 1/10. 1.0806. WHAT WE HAVE HAD OVER THE LAST COUPLE OF MONTHS, EQUITIES UP IN DOLLAR STRONGER AND A CONVERSATION ABOUT U.S. EXCEPTIONALISM MAKING A COMEBACK. LISA: IS THIS ENOUGH TO GENERATE THE DECLINE IN INFLATION THE FED WOULD LIKE AND THE DECLINE IN EMPLOYMENT STRAIGHT -- STRENGTH. JON: HERE IS THE QUOTE. THE FOMC COMMITTEE IS LIKELY TO SEE A DIVIDED COMMITTEE DECIDE TO PAUSE. FOR THAT REASON, I THINK THAT ADDRESS FROM GOVERNOR JEFFERSON, THE REASON WHY A LOT OF PEOPLE REGARDLESS OF THE DATA THOUGHT THEY ARE TAKING PART OF THIS MEETING. TOM: IT IS THE CONSENSUS RIGHT NOW AND WE WILL HAVE TO SEE AND WE WILL HAVE SOMEONE TO LOOK AT THE MNUCHIN AND HIS EX -- FOR EXPERT IMPACT ACROSS AMANDA AND WE WILL HAVE RANDALL BECAUSE THEY'RE FROM CHICAGO, ONE OF OUR GREAT FINANCIAL ECONOMIST AND THE WILL TAKE A BROADER PICTURE OF -- WITH BRUCE KASMAN. WE DO THIS WITH COLUMBIA HERITAGE WITH THE MODERN-DAY JEFFREY SACHS AND THE FINANCIAL -- FOUNDATIONAL EFFORTS OF ROBERT MONDALE. DR. KASMAN, I WANT TO TALK ABOUT JEROME POWELL, CENTRAL BANKER TO THE WORLD AND YOUR FOCUS IS ON CONTINENTAL EUROPE. WHAT IS THE DRAMA FOR EUROPE TODAY IN THE DECISION MAKING OF JEROME POWELL IN THE FED? -- AND THE FED? DR. KASMAN: AND LOOKS LIKE THE FED WILL COST AND THE ECB IS MEETING THIS WEEK AND IS LIKELY TO TIGHTEN AND ALSO SICKLE THEY HAVE MORE WORK TO DO. -- AND ALSO SICKLE THEY HAVE MORE WORK TO DO. ONE OF THE BIGGER ISSUES IS ABOUT SIGNAL STATION -- SIGNAL IS ASIAN --SIGNALIZATION. THE SERVICE SECTOR IS DOING WELL. IT HAS THE SAME ISSUES AROUND THE BANK CREDIT TIGHTENING IN THE U.S. AND HOW THEY EUROPEAN ECONOMY WILL PLAY OUT WILL BE IMPORTANT IN DETERMINING THE OVERALL GLOBAL PICTURE AND HAVE IMPACTS ON THE U.S.. TOM: WE HAVE READ ALL THE DIFFERENT MACRO ECONOMICS COMING ON. ONE OF HIS GREAT COMMENTS IS THAT THERE WILL BE FISCAL STIMULUS IN EUROPE THAT WILL COME TO THE RESCUE OF EUROPE AND IT IS A DIFFERENT FISCAL CALCULATION THEN JEROME POWELL HAS. HOW WILL DISPLAY INTO WHAT EUROPE WILL DO? DR. KASMAN: THERE IS MORE WORK TO DO FOR THE ECB AND I THINK THE FED WILL HAVE MORE WORK TO DO HERE AND HE IS TAKING A PAUSE BUT I DON'T THINK IT WILL GET INFLATION UNDER CONTROL AND ONE OF THE THINGS THAT PEOPLE ARE LOOKING FOR IMMEDIATE RECESSION, ARE MISSING, A LOT OF FISCAL POLICY IS MOVING TO THE OTHER DIRECTION AND THAT IS THERE IN EUROPE, AS WELL AS SOME EMERGENCY MEASURES AROUND LAST YEAR'S PRICES IS A FACTOR. IN THE U.S., LOOK AT WHAT IS HAPPENING IN DEFENSE SPENDING AND GOVERNMENT HIRING. THIS IS A DIFFERENT PICTURE THAN WHAT WE HAVE SEEN OVER THE LAST TWO CYCLES. LISA: THIS IS REALLY INTERESTING, THE IDEA THAT FISCAL STIMULUS WILL FOR CENTRAL BANKERS AROUND THE WORLD TO TIGHTEN MUCH MORE THAN PEOPLE EXPECT. DO YOU THINK PEOPLE ARE MISGUIDED IN THINKING THE FED IS DONE AROUND HERE AND WILL HOLD RATES WHERE THEY ARE BECAUSE OF THE FISCAL IMPULSE? DR. KASMAN: I DON'T WANT TO PUT TOO MUCH WEIGHT ON THE FISCAL STIMULUS. IT IS ONE FACTOR AMONG TWO OR THREE WHICH IS EMOTING RESILIENCY. THE MOST IMPORTANT FACTOR IN TERMS OF WHAT WILL DRIVE MORE CENTRAL BANK TIGHTENING IS THE PERSISTENCE OF INFLATION AND THE UNDERLYING SHIFT THAT WILL TAKE PLACE IN THE INFLATION PROCESS AND HOW THAT HAS PLAYED THROUGH IN A WORLD WHERE WE HAVE DAMAGED TO LABOR SUPPLY AND TYPE LABOR MARKETS. JUST FROM THE POINT OF VIEW OF THE FED, IT IS REASONABLE TO TAKE A PAUSE FOR WHAT IT IS DOING, IT IS PROMOTING RISK APPETITE FINANCIAL MARKETS WHICH IS UNDER -- UNDERMINING FINANCIAL TRANSITION AND IT IS SIGNALING TO THE MARKET THAT THE FED IS MEASURING -- GRADUALLY LOWERING INFLATION. THIS IS THE PROBLEM THE FED HAS TODAY AND THAT IS WHY THEY WILL SIGNAL TO US THEY ARE NOT DONE BUT IT WILL BE HARD TO FIND THAT BALANCE. LISA: I WILL SAY SOMETHING SACRILEGIOUS. LET'S SAY IT IS WORSE FOR RISK MARKETS IF THE FED KEEPS RATES WHERE THEY ARE. ISN'T THAT WORSE THAN POTENTIALLY BREAKING SOMETHING AND COMING IN WITH RATE CUTS AS OPPOSED OF DOING A FULL REVERSER -- REVERSAL? DR. KASMAN: ULTIMATELY, IT MIGHT BE A RIGHT NOW IF THERE IS ANYTHING WE SHOULD APPRECIATE AS ECONOMISTS, IS THAT IT IS VERY DIFFICULT TO FORECAST EXACTLY WHERE WE WILL BE IN 6-9 MONTHS. THERE IS A RISK THAT IT WAS LIKE TO RECESSION AND THE FACT THAT THE FED IS PAUSING AND TELLING US IT WILL BE GRADUALIST ON INFLATION IN TERMS OF BRINGING IT DOWN, IS A CONSTRUCTIVE SIGNAL. THERE IS A LIKELY SCENARIO WHERE INFLATION DOESN'T COME ALL THE WAY DOWN AND THE FED HAS TO COME BACK BUT THERE IS SOME POSSIBILITY THAT THEY HAVE A SOFT LANDING SO FOR A YEAR -- THE NEAR TERM, IT IS REASONABLE FOR THE FED TO DO AND IT WILL PROMOTE RESILIENCE. HER LEFT THEN NOT, IT WILL NOT PROVE SUCCESSFUL AND WE WILL PAY A PRICE. LISA: WHEN YOU TALK ABOUT THE INFLATION FOR -- THE POTENTIAL FOR INFLATION NOT TO COME BACK -- DR. KASMAN: I THINK IT IS A MISTAKE TO CLEAR OUT THE TIGHT LABOR MARKETS TO FOCUS ON WHAT A -- WE CALL A PHILLIPS CURVE RELATIONSHIP. WE HAVE DAMAGED SUPPLY IN A WAY WHERE IS NOT FULL RECOVERED -- RECOVERY. THE BIGGER ISSUE IS THAT WE STARTED TO EMBED PSYCHOLOGY AND A WHICH WAGE AND PRICE GAUGES ARE LINKED AND THAT WASN'T THE CASE OF THE LAST 30 YEARS AND IN ORDER TO BRING DOWN INFLATION, YOU NEED TO COMPRESS PRICING POWER ON THE CORPORATE SECTOR SIDE. THAT WILL HIT LABOR MARKETS. IT IS CHANGING THEIR BEHAVIOR OF THIS IS REMOVING THAT PRICE PICTURE THAT IS COMING THROUGH THE SYSTEM WHICH IS A BREAK FROM WHAT WE HAVE SEEN? JON: IT IS JP MORGAN'S FAULT AND I WILL GO TO THE FORMER VICE CHAIR AND ALL HIS WORK IN COLUMBIA AND IN ASA, HE REALLY MADE A CASE THAT WE WILL NOT GO BACK TO 2% AND THIS IS A FED THAT WILL HAVE TO FIND TWO POINT EXPERTS IN --2.X%. WE WILL BLAME SOMEONE BY COMING UP WITH A POTENTIAL GDP STATISTIC THAT IS WELL OVER 2% AS WELL. DO WE HAVE TO ADJUST THAT NOW AFTER THIS INFINITIVE INFLATION UNDER THE SYSTEM, WHAT THE BIDEN SYSTEM HAS WROUGHT? DR. KASMAN: WE HAVE BEEN RUNNING WITH A POTENTIAL GROWTH RATE FOR THE U.S. AT 1.5% FOR ALMOST A DECADE. YOU ARE RAISING AN IMPORTANT POINT. THERE IS A LOT OF STUFF GOING ON THAT COULD HAVE AN INFLUENCE OF POTENTIAL GROWTH GOING FORWARD AND PRODUCTIVITY GROWTH WHICH IS KEY TO THE INFLATION OUTLOOK. IMF GNOSTIC, THERE IS A LOT OF CROSS CURRENT AND -- I AM AGNOSTIC, AND THERE IS A LOT OF ACROSS CURRENT. WE PROBABLY HAVE TO .5 PERCENTAGE POINTS LESS PEOPLE -- AND HOW THAT IS INTERACTING WITH UNDERLYING INFLATION PSYCHOLOGY, IF WE GET BETTER POTENTIAL BACK --THAT WILL HELP US. IF WE GET WORSE, THAT WILL MAKE THE TRADE-OFF WORSE AND IMF GNOSTIC ON HOW THAT WILL PLAY OUT. TOM: LET'S BRING IT BACK. I HATE THE SKIP AND BOTH PAUSE. I WE DEBATING A SYMMETRIC AND ASYMMETRIC CAMP? -- ARE WE DEBATING A ASYMMETRIC IN SEMANTIC -- DEBATING ASYMMETRIC AND ASYMMETRIC CAMP HERE? DR. KASMAN: IT IS HARD TO TALK ABOUT THE SKIP. I THINK THE FED HAS SIX MEETS -- WEEKS AFTER -- THEY WILL TAKE STOCK ON HOW -- AT THE SAME TIME, I THINK THEY HAVE TO TELL US THAT THEY HAVE NOT DECLARED VICTORY ON GETTING INFLATION DOWN, THAT THERE IS PRESSURE FOR THEM TO MOVE MORE AND THAT THEY WILL -- THE LIKELY SCENARIO, IT WILL BE IN THE STATEMENT WHERE PEOPLE SEE AN EXTRA RATE HIKE PUSH IN AND IT WILL BE IN MORE DETAIL IN THE CORRECT -- PRESS CONFERENCE THAT THEY WILL MORE LIKELY THAN NOT CONTINUAL -- CONTINUE TO RAISE RATES. I DON'T THINK THE FED IS SENSITIVE TO EQUITIES RALLY BUT THE BROADER PICTURE HERE IS THAT FINANCIAL MARKETS ARE SHOWING VERY LITTLE STRESS. THEY HAVE IMPROVED RISK APPETITE, HAS IN INCREASED -- HAS INCREASED AND IT IS A SIGNIFICANT OFFSET TO THE TIGHTENING GOING ON IN BANK CREDIT AND I THINK THAT DOES MATTER TO THE FED. THEY ARE TRYING TO MANAGE THAT IN A WAY WHERE THEY DON'T POLICE UNWANTED IS THE BRITS THAT THEY WILL HAVE TO DEAL ON -- WITH -- THAT THEY DON'T UNLEASH UNWEIGHTED EXUBERANCE THAT THEY WILL HAVE TO DEAL WITH LATER ON. JON: IT IS THE FED'S LEGS AT THE MOMENT. -- THE FED'S LANGUAGE AT THE MOMENT. TOM: THAT IS THE ASYMMETRIC BOX. JON: THEY DON'T WANT TO COMMUNICATE THAT. TOM: THAT CONVERSATION WITH DR. KASMAN WAS SO RICH ABOUT THE BROADER THEORETICAL PICTURE OF WHAT WE HAVE WROUGHT OUT OF THIS PANDEMIC AND THE GREAT DIVIDE BETWEEN ME AND YOU, I AM WITH MCKEE I GET THESE PEOPLE GREAT DISCRETION GIVEN THAT -- I GIVE NO GREAT COVER WITH DEALING WITH A MEDICAL EVENT. YOU KNOW WHAT IS THE MEDICAL EVENT OVER? THAT IS THE DEBATE. ARE THEY WORKING WITHIN CONVENTIONAL MONETARY ANALYSIS ARE WE -- OR ARE WE STILL IN PANDEMIC LAND? JON: WHAT PANDEMIC LAND MASS IN 2020, IS NOT WHAT IT MEANT IN 2021 AND 2022. THAT IS WHAT THEY MISSED. TOM: ABSOLUTELY. JON: THEY DID WHAT THEY HAD TO DO. COMING OUT THE OTHER SIDE AFTER ROUND AFTER ROUND OF FISCAL STIMULUS AND SUPPORT PACKAGES THAT CAME FROM WASHINGTON FOR PRESIDENT TRUMP AND PRESIDENT BIDEN WITH A LARGER PACKAGE IN EARLY 2021, THE PANDEMIC LAND CHANGED. AND THE CHAIRMAN MISSED IT. TOM: WHERE WE ARE TODAY AND IT IS A DOUBLE BARREL, WE ARE LOOKING AT APPLE AS A $3 TRILLION COMPANY AND I AM SEEING A LOT OF ARTICLES ABOUT JUNK DEBT ALL OF THE SUDDEN BLOWING UP. THE BARBELL HERE OF PROSPERITY IN APPLE VERSUS THE CHALLENGES IN THE BRAMO SPACE IS SOMETHING. LISA: IF YOU TAKE A LOOK AT SPREADS AND HIGH YIELD BONDS, THEY ARE THE LOWEST GOING BACK TO MARCH. THEY HAVE RALLIED BECAUSE PEOPLE SEE THIS DYNAMISM CONTINUING. I WANT TO PICK UP ON SOMETHING BRUCE KASMAN SAID, THE FED DOESN'T WANT TO UNLEASH UNWARRANTED EXHIBITS. THE FEAR OF UNLEASHING EXUBERANCE AFTER RAISING RATES AFTER 500 BASIS POINTS SUGGESTS SOMETHING PROFOUND ABOUT THE ECONOMY. IT IS NOT THE MISSION -- IT IS NOT DIMINISHING THE WAY PEOPLE THOUGHT. IT IS LACK OF FACTS OR IS THIS SOMETHING NEW? JON: DO THEY ACCEPT HIGHER INFLATION RATE? YOU MENTIONED RICH CLARIDA. WHAT IS SO IMPORTANT, 2% IS NOT THE OLD VIEW, IT IS SUB 2%. JON: EQUITIES THIS MORNING, POSITIVE AND ZERO POINT 2% ON THE S&P 500. AMRITA SEN OF ENERGY ASPECTS OF NEXT. >> I HAVE BEEN CONSISTENTLY IN THE CAMP THAT WE WOULD SEE SOME SLOWING IN GROWTH BUT NO RECESSION AND WE COULD SEE INFLATION COME DOWN AND PART OF THAT IS BECAUSE I HAVE HAD CONFIDENCE IN THE FED, THAT THEY WOULD BE PAID CAREFUL ATTENTION TO THE DATA. YOU DON'T KNOW HOW LONG IT TAKES FOR MONETARY POLICY CHANGES TO AFFECT THE ECONOMY AND I THINK THEY HAVE DONE SO MUCH. JON: JOSEPH COHEN THERE OF COLUMBIA UNIVERSITY. AT LEAST UP BY 0.2% -- EQUITIES UP BY 02 -- 0.2%. AT THE HIGHEST LEVEL SINCE APRIL OF LAST YEAR. EVEN WHEN YOU ACCOUNT FOR ALL THE HIKES WE HAVE SEEN, THE BANKING FAILURES THROUGH MARCH, THIS EQUITY IS -- MARKET IS POSITIVE .2 POINT GOING INTO TODAY. TOM: SHE DIDN'T PREDICT A BULL MARKET BUT SHE CLEARLY STATED SHE IS IN THE CAMP OF ROTATION TWO -- TWO MORE VALUE COME AWAY FROM TECH AND TOWARDS THOSE THAT REALLY HAVEN'T MOVED. SHE IS NOT DOING AN ANALYST THINK. JON: THIS SHOULD GET A PRICE TARGET? -- DID SHE GIVE A PRICE TARGET? TOM: I READ SOMETHING LAST NIGHT BUT -- JON: WE ARE TRACKING PRICE TARGETS OUT OF COLUMBIA? TOM: WE ARE. LISA: SHE IS ADVISING A LOT OF PUBLIC PENSIONS AND SHE SAID THE TIME TO GET INTO EQUITIES WAS LAST YEAR AND NOW IT IS MORE IN FIXED INCOME. JON: IT DRIVES ME LET -- NUTS. I HATE THAT PHRASE. NO ONE EVER COMES ON TV AND SAYS 12 MONTHS, MAKE THE EASY MONEY. TOM: THE QUESTION IS HOW DO YOU HAVE -- IF YOU BELIEVE IN A OCTOBER LOW, WHAT IS THE SECOND LEG OF THIS FULL MARKET? -- BULL MARKETS? --MARKET. THE ANSWER IS SHE LOOKS FOR ROTATION. JON: A LOT OF PEOPLE HAVE MISSED OUT ON THIS RALLY, THIS MOVE. I WILL CATCH UP WITH JOHN MICHAEL. LOOK OUT FOR THAT CONVERSATION BECAUSE HE THINKS IT IS A REAL RISK TO GET TRAPPED IN CASH AND THAT HAS BEEN A CONVERSATION ON THIS SHOW FOR A NUMBER OF WEEKS. TOM: CAN WE JUST GET AMRITA SEN ON? COFOUNDER AND DIRECTOR OF RESEARCH IN ENERGY ASPECTS. ON THE SHOCK OF $66 PRINT ON WEST TEXAS INTERMEDIATE. WHAT IS YOUR CONFIDENCE THAT DEMAND WILL WEAKEN IN OIL? AMRITA: I THINK I HAVE LITTLE CONFIDENCE OF THAT BECAUSE THE DATA CONTINUES TO COME IN STRONGER THAN EXPECTED AND WE HAVE BEEN CONSERVATIVE ON DEMAND BUT I DON'T BUY INTO THE ARGUMENT THAT CHINA IS REOPENING AND DATA IS COMING IN ON 3 MILLION BARRELS PER DAY YEAR ON YEAR. INDIA IS PRINTING RECORD HIGH GROWTH AND U.S. DEMAND IS GOING UP AND THERE IS A DISCONNECT BETWEEN THE DATA COMING IN AND FORECAST VERSUS PRICES. IT IS HARD TO SQUARE. I DON'T THINK I HAVE SEEN A MARKET LIKE THIS BEFORE. TOM: THAT IS THE ZEITGEIST AMONG EVERYONE WHO PLAYS THE PETROLEUM GAME. IT IS THE SCOPE HERE FOR BRENT CRUDE TO MOVE X NUMBER OF DOLLARS, $10, OR DOES AMRITA SEN LOOK FOR A JOB CONDITION ON THE PATH BACK TO $120 A BARREL? AMRITA: I THINK THERE NEEDS TO BE A VERY CLEAR JUMP CONDITION. THERE NEEDS TO BE A CATALYST AND THE PROBLEM IS WE AREN'T GETTING THE SIGNALS FROM PRICES THAT THINGS ARE TIGHT EVEN AFTER SAUDI ARABIA MADE THOSE UNILATERAL CUTS. I GENERALLY BELIEVE, IF YOU ASKED ME WHAT DWIGHT MISSED THIS YEAR, IS THE RISING PRICE OF CAPITAL. NO ONE WANTS TO HOLD IMAGERY AND AS A WORLD, WE ARE GOING TOWARDS LOWER -- EVERYONE IS DUMPING -- THAT LEADS US MORE SUSCEPTIBLE TO PRICE SPIKES. WE NEED TO SEE VERY CLEAR EVIDENCE OF STOP DRAWS --STOCK DRAWS.AND NEEDS TO BE IN THE VISIBLE CENTERS LIKE THE U.S. AND WE HAVE HAD A MANY REFINERY OUTAGES. LISA: THAT IS WHAT SOMEONE WAS TALKING ABOUT, THE ON ABILITY OR UNWILLINGNESS TO STORE OIL AND PEOPLE DON'T WANT THE PHYSICALITY OF IT IN PART AS WELL AS OTHER IT -- ISSUES. THE INTERNATIONAL ENERGY AGENCY SAID THE DEMAND IS FINISHING GREATLY IN LARGE PART OF NOBLE ENERGY. DO YOU THINK THAT IS OVERSTATED, WE COULD CP OIL DEMAND IN THE NEXT COUPLE YEARS -- WE COULD SEE PEAK OIL DEMAND IN THE NEXT COUPLE YEARS? AMRITA: I THINK THAT WILL BE A DICHOTOMY WITH THEIEA --THE IEA. THEY KEEP RAISING THE LEVEL ON WHICH DEMAND IS SPEAKING AND THE LAST FEW YEARS, THEY MANAGED TO UNDERESTIMATE THE MARKETS AND FROM A GOVERNMENT POINT OF VIEW OUR POLICY POINT OF POINT -- VIEW, THAT THE MCNAIR -- THE NARRATIVE HAS TO BE THAT WE ARE TRANSITIONING AWAY FROM FOSSIL FUELS BUT THINGS ARE DIFFERENT. IT DOESN'T MEAN IT FALLS OFF A CLIFF AND THE DRIVER REMAINS TRUCKING AND IT IS DECENT. LISA: WHAT IS THE DISTINCTION BETWEEN THE PEOPLE WHO THINK RENEWABLE ENERGY SOURCES ARE MAKING AN AND -- MATERIAL IMPACT ON DEMAND AND RENDERING OIL INTO EFFECT -- INSUFFICIENT OR LANDS ON GLOBAL DEMAND AND THOSE WHO SAY, IT IS NOT TRUE AND YOU ARE SEEING LOTS OF DIESEL DEMAND AND GASOLINE USAGE? AMRITA: I DON'T THINK -- IT IS NOT THAT BLACK AND WHITE. IT IS THEORETICALLY HOW MUCH MORE COULD OIL DEMAND HAVE GROWN BY. IT IS NOT THAT WE ARE NOT SEEING RECORD HIGH DEMAND IN PLACES LIKE LATIN AMERICA OR CHINA. THE QUESTION IS WITHOUT RENEWABLES, COULD OIL HAVE GROWN FURTHER? IT COULD HAVE BUT THAT IS CONFUSING MATTERS. THIS YEAR, OUR YEAR'S REPORT TODAY SAYS DEMAND -- ONCE DEMAND READS -- REACHES A RECORD I, ARE WE REACHING DEMAND? WE ARE NOT. JON: SOME VERY INTERESTING BULL MARKET. TOM: LISA NAILED IT WITH THE LINKAGE BETWEEN WHAT AMRITA SEN SAID AND WHAT JEFF CURRY OF GOLDMAN SACHS SAID. I THOUGHT THE MICRO ANALYST FROM CHICAGO IS BRILLIANT. A LOT OF THINGS HAVE CHANGED FOR EVERYONE IN THE OIL WORLD WITH THE AIR FIRST -- INTEREST RATE STRUCTURE HERE. JON: A BIG CHANGE FOR THE SPR. THERE WAS A STORY THAT THEY WOULD LOVE TO REFILL IT BY 12 MILLION BARRELS AFTER DRAINING IT BY MORE THAN 100 EUROS. TOM: IS IT A SIMPLE ANALYSIS? OIL IS PRINTING AT $66 THE OTHER DAY AND WEST TEXAS IS 70, DOESN'T SOMEONE JUST SAY FILL THE SPR? JON: I THOUGHT THAT WAS WHAT WAS HAPPENING. LISA: NOT SO MUCH. MAYBE THEY DON'T HAVE THE MONEY ESPECIALLY CONSIDERING THE DEBT CEILING CONSTRICTS. JON: THEY ARE JUST HAPPY WITH WHERE PRICES ARE. TOM: THE REASON FOR THE STRATEGIC PETROLEUM RESERVE, WHEN WE GET AMRITA SEN, $20 A BARREL. JON: JUST WHY SOME PEOPLE CALL IT THE MIDTERM RESERVE. DO YOU REMEMBER THAT, THE STRATEGIC MIDTERM RESERVE? LISA: TO YOUR POINT ABOUT PRICES REMAINING GLOW AND HOW THEY LIKE THIS, WHEN DO THEY START TO GET ANNOYED THAT THE PRICE OF GASOLINE HAS A COME IN QUITE AS MUCH AS THE PRICE OF CRUDE AND THIS IS SOMETHING WE KEEP SEEING -- TOM: IT IS DOWN 23%. LISA: I AM NOT SAYING THEY ARE GOUGING. TOM: WEST TEXAS -- WITH TAXES, IT WAS FIVE DOLLARS AND $.40. HERE IT IS $3.50. CAN DO THE -- JON: IT IS EXPENSIVE. TOM: DID YOU DO SCHILLINGS? I READ DICKENS AND I DON'T KNOW WHAT THEY ARE SAYING. HOW DID THEY KEEP TRACK OF THE STUFF. JON: THEY SEEM -- THEY CHANGED THINGS. WOULD YOU HAVE HAD A CANE? TOM: A CANE WITH A KNIFE IN IT IN CASE THE BAD GUYS GO AFTER ME. [LAUGHTER] LISA: FROM LIKE JAMES BOND. JON: THAT WOULD HAVE BEEN A GREAT REMAKE IF THEY HAVE GIVEN YOU THE JOB INSTEAD OF MICHAEL CAINE, THAT WOULD HAVE WORKED. SCARLET: --TOM: AH. JON: EQUITY FUTURES UP 0.1%. >> WE THINK WE ARE SITTING TOWARDS THE TOP END OF A VERY STRONG RALLY. >> THE FED HAS MADE SIGNIFICANT INROADS IN THE BATTLE AGAINST INFLATION. >> WHAT IS LEFT BEHIND IS A LINGERING AND HIGH INFLATION RATE THAN WE WOULD LIKE. >> I THINK THE FED ISN'T DONE AND IT WILL NOT CUT RATES QUICKLY. >> IF I WERE A MEMBER OF THE FOMC, I WOULD WAIT AND WATCH. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOVITZ. JON: GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO ALONGSIDE TOM KEENE AND ALISA AND ABRAMOVICH -- LISA ABRAMOVICH. DK, WE TALKED ABOUT THIS -- TK, WE TALKED ABOUT THIS, WHEN THE FED STOPPED HIKING, THE S&P 500 CLOSED AT A LEVEL BR -- BELOW WHERE WE ARE NOW. IT IS POSITIVE THROUGH MAKING FAILURES AND WE HAD A BEAR MARKET AND WE ARE BACK IN APRIL. TOM: I DON'T BELIEVE IN THE DOTS BUT THE IDEA IS THE GREAT MS. KAUL IS THE RECESSION, MET WAS EDDIE --MAT T LIZETTI PUT A DATE ON IT. A LOT OF PEOPLE WERE SOONER, AND THE ANSWER IS THE RECESSION DID NOT HAPPEN. JON: YOU WILL GET THE STATEMENT AND PROJECTIONS AND LET'S TALK ABOUT NUMBER TWO, THE PROJECTIONS. A LOT OF PEOPLE BELIEVE THAT TODAY, YOU WILL HAVE TO UPGRADE GDP AND DOWNGRADE UNEMPLOYMENT AND IF A LITTLE NUDGE TO THE DOT PLOT TO APPLY WE WILL GO AGAIN. LISA: THE REALITY IS THEY WON'T SIGNAL THAT EVERYTHING IS FINE AND THE BEST LANDING -- THERE IS A CONCERN THAT WE HAVE GOING FORWARD ABOUT WHERE THEY SEE THE POTENTIAL, THE ASYMMETRIC RISKS OF INFLATION RESTARTING LATER -- TOM: WHAT IS THE EFFICACY OF THE DOTS? WHAT IS THE VALUE ADD OF THE DOTS OTHER THAN WHAT BULLARD THINKS? JON: SIGNAL. TOM: CENTER DOT? JON: IF YOU WANT TO DEMONSTRATE THE PAUSE DOES NOT MEAN YOU ARE DONE, YOU NEED TO HAVE SOMETHING BANKED INTO THE MEDIA DOT. I IMAGINE THAT CHAIRMAN POWELL WILL WELCOME DISSENT. IT WOULD BE NICE IF SOME PEOPLE ON THE COMMITTEE SAID I THINK WE NEED TO DO MORE. LISA: IT CREATES THE UNCERTAINTY THEY WOULD WELCOME BACK BECCA POTENTIALLY TOP-DOWN AS UNWANTED EXUBERANCE. THEY CAN MOVE THESE THOUGHTS AROUND. IT IS NOT LIKE THEY ARE COMMITTED TO THE DOTS. IT IS A REAL PROBLEM THEY HAVE ON THEIR HANDS. WHEN PEOPLE TALK ABOUT MORE WORK TO DO, IS IT HOLDING RATES OR HAVING RATES MATERIALLY HIGHER? JON: WE HAVE SET ON THE RECORD THAT IF THE FED HAD A CHOICE, THEY HELP -- WOULD HAVE GOT WRITTEN -- RID OF THIS DOT PLOT. THE BELIEF IS, NO HEIGHT, YOU ARE NOT DONE AND YOU WILL LOOK AT THE DATA. SOME PEOPLE THINK WE WILL GET A HIKE. THE HORSES STILL BEAR. HE STILL BELIEVES INFLATION IS STUBBORNLY STABLE. TOM: WITH GREAT RESPECT, I SUGGESTING THE MONETARY AND FINANCIAL MATHEMATICS WITH GOVERNOR PARSON OR -- WITH -- THAT GOVERNOR POSNER IS EXCEPTIONAL AT -- DOES A WEAKENING CHINA HAS MORE -- HAVE MORE TO DO WITH WHERE THE FED IS GOING THAN THE DOTS. I THINK WE HAVE TO GET BACK TO BASE WHICH IS EVERYONE INCLUDING ME HAS BEEN WRONG ABOUT A POINTS AND RESILIENT AMERICAN GDP -- A BUOYANT AND RESILIENT AMERICAN GDP. JON: WE ARE UP BY 0.2% AND THE STAGE IS SET, THE SCORES LOOK LIKE THIS. YIELDS UP ABOUT A BASIS POINT AND THE 10-YEAR, 3.82. LISA: 8:38 A.M., WE -- 8:30 A.M., WE GET PPI AND THIS IS MORE MANUFACTURING INPUT PRICES THAT HAVE COME DOWN MORE SHARPLY THAN WHAT WE HAVE SEEN IN SERVICES AND BEYOND. CURIOUS TO SEE HOW MUCH THIS GIVES A TAILWIND, SOME OF THE EARNINGS IN THE S&P OF THE INPUT PRICES ARE COMING DOWN. JAY POWELL WILL TAKE THE HELM AT THE NEWS CONFERENCE AT 2:30 AND WE HAVE SOMETHING AT 1:30, WE HAVE MICHAEL COLLINS AND SETH CARPENTER AS WELL AS OTHERS TO PARSE THROUGH WHAT A HAWKISH SKIP WRITING. JON: ANASTASIA AMOROSO, CHIEF INVESTMENT STRATEGIST AT ICAPITAL. I REMEMBER YOU SITTING WITH THIS TABLE EARLY APRIL AND YOU MADE THE CALL THAT WE WOULD BREAK UP TO THE UPSIDE. YOU FORGET EVERYTHING. WE HAD A GREAT RATE -- EVERYONE IS ON BOARD WITH THAT MOVE. DO YOU HAVE THIS VIEW THAT WE BROADEN OUT OR YOU'D RISK AND TAKE SOME OF THE PROPHETS? ANASTASIA: WE DO BROADEN OUT. THE REASON FOR THAT IS THE U.S. ECONOMY HAS BEEN MORE RESILIENT THAN ANYONE HAS EXPECTED AND AS A RESULT, WE HAVE GONE THROUGH A EARNINGS DOWNGRADE CYCLE AND IF YOU LOOK AT THE EARNINGS REVISION RATIO, IT IS POSITIVE FOR THE LAST MONTH AND THAT INSTILLS A LOT MORE CONFIDENCE IN BE EPS -- THE EPS PART OF THIS CONVERSATION AND THE FED, WHETHER TO SKIP OR PAUSE, THE REALITY IS THEY ARE NOT GOING TO GO 75 BASIS POINTS FOR CONSECUTIVE MORE MEETINGS. WE COULD HAVE SOME STABILITY IN VALUATIONS AND THAT IS WHY THINK THE RALLY BROADENS OUT. TOM: IS APPLE UNDER OWNED BUT FAR MORE THAN THAT, IS IT YOUR TAKE THAT THE INSTITUTIONAL MONEY UP TYPICAL, BUY AND HOLD THREE YEAR MONEY AND MISSED THE MARKET MOVE AND THERE IS A GENERAL STATEMENT, UNDER OWNED? ANASTASIA: MASSIVELY UNDER OWNED AND A LOT OF INVESTORS FOUND HIMSELF IN CHASING MODE. IT IS THE SYSTEMATIC TRADERS AND HEDGE FUNDS AND THEY PILED INTO THE MARKET AND IT PILED UP HIGHER BUT YOU LOOK AT THE BOND AND CASH FLOWS AND WHAT THEY HAVE DONE VERSUS EQUITY OUTFLOWS, THERE IS A MASSIVE AMOUNT OF CAPITAL THAT COULD. -- COULD PIVOT. THERE ARE VALUATIONS THAT SAY TECHNOLOGY HAVE HAD ITS RUN AND I WANT TO BE A TAKE IN GROEP -- INVESTOR -- A TECH INVESTOR. THE MULTIPLE ON THE S&P IS IN LINE WITH THE 10 YEAR AVERAGE AND THAT IS WHY I THINK THIS ROTATION CAN BROADEN OUT AND I ALSO WANT TO BRING CHINA INTO THE EQUATION. AS PESSIMISTIC AS EVERYONE IS ON CHINA, THE GREAT NEWS THERE IS CHINA CPI INFLATION IS ZERO. POLICY RATES ARE HIGHER AND THERE IS ROOM TO CUT RATES AND STIMULATE IN CHINA AND IN THE LAST FEW WEEKS, WE HAVE SEEN THE WILLINGNESS OF POLICY MAKERS TO STEP UP THE STIMULUS. LISA: GIVEN THAT BACKDROP, IF THE FED DOES HAVE A SKIP, HAWKISH, WILL THAT UNLEASH A ROLET -- UNWARRANTED EXUBERANCE IN RISK ASSETS IN THE U.S.? ANASTASIA: IT ALREADY HAS. WE PRE-TRADED BE SKIP. THIS EXUBERANCE IS SOMEWHAT WORDED AND IF YOU LOOK AT HISTORY, THE FED HIKES RATES BUT IT DOESN'T CAUSE A RECESSION. THERE IS A PERIOD OF TIME BEFORE THE RECESSION ONSET AND THERE IS A EXUBERANCE PHASE WHERE THE MARKET RALLIES 12 MONTHS AFTER THE FED -- THE REASON I THINK IT IS WARRANTED BECAUSE THE ECONOMY IS HANGING IN THERE AND THE EARNINGS ARE IN THERE. LISA: LET'S SAY THE FED HOLDS RATES HERE FOR A LONG PERIOD OF TIME, WHERE DOES THE TUBING RATE, WHERE THE PAIN GETS FELT AND THIS EXUBERANCE WEARS OUT? ANASTASIA: I THINK THE FED WOULD NEED TO GO HIGHER TO REALLY CRACK THE ECONOMY AND IF YOU LOOK AT THE ECONOMY WITH 5% RATES, WE ARE FILLING STRENGTHS -- FEELING STRENGTHS BUT THIS ECONOMY IS DOING FINE WITH 5% RATES. YOU NEED TO RAISE RATES TO A MUCH MORE RESTRICTIVE LEVEL FOR SOMETHING TO CRACK IN THE UNEMPLOYMENT RATE. TOM: DOES A 60/40 ALLOCATION WORK? ARE YOU A 60/40 TYPE OR DO YOU HAVE TO GO TO A DIFFERENT MIX. ANASTASIA: ANYONE WHO DECLARED 60/40 TO BE DEAD HAS BEEN WRONG. TOM: OFF A MISERABLE YEAR. ANASTASIA:ANASTASIA: IF YOU LOOK OVER THE LAST 15 YEAR PERIOD AND WE EXPAND FROM THE 60/40 AND I BROADEN THAT -- IT TO PRODUCT MANAGING STRATEGIES, ALL OF THOSE THINGS HAVE OUTPERFORMED THE 60/40 SO WE WANT TO LOOK BEHIND THE 60/40 AND IT IS NOT JUST SOMETHING THAT WORKED LAST YEAR. JON: NEW BITAL SOMETHING YOU SAID ABOUT THE LABOR MARKET AND HOW FAR FED FUNDS WOULD NEED TO GO, WHERE DOES THAT LEAVE THE BOND MARKET? WHAT IS THE 10 YEAR LOOK LIKE OVER THE NEXT 12 MONTHS? ANASTASIA: THE 10 YEAR IS SUPPORTED AROUND THESE CURRENT LEVELS BECAUSE IF THE FED NEEDS TO GO HIGHER, THE FRONT OF THE CURVE RISES BUT THE BACK END DOESN'T BECAUSE IT IS THE FUNCTION OF THE FORWARD GROWTH EXPECTATIONS BUT IF THE FED HIKES RATES, THE INFLATION -- RISES. IF WE ARE WANTING TO PREPARE FOR A 2024 RECESSION, THAT IS WHAT YOU BUY. YOU BUY THE 10 YEAR AND 30 YEAR AND I THINK THAT IS A GREAT BALANCE TO MAYBE SOME OF THE CYCLICAL STUFF IN THE PORTFOLIO. >> DO YOU THINK WE ARE AT THAT POINT NOW TO MAKE THAT MOVE? ANASTASIA: I THINK YOU DOWN -- CAN. IF YOU ARE BUYING SOME 10 YEAR TREASURIES INTO YOUR PORTFOLIO, THEY CAN PROVIDE SOME STABLE VALUE BECAUSE THE GROWTH EXPECTATIONS ARE NOT LIKELY TO SPECULATE HIGHER. JON: ALSO CALL ON THE EQUITY MARKET. ANASTASIA AMOROSO THERE. IT IS USUALLY THE POLITE THING TO DO IS LISTEN TO GUESTS. LISA: A LOVER OF QQQS. JON: ARE YOU IN CASH? TOM: WE ARE THERE AND THE GIRLS OF HAS BEEN GREAT WITH THE 5% COUPON WE ARE SLOTTING IN. YOU TAKE THE TWO AND 20 OFF IT -- JON: IT IS FUNNY ON CASH. IT IS QUITE A BUSINESS YOU ARE RUNNING THERE. TOM: WE HAVE TO DO AN ETF. JON: WE CAN WAITS FOR THAT. COMING UP ON SURVEILLANCE, MIKE SCHUMACHER OF WELLS FARGO, WE WILL TALK ABOUT THE BOND MARKET. THE FEDERAL RESERVE AROUND THE CORNER AND EVERYONE IS SICK TO DEATH ABOUT THIS CONVERSATION? LISA: IT IS CHANGING A LITTLE BIT AND ANASTASIA WAS TALKING ABOUT THAT. DO THEY GAME OUT THEIR UNDERSTANDING OF WHY THIS ECONOMY HAS REMAINED SO RESILIENT? TOM: YOU KNOW WHAT WE WILL BE RUNNING? BRAMHALL --BRAMO DISSENTS. JON: SHE DISSENTS ALL THE TIME. IF YOU ARE TUNING IN, WELCOME TO THE PROGRAM. LIVE FROM NEW YORK CITY, YOUR EQUITY MARKET ON 0.2%. ON BLOOMBERG SUBMITTED -- SURVEILLANCE, MIKE SCHUMACHER OF WELLS FARGO, DAVID BALLIN, MIKE WILSON OF MORGAN STANLEY AND WE WILL HAVE THAT CONVERSATION AT 8:15 EASTERN TIME. THE S&P 500 HAS CROSSED THE 20 THRESHOLD. WE RESPECTFULLY DISAGREE DUE TO OUR 2023 EARNINGS FORECASTS AND HIS CALL ON THE EARNINGS IS SOMETHING HE HAS STUCK WITH FOR THE WHOLE OF THIS YEAR. WHEN IS THAT MORE PRONOUNCED WEAKNESS COME, -- START TO COME THROUGH? TOM: WHAT IS INTERESTING TO ME IS THE START OF THE TOP OF THE INCOME STATEMENT, EARNINGS ARE DEFINED DOWN ANY LEVEL OF -- NUMBER OF LEVELS. GO TO REVENUES AT THE TOP AND IF YOU GET A PERSISTENT INFLATION, BY DEFINITION, YOU GET A BETTER NOMINAL GDP. AND I USE HONEYWELL AS A PROXY AS -- INSTEAD OF A SURPRISE, A PERCENT REVENUE, YOU DON'T GO BACK TO 5% BUT YOU GET 6.8% AND -- REVENUE AND THAT IS A BETTER EARNING STRUCTURE. LISA: I WONDER IF THAT IS THE TALE OF TWO DIFFERENT TYPES OF COMPANIES SO SMALLER COMPANIES ARE SEEING MORE PRESSURE SO HOW MUCH DOES THAT HIGHLIGHT THE WEAKNESS WE CAN SEE? JON: WE WILL CONTINUE, -- COUNTING DOWN TO THE FEDERAL CHAIR DECISION. DON'T CALL IT THE END OF THE CYCLE IF YOU WORK AT THE FEDERAL RESERVE. >> THIS IS CALLED ALEXION INTERFERE IS IN YET ANOTHER ATTEMPT TO STEAL A PRESIDENTIAL ELECTION. I HAD EVERY RIGHT TO HAVE THESE DOCUMENTS. I WILL APPOINT A SPECIAL PROSECUTOR TO GO AFTER THE MOST CORRUPT PRESIDENT IN THE HISTORY OF THE UNITED STATES OF AMERICA, JOE BIDEN. THEY ARE NOT COMING AFTER ME, THEY ARE COMING AFTER YOU AND THEY -- I HAPPEN TO BE STANDING IN THE WAY. JON: THE FORMER PRESIDENT FIGHTING BACK AFTER PLEADING NOT GUILTY TO THE CHARGES OF ALLEGED MISHANDLING OF CLASSIFIED DOCUMENTS AFTER APPEARING IN COURT. COUNTING DOWN TO THE FEDERAL RESERVE DECISION AROUND THE CORNER, CONSENSUS VIEW IS NO CHANGE. A SKIP, A PAUSE FOR A FEDERAL RESERVE THAT IS UNWILLING TO COMMUNICATE THE END OF THE HIKING CYCLE. YOUR EQUITY MARKET POSITIVE BY 0.1% ON THE S&P 500. IN THE BOND MARKET, YIELDS UNCHANGED AND THE 10 YEAR AT 3.817 THREE AND IN THE FX MARKET, SLIGHTLY WEAKER DOLLAR. POSITIVE BY 1%. TOM: I FIND THE HIGH POINT SO FAR IN THE HYDROCARBON DISCUSSION WITH -- IS HER AGREEMENT WITH JEFF CURRY WITH THE INTEREST RATE STRUCTURE THAT AFFECTS EVERYTHING. JON: MORE DEMAND DESTRUCTION NEEDED TO GET INFLATION TO 2%. HOW MUCH DEMAND DESTRUCTION WILL WE SEE BETWEEN NOW AND JULY? TWO BRUCE KASMAN'S POINT, IT IS A SHORT WINDOW BETWEEN NOW AND THE JULY MEETING. TOM: EXPAND IT. IT IS A SHORT WINDOW TO THE END OF THE YEAR AS WELL AND TO THE SLOT NOTE DEMAND DESTRUCTION, THE ISSUE IS ON THE SUPPLY SIDE AND WE ARE AT A MASSIVE PANDEMIC DYNAMICS, THAT THEY WILL STRUGGLE WITH. JON: THE STOCK MARKET THINKS WE HAVE THE WORST BEHIND US WHICH SHOWS EARNINGS GROWTH IS EXPECTED TO BOTTOM AND IMPROVES QUITE RAPIDLY OVER THE COMING FOUR QUARTERS. THIS FORECAST WILL ONLY BE CORRECT IF CORE INFLATION MOVES QUICKLY DOWN TOWARDS 2%. IF CORE INFLATION REMAINS ABOUT -- AROUND FIVE COME PERCENT -- 5%, -- THAT IS A TUG-OF-WAR. TAKE YOUR BATTLE. TOM: WE WILL SEE IT AT 2 P.M. WE WILL HAVE DIANE SWONK JOINING US. FROM THE FESTIVITIES FROM MIAMI, ANNMARIE HORDERN JOINS US. I WILL GO BACK TO THE LANGUAGE THAT WE SAW YESTERDAY, AND TRY TO MAKE THIS THING POLITICAL. TO A WONDERFUL EXERCISE IN THIS -- SEPTEMBER FROM THE WASHINGTON POST, WITH LOTS OF PIE CHARTS WHERE HE CHART -- WHERE HE TRIED TO FIGURE OUT HOW BIG IS MAGA OUT THERE? WHAT ARE THE CENTRIST REPUBLICANS DOING BECAUSE THE PIE CHARTS SAY MAGA IS NOT AS BIG AS A GENERAL STATEMENT. WHAT IS THE RESPONSE TO BE NON-M -- THE NON-MAGA -- >> THE CONCERN FOR MANY OF THE CENTRIST IS WHAT YOU COULD SEE IS WHAT WE HAD IN 2016, 8 PLURALITY -- A PLURALITY, EVEN IF MAGA IS NOT THAT BIG, THEY'RE TOO MANY CANDIDATES SHARING THE REMAINDER 70% AND THE FORMER PRESIDENT HAS A GRIP ON 30% OF THE PARTY. THERE ARE MORE THAN 500 DAYS UNTIL NOVEMBER AND POTENTIALLY THERE ARE RUMORS UP -- OF OTHER INDIVIDUALS GETTING IN. LEN YOUNGKIN --GLENN YOUNGKIN. THIS IS WHAT CENTRISTS ARE TALKING ABOUT AND THE ISSUE THEY SEE, MAYBE THE FORMER PRESIDENT WILL HAVE TO MANY LEGAL HOARDERS -- HURDLES. THE FLIPSIDE OF THAT IS THAT THE FORMER PRESIDENT, THIS MASSIVE LEGAL HURDLE, THE FIRST EVER FORMER CURRENT PRESIDENT TO BE ARRESTED IN FEDERAL COURTS, HE USED IT AS A CAMPAIGN RALLY. WHAT WE ARE SHOWN IS THAT WE -- HE MADE A STOP AT THE THEN --BEN 'S CHILLY BOWL OF MIAMI. HE WENT TO THIS CUBAN RESTAURANT AND IT BECAME A CAMPAIGN EVENT. TOM: HIS MESSAGE AND IT HAS ALWAYS BEEN HIS MESSAGE BEFORE 2016 IS A MESSAGE OF GRIEVANCE. WE HEARD THAT YESTERDAY, THOSE THAT SUPPORT THE FORMER PRESIDENT. THOSE THAT DO NOT. HOW IS THIS MESSAGE PLAYING ACROSS THE REPUBLICAN SPECTRUM? >> WHEN YOU LOOK AT WHAT THE OTHER NOMINEES ARE SAYING, I WOULD SAY YOU ARE STARTING TO HEAR A LOT MORE NOISE ABOUT, AS THEY THREAD THIS VERY FINE LINE OF MAKING SURE THEY DO NOT OSTRACIZE THE BASE AND THE TRUMP VOTERS. YOU ARE SEEING THESE " SERIOUS CONCERNS" OF THE INDICTMENT. YOU HAD A FROM NIKKI HALEY WHEN SHE -- YOU HAD A NEW LINE FROM NIKKI HALEY. SHE SAID SHE WOULD PARDON THE FORMER PRESIDENT IF SHE BECAME PRESIDENT, OR THE CANDIDATE AND PRESIDENT BECAUSE HE THINKS IT WOULD BE GOOD FOR THE COUNTRY AND YOU HAVE SOMEONE WHO IS A CANDIDATE. HE SAID HE WOULD PARDON THE FORMER PRESIDENT BUT HE SAID I WILL NEED TO MAKE THE CASE. SOME SEE THEY CAN PUSH TRUMP OUT OF THE RACE BUT THAT WILL BE THE NEXT BIG LITMUS TEST. LISA: WE WILL COVER THIS EXCESSIVELY. I DO WANT TO GET YOUR TAKE ON SOMETHING WE WERE TALKING ABOUT EARLIER IN THE PROGRAM, ABOUT THE SPR AND WHY WE AREN'T REFILLING IT AT THESE RATES. SORRY TO THROW YOU A CURVEBALL BUT WE HAVE BEEN TALKING THIS -- ABOUT THIS. WHY ARE WE NOT HEARING ABOUT THE MATERIAL REFILLING OF THE STRATEGIC PETROLEUM RESERVE? ANNMARIE: THEY ARE AT THE FRONT LEGS OF THE DRAWDOWN AND YOU CANNOT DRAW DOWN AND FILL UP AT THE SAME EXACT TIME. IT IS A GREAT QUESTION BECAUSE THE ADMINISTRATION HAS SAID AROUND THESE LEVELS, THEY WOULD. THEY POTENTIALLY -- THEY COULD, I AM LOOKING AT A CRYSTAL BALL. MAYBE THEY DO SEE FURTHER WEAKNESS IN THE OIL PRICE AND WOULD PREFER TO WAIT IF THEY DROP BELOW $60 A BARREL. JON: MAYBE THEY ARE HAPPY WHERE PRICES ARE AND THEY DON'T CARE ABOUT FILLING THE SPR. ANNMARIE: THEY COULD BE. AND THEY DON'T WANT TO HAVE THIS HURDLE OF SPENDING MORE MONEY BUT POTENTIALLY THEY ALSO COULD SEE SOME MORE WEAKNESS. WHAT WAS PRETTY ASTONISHING IS AFTER THE LAST OPEC MEETING FOR YOU HAD ANOTHER UNILATERAL CUT FROM THE KINGDOM, PRICES DIDN'T EVEN BREAK $80 A BARREL ON BRENT WHEN YOU LOOK AT THE CLOSE OF DAY SO THAT SPEAKS TO ME, POTENTIALLY MORE CONCERN AND DEMAND. JON: BRENT IS $75. THANKS FOR LISA BRINGING UP THE CRUDE MARKET. JP MORGAN CUTTING THE 23 BRENT THROUGH -- 2023 BRENT CRUDE FORECAST FROM $81 A BARREL TO -- FROM 90. -- $90. WE COME DOWN FROM TRIPLE DIGIT AND THE CONVERSATION FROM THE 90'S AND TOWARDS THE 80'S WERE PRICES IN THE 70'S. TOM: I HAVE A COFFEE TABLE AT HOME, RIGHT NEXT TO A BOOK, THE JP MORGAN FORECAST FROM 145 YEARS AGO WHERE ONE PERSON LAID OUT OVER $100 BARREL PRICING BASED ON GLOBAL DEMAND. WE HEARD FROM AMRITA SEN, THE IDEA THAT SHE BELIEVES THE DEMAND MATH IS WRONG AND DEMAND IS MUCH BETTER. I AM FASCINATED HERE TO SEE IF WE SWING AND GET THE DEMAND THAT AMRITA SEN PERCEIVES OR MAYBE CHRISTIAN MALE PERCEIVES. JON: THIS MARKET ENJOYS MAKING A FULL OUT OF PEOPLE. TOM: OIL IS THE WORST. JON: THAT LIST IS GOING. LISA: IT IS AND NOW THAT EVERYONE THROWS IN THE TOWEL, WE CAN SEE REAL FIREWORKS. TOM: THE ONLY ONE I HAVE EVER SEEN JONATHAN: EQUITIES RIGHT NOW POSITIVE. CAN'T WE MAKE THAT FIVE CHAIRMAN POWELL MIGHT BE IN CONTROL OF THE FATE OF THAT. TOM: THANK YOU FOR BRINGING THIS UP JUICY A CHART IN THE LAST 24 HOURS OF LIKE EVERY FED MEETING WE GO FLAT, FLAT, FLAT, WARRING, BORING, BORING. THEN STEVE FROM THE DEATH STAR AND WE GOT IN MY RIGHT ON THIS? JONATHAN: ARE YOU SAYING STEVE MAKES THE MARKET GO DOWN? TOM: YOU CAN FLIP AROUND. DON'T WE COME OUT OF THIS AT 4:00 P.M. LIKE THAT WAS HARSH? JONATHAN: DAZED AND CONFUSED. THIS ONE STRAIGHTFORWARD FOR SOME PEOPLE AT LEAST. THEY SKIP, THEY CONSIDER HIKING AGAIN IN THE FUTURE DEPENDING ON HOW THE DATA COMES IN AND THE PROJECTIONS, THE SEP SO IT'S CALLED. THEY CONVEY THAT THERE MIGHT BE SOME WORK TO DUPONT INTEREST RATES. FOR 67, THE LAST TIME THE FED MET. YIELDS ARE A LOT HIGHER. YIELDS ARE A WHOLE LOT HIGHER. ALSO IN THE FX MARKET TOO. EUROPE, EUROPE, EUROPE, CHINA, CHINA, CHINA. EURO-DOLLAR TO 120 AND IT NEVER GOT THERE. 108 THIS MORNING, LISA. LISA: AND AS WE TALK ABOUT POTENTIAL FOR THE RATE HIKES LEADER THIS WEEK EVEN AS THERE IS A SKIP PAUSE FROM THE FEDERAL RESERVE THIS IS GOING TO BE THE KEY QUESTION HOW MUCH DO THEY PUSH BACK AGAINST THE EQUITY MARKET AT A TIME WHEN THERE ARE TECHNOLOGICAL SEE CHANGES? THEY COULD FUNDAMENTALLY SHIFT A LOT OF THE GROWTH IN THE U.S.. TESLA IN THE FOREFRONT. THIS IS THE 14TH CONSECUTIVE SESSION OF GAINS. A RECORD STREAK AFTER ALREADY ADDING $240 BILLION TO ITS MARKET CAPITALIZATION DURING THIS. IS, TO ME, IS ACTUALLY TRULY A GAME CHANGER IF ALL OF A SUDDEN YOU HAVE GENERAL MOTORS AND FORD DYING INTO THEIR ENTIRE ELECTRIC HICKLE CHARGING NETWORK AND SAYING YOU GUYS HAVE IT WE ARE GOING TO ADAPT TO YOU. THIS IS BEYOND JUST MAKING CARS. ALSO GETTING FEEL TO BUY THE AI KIND OF TREND. THE OTHER TECHNOLOGICAL PROWESS. THOSE SHARE IS UP 3%. WE ARE IN THE SUMMER AI IS AN IMMEDIATE THEM AND SHALL, --SHELL SHARES UP TO .5%. INCREASED ITS DIVIDEND BY 15% AND MOVED AWAY FROM EMPHASIZING RENEWABLE ENERGY AND WENT BACK TO THE SIZING ALSO -- EMPHASIZING FOSSIL FUELS. TOM: A GREAT EXERCISE HERE I'M A BIG BELIEVER IN SELECT COMPANIES READING THE MDMA AND A GREAT EXERCISE IS TO GO BACK TWO YEARS, FOUR YEARS, SIX YEARS AND READ THE MDMA OF ANY COMPANY OF WHAT THE IT WAS AT THE TIME. FOUR YEARS AGO OR TWO YEARS AGO SEEMS TO BE RADICALLY DIFFERENT THAN WHAT YOU'RE MESSAGING RIGHT NOW. LISA: IT'S LEADING TO UNCERTAINTY. WE TALKED ABOUT THIS YESTERDAY. THE DEEMPHASIS OVER THE PAST SIX MONTHS BY SHAREHOLDERS IN PARTICULAR TYPICALLY WITH RESPECT TO COMPANIES SAYING CASH IN. JONATHAN: WHAT DO THEY HAVE IN COMMON? STOCKS, COMPARE THEM TO A BUCKET OF U.S. ENERGY STOCKS OVER THE PREVIOUS TWO YEARS. CLEAR OUTPERFORMANCE. THEY HAVE THE PR STORY THEY WERE TOO BUSY TALKING TO THEIR GOVERNMENTS AND NOT TALKING TO THEIR SHAREHOLDERS. TOM: AND THEY GET THE BIG TRAP OF THE DIVIDEND. DO YOU PERCEIVE ROYAL SALES A DUTCH COMPANY OR A LONDON COMPANY? JONATHAN: A DUTCH COMPANY THAT WAS HEADQUARTERED IN LONDON. HISTORICALLY. CAN I TALK ABOUT DISNEY QUICKLY? TOM: PLEASE. IT'S LIKE LITTLE MERMAID. JONATHAN: WHEN COMPANIES START THROWING OUT DATES LIKE 2030, 2031. THE THIRD INSTALLMENT OF AVATAR IS GOING TO COME OUT DECEMBER 2025 INSTEAD OF DECEMBER 2024. THE TWO OTHER AVATAR SEQUELS PUSH BACK BY THREE YEARS. THEY WILL COME OUT IN 2029 AND 2031 DOESN'T THAT FEEL LIKE A LIFETIME AWAY? LISA: WE WILL BE IN AUGMENTED REALITY. IT WAS PRETTY TECHNOLOGICALLY AMAZING. IMAGINE THEY HAVE TO ADD ON TO THAT BUT YEAH. JONATHAN: AVENGERS MOVIES DELAYED A YEAR FROM MAY OF 26. STAR WARS PUSHED BACK A YEAR IT'S ALL GETTING PUSHED BACK. WHAT'S BOB IGER UP TO? CAN YOU IMAGINE HEARING THIS? TOM: IS THAT THE WRITERS STRIKE? IT HAS TO BE SOMETHING BIGGER LIKE BUDGETING? LISA: HOW MUCH IS CONTENT NO LONGER KING? TOM: MICHAEL SCHUMACHER SAYING DID I SIGN UP FOR THIS? WE ARE NOT GOING TO LOOK FOR A LITTLE MERMAID REVIEW FROM HIM. I WANT TO TALK ABOUT THE CHALLENGE OF JEROME POWELL IN A WAY I DO IT IS MICHAEL ROSENBERG INVENTED WITH THIS TEAM AT BLOOMBERG THE BLOOMBERG FINANCIAL CONDITIONS INDEX. IT IS 11 RATIOS IT IS WONDERFULLY COMPLEX. I'M NOT GOING TO GO TO THE METHOD BUT ALL YOU HAVE TO KNOW IS A POSITIVE NUMBERS ACCOMMODATED AND NEGATIVE IS TILTED TOWARDS RESTRICTION. IS THE STOCK MARKET HINDERING JEROME POWELL'S CHOICE SET? IS DEGREES OF FREEDOM? HAVE WE BECOME ACCOMMODATIVE AS IT SEEMED BY THE BFC I I THINK IT'S .079 HE HAS FEWER CHOICES HE MAKES FEWER CHOICES HE CAN MAKE TODAY. >> SURE. IT'S A TIGHTENING CYCLE. THESE CONDITIONS ARE SUPPOSED TO TIGHTEN. YOU LOOK AT THE STOCK MARKET UP 13%. I KNOW REGIONAL BANKS, ETC.. EQUITIES ARE RIPPED. CORPORATE CREDIT IS DOING REALLY WELL. THIS FLIES IN THE FACE OF THINKING -- THINKING TIGHTENING. JEROME POWELL HAS LESS TIGHTENING. TOM: THE ONLY WAY HE CAN DO IT BASED ON MY HISTORY IS TO DELAY. PRETEND AND DELAY SOBER GOING TO GO THROUGH TODAY. HE'S GOING TO READ ALL SORTS OF STATEMENTS THE ANSWERS ARE GOING TO BE WRITTEN OUT IN ADVANCE. IS THIS A MEETING IN PREPARATION FOR JULY HOPING THE FACTS CHANGE FOR JEROME POWELL? >> THEY COULD CHANGE. THE ONE BIG THING BETWEEN NOW AND THE JULY MEETING, GRANTED THE ECONOMIC DATA FLOW PRETTY LIGHT. THE EARNINGS THEY START TO REPORT THE REGIONALS I THINK THE LIFE -- JULY 19 IS THE FIRST. IT'S POSSIBLE YOU GET LOTS OF NOISE LET'S SAY IN THE WEEK OR SO AHEAD OF THE JULY MEETING BUT THAT SEEMS LIKE A LONG TIME AWAY. MAYBE THE FED CAN LOOK OUT SIX OR SEVEN WEEKS IN THE FUTURE BUT IT SEEMS LIKE A STRETCH. LISA: PERHAPS THERE BUDGET IS A LITTLE BIT LESS THAN THE AVATAR SEQUELS. JUST A LITTLE. WE PRICED OUT RATE CUTS. THAT'S WHAT WE HAVE BEEN DOING FOR THE LAST COUPLE OF MONTHS SINCE THE BANKING CRISIS THAT HAPPENED FOR HALF A SECOND. DO YOU EXPECT THE MARKET TO START PRICING AND MATERIAL ARE HIGHER RATES? THERE'S MORE WORK TO DO AND THE DYNAMISM IS NOT GOING TO CRACK UNDER 5% RATE. >> WE THINK IT'S BEEN INTERESTING. WHEN YOU LOOK AT THE WAY RATE CUTS HAVE BEEN PRICED OUT FOR 2020 AMAZING. IF I LOOK AT 2024, IT'S 130 BASIS POINTS IN CUTS. WE THINK THE NUMBER GOES DOWN. DOES A GOOD TO ZERO? NO. A DECENT AMOUNT OF RATE CUTTING TAKEN OUT. WHAT I CONTINUE TO BE SURPRISED BY IS SO MUCH EASING BY THE FED RELATIVE TO OTHER CENTRAL BANKS. OR YOU CAN EVEN LOOK AT IT THIS YEAR THE RELEVANT POLICY. WHY IS THE ECB PRICED TO HIKE 55 BASIS POINTS BETWEEN NOW AND SEPTEMBER AND THE FED IS PRICED FOR 20? WHY DOES THE MARKET PRICE THE FED TO BE EFFECTIVELY UNCHANGED WHEN OTHER CENTRAL BANKS ARE PRICED MUCH HIGHER? LISA: PERHAPS THEY GOT IT WRONG BUT BASED ON WHAT PEOPLE ARE EXPECTING FROM THE FED THEY ARE GOING TO CONFIRM THAT IF THERE WERE GOING TO SKIP. IT DOESN'T NECESSARILY LEAD INTO SOME OF THE OPTIMISM AS WE HEARD EARLIER THE EXUBERANCE IN RISK MARKETS. >> THE ACTION TODAY I WOULD SAY IT'S GOING TO BE ALL IN THE PRESS CONFERENCE AND NOT THE STATEMENT. IF YOU LOOK OF THE PERIOD OF THE LAST YEAR, GO THROUGH THE LAST EIGHT FED MEETINGS WHATEVER THE MARKET DOES WE WOULD CALL THESE STATEMENT PERIODS. GOES INTO A U-TURN ONCE CHAIRMAN POWELL TAKES THE MIC SO HE WALKS BACK SOME OF THE POLICY MOVES TRIES TO EXPLAIN A BIT. WHATEVER IT MIGHT BE. JONATHAN: GETS CONFUSED. >> WERE CONFUSED. I THINK WE GET MORE OF THAT TODAY. LOOK AT THE PRESS CONFERENCE INVOKING -- FOCUS LESS ON STATEMENTS. JONATHAN: MIKE SCHUMACHER OF WELLS FARGO, THANK YOU FOR THAT. LOOKING FOR THAT IN A BIG WAY. SOMETHING I'M HESITANT TO DO A LOT OF THE TIME BUT JUST LOOKING AT WHAT HAPPENED WITH THE GILT MARKET -- GILT MARKET. IF YOU WANT TO CALL IT THAT. HAD ALL OF THIS DRAMA ABOUT WHAT WOULD HAPPEN IF THE BANK OF ENGLAND AND WHAT WOULDN'T HAVE BEEN WE ARE TALKING ABOUT THE PROSPECT OF SIX PERCENT INTEREST RATES. LET'S TALK ABOUT WHAT WE HAVE BEEN GETTING WRONG OVER THE LAST 12 MONTHS. WE THOUGHT IF YOU WENT TO FIVE, ECONOMIES WOULD CRACK. THE U.S., THE U.K. EUROPE, WE THOUGHT THEY WOULD STRUGGLE TO GET THROUGH TOO. SO WE GOT THAT WRONG. THEN WE LOOKED AT SOME CENTRAL BANKS ELSEWHERE THAT PAUSED, STARTED TO COMMUNICATE CONDITIONAL PAUSE AND WE THOUGHT THEY WERE DONE. THEN THEY RESTARTED SO WE GOT THAT WRONG. THEN YOU HEAR FROM MICHAEL SCHUMACHER THE U.S. IS SHOWING MORE RESILIENCE THAN PERHAPS OTHER PLACES WORLDWIDE AND YET WE BELIEVE THEY'RE GOING TO CUT OR THAN EVERYWHERE ELSE. WHAT'S THAT ABOUT? LISA: WE STILL BELIEVE IN THE LAG EFFECT THAT HAVE NOT TRANSPIRED TO THE DEGREE THEY WERE SUPPOSED TO. THIS IS GOING TO BE DETENTION FOR THE FEDERAL RESERVE. DO THEY STILL BELIEVE IN A FRAGILITY THAT IS ANYTHING BUT WE ARE SEEING, ANYTHING THAT WHAT WE ARE SEEING IN LABOR MARKETS? THAT IS THE DISTINCTION BETWEEN THE U.S. THAT GOT AHEAD OF THE OTHER CENTRAL BANKS. JONATHAN: IF YOU THINK ABOUT THE GUILT CRISIS AT THE END OF SEPTEMBER TWO DAYS FROM THE PEAK OF THE TWO YEAR YIELD, TABLE BOTTOM TO. CABLE RIGHT NOW IS THAT 125 IS A BIG DIFFERENCE PEOPLE ARE ASKING WHY. WE'VE GOT THESE YIELDS HIGHER AND THERE'S ALL THIS PANIC ABOUT THE CENTRAL BANK. THIS IS COMING SO FAR WITHOUT FINANCIAL INSTABILITY. IT'S COMING WITHOUT THE RISK OF POLICYMAKERS STILL INFLATION PROBLEM AND IT'S COMING WITH THE FULL BELIEVE THAT THE BANK OF ENGLAND IS GOING TO HAVE TO DO SOMETHING ABOUT IT BY HIKING INTEREST RATES. THAT'S THE DIFFERENCE BETWEEN NOW AND WHAT TO PLACE IN SEPTEMBER. TOM: THE KEY TODAY IS THE 6%. MOVING FROM THE FIVE SHORT-TERM NO ONE CAN IMAGINE GETTING UP TO THE 6% LEVEL THAT YOU MENTIONED. JONATHAN: IF YOU'RE JUST TURNING INTO THE PROGRAM, WELCOME, GOOD MORNING TO YOU. EQUITY FEATURES POSITIVE BY AROUND 0.1%. COMING UP VERY SHORTLY, DAVID BADEN, JONATHAN PINGEL OF UBS, HIGHLY CONCENTRATED U.S. TECH RALLY MASKING THE VALUE STILL EMBEDDED IN EQUITIES FOLLOWING THE 2022 BEAR MARKET. NOT THE FIRST OF HEARD THAT THIS WEEK TAKEI. TOM: A LOT OF RESPECT FOR DAVID BALIN. YOU HAVE TO PARTICIPATE IN THE MARKET. THERE'S A WHOLE GROUP OF PEOPLE SAYING I'M OUT OF THE MARKET WHEN DO I GET BACK IN? A LOT OF PEOPLE ARE SAYING YOU HAVE TO BE IN THE MARKETS OK. WHERE? HOW MUCH NVIDIA CAN ANYONE ON? LISA: RIGHT AHEAD OF A FED THAT IS TALKING ABOUT THE NEED TO REALLY BRING DOWN INFLATION AND THE LABOR MARKET. THIS IS A COLLISION COURSE THAT IS PROBABLY THE MOST UNDERRATED COLLISION COURSE OF ALL YEAR BECAUSE PEOPLE HAVE STOPPED TALKING ABOUT IT. THEY'RE LIKE AI IS GOING TO MASK EVERYTHING. JONATHAN: WELL IT HAS SO FAR. BUT SEE HOW COMMITTED THEY ARE TO GETTING INFLATION BACK DOWN TO 2%. DO THEY GO DOWN THE PIMCO ROUTE? WHICH IS TOLERATE TO POINT SOMETHING? AND IF THEY DO IT COULD SUPPORT GROWTH AND WE HAVE A DIFFERENT STORY. TOM: THEY WILL DENY THAT THE HALLWAY. CANON IS 2%. JONATHAN: THAT'S A HOPE AND A PRAYER. EQUITY FEATURES POSITIVE. 0.1%. >> IT'S HEARD TO TALK ABOUT A SKIP. IT'S POSSIBLE BUT IT IS NOT OUR VIEW. IF IT IS TRYING TO TAKE STOCK OF WHAT ACTUALLY IS HAPPENING IN TERMS OF TAKING SECTOR START IT'S GOING TO TAKE MORE TIME TO SEE THAT. AT THE SAME TIME I THINK THEY HAVE TO TELL US THAT THEY HAVE NOT DECLARED VICTORY ON GETTING INFLATION DOWN. THERE IS PRESSURE FOR THEM TO MOVE MORE. JONATHAN: CHIEF ECONOMIST OVER AT J.P. MORGAN WEIGHING IN ON THE FEDERAL RESERVE LOOKING FOR A PAUSE LATER. SOME PEOPLE SAY I THINK MAY BE WE SHOULD BE HIKING INTEREST RATES WHICH SETS THE STAGE FOR A BIGGER DEBATE. IT CAN MAKE ANOTHER CALL. THEY DON'T WANT TO COMMUNICATE JUST YET. CONSENSUS VIEWED. THIS HIKING CYCLE IS OVER AFTER STARTING IN MARCH OF LAST YEAR. TOM: BUT WILL HE COMMUNICATED IN THE PRESS CONFERENCE? IT WILL BE INTERESTING TO SEE HOW IT PLAYS OUT. JONATHAN: THE NEWS CONFERENCE COMING UP A LITTLE BIT LATER. TOM: WE AIM TO PLEASE HERE AND WHAT WE DO BEFORE WE GO TO APPLE IS TO GO BACK AND LOOK AT THE INTERN REPORT TALKING ABOUT SHELL. IS IT ROYAL DUTCH SHELL? JONATHAN: I THINK OUR DSA IS THE TICKER IS IN IT? TOM: 2000 19 -- 2019 AT THE -- I THINK THIS WAS PUBLISHED IN 2020. I SEE PEOPLE WITH HIGH HOPES AND SOCIAL COMMITMENT. WE WHOLEHEARTEDLY SUPPORT THE GOAL OF THE PARIS AGREEMENT. JONATHAN: THAT WAS THE OLD CEO RIGHT? TOM: BLOOMBERG SURVEILLANCE HAS BEEN INVOLVED WITH THE PARIS AGREEMENT. WE WERE THERE FOR IT BUT THAT IS O WHAT HE IS WRITING ABOUT TODAY. JONATHAN: THE NEW GUY DOESN'T SOUND LIKE THE OLD GUY. IT'S A REALITY CHECK AS WELL. ALL THE HAPPY TALK ABOUT TRANSITIONING AWAY FROM SOME OF THE STUFF IS TREMENDOUSLY DIFFICULT AND SLIGHTLY MISLEADING FOR A LOT OF PEOPLE AS WELL. CAN I GET YOU SOME NEWS OUT OF GOOGLE TOO? GOOGLE ACCUSED OF ABUSING -- THE EU COMPETITION SAYING GOOGLE IS PRESENT AT ALMOST ALL LEVELS OUR PRELIMINARY CONCERN IS THAT GOOGLE MAY HAVE USED ITS MARKET POSITION TO FAVORITES ON INTERMEDIATION SERVICES. HASN'T THIS BEEN FOREVER? YOU KNOW HOW PEOPLE FEEL ABOUT THIS SO LET'S ADDRESS THE ELEPHANT IN THE ROOM THERE'S ABOVE THIEF IN THE UNITED STATES THAT EUROPE'S HARSH ON THESE FIRMS BECAUSE THEY ARE NOT EUROPEAN FIRMS. TOM: MAY BE. JONATHAN: EUROPE DOESN'T HAVE THEM. TOM: THEY ARE HARSH ABOUT THE SCOPE AND SCALE OF THEM WHETHER IT'S GOOGLE OR APPLE. LISA: IT REALLY TELLS YOU HOW MUCH CARE ALPHABET SHARES DOWN TO TENSE OF A PERCENT. LIKE WHO CARES. TOM: LET'S GET TO A $3 TRILLION QUESTION. HE GOT AND ATTIRE -- ATARI AND TURNED IT INTO A MAC PRO. WE NEED AN UPDATE HERE ON THE FACTOR OF APPLE UP 40% OF THE JANUARY BEGINNING OF THE YEAR THERE'S A PERSISTENCY TO THE TREND. WHAT'S YOUR TARGET AS THE TREND CONTINUES? DO THEY BLOW THROUGH A $3 TRILLION EVALUATION? >> MAY BE THE WORD OF THE DAY IS PAUSE. I THINK APPLE SURE IS WE'LL TAKE A PAUSE HERE. THE GOOD NEWS FROM THE NEW PRODUCT LAUNCH WHICH IS THE MOST SIGNIFICANT PRODUCT WATCH SINCE THE IPHONE 2007 IS PRICED INTO THE STOCK. THE STOCK IS TRADING AT A PREMIUM. AND ON A SALES BASIS. I THINK THE GOOD NEWS IS PRICED INTO THE STOCK. I'M LOOKING FOR SURE IS TO TAKE A BREATHER. TOM: THE CORE UNIT THING IS THE IPHONE. I BELIEVE THERE'S AN IPHONE LANGUAGE COMING OUT MAYBE A NEW IPHONE CHIP? CAN THEY KEEP INNOVATING THE IPHONE TO KEEP THE UNIT SALE PERSISTENCY GOING? >> THE ANSWER IS YES BUT ON A NEAR-TERM BASIS WHAT DOES SUCCESS LOOK LIKE FOR APPLE? AT LOOKS LIKE SALES GROWTH DEFINITELY NOT DOUBLE DIGIT SALES GROWTH. YOU HAVE A STOCK TRADING AT A PREMIUM MULTIPLE RELATIVE TO ITS HISTORY. -IS DOING AMAZINGLY WELL IN A CHALLENGING ENVIRONMENT TAKING ADVANTAGE OF THE NETWORKS LEVERAGING THEIR 5G NETWORKS OF VERIZON AND SUCH AND HELPING CONSUMERS BY THE FUNDS. SUBSIDIZING THEM APPLE OFFERING BUY NOW PAY LATER. IPHONE CAN CARRY THE DAY BUT AGAIN I THINK A LOT OF THIS GOOD NEWS IS ALREADY PRICED INTO THE STOCK. LISA: WILL APPLE USE ARTIFICIAL INTELLIGENCE AND CHATGPT TECHNOLOGY TO MAKE SEERY BETTER AND TO MAKE IT TOMORROW SORT OF INTERTWINED ASPECT OF THE IPHONE? >> THE ANSWER IS YES. I THINK THAT WHEN WE STARTED THE DISCUSSION OF ARTIFICIAL INTELLIGENCE, I PUBLISHED 25 PAPERS ONE A COUPLE YEARS BACK WAS ON THE POWER OF ARTIFICIAL INTELLIGENCE. APPLE I THINK APPROPRIATELY DISCUSS THAT IT WAS A HORIZONTAL TECHNOLOGY NOT A VERTICAL ONE. IT MAKES ALL OF ITS PRODUCTS BETTER, HOPEFULLY IT MAKES SIRI BETTER. LISA: WE ALSO TALK ABOUT AUGMENTED REALITY THE GOGGLES PEOPLE COMPELLED ON AND EXPERIENCE A NEW AND IMPROVED WORLD. WHAT IS THE FUTURE OF THIS? EVERYONE TALKS ABOUT HOW THIS IS REVOLUTIONIZING THINGS IN A WAY THE IPHONE DID BUT WERE NOT UNDERSTANDING THE IMPLICATIONS. CAN YOU GIVE US THE MARKET CASE? WHO WINS AND WHO LOSES? >> I LIKE TO THINK ABOUT IT I THE VIEW OF THE METAVERSE. IT WILL BE A THING NOT THE THING. THEY COULD HAVE IMPLANTED CHIPS WHICH IS SOMETHING ELON MUSK IS WORKING ON. ONE OF THE CONSUMERS WILL ACCESS THE INTERNET THAT IT WILL BE THE DOMINANT WAY I THINK WINTER -- WINT NER IS THAT A RVR. MUCH LOWER PRICE POINT ITEM. LISA: WE HAD A PARTNER OF GOLDMAN SACHS YESTERDAY CHEESEMAN TALKING TO COMPUTER SCIENTISTS AND HER SENSE THAT PERHAPS PEOPLE ARE OVERLY OPTIMISTIC ABOUT THE FUTURE OF OUR ARTIFICIAL INTELLIGENCE AND WITH THESE TECHNOLOGIES CAN ACTUALLY ACHIEVE RELIABLY DO YOU FEEL LIKE IT'S BEEN OVERPLAYED AT LEAST TO THIS POINT? >> MY CONCERN ABOUT IT IS AS A CONSUMER WHO GREW UP WITH SKYNET BUT MY PRIMARY CONCERN IS WHAT HAPPENS TO OUR DISPLACED WORKERS IF WE TRULY BECOME A FULLY AUTOMATED OR MUCH MORE AUTOMATED SOCIETY? WAS GOING TO HAPPEN TO THE ECONOMY AT 25% OF THE WORKFORCE IS DISPLACED BY AUTOMATION? I THINK THERE IS WAY TOO MUCH HYPE ON WHAT IT CAN MEAN. I THINK MACHINE LEARNING IS THE ABILITY TO SEPARATE WHAT IS A CAT, WHAT IS A DOG, THINGS OF THAT NATURE. I THINK THE CHAT FOR CUSTOMER SERVICE IS FLAWED. A CHAPPED RESEARCH HAS ELEMENTS THAT ARE FLAWED AND MAY ALWAYS BE FLAWED. USED RESPONSIBLY I THINK THERE'S GOING TO BE A LOT OF CHALLENGES INCLUDING AN INCREASE IN AUTOMATION. JONATHAN: 3499 MAKES IT SOUND CHEAP. THREE POINT $5,000 TOM HOW ARE PEOPLE GOING TO PAY FOR THIS? >> IF YOU LOOK BACKWARDS WE CAN SEE WHY APPLE HAS DONE THE CREDIT CARD BY NOW PAY LATER, THINGS OF THAT NATURE. I'M OF THE BELIEF THAT APPLE WILL OFFER YOU OF SUBSCRIPTION. YOU MIGHT GET A VISION PRO HEADSET OR THE LATEST IPHONE AND THEN IF YOU ARE PAYING 250 A MONTH OR WHATEVER IT IS YOU MAY NOT THINK ABOUT THE TWO GRAND YOU ARE PAYING FOR THE IPHONE OR THE 3.5 K YOU ARE PAYING FOR THE VISION PRO. JONATHAN: I HAVE TO SQUEEZE IT IN. THAT'S BEEN DEVELOPED WITH THE HEADSET ALREADY. WHAT IS IT MEAN FOR THE EVALUATION OF THE COMPANY AS YOU START TO GET MORE RECURRING REVENUE IN THAT FASHION? >> THE LEADERSHIP HAS BEEN HIGHER MULTIPLE HE'S ACHIEVED BY ADDING SERVICES THE QUESTION IS WILL HE BE ABLE TO COMPLEMENT FUTURE HARDWARE AND SERVICES OFFERINGS TO MASSIVELY INCREASE THE SALES BASE AND ON A HIGHER MULTIPLE INCREASE THE STOCK? RIGHT NOW WE ARE TAKING A WAIT-AND-SEE ATTITUDE. JONATHAN: TOM, THANK YOU. PEOPLE TALKING ABOUT THIS FOR A WHILE. I THINK I HAD A CONVERSATION WITH YOU SEVEN OR EIGHT YEARS AGO ABOUT HARDWARE AS A SERVICE, RECURRING REVENUE. THEN YOU START TO SPEND THAT KIND OF MONEY OFTEN YOU GET A BETTER VALUATION. TOM: WALK WHEREVER YOU WALK, HOW MUCH APPLE PRODUCT IS IN YOUR EYESIGHT? YOU'RE WALKING DOWN THE STREET HOW MANY PEOPLE ARE GLUED TO THEIR APPLE IPHONE AS A PHYSICAL ENTITY? THEY HAVE BEEN ABLE TO MAINTAIN MARGINS. I JUST LOOKED AT THE CASH FLOW FROM PRE-COVID THEY HAVE GONE FROM 58,000,000,002 100 MILLION IN FREE CASH FLOW. JONATHAN: WHAT'S THE SUBSCRIPTION GOING TO BE FOR THE HEADSETS? LISA: 3499. [LAUGHTER] 3499, YES. >> WE ARE SELLING RALLIES. >> THERE ARE INVESTMENT OPPORTUNITIES TO BE MADE, TO BE IDENTIFIED. >> ULTIMATELY THE NEXT COUPLE OF YEARS ARE LIKELY TO BE GOOD FOR EQUITIES. >> THE U.S. HAS GOT AN CHALLENGE. >> INFLATION IS COMING DOWN IT TAKES PRESSURE OFF OF THE FENCE TO CONTINUE TO RAISE INTEREST RATES. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. TOM: GOOD MORNING, EVERYONE. ON RADIO, ON TELEVISION. OUR COVERAGE AT 2:00 P.M. WE WILL START AT 1:30. SO MUCH TO TALK ABOUT WITH SPIRITED CONVERSATION IF YOU ARE NOT IN THE STOCK MARKET DAVID BAILEY AND WILL BE HER IN A MOMENT HE HAS NAILED OUR DISSIPATION IN THE MARKET IS NECESSARY. YOU BROUGHT THAT UP EARLIER IT'S A BULL MARKET DOES IT MATTER TO JEROME POWELL? JONATHAN: SKIP, PAUSE, IT'S NOT THE END. THEY MIGHT TAKE A PAUSE ON HIKED INTEREST RATES. AFTER TAKING INTEREST RATES, NUMBERS MATTER. MARCH 16, 2022 THE S&P 500 CLOSING THAT DAY 43.57 CLOSED YESTERDAY 500 BASIS POINTS LATER. BANK FAILURES, ALL THIS CONVERSATION TALK CLOSED YESTERDAY AT 4369. TOM: THE FED IS LIKE A GREAT MARRIAGE. A GREAT MARRIAGE IS NO DISSENT AND WE HAVE NO DISSENT OF THE FED TODAY. JONATHAN: YOU MIGHT GET SOME DISSENT A LITTLE BIT LATER. MAY BE FROM A FED GOVERNOR TOO. THANKS FOR THE TEAM HERE AT BLOOMBERG FOR COMING UP WITH THIS STUFF. SINCE 2005 IT'S BEEN THAT LONG WILL CHAIRMAN POWELL WELCOME SON DISSENT TODAY? JUST TO COMMUNICATE TO PEOPLE THERE ARE PEOPLE ON THE COMMUNITY? TOM: I AGREE HE WILL GO TO THEM AND SAY IF YOU WANT TO DO IT THIS IS THE TIME. YOUR OBSERVATION HERE ON FUTURES UP SIX THERE IS A TERRIFIC INTO THE MARKET NASDAQ UP 2/10 OF A PERCENT. YOU MENTIONED EARLIER ALL THE CLUE ABOUT REAL ESTATE AND INKS BONDS DO WELL ON A TWO BASIS. LISA: AND YOU ARE SEEING THIS RALLY PERSIST. THE FED WILL PROBABLY HIKE AT 25 BASIS POINTS PUT OUT A NOTE SAYING THEY MIGHT SKIP IT IT'S THE WRONG DECISION THAT MEANS THEY ARE NOT DATA-DEPENDENT. AND HE WRITES A SURPRISE FED RATE HIKE HAS NOT BEEN SEEN SINCE THE 1990'S BUT THE AGAINST FED POLICY SURPRISE IN 30 YEARS MIGHT BE APPROPRIATE GIVEN THE HIGHEST INFLATION IN 40 YEARS. TOM: THAT'S WHAT WE SEE HERE AND OF COURSE THERE CAN BE EVENTS THAT MAKE US MORE OPTIMISTIC. IS THIS AN OPTIMISTIC EVENT AT THIS MOMENT? JONATHAN: SECRETARY BLINKEN TO VISIT CHINA AND THE U.K. JUNE 16. DIG INTO 21ST. JUNE 16 TO JUNE 21. SECRETARY BLINKEN TO VISIT CHINA AND THE UNITED KINGDOM. TOM: YOU WONDER WHICH MEETING WILL BE MORE STRESSFUL. JONATHAN: I EMAGIN BASED ON RECENT EVENTS IT'S GOING TO BE CHINA. HE WAS SET TO GO TO CHINA AND THEN WE HAD THE SECRET SPY BALLOON WHICH WAS NOT A SECRET SO SWEET SO IT FOLLOWED -- WE ALSO IT FLYING THROUGH THE AIR. AND THEN THE ADMINISTRATION CONFIRMING. THE ISSUE I HAD WITH THE SITUATION AT THE TIME IS THAT IT WASN'T THE FIRST TIME SPY BALLOON FLEW ACROSS THE UNITED STATES FROM CHINA. THIS WAS THE FIRST TIME WE ALL FOUND OUT ABOUT IT AND SECRETARY BLINKEN WAS GOING ANYWAY SO HE HAD TO CANCEL HIS APPEARANCE IN CHINA BECAUSE WE HAD ALL SEEN IT. AND NOW HE'S GOING ANYWAY BECAUSE IT'S HARDLY A SHOCKER. IT'S ONE OF THOSE THINGS WERE SOMETIMES YOU MANAGE FOREIGN POLICY FOR DOMESTIC PR PURPOSES AND I THINK THAT WAS A GREAT EXAMPLE. TOM: DOMESTIC QUIET IS A GOOD AND BEAUTIFUL THING. JONATHAN: STOCKS ARE UP AND HAVE BEEN FOR THE PREVIOUS FOUR DAYS. CAN WE MAKE IT FIVE? GOING INTO THE FED A LITTLE BIT LATER A TOUCH LOWER THE TENURE 380 95. TOM: GLOBAL WALL STREET TO RESET. CHARGE OF THE BULL MARKET GLOBAL BULL. YOUR CREED, DAVID, IS YOU HAVE TO PARTICIPATE. YOU HAVE TO BE IN THE MARKET. SPEAK TO PEOPLE NOW WHO MISSED THIS FROM OCTOBER. >> IF YOU'RE COMFORTABLE IN CASH YOU REALLY MISSED THE WHOLE MESSAGE ABOUT WHAT'S GOING TO HAPPEN IN 23, 24, 25 WHEN WE GO INTO A HIGHER GROWTH MODE COMING INTO WHAT IS NOW A ROLLING RECESSION. IT'S TEMPTING TO LEAVE YOUR MONEY IN CASH OR IN THE MONEY MARKET FUND AND TAKE A LOOK AT THAT RETURN THIS YEAR VERSUS WHAT'S HAPPENING IN THE MARKET. YOU PROBABLY MADE 2% ON YOUR MONEY MARKET FUNDS BUT SO YOU WOULD HAVE MADE BETWEEN SIX AND 11% IN A NORMAL PORTFOLIO. NO ONE CAN PREDICT WHAT MARKETS ARE GOING TO DO YOU DON'T WANT TO BE OUT OF THE MARKETS. THAT'S WHY YOU HAVE A PORTFOLIO AND YOU TRADE OPPORTUNISTICALLY AROUND IT. YOU NOT KNOWING NO ONE WOULD HAVE PREDICTED THIS MARKET. I THINK IT'S CLEAR NOW THE MARKET TIMING IS A VERY BAD IDEA. LISA: AT THIS POINT PEOPLE ARE WONDERING HOW MUCH THE FED IS GOING TO CARE ABOUT THE EXUBERANCE OF SOME PEOPLE SEE AND CERTAIN STOCKS AND MAYBE IT WILL SEARCH A BROADEN OUT. HOW MUCH DO YOU SEE THE RALLY AS BEING REALLY SUSCEPTIBLE TO A SHOCK FROM THE FED THAT MAY NOT BE DONE, THAT MIGHT ACTUALLY GO QUITE A BIT MORE? >> YOU HAVE ALL DONE HERE AND MEDIA LIES HAS MADE IT CLEAR WE WERE GOING TO HAVE A RECESSION. IT'S BEEN WELL TELEGRAPHED AND THE DISCUSSION AROUND WHAT THE FED IS GOING TO DO -- JONATHAN: ARE YOU BLAMING THE MEDIA? >> WE TELEGRAPHED WHAT'S GOING TO HAPPEN. THE TRUTH IS WHAT'S GOING ON NOW AND THIS IS PARTLY WHAT'S HAPPENED WITH AI. PARTLY WHAT'S HAPPENING AND SOME INDUSTRIES ARE SHRINKING, SOME INDUSTRIES ARE GROWING. WE ARE HAVING THE RECESSION EVEN AS WE HAVE OTHER PARTS OF THE ECONOMY GROW. WHEN WE GET TO 24 WE WILL BE IN A GROWTH ENVIRONMENT WITH EARNINGS GOING UP. THE MARKET YOU CAN START TO SEE IT BROADENING. NOW YOU'RE SAYING THAT S&P 600 MOVING UP. THAT'S A ME IS AN INDICATION OF THE BROADENING THAT'S INDICATIVE OF WHAT'S GOING TO HAPPEN IN 2024. LISA: WITH RESPECTS TO EARNINGS, ANY SORT OF DOWNTURN THAT MIGHT HAVE PERCOLATED INTO A REVOLVING ROTATION OF SECTORS HOW MUCH DOES THE FED KILL THIS? WE WERE TALKING EARLIER ABOUT THE COLLISION COURSE THE FED VERSUS THE MARKETS IN VERSUS THE FED THAT INFLATION IS NOT COMING DOWN AS QUICKLY AS THEY THINK. DO YOU SEE THIS AS COMPATIBLE OR IS THIS A COLLISION COURSE IS GOING TO HAVE TO RESOLVE IN A MESSY WAY? >> WANTS TO LOWER INFLATION WHICH IS GONE FROM 9% HUBBELL A DOWN TO 4%. NOW WE HAVE RENTS ROLLING OVER AND WITH THE FEDS LAST STAND IS GOING TO BE IS ABOUT WAGES. THAT'S WHAT THEY'RE GOING TO FOCUS ON. I THINK THEY WILL CAUSE US TO HAVE UNEMPLOYMENT FINALLY AT THE END OF ALL OF THIS WHICH IS WHAT WE'RE LOOKING FOR. IT'S TAKING A VERY LONG TIME TO GET THAT THE MARKET HAS BEEN VERY RESILIENT. I DON'T THINK THAT THESE ARE INCOMPATIBLE. I THINK WE WILL HAVE EARNINGS RISE IN 24. WE ARE GOING TO HAVE A VERY SHALLOW RECESSION AND THUS WHAT'S GOING TO HAPPEN. TOM: PORTFOLIO 101 IS DIVERSIFICATION YOUR ENEMY RIGHT NOW? SHOULD YOU HAVE A MORE FOCUSED PORTFOLIO OR UTILIZE DIVERSIFICATION? >> THIS IS THE MARKET FOR DIVERSIFICATION. YOU CAN EXTEND YOUR DURATION, EXTEND YOUR YIELDS AND THAT WILL HAVE A CHRISTIAN WHEN EQUITIES GO DOWN. YOU WANT TO BE NEW PART TO THE MARKET. SMALL, IDIOM SIZED STOCKS. YOU WANT TO GET EXPOSURE TO ASIA IF YOU BELIEVE THE DOLLAR IS GOING TO ALL OF THESE ON A RELATIVE BASIS. THE TOTAL MARKET VALUE OF DOING THAT IS STRONGER MORE RESILIENT PORTFOLIO. TOM: I WILL TAKE THE FIRST TO GO TO THE TOTAL VALUE OF THE S&P. FOR MORE OUR AUDIENCE IS NOT LOOKING AT THAT THEY WANT TO KNOW SHOULD THEY LOAD THE THAT ON APPLE AND ITS BRETHREN? >> I THINK THAT RESULT IS KIND OF BEHIND US. THESE STOCKS ARE VERY FULLY VALUED ON MANY DIFFERENT BASES BUT THE STOCKS, THE NEXT GROUP OF TRILLION DOLLAR COMPANIES GOING FROM 100 TO 200 BILLION ARE RIGHT THERE AND THERE ARE GOING TO BE A SET OF COMPANIES IMPACTED BY THE EFFICIENCIES ASSOCIATED WITH WHAT AI ACTUALLY DOES. YOU CAN BEGIN TO PROJECTED ACROSS INDUSTRIES WHERE THERE IS GOING TO BE REAL VALUE ADDED TO THOSE COMPANIES. TOM: APPLE, 31 MULTIPLE. THAT IS HOW IT'S PUSHED AWAY. JONATHAN: UBS CUT TO NEUTRAL BASED ON SOME OF THAT. TOM: JUST STUNNING. JONATHAN: I ALWAYS ROLL MY EYES WHEN PEOPLE SAY THE MEDIA AND RECESSION. I'M A SENSITIVE GUY. >> THE GOVERNMENT HAS GONE OUT AND TALKED ABOUT THE RECESSION SO FAR IN ADVANCE OF PEOPLE BEGIN TO PLAN FOR IT. THEY BEGIN TO RATIONALIZE WHEN THEY WERE GOING TO SPEND MONEY THEY KNEW IT WAS GOING TO COME AND THEY HAVE BEEN ABLE TO HANG ON TO HIGHER PRICES. JONATHAN: IF YOU MEAN SHINING A LIGHT I TOTALLY AGREE. EVERY SINGLE DAY. EVERY SNOW DAY. TOM: THEY DON'T [LAUGHTER] LISA: JUST BECAUSE PEOPLE GOT THE RECESSION CALL FROM DOESN'T MEAN IT WILL ALWAYS BE WRONG AND THIS IS THE REASON WHY I THINK THIS MARKET IS SAYING THEY ARE SICK OF TALKING ABOUT RECESSION. IT DOESN'T MEAN ECHOES OF WAY. JONATHAN: IT'S THREE MONTHS AWAY. IT'S ALWAYS THREE MONTHS AWAY. NEXT QUARTER. DEAL WITH IT. LISA: JAMIE DIMON, FIVE YEARS. JONATHAN: IT'S ALWAYS FIVE YEARS. HE'S ASKED AND IT'S FIVE YEARS. TOM: I WOULD GO WITH THAT. JONATHAN: HATED THE SAME IT WOULD BE LIKE FIVE YEARS AND ULTIMATELY SOMEONE HAS TO DECIDE. TOM: SERIOUSLY YOU WONDER IT'S NOT TO MAKE A JOKE ABOUT IT BUT THE PEOPLE HAVE BEEN BEARISH WHEN DO THEY CHANGE THEIR TUNE? WHAT IS THE MECHANISM TO ESCAPE FROM A PARISH CALL? JONATHAN: WE MENTIONED JP MORGAN. HIS CASH TRUCK THAT WE'VE BEEN DISCUSSING IT WAS SO ATTRACTIVE AT THE START OF THE YEAR. STOCKS JUST RIPPED AND YOU'RE THINKING ONE 800 NEED TO PUT SOME MONEY TO WORK AND THAT'S WHY THIS CONVERSATION ABOUT AN EQUITY MARKET HAPPEN. TOM: I'VE GONE BACK TO THE ANALOG OF 75, UP TO 76. I'M NOT SAYING IT'S GOING TO HAPPEN THAT THAT'S THE CONSTRUCTIVE DEBATE IN JULY. LISA: HOW DO YOU MOVE AWAY FROM A BEARISH VIEW? AI. IT CHANGES EVERYTHING. I'M GOING ALL IN. [LAUGHTER] JONATHAN: MONEY MARKET FUNDS, JUST REMEMBER A LOT OF PEOPLE ON FIXED INCOME HAVE AN INCENTIVE TO TELL YOU YOU CAN MAKE BETTER MONEY ELSEWHERE BECAUSE THE FEES ARE NOT GREAT. YOU NEED TO GET THE MONEY TO GO SOMEWHERE ELSE. THAT'S MY WORD ON THAT. IF YOU'RE JUST TUNING INTO THE PROGRAM ALL COMPARED -- WELCOME. COMING UP IN THE NEXT VERY. ALL OF THAT TAKING PLACE COMING INTO THE FED MEETING A LITTLE BIT LATER ON THIS AFTERNOON HIKE , SKIP, A PAUSE? I THINK WE ARE ALL ON THE SAME PAGE AT THE MOMENT. LISA: THE QUESTION MOVES ON ARE THEY DONE AND IT MOVES ON TO WE PRICED OUT GREAT PETS HOW MUCH MORE TO THEY HAVE TO DO IF THE LONG AND VARIABLE LAGS ARE NOT NECESSARILY AS SIGNIFICANT AS PEOPLE PREVIOUSLY THOUGHT MARKETS HAVE MOVED ON FROM THE BANKING CRISIS. I DON'T KNOW THAT THE FED HAS YET AND WHEN THEY DO HOW DOES THAT SHIFT AWAIT DISCUSSION? JONATHAN: AND WE STILL HAVEN'T ANSWERED THIS QUESTION. THE LONGER VARIABLE LIKE JUST HOW LONG ARE THEY? ARE THEY 30 YEARS LONG BECAUSE RATES ARE OFTEN? LISA: EXACTLY. TOM: WE HAVE A DRINKING GAME F. LISA: MAKE IT FUN. JONATHAN: LOOKING FORWARD TO THAT CONVERSATION IT IS ABOUT THREE OR FOUR MINUTES AWAY. EQUITIES HIGHER ON THE S&P THIS IS BLOOMBERG. >> AT THE BEGINNING OF THE YEAR WE CALLED FOR RECESSION COMING AND WE CALLED FOR PERSISTENT INFLATION WE ARE GOING TO SEE EVIDENCE OF THAT VERY SOON RECESSION IS COMING THAT MAY BE ALREADY HERE. THE BOTTOM LINE IS THERE ARE INVESTMENT OPPORTUNITIES TO BE MADE, TO BE IDENTIFIED. TOM: REALLY A KEY PHRASE, PERSISTENT INFLATION LISA ABRAMOWICZ AND TOM KEENE. WITH US WE MOVED TO A FED MEETING 2:00 P.M. THIS AFTERNOON WE WILL HAVE SPECIAL COVERAGE FOR YOU. BEFORE WE GO ALL EQUITY ALL THE TIME, LISA THE BOND MARKET I NEED THE DISBELIEF FORGET ABOUT PERSISTENT RATES BUT THE VICINITY HAS MENTIONED THE DREADED WORD SIX OF GETTING FROM FIVE POINT EXCESS NO ONE IS MODELING IF YOU GO TO 5.5 OR 5.6. OR EVEN TOUCH A SIX HANDLE. LISA: MARCH 1 THIS YEAR PEOPLE WERE TALKING ABOUT THE INTEREST RATES BECAUSE THE BANKING CRISIS. EVERYONE HAS MOVED ON AND MOVED INTO SOME OF THESE REGIONAL BANK STOCKS. AT WHAT POINT DOES THE FED LEAD INTO BANKING CRISIS, CREDIT CONTRACTIONS VERSUS THIS FEELING OF PERHAPS WE NEED TO REVISIT THE BELIEF IN THAT DREADED SIX HANDLE OR POTENTIALLY ART RESTRICTIVE RATES? TOM: IF YOU WANT TO WORRY YOU CAN LOOK AT PEOPLE MARKET EFFORT RIGHT NOW WE ARE SEEING MANY HOUSES JUST HIGHER THE MORGAN STANLEY SHOP THEY ARE NOT. MICHAEL WILSON IS CIO, AT MORGAN STANLEY AND ONE OF YOUR THEMES, MICHELSON, IS THERE IS A COMPLETE MISCAST ON THE INTEREST RATE GAME ADDRESSED BY THE FED TODAY. PERSISTENT INFLATION IS THAT A CORE REASON FOR YOUR CAUTION IN THE EQUITY MARKET? >> IT'S ACTUALLY NOT. OUR VIEW IS INFLATION IS GOING TO COME DOWN. IT'S NOT GOING TO BE GOOD FOR STOCKS BECAUSE THAT IS WHERE THE EARNING POWER HAS BEEN COMING FROM. THIS IS OUR BOOM BUST THESIS. WE EXPECTED INFLATION TO DRIVE A PROFITS BOOM AND NOW WHEN INFLATION COMES DONE YOU'RE GOING TO HAVE A PROFITS RECESSION. THAT'S REALLY WHERE WE ARE DIFFERENTIATED FROM AN EQUITY STANDPOINT. NOT LOOKING FOR ANYMORE HIKES REALLY THE REST OF THIS YEAR BUT A VERY SLOW PATH IN TERMS OF CUTTING NEXT HER. LISA: WHAT ARE YOU LOOKING AT GOING FORWARD IN TERMS OF CLIENT RESPONSES? HOW THEY PUSH BACK AGAINST THE BEARISHNESS THAT YOU'VE BEEN EXPRESSING? >> WHAT A WEIRD CISA WAGE AND -- SITUATION. A YEAR AGO JUST TO REMIND THE CENTER AS CALLING FOR A EARNINGS RECESSION AND WERE DISMISSED. THE ONLY DIFFERENCE NOT AS WE ARE SAYING IT'S GOING TO PERSIST FOR AS I THINK MOST PEOPLE KNOW THE EARNINGS RECESSION IS OVER AND WE ARE GOING TO SEE A RE-ACCELERATION OF GROWTH IN THE SECOND HALF OF THE YEAR. LISA: IN OTHER WORDS YOU'RE SAYING THAT YOU GOT IT RIGHT IF USED HER BOUT SOME OF THE TECH NAMES AND IF THERE WAS AN EARNINGS RECESSION THAT PLAYED OUT IN LOWER VALUATIONS YOU'RE SAYING IT'S GOING TO CONTINUE NOT NECESSARILY TALK ABOUT THE HEADLINE LEVEL OF THE S&P IS MUCH AS THESE PARTICULAR STOCKS FIGHTING AGAINST THE IDEA OF A BROADENING OUT IS THAT CORRECT? >> THE TECHNOLOGY STOCKS HAD THE BIGGEST EARNINGS RECESSION. IF YOU LOOK AT SOME OF THE TECHNOLOGY STOCKS THEIR EARNINGS WERE DOWN SIGNIFICANTLY IN THE FOURTH QUARTER. THEY HAD AN EARNINGS RECESSION LAST YEAR AND THE PRESUMPTION IS THAT'S OVER. IT'S GOING TO BE ACCELERATE. WE THINK INCLUDING TECH, OVERALL IT'S GOING TO PERSIST INTO THE SECOND HALF OF THE YEAR IT'S GOING TO GET WORSE BEFORE IT IMPROVES NEXT YEAR. TOM: ED HYMAN MOVING DOWN TO 3% THERE DAVID ROSENBERG IN TORONTO AS THAT -- IN THAT CAMP AS WELL. GET TO THE WILSON EARNINGS CALL TO GET TO 3900 OR WHATEVER AND TO ME IT'S ALL AT THE REVENUE. IS THE CORE OF YOUR CALL WITH YOUR SECURITY ANALYSTS THAT REVENUE GROWTH WILL DISAPPOINT? >> LAST YEAR THE EARNINGS RECESSION WAS ALL A COST ISSUE. THE BIG TAG -- TECH COMPANIES OVER INVESTED. THAT WAS A PROBLEM FOR DISCRETIONARY, CONSUMER DISCRETIONARY COMPANIES THAT OVER INVESTED KNOW WE ARE GOING TO SEE A TOPLINE DISAPPOINTMENT. MAYBE NOT A RECESSION BUT 0% GDP GROWTH EFFECTIVELY AND THAT'S GOING TO FEEL LIKE A RECESSION BECAUSE YOUR PRICING IS GOING TO FF OR A. THERE IS THIS ECONOMY BETWEEN GOODS INFLATION AND SERVICES INFLATION. GOODS IS BACK TO THE 2% LEVEL. THAT'S THE REVENUE GROWTH DISAPPOINTING. TOM: HOW DO YOU ALLOCATE HERE DO YOU PARTICIPATE IN THE MARKET OR IS CASH A COMFORTABLE PLACE TO BE? >> BOTH. TOM: THAT'S A STRATEGY. BOTH. >> IN ALL SERIOUSNESS CASH OFFERS YOU GREAT ADJUSTED RETURN THERE'S NOTHING WRONG WITH THAT BUT WE ARE FULLY INVESTED IN GROWTH TOO. TOM: I THINK THIS IS MISUNDERSTOOD, LISA. PEOPLE LOOK AT WILSON AND TAKE IT OUT OF THE MARKET. LISA: EVERY TIME HE COMES ON HIS IS A FULLY INVESTED IT'S NOT HIDING UNDER A MATTRESS. IF THERE IS A RECESSION AND NOBODY CARES, WHAT HAPPENS IF THERE'S AN EARNINGS DECLINE AND PEOPLE SHRUG IT OFF AND SAY WILL LOOK TO THE FUTURE AND THERE IS GOING TO BE THIS EXCEPTIONALISM AND WERE ALSO YOU GOING TO PUT YOUR MONEY? >> THIS IS WHY WE ARE IN A DIFFICULT SITUATION RIGHT NOW. IF WE LOOK AT 24 AND 25, THIS IS WHAT PEOPLE ARE GETTING EXCITED ABOUT. GREEN ENERGY, TRADITIONAL ENERGY, AND NOW OF COURSE AI. THIS IS EXCITING THE PROBLEM IS IT'S A COST FIRST AND THEN A PRODUCTIVITY BENEFIT. LISA: THIS IS SORT OF THE FRUSTRATION WHEN PEOPLE SAY THERE IS A DIVERGENCE THEY SAY WILL THE ON MARKET IS LOOKING AT THE NOW. IT DOESN'T LOOK VERY GOOD AND IT STUCK MARKETS ARE LOOKING AT 24 AND 25 WHAT IS THE CATALYST TO BRING THEM DOWN AT A TIME WHEN PEOPLE WILL LOOK PAST NEAR-TERM PAIN. >> > WE ALWAYS GET KIND OF CATEGORIZED CALLING THE LOW IN OCTOBER AND MARCH OF 2020 BECAUSE OF PRICE. WE ARE VERY DISCIPLINED MOST PEOPLE ARE NOT DISCIPLINED. THUS JUST THE NATURE OF THE MARKET. IT FEELS BETTER WHEN THEY ARE GOING OF IT FEELS BETTER TO BUY THINGS WHEN THEY ARE GOING UP AND THAT IS WHERE WE ARE NOW. THE RISK REWARD IS LOUSY. I THINK IT'S GOING TO BE PRICED WITH WILL CHANGE PEOPLE'S MINDS. MAYBE WE DON'T GET A FATTER PITCH THAT WERE HOPING FOR BUT WE ARE NOT WORRIED IT'S GOING TO RUN AWAY FROM US AND WE CAN BUY THE STOCK MARKET TOM:. TOM:I SEE A LOT OF INDICATORS THAT SAY PEOPLE ARE COMFORTABLE WITH MICHAELSON'S PAUSE AND AFRAID OF THIS BULL MARKET AND THEY ARE CAUTIOUS. WHAT IS THE BET THAT MORGAN STANLEY SEIZED BY THE INVESTMENT , BY THE HEDGE FUNDS? >> I MEAN I THINK ONCE AGAIN OUR VIEW IS I'M IN A POSITION OF LUXURY. WE HAVE ASSET ALLOCATION WHICH IS KIND OF MEASURED ON A LONGER-TERM BASIS SO I HAVE THE LUXURY OF TIME. OUR ASSET OWNER CLIENTS HAVE THAT ADVANTAGE AND THAT'S WHAT WE TRY TO TAKE ADVANTAGE OF. FOLKS WHO DON'T HAVE THE ADVANTAGE OF TIME TRY TO PARTICIPATE AT THE WORST POSSIBLE MOMENT. THE OPPORTUNITY THAT WAS CREATED MARCH 2020 IS BECAUSE PEOPLE WERE BEING FORCED TO DIVEST. WE WERE HAPPY TO PICK UP THE SHARES AT CHEAP PRICES. LISA: WHAT YOU THINK IS THE MOST OVERPRICED ASSET OF THE S&P RIGHT NOW? >> MOST PEOPLE ASSUME IT'S ONLY 10 STOCKS. THAT'S NOT TRUE. IS THE SAME AS THE MARKET WAITED MULTIPLE. IT'S A VERY BROAD OVERVALUATION. WE SAY SOME SECTORS ARE CHEAP THE ONLY ONES THAT ARE CHEAPER ENERGY AND FINANCIALS. THE QUESTION THERE IS WATER EARNINGS GOING TO DO? TOM: FOCUS ON ENERGY YOU GOT 20 SECONDS. >> I THINK ENERGY AT THE STOCK LEVEL, THERE'S OPPORTUNITIES. THE REGIONAL BANKING CRISIS CREATED OPPORTUNITIES AND I THINK THAT'S WHAT WE'RE TRYING TO DO NOW WERE TRYING TO FIND THESE ONE-OFF OPPORTUNITIES. TOM: THANK YOU SO MUCH. 3900 IS WHERE YOU ARE? >> 3900 YEAR AND, YES, SIR. STILL THERE. TOM: WILL YOU LET US KNOW IF IT CHANGES? >> YOU'LL BE THE FIRST CALL. TOM: IT'S ABOUT A MARKET OF OPINIONS. IT'S EXTRAORDINARY RIGHT NOW. LISA: IT IS EXTRAORDINARY ESPECIALLY TO PARSE THROUGH. WHAT ARE THE EVALUATIONS THAT MATTER AT A TIME WHEN THERE IS SUCH A BIFURCATED KIND OF MARKET? TOM: MR. BOOZMAN TALKED ABOUT I LOOK AT WALMART AND GO REALLY? PLEASE STAY WITH US IT IS FED DAY. >> "BLOOMBERG SURVEILLANCE." THANK YOU FOR JOINING US. THE CONSUMER PRICE INDEX AND THE PPI IS CPI YOU HAVE TWO THINGS TO LOOK AT. CORE AND TOP LINE. WITH PPI, TRADITION AS A LOOK AT THREE DIFFERENT ITEMS THAT HAVE BEEN AMENDED OVER THE YEARS. ONLY ONE PERSON I KNOW, EXPERT ON CPI, PPI, AND THAT IS MICHAEL MCKEE TO HELP US WITH THE BUSINESS INFLATION RIGHT NOW. MICHAEL: GOOD MORNING. PPI FINAL DEMAND FALLS .3% WHICH IS A DROP FOR INDEX OF .2% A MONTH BEFORE. WAITING FOR THE DETAILS TO DROP BUT I AM SURE IT IS PROBABLY ENERGY RELATED. THEIR ENERGY -- CORE RATE X ENERGY FOOD AND TRADE COME IN FLAT AT 0.0 PERCENT DOWN .2% GAIN. BOTH NUMBERS BELOW WHAT ANALYSTS HAD EXPECTED. YEAR-OVER-YEAR FINAL DEMAND FALLS TO 1.1%. HISTORICAL ON THAT IN A SECOND. THE CORE FALSE 2.8% -- FALLS 2.8% FOR THE YEAR. WE ARE SEEING A BIG DROP IN PRICES AT WHOLESALE LEVEL. THEY DO NOT TRANSLATE THIS DIRECTLY -- DIRECTLY INTO CONSUMER PRICES BECAUSE MIDDLEMAN HAS SOME SAY BUT IT IS A SIGN LOWER-LEVEL PRICE FROM BOTTOM UP PRICES ARE STARTING TO FALL BACKWARDS. IT WILL HE REINFORCE THE FED IDEA THAT MAYBE THEY PAUSE TODAY . TOM: I WOULD DO THE MARKETS RIGHT NOW. EQUITY MARKET THERE IS A LIFT BUT NOT ALL THAT MUCH. BOND MARKET IT IS A BOOM MOMENT. TWO YEAR YIELD COMES IN NICELY. WHAT I HAVE HERE IS A READJUSTMENT ON THE 10 YEAR TIP FROM 1.60 DOWN NICELY TO 1.97 HANDLE. CURRENCIES REALLY MOVE. LISA: EURO VERSUS THE DOLLAR AND YOU CAN SEE A POP. THE BELIEF THAT ECB ON THURSDAY IS GOING TO RAISE RATES AND IT RECONFIRMS THE IDEA OF THE FED NOT GOING TO MOVE TODAY AND POTENTIALLY DISINFLATION WILL GAIN ITS THEME AS TIME GOES ON AND PEOPLE IN EQUITY MARKET SEEMS TO BE HOLDING ONTO. TOM: DXY INDEX, TRADITIONAL EURO WAITED. THAT SLAMS DOWN AS YOU SEE THE STRONGER EURO AND EVEN BLOOMBERG DOLLAR INDEX MOVES AS WELL. LUMBAR FINANCIAL CONDITIONS INDEX MOVE TO MORE ACCOMMODATIVE STANDS. -- BLOOMBERG FINANCIAL CONDITION INDEX MOVE TO MORE ACCOMMODATIVE STANCE. YOU WONDER IF IT IS WHERE POWELL BAGS TO MAKE IT A TRULY ASYMMETRIC VERSUS -- SYMMETRIC VERSUS ASYMMETRIC OF CUTS TO COME. LISA: WE DO THERE IS DISINFLATION IN GOOD SECTOR DRIVEN BY ENERGY. SERVICES IN THE LABOR MARKET DRIVEN THE OTHER SIDE. HOW MUCH DO THEY EMPHASIZE THE NEED TO SEE MORE DISINFLATION ON THAT FRONT BEYOND ANYTHING YOU SEE IN GOOD SECTOR? TOM: MICHAEL LOOKING AT WHOLESALE. THERE USED TO BE BEGINNING OF THE FACTORY, MIDDLE OF THE FACTORY, FIND A MAN OUT OF THE DOOR. ELECTORATE IS MORE COMPLEX. WHICH PART OF PPI HAS YOUR ATTENTION? MICHAEL: YOU LIKE TO LOOK AT PPI FOR FINAL DEMAND, EXCHANGE SERVICES AND ENERGY AND FOOD BECAUSE IT IS CORE RATE FOR YOU TO TRADE SERVICES IS NOT TRAINED IN INTERNATIONAL CENTS. IT IS THE MARGINS RECEIVED BY WHOLESALERS AND RETAILERS. YOU GET A PICTURE OF WHAT IS GOING ON AND A LOT OF COMPANIES. THE DECLINE IN OVERALL FINAL DEMAND NUMBERS WASN'T DUE TO ENERGY PRICES. GASOLINE -- DECLINE IN OVERALL DEMAND NUMBERS WAS DUE TO ENERGY PRICES. FOOD WAS DOWN 1.3%. MEMBER FOOD WAS A BIG PART ON THE CPI SO WE MAY BE SEEING BENEFITS THERE. SERVICES MOVED UP 20% BUT IS DOWN .3% HIGHER MONTH. MAYBE SERVICE PRICES STARTING TO COME OFF A BIT. INDEX FOR IRON AND STEEL SCRAP FAIL FOR THE MONTH. WHEN ALAN GREENSPAN WAS CHAIRMAN OF THE FED HE'S A LOOK AT STEEL SCRAP AS AN INDICATOR OF HOW THE ECONOMY WAS DOING. IT IS WHERE YOU SELL YOUR OLD REFRIGERATOR AND ACE MELTED DOWN AND MAKE IT TO SOMEONE ELSE. IF IT IS GOING DOWN, THERE IS LESS DEMAND FOR STEEL AND MAY MEAN THE ECONOMY IS SLOWING. NOT SURE IF IT IS SO ACCURATE THESE DAYS. BUT I DID POP BACK INTO MY HEAD -- IT DID POP BACK INTO MY HEAD. TOM: BOTTOM MARKET MOVING HERE. TWO YEAR YIELD 4.60%. 3.8 0% ON 10 YEAR YEAR -- YIELD. HE JOINS US NOW CREATE I WANT TO CUT TO THE CHASE. TO TRY TO RECALIBRATE HOW FAR OR HOW CLOSE WE ARE TO RECESSION. THAT IS THE GREAT CENTRAL-BANK HOPE. RECESSION IN THE DISTANCE? >> WHEN I LOOK AT THE DATA AND I CAN GO BACK TO THE GREENSPAN INDICATORS LIKE RAILCAR LOADING WHICH HAVE FALLEN A LOT BUT WE ARE STARTING TO SEE THE WEAKNESS IN DEMAND BREED WHEN VEHICLE SALES FELL IN MAY 5%. EVEN CPI DATA WE SEE TWO MONTHS OF NEW CAR PRICES DECLINING. WE WILL SEE WHAT WE GET ON RETAIL SALES ON THURSDAY. WE ARE EXPECTING A WEEK HEADLINE NUMBER. THAT COULD BE INDICATIVE OF CONSUMERS STARTING TO COME UNDER PRESSURE AS THEY SPENT OUT THEIR EXCESS SAVINGS, STUDENT LOAN PAYMENTS RESUME, AND STILL FEELING THE WAY BEATING THROUGH FROM THE LAG INTEREST RATE INCREASES FROM THE FED. WE EXPECT IN SECOND HALF OF THE YEAR PROBABLY GOING TO TIP INTO CONTRACTION. LISA: I'VE BEEN STRUCK BY THE FACT EVERY TIME SOMEONE STOPPED TO SAY WE SEE THE SAVINGS RUN OUT, CONSUMERS SHOW MORE DISCRETION, SOMEBODY ELSE POPS UP A SHOWS AN EXAMPLE OF HOW IT IS NOT THE CASE. I'M THINKING OF WELLS FARGO CFO COMING OUT AND SAYING CARD SPINNING UP 10% IN APRIL AND MAY DESPITE DISCRETION. HOW MUCH IS THIS ROLLING BALL OF MONEY THAT KEEPS FLOODING INTO DIFFERENT SECTORS OF THE ECONOMY GOING TO ROLL INTO ANOTHER PLACE, BUT NOT NECESSARILY GO AWAY? GUY: IT IS BEEN A BIG PART OF WHAT WE THINK OUT CAP CONSUMER SPENDING ELEVATED. WILL SPENDING THE LAST THREE MONTHS OF DATA AND UTILIZE RUNNING 1.1%. YEAR-OVER-YEAR INCREASES ARE GOING TO LOOK GAUDY. BUT IF YOU LOOK AT WHAT IS HAPPENING SINCE JANUARY, CONSUMER SPENDING HAS NOT BEEN ALL THAT STRONG. I UNDERSTAND CREDIT CARD DATA DOES LOOK PRETTY GOOD. IF YOU THINK ABOUT AUTO SALES DECLINING AND I THINK WHAT WE SEE IN RETAIL SALES, IS A BIT MORE SOFTNESS THEM WHAT WE ARE SEEING SEVEN MONTHS AGO. LISA: WHERE TALKING PPI DATA COMING IN SOFTER THAN EXPECTED WHICH IS A GOOD DOWNSIDE SURPRISE FOR THOSE WHO WANT TO SEE INFLATION COME OFF MORE QUICKLY THAN IT HAS BEEN. HOW MUCH IS THIS END UP FUELING CORPORATE PROFITS AND ALLOW THEM TO CONTINUE TO INCREASE WAGES? IF THEIR INPUT PRICES COMING DOWN, BUT OUTPUT PRICES CAN STATE WHERE THEY ARE, GO HIGHER BASED ON THEIR PRICING POWER. JONATHAN: PROFIT MARGINS COULD BE HAVING AN IMPORTANT COMPONENT ON NOMINAL WAGE PRESSURE. YOU CAN IMAGINE IF YOU HAVE ELEVATED PROFITS, YOU'RE GOING BE MUCH MORE WILLING AS AN EMPLOYER TO PASS ALONG WAGE INCREASES IN TIGHT LABOR MARKET SUCH AS THIS. A LOT OF WHAT IS GOING TO COME BACK DOWN TO THE INFLATIONARY PRESSURES IS GOING TO BE WHAT HAPPENS IN A ECONOMY AND WHETHER WE GET INCREMENTAL WEAKNESS. TO THE EXTENT CONSUMER SPENDING DOES SLOW, IS GOING TO GET HARDER TO PASS ALONG PRICE INCREASES FROM THE BUSINESS SECTOR. THINGS WITH THE FED IS HOPING FOR IN SLOWING THE LABOR MARKET AND CONSUMER DEMAND. TOM: IS YOUR PERCEIVED DISINFLATION A COMFORTABLE LINEAR FUNCTION OR SORT OF UGLY ALONG THE WAY, WE GO DOWN A POINT AND THEN ANOTHER POINT? JONATHAN: YOU ARE EXACTLY RIGHT. 100%. WE HAVE BEEN BELOW TO THE DISINFLATION WE EXPECT. -- WE HAVE EBB AND FLOW TO THE DISINFLATION WE EXPECT. WE ARE EXPECTING THAT REBOUND IN PACE AS WE HEAD INTO LATER IN THE YEAR. ONE OF THE THINGS YOU SAW IN PPI YEAR-OVER-YEAR WITH ENERGY PRICES COMING DOWN, SOME OF THESE BASE EFFECTS WILL PULL DOWN YEAR-OVER-YEAR CHANGES CREATE YOU WILL START TO SEE THAT THIS SUMMER AS WELL. IN TERMS OF MONTHLY PACE, I'M SURE IT'S GOING TO BE BUMPS IN THE ROAD. TOM: ONE FINAL QUESTION. DOES THE FED DO POLICY BASED OFF BARREL OF BRENT CRUDE? WEST TEXAS INTERMEDIATE CRUDE? A GALLON OF GAS? JONATHAN: I WOULD ARGUE NO. THEY TEND TO LOOK THROUGH ENERGY PRICES TO SOME EXTENT. ENERGY PRICES WILL BE DUE TO CORE PRICES BUT FOR THE MOST PART, THERE'S NOT A LOT THEY CAN DO FOR THE PRICE OF CRUDE, WERE ASKED WHAT THEY ARE WORRIED ABOUT IS MUCH MORE -- WHEREAS WHAT THEY ARE WORRIED ABOUT IS THE RISK OF VOTING LONG AS INFLATION STAYS ELEVATED -- RISK IMPLODING AS LONG AS INFLATION STAYS OF ELEVATED. TOM: THE BASIC IDEA HERE -- YOU HAVE TO GO BACK EVERY ONCE AND A WHILE WHAT IS CONSUMPTION DOING? EXPORTS, IMPORTS DOING? THE ANSWER IS NOBODY HAS A CLUE. LISA: REMEMBER IN THE BEGINNING OF THE YEAR COMPANIES BACK THERE EXPENDITURES. ALL THESE COMPANIES WERE BEHIND THE EIGHT BALL AND HAD TO COME OUT AND REINVEST EVEN IF THERE WAS UNCERTAINTY AND HOW MUCH IS THAT GOING TO PROLONG THIS CYCLE? THESE ARE THE VAGUE'S OF HUMAN EMOTIONS AND THE UNCERTAINTY OF HIS REALITY OF PEOPLE HAVING MONEY AND SPENDING IT. TOM: THE LINE OF PPI FROM THE ONE HE HAD REVISIONS TO DISINFLATION AS WELL. IT IS NOT JUST SINGLE STATISTIC. LISA: ACUTE THING ABOUT MORTGAGE APPLICATIONS EARLIER THIS MORNING. INCREASED 7.2 PERCENT. ON THE FLIPSIDE, YOU SEE AREAS THAT BOTTOM OUT LIKE HOUSING STARTING TO CREEP UP AS PEOPLE REALIZE THEY HAVE TO GET ON IT GIVEN THEY NEED A PLACE TO LIVE. TOM: I DO NOT THINK YOU AND I HAVE A CLUE WHAT THE REAL ESTATE MARKET LOOKS LIKE IN AMERICA. WE LIVE IN AND OUT AT SEA. -- AN ODDITY. NASDAQ UP NICELY, A RAID ON THE SCREEN. --RED ON THE SCREEN. S&P UP 1%. LISA: I'M LOOKING AT THE WHAT IS GOING ON IN EXPECTATIONS FOR THE FED COMING OUT LATER THIS AFTERNOON. WHAT IS YOUR CYCLE A FORM TODAY? -- TAKE AWAY FROM TODAY. BUT IF YOU THOUGHT ABOUT THE MAIN THRUST OF THE TENSION? TOM: THE TENSION AT 2:30 IS HISTORIC. IT GOES BACK TO BASICS WHICH IS EACH AND EVERY ECONOMIC REPORT. HOW MUCH OF THIS IS NORMAL ECONOMICS? HOW MUCH OF IT SUPPLY-SIDE NATURE PANDEMIC INDUCED? I WOULD SUGGEST POWELL WILL COME OUT EARLY IN THE PRESS CONFERENCE AND RECAPITULATE THIS NATION IS STILL AFFECTED BY WHAT WE LIVED WITH FOR THREE YEARS. LISA: THEY PUT OUT A PAPER WHERE THEY TALK ABOUT HOW INITIALLY IT WAS SUPPLY-SIDE CONSTRAINTS THAT FEEL THE INFLATION AND NOW IT IS BEING DRIVEN BY THE WAYSIDE, LABOR MARKET TIGHTNESS. THEY TALKED ABOUT HOW THE SHIP IS MAKING IT MORE DIFFICULT FOR THE FED BECAUSE THEY HAVE TO SEE UNEMPLOYMENT RISE TO BRING INFLATION OVER BASED ON WHAT THE MAIN DRIVER IS. TOM: MY BOOK OF THE SUMMER IS OLIVIA'S. THE BASIC IDEA HERE IS SIMPLE. SHE LOOKS FOR OTHER FACTORS TO OVERLAY ON TOP OF THE DAILY BIBLE WE TALK ABOUT AND ONE OF THEM IS THE USE OF TECHNOLOGY --BABBLE WE TALK ABOUT AND ONE OF THEM IS THE USE OF TECHNOLOGY. AND MOST INTERESTING FED MEETING. STAY WITH US. >> I THINK FROM TRADE AND INVESTMENT THAT IS AS OPEN AS POSSIBLE AND IT WILL BE DISASTROUS FOR US TO ATTEMPT TO DECOUPLE FROM CHINA. WE DO NOT THINK IT IS IN OUR INTERESTS TO STIFLE THE ECONOMIC PROGRESS OF THE CHINESE PEOPLE. TOM: TREASURY SECRETARY, FORMER CHAIR OF THE FED, JANET YELLEN THERE. OVER THE YEARS, THE ONE PERSON WHO HAS DRIVEN FOR THIS THOUGHT IS CATHERINE MANN, NOW AT THE BANK OF ENGLAND. PROFESSOR MANN ON IS THE HIGH GROUND LOCAL DEPENDENCIES OF CHINA WITH AMERICA AND AS YOU HEARD THERE, SHE WOULD NOT SAY IT IS NOW BECAUSE SHE'S WORKING FOR THE BLE BUT SHE WOULD SAY YOU HAVE TO ENGAGE THE CONVERSATION. LISA: WHICH IS PERHAPS THE REASON WHY AN TONY BLINKEN HEADED OVER TO BEIJING. WE ARE LEARNING THIS AS HE TRIES TO MEND TIES. I'M WONDERING WHAT THE PARAMETERS ARE AT THE TIME WERE THERE IS PUBLIC PRESSURE TO DECOUPLE AS IT IS NOT THE LESS REALISTIC. TOM: HE WILL DISCUSS THE IMPORTANCE OF MAINTAINING OPEN LINES OF COMMUNICATION TO RESPONSIBLY MANAGE U.S. RELATIONSHIP AND LOOKS FOR PREVENTER COOPERATION ON SHARED TRENDS -- TRANSNATIONAL CHALLENGES. JOINING US ANNMARIE HORDERN. WE ARE THRILLED TO BRING IN DAMIEN, CHINA CREDIT STRATEGIST FOR BLOOMBERG. THIS IS NOT A SURPRISE. ANNMARIE: IT IS NOT. WE'RE THE FIRST TO REPORT ABOUT THE TRIP AND NOW THE STATE DEPARTMENT CONFIRMING OUR SCOOP WITH THE DATES. SECRETARY BLINKEN HEADED TO BEIJING. THE FIRST TIME I SECRETARY OF STATE HE HAS TAKEN THIS TRIP. IT IS A LONG TIME IN THE MAKING. ONE OF THE DELIVERABLES WHEN XI JINPING AND PRESIDENT BIDEN SAT DOWN IN BALI AT THE G20 WAS THAT SECRETARY OF STATE BLINKEN WOULD HAD TO CHINA. THAT TRIP WAS ON THE BOOKS IN FEBRUARY AND HE WAS STILL SET TO GO WHEN THE WHITE HOUSE KNEW THERE WAS THIS SPY BALLOON FLYING OVER THE CONTINENTAL U.S. BUT POLITICALLY BECAME TOXIC WHEN IMAGES OF THE SPY BALLOON SURFACE AND HE HAD TO CANCEL THE TRIP. WE HAD A FRESH LOW OF RELATIONS BETWEEN WASHINGTON AND BEIJING. NOW HE IS GOING AND LIKELY POTENTIALLY OPEN THE DOOR FOR OTHERS TRIPS. I ALSO SAT DOWN RECENTLY WITH TREASURY SECRETARY WHO SAID HER PLANS WERE TO GO AND VISIT HER COUNTERPART IN CHINA. TOM: HOW WILL HE BE GREETED? A FOREIGN POLICY DIPLOMATIC MISSION OR WILL YOU LOOK FOR SOMETHING MORE THAN AT? PERHAPS LIKE WE SAW WITH KISSINGER WITH NIXON A FEW YEARS BACK? ANNMARIE: THIS IS JUST AN OPENING OF THE WINDOW AND THE DOOR TO TRY TO PUT THE GUARD RAILS ON THE RELATIONSHIP. IT IS ALSO INTERESTING THIS WEEK YOU HAVE SECRETARY OF STATE HEADING TO CHINA YOU ALSO HAVE JAKE SULLIVAN, RESIDENT NATIONAL SECURITY ADVISOR, HE IS IN INDIA AND ALSO GOING TO JAPAN. YOU CAN SEE THE ADMINISTRATION IS STARTING TO PUT EMPHASIS, ESPECIALLY AS WE ARE IN A YEAR TO RUSSIA'S INVASION OF UKRAINE. THEY HAVE DONE A LOT OF WORK WITH EUROPE. THEY ARE STARTING TO PUT EMPHASIS ON ASIAN-PACIFIC. LISA: FOCUSES ON WHO HAS THE LEVERAGE. FROM YOUR VANTAGE POINT, WE ARE TALKING U.S. MAKING OUTREACHES TO CHINA AT A TIME THERE CONVENING BUSINESS LEADERS WITH URGENCY TO TRY TO GET A HANDLE ON HOW TO SUPPORT THE ECONOMY PREET WHERE IS BALANCE OF LEVERAGE? WHAT IS THE BACKDROP OF CHINA TO THE POTENTIAL POLICY? DAMIEN: HERE'S THE THING. IT IS ALL ABOUT CHINA BECOMING A FUNDING CURRENCY. IF YOU LOOK AT THE NEGATIVE CARRY INVENTED IN CHINA IS WHY YOU HAVE THE CNH WE'RE GETTING CREATE YOU HAVE ENCORE CORPORATE SPLICER DOLLARS. BECAUSE OF THE POLICY AMBIGUITY GOING ON. RIGHT NOW, GIVEN WHAT WE ARE, GIVEN THE DATA COMING OUT, CHINA IS RIGHT TO MAKE A TRIP TO U.S. AND RECTIFY THE SHIP. LISA: IS THIS SENSE THAT CHINA HAS ENOUGH PRESSURE ON IT TO TRY TO MAKE MORE CONCRETE OVER TOWARDS DENNY A THE PANDEMIC WHERE THERE HAVE BEEN PROFOUND SHOWS IN POLICY AND SOCIAL APPROACH BY XI JINPING? DAMIEN: WITH NOT SEEN REAL ACTION. WE HAVE HEARD THE CONVENING BUSINESS LEADERS ASK OPINIONS ON WHAT WE CAN DO TO GET SENT TO MS. BACK. BECAUSE OF THE ECONOMY IS FLAT ON HIS BACK. THAT'S A DO WITH THE PROPERTY SECTOR AND IT SEEMS THIS TIME AROUND CHINA IS NOT WILLING TO STIMULATE THE PROPERTY SECTOR AS THEY HAVE IN YEARS PAST. IT MEANS THEY WILL HAVE TO PAVE IT OR EXPORT ORIENTED APPROACH. HENCE THE U.S. TOM: ARE WE TRAVELING TO BEIJING REALIZING CHINA IS FLAT ON HIS BACK? ANNMARIE: I THINK WHAT YOU WANT TO SEE FROM THE STATE DEPARTMENT AS THEY ARE TRYING TO HAVE MORE OF A DIPLOMATIC OVERTURE. I THINK DEMONSTRATION IS TRYING TO PUT GUARD ROSE ON THE RELATIONSHIP BUT THEY SEE THE CONCERNS GOING ON DOMESTICALLY IN CHINA. FOR THE STATE DEPARTMENT WHAT THEY ARE CONCERNED ABOUT IS WHAT HAPPENED MOST RECENTLY IN SINGAPORE WHERE THERE IS A CORDIAL HANDSHAKE BETWEEN THE TWO MILITARY CHIEFS AND BIGGEST ECONOMISTS IN THE WARD, BUT THAT WAS IT. THERE WAS NO REAL DIALOGUE. AT THE SAME TIME WE HAD A CHINESE VESSEL AND U.S. WARSHIP GOING CLOSE TOGETHER. THEY WANT TO MITIGATE THESE RISKS. TOM: IS CHINESE BANKING SYSTEM SOUND? DAMIEN: NOT AT ALL. WE HAVE SEEN PROPERTY DEVELOPERS AND I WISH THE IMMISCIBLE GOVERNMENTS. IT REALLY FEEL THE PAIN HERE -- AND ARE WE SEE M UNICIPAL GOVERNMENTS RELEASE EAT THE PAIN HERE. TOM: LIZ ECONOMY, SHE PREDICTED -- SHE NAILED IT THE FERTILITY IN CHINA. LISA: IT SHOWS WHY THE POLICY MAKERS MAY WANT TO COME TO THE TABLE WITH U.S.. ONE THING WE HAVE TALKED ABOUT AND I FIND IT FASCINATING, POLICY MAKERS AND BUSINESS LEADERS WANT TO SEE THE RELATIONSHIP MENDED MORE THAN PUBLIC SENTIMENT. BOTH SIDES FOR YOU HAVE CATERING TO THE POPULATION SAYING WE HARDENING OUR LINE WITH THE OTHER ENTITY. HOW MUCH IS THAT FACTORING INTO THE DISCUSSIONS WE EXPECT TO HEAR COME IN THE NEXT WEEK? ANNMARIE: IT IS DIFFICULT BECAUSE THE POLITICAL RHETORIC FROM WASHINGTON IS VERY HOT WHEN IT COMES TO CHINA. THAT IS ONLY GOING TO INCREASE AS WE HEAD TOWARDS NOVEMBER OF 2024 AND A PRESIDENTIAL ELECTION FROM BOTH SIDES. THEY'RE GOING TO WANT TO MAKE SURE THEY ARE TALKING TOUGH AND TAKING A TOUGH STANCE ON CHINA. AT THE SAME TIME, HE HAD THE ADMINISTRATION, POTENTIALLY NEW PROVISIONS AND PENALTIES THEY CAN USE ON CHINA. WE HAVE SEEN THIS ADMINISTRATION GIVE THE TRUMP ERA TARIFFS. THEY HAVE A NUMBER OF EXPORT CONTROL PUT ON CHINA. WE ARE STILL WAITING ON DETAILS ABOUT THE OUTBOUND INVESTMENT RESTRICTION AND POTENTIALLY CAN HURT U.S. BUSINESSES DESPITE THE ADMINISTRATION AT G7 WAS TRYING TO SHORE UP EUROPEAN PARTNERS ON IT. THEY ARE TRYING TO PUT GUARDRAILS ON A RELATIONSHIP AT THE SAME TIME WE ARE ALSO LOOKING TO PUT PENALTIES IN SOME PLACES ON CHINA. AT THE SAME TIME TRYING NOT TO GET THE BLOWBACK FROM REPUBLICANS, ESPECIALLY AS THIS IS A PRESIDENT RUNNING FOR 2024. TOM: THANK YOU SO MUCH. I HAVE ONE FINAL QUESTION AS WE CLOSE OUT THE HOUR. IT IS WIDELY MANDATED ON PAGE 42 OF MY BLOOMBERG THEY CAN BE NOTE YANKING GUARD ON SAID. YOU SHOW UP WITH A YANKEE TIE TODAY. DAMIEN: WE HAVE A BIG ACE PITCHING MATCHUP TONIGHT, THE NEW YORK YANKEES AND THE NEW YORK METS. IT IS GOING TO BE A GREAT GAME. I WAS WAS BETWEEN THAT AND ACTIVITY DATA -- I WILL SWITCH BETWEEN THAT AND THE ACTIVITY DATA. LEGEND SEATS ONLY. LISA: YOU LET ANNMARIE GO WAY TOO EARLY. I SAW THAT. TOM: -- LISA: ALL I CAN SAY IS, DO NOT DO THAT AGAIN. TOM: NEW YORK YANKEES AND NEW YORK METS AS A CLOSE OUT THE HOUR. ANNMARIE HORDERN ON AND THE POOR ANALYSIS ON THE STATE DEPARTMENT ASKEW ARE ATTENDED PER UNIT BLINKEN WILL TRAVEL TO CHINA. WE WILL TRAVEL TO THE FED SHOW THIS AFTERNOON. OUR USUAL LINEUP. WE'LL BE WATCHING THOSE MARKETS INTO THE CLOSE. RED AND GREEN ON THE SCREEN. IT BIT OF A LIFT. QUIET BEFORE A FED MEETING.

Channel: Bloomberg Television

Views: 35,907

Keywords: Jon Ferro, Lisa Abramowicz, Tom Keene

Id: uSevc1k3ZIg

Length: 146min 8sec (8768 seconds)

Published: Wed Jun 14 2023