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00:00> > WE ARE THINKING THE FED IS GOING TO BE TOO GENTLE WITH THE ECONOMY. > > WHAT IS A SLOWDOWN VERSUS A SOFT OR HARD LANDING? > > A LOT OF ROOM FOR STEAM TO COME OUT OF THE ECONOMY BEFORE YOU GET CUTBACKS. > > INFLATION IS HIGH, BUT THIS IS THE FIRST TIME IN A LONG TIME WHERE THERE ARE NO RESTRICTIONS. > > THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWITZ. > > WE WELCOME YOU WANT A PERFECT DAY IN LONDON AFTER THE HORRIFIC WEATHER IN SWITZERLAND. WE END THE HEADLINE FOR THIS WEEK WITHOUT QUESTION, IS FINALLY A BID TO EQUITIES. LISA: WE HAD A MOMENT WITH EQUITIES GOING BACK 10 WEEKS, WE SEE POSSIBLY THE FIRST WEEKLY GAIN AND EQUITIES, GOING BACK EIGHT WEEKS. TOM: WE ARE GOING TO GET TO THIS AT A MOMENT. WE NEED TO TALK ABOUT WHAT WE HAVE SEEN THE DAVOS, WHAT WE BRING TO LONDON IN THE INTERNATIONAL SINCE OF THE CITY, THE INTERNATIONAL SENSE OF FINANCE. WHAT WE HEARD IN DAVOS, WE NEED INTERNATIONAL SOLUTIONS TO THESE CRISES WE HAVE. LISA: SOME COHESION TO REMEDY THE ISSUES WITH HIGH FOOD PRICES, HIGH GAS AND TAX PRICES. THIS IS A GLOBAL FEEL WE SAW IN DAVOS, THE FOCUS IS ON EUROPE AND WHAT IS GOING ON WITH UKRAINE. TOM: LARRY WILL JOIN CELEBRATING HOWARD DAVIES NEW BOOK OUT, FRANCINE LACQUA SPEAKING WITH SIR HOWARD IN THE LAST HOUR. WE WILL TOUCH ON THAT, AS WELL. LET'S GET TO IT. THE IMPORTANT CONVERSATIONS WE HAVE, LISA IS BRIEFING US. > > THIS IS AN IMPORTANT DAY. WE GET PERSONAL INCOME AND PERSONAL SPENDING, EVERYBODY HAS BEEN TALKING ABOUT WHETHER THE U.S. CONSUMER, HOW MUCH CAN THAT END UP DRIVING FURTHER GROWTH? WE ARE EXPECTING IT TO DECELERATE. I AM CURIOUS TO SEE WHERE WE GO THERE. 10:00 A.M., U.S. UNIVERSITY OF MICHIGAN SENTIMENT SURVEY FOR THE MONTH OF MAY, EXPECTED TO SAY ABOUT THE -- STAY THE WEAKEST GOING BACK TO 2011. HOW MUCH DOES THIS CHANGE, WE ARE NOT EXPECTING MUCH. A PRECURSOR FOR WHAT IS TO COME. WE WILL HAVE A FULL ENGLISH BREAKFAST WITH STEPHEN MAJOR, MOHAMED EL-ERIAN, JORDAN ROCHESTER, SOME OF THE MANY GUESTS THAT WILL BE JOINING US IN LONDON. TOM: A LOT TO TALK ABOUT. I MAKE A JOKE ABOUT THE FLIGHT ATTENDANT ON SWITCH -- SWISS AIR, SHE SAID, ASK LISA HOW THE SEVEN YEAR OPTION WENT. LISA: IT WENT WELL. TOM: IT WENT WICKED WELL. SO WHAT? LISA: PEOPLE ARE STARTING TO BUY AGAIN. THIS IS ONE OF THE KEY CONUNDRUMS, YOU HAVE EASING IN FINANCIAL CONDITIONS BECAUSE THE FED IS SAYING THEY ARE POSSIBLY GOING TO PAUSE BECAUSE OF GROWTH CONCERNS, WHICH SETS THEM BACK TO WHERE WE WERE BEFORE. HOW MUCH DOES THIS BECOME A PROBLEM? IT IS A SELF-FULFILLING PROPHECY. THE EQUITY CONVERSATION OF THE DAY. TOM: AMAZING COURAGE AT THE END OF 2018 IN THE PHASE I, PHASE II OF THIS BULL MARKET, THE SUSTAINED EQUITY BOWL, WE GET AN UPDATE FROM THE GLOBAL MARKET STRATEGIST AT TORAH. THIS IS YOUR FIRST TIME BACK TO QPS. DOES PART OF THE GLOOM OUT THERE NOW, COVID GLOOM STILL? > > WE HAVE FORGOTTEN ABOUT COVID, TO BE HONEST ONE OF THE THINGS WE -- THAT WORRIES ME, WE HAVE COMPLETELY FORGOTTEN ABOUT IT. THERE ARE SILVER LININGS PER WEEK GOT A BIG REOPENING REBOUND IN SOME MARKETS AND SECTORS, WHICH WE HAVE FORGOTTEN ABOUT AMONGST THE DOOM AND GLOOM WE HAVE SEEN. LISA: COVID DOES NOT EXIST HERE. NOBODY HERE WEARS A MASK. IT IS KIND OF AMAZING. ARE BOTH CONCERNS OVERDONE HERE? CLOSE I THINK SO. I SAY THAT HUMBLY AND WE ARE IN UNCHARTED TERRITORY. YOU LOOK AT THE PMI'S, THEY ARE SLOWING. THE Q2 IN THE U.S. IS BEST THAN THE FIRST QUARTER. THE YIELD CURVE, NOTHING TO WORRY ABOUT. I DO THINK WE ARE BEGINNING TO BUILD A BASIS OUT OF THE VICE THE FED HAS HAD A SIN, PUSHING DOWN EVALUATIONS AND PUSHING UP A RECESSION CONCERN. I THINK IT PUTS US IN A PLACE WHERE WE CAN STOP BUILDING A BASE AND LOOK FORWARD TO BETTER TIMES. LISA: BASICALLY, THE MORE THAT PEOPLE TAKE A SIGH OF RELIEF AND GO BACK INTO RISK ASSETS, THE MORE THE FED IS GOING TO SAY, WE ARE SEEING AND EASING IN FINANCIAL CONDITIONS. WE CANNOT HAVE THAT BECAUSE OF INFLATION. AT WHAT POINT DOES THIS CREATE THIS FEELING FOR RISK ASSETS FOR THE FORESEEABLE FUTURE? > > I AGREE, THE FED IS NOT GOING TO LET MARKETS TURN ON A DIME. THE FED IS NOT GOING TO TURN TO A RESCUE. I THINK WE CAN BUILD A BASE AND LATER IN THE YEAR, WHEN THOSE INFLATION CONCERNS, WHEN GROWTH HAS EASED, THE FED HAS LESS TO WORRY ABOUT WITH INFLATION, WE CAN BEGIN TO SEE THAT WRITING. WRITE UP, WE WANT TO BUILD THAT BASE, IT WILL COME EARLIER -- LATER IN THE YEAR. TOM: TAKE THE OPTIMISM, BRING IT TO THE REVENUE LINE OF DIFFERENT SECTORS OF THE ENTIRE MARKET, AGAINST NOMINAL GDP, WHICH IS A HUGE MYSTERY. THE COMBINATION OF GDP AND INFLATION, WE DO NOT KNOW THAT DOWN. PUT THAT INTO THE REVENUE GUESS WHEN YOU ARE TWO YEARS FORWARD. > > I CALL IT THE $25 TRILLION QUESTION. DOES THE U.S. GO INTO A RECESSION OR NOT, AND WHAT HAPPENS TO CORPORATE? THIS HAS BEEN A VALUATION DRIVEN CORRECTION, ALL BEEN ABOUT VALUATIONS. EARNINGS HAVE BEEN ROCK SOLID. IF COMPANIES CAN KEEP DELIVERING HERE, WE WILL BUILD UP AND START HAVING A RALLY. IF WE GO INTO A RECESSION AND COMPANIES CRACK, AND THEY STOP INVESTING, WE STOPPED SEEING THE MARGINS COME DOWN, THE THINGS THAT HAVE HELD SOLID SO FAR, WE ARE IN TROUBLE. I THINK WE ARE STILL LOOKING AT A SCENARIO WHERE, A MODEST SLOW DOWN, COMPANIES CAN LOOK AFTER THEMSELVES. YOU HAVE SEEN THAT SO FAR. THEY HAVEN'T GOTTEN THE CRISIS MEMO. YOU ARE SEEING THE M & A, DOUBLE-DIGIT GROWTH. I CAN GO ON AND ON. THEY ARE TELLING YOU A DIFFERENT MESSAGE FROM THE CAPITAL MARKETS. TOM: YOU RUN INTO A MERE MORTAL WHO IS SCARED STIFF, THEY HAVE GOT CASH, THEY ARE 25% IN CASH. THEY HAVE LOSSES. WHAT DO YOU TELL THEM TO DO WITH THAT CASH? > > DOLLAR COST AVERAGE IT IN INTO VALUE. I THINK THE VALUE HAS A LONG WAY TO GO. TOM: WE ARE ALLOWED TO NAME NAMES. BANKS, WHAT? > > ALL OF THE ABOVE. I THINK BANKS WILL DO WELL ONCE THESE RECESSION FEARS GO DOWN. LISA: THIS DOESN'T EXIST. IT IS NOT GOING TO HAPPEN. RIGHT NOW, WE ARE TELLING A LIE THAT IT DOESN'T HAD A PRESIDENT BEFORE. WHAT DO YOU SAY ABOUT THE PUSHBACK AGAINST THEM? > > THE CONSUMER IS IN GOOD SHAPE. CORPORATE'S ARE IN VERY GOOD SHAPE. YOU ARE SEEING INFLATION EXPECTATIONS ROLLOVER, BOND YIELDS ROLLING OVER, THE HAS BEEN SUCCESSFUL ON FRONT LOADING THIS TIGHTENING OF FINANCIAL EXPECTATIONS, YOU ARE SEEING IT WORK. IT IS EARLY DAY, THE FED IS NOT GOING TO TAKE ITS FOOT OFF THE ACCELERATOR ANYTIME SOON. WE ARE BEGINNING TO BUILD THAT BASE FOR A RALLY LATER IN THE YEAR. TOM: LET'S GO OFF HINDSIGHT YOU HAVE BEEN THE NUMBER ONE PERSON I KNOW OF THEORIZED BULL MARKET TONE SINCE NOVEMBER AND DECEMBER OF 2018. HOW DID YOU KNOW ALONG ALL CHRISTMAS OF 2018? > > THAT WAS A DIFFERENT WORLD. WE HAD A FED PUT THEIR, WHICH WE DO NOT HAVE NOW. I AM BULLETS WITH HUMILITY IN THIS ENVIRONMENT, WE HAVE NOT SEEN THIS DOUBLE-BARRELED FED TIGHTENING. TRIPLE WHINNIES AROUND THE WORLD. IT IS NOT JUST INFLATION IN THE U.S., IT IS LOCKDOWNS IN CHINA. MY NARRATIVE, THINGS GET LESS WORSE WITH PRICE DOLLAR THEN, WE TAKE PRESSURE OFF, MARKETS WILL MOVE HIGHER. IT IS NOT, WE WAKE UP TOMORROW, IT WILL BE AGAIN. TOM: THEN LADLE IS GIVING US THE SPIRIT OVER THE LAST COUPLE OF YEARS, THROUGH COVID, THIS FINANCIAL SYSTEM THAT WILL WORK. WE GOT A MASSIVE DEBATE THIS MORNING, IS THE SUBWAY STOP OUT HERE, IS IT BANK OR BUNK? LISA: BANK. > > BANK. TOM: BANK. OK. CLOSE TO BE A BULL, YOU HAVE TO SAY THINGS GET WORSE. TOM: THE PENDULUM OF LESS WORSE. WE ARE GOING TO FRAME OUT IN THE FRIDAY, AN IMPORTANT WEEK READING. OVER THE WEEKEND, IN THE UNITED STATES, MEMORIAL DAY. WHICH WILL BE A DIFFERENT MEMORIAL DAY WITH THE TRAGEDIES WE HAVE SEEN IN TEXAS, THE NRA MEETING REALLY FRONT AND CENTER WITHIN THE DIALOGUE THIS MORNING. IN THE UNITED KINGDOM, I BELIEVE WE HAVE CAPTURED THE PRIME MINISTER ON A TRAIN. LISA: HE WAS TALKING ABOUT WHAT IS GOING ON WITH UKRAINE AND RUSSIA, ALSO TALKING ABOUT THE WINDFALL TAX, WHICH WE HEARD ABOUT YESTERDAY, WHAT THAT MEANS FOR THE OIL COMPANIES. A KEY POINT FOR HIM. TOM: IT IS TARGETED IN TRANSITORY, WHICH MEANS, IT NEVER WILL BE. THEY'VE GOT A NAME FOR THE WINDFALL TAX. LISA: WE WILL GET INTO TRYING TO EXPLAIN THE NAME. TOM: DATA CHECK, HELP YOUR FUTURES UP 11, DOW FUTURES UP 30, THE 10 YEAR YIELD, I HAVE GOT TO BE LOOKING AT, .11. THAT IS UP DOWN. CAN YOU IMAGINE THE -10 YEAR YIELD? LISA: WE HAVE GOTTEN MORE ACCOMMODATIVE. AT A TIME WHEN INFLATION HAS NOT MATERIALLY COME DOWN. IS THAT A GOOD THING? TOM: WE ARE SPREADING OUT ON A FOOT BEAL -- FOOTBALL FIELD, COMING UP. MOHAMED EL-ERIAN, THE STAY WITH US. THIS IS BLOOMBERG. GOOD MORNING. ♪ RITIKA: BRITISH PRIME MINISTER BORIS JOHNSON ONCE MORE MILITARY SUPPORT FOR UKRAINE. HE URGED THAT MORE SOPHISTICATED ROCKET SYSTEMS BE SENT SO UKRAINIAN FORCES CAN HIT RUSSIAN TARGETS FURTHER AWAY, NEGOTIATING, HOW CAN YOU DEAL WITH A CROCODILE WHEN IT IS IN THE MIDDLE OF EATING YOUR LEFT LEG? THE LATEST U.S. CHALLENGE TO CHINA, THE BIDEN ADMINISTRATION AND TAIWAN ARE PLANNING TO ANNOUNCE NEGOTIATIONS TO INCREASE ECONOMIC TIES, THE TOP WOULD FOCUS ON ENHANCING -- DEALING WITH THE TRADE AGREEMENT IN WASHINGTON ABOUT ITS RELATIONSHIP WITH TAIWAN. THE WHITE HOUSE IS SCRAMBLING TO DO SOMETHING ABOUT RECORD HIGH GASOLINE PRICES IN AN ELECTION YEAR. BLOOMBERG HAS LEARNED THE BIDEN ADMINISTRATION HAS REACHED OUT TO THE OIL INDUSTRY ABOUT RESTARTING REFINERY SPRAYED THE AVERAGE PRICE OF A GALLON OF UNLEADED GASOLINE IS $4.60 ON WEDNESDAY. SENATE DEMOCRATS SAID THEY WERE OPTIMISTIC ABOUT A COMPROMISE FOR GUN CONTROL LEGISLATION IN THE WAKE OF THE TEXAS SCHOOL MASSACRE. DEMOCRATS APPEAR TO BE WILLING TO ACCEPT INCREMENTAL STEPS AND WILL MEET WITH VOTERS THAT MAY PRESSURE THEM TO TAKE ACTION. IN SHANGHAI, A SIGN OF THE EXTREME STEPS BEING TAKEN TO KEEP MONEY, WORK DOWN -- WORKERS STARTED TO REVOLT AGAINST OVERSEERS AFTER BEING LOCKED DOWN IN THEIR FACTORIES FOR ALMOST TWO MONTHS. THEY SAY THEY RUSHED PAST GUARDS AND ISOLATION BARRIERS, EXPECTING WORKERS TO SLEEP ON FACTORY BANKS. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON "BLOOMBERG QUICKTAKE." POWERED BY MORE THAN 2,700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. > > WE CANNOT BE IDEOLOGICAL ABOUT THIS. WE SHOULD BE PRAGMATIC. IT IS POSSIBLE TO TAX EXTRA NORI -- EXTRAORDINARY PROFIT EARNINGS AND INVESTMENT. PREVIOUS GOVERNMENT, WE WILL INTRODUCE A TEMPORARY TARGETED PROFIT LEVY. TOM: SECRETARY ELLEN ON THE FLOOR OF CONGRESS WITH DEMOCRATS AND REPUBLICANS, THEY ALMOST AGREE ON SOMETHING. CAN YOU SEE THEM GOING, AH. IT IS EXTRAORDINARY HOW THEY DO THAT. WE ARE HAVING A LOT OF FUN, THE BIGGEST FUN WE ARE HAVING. THE LEVY. A TEMPORARY TARGETED ENERGY PROFIT LEVY. QUEEN VICTORIA STREET TODAY, WAITING FOR SIR HOWARD DAVIES TO COME. I TOLD HIM I WOULDN'T GO INTO THE BUILDING UNTIL HE SHOWED UP WITH STERLING UNDER 120. THE ELEVATORS HERE, THE BUILDING, HE WAS TRYING TO EXPLAIN TO ME TEMPORARY TARGET IS GREAT, BUT THE QUESTION IS THE INVESTMENT SIDE OF THIS WINDFALL. LISA: WHAT IS GOING TO BE OK FOR THEM TO DEAL WITH? NOT ONLY THAT, WHAT IS NORMALIZED PROFITS? THAT IS WHEN THEY ARE GOING TO ROLL IT OFF. IS THAT AN EXCUSE TO KEEP GOING? TOM: NORMALIZED PROFITS. FOR OUR AMERICAN AUDIENCE, THE BASIC IDEA IS, YOU MOVE FROM LONDON, NORTH, NORTH, NORTH, YOU GO WHERE YOUR ANCESTORS WERE BAKERS. THE PRIME MINISTER HAS FAMILY FROM DARLINGTON, THIS SIDE OF SCOTT LIND -- SCOTLAND. LISA: DOING GREAT. TOM: I AM TRYING. KITTY JOHNSON ON THE TRAIN WITH HIM, YOU HAVE GOT TO BELIEVE WITH THE NEWS FLOW WE LOOK AT, YOU GO, REALLY? THIS IS THE GUY THAT NEEDED A QUIET TRAIN RIDE? LISA: HE DID. HE DIDN'T GET ONE. HE WAS TRYING TO GIVE A FEELING OF CONFIDENCE AMID A DIFFICULT LEADERSHIP RIGHT NOW. TOM: A CHALLENGE TO SAY THE LEAST WITH KITTY ON THE TRAIN, THE PRIME MINISTER OF THE UNITED KINGDOM. > > IT IS IMPORTANT WE DO NOT GET LULLED BECAUSE OF THE INCREDIBLE ERRORS OF THE UKRAINIANS IN PUSHING THE RUSSIANS BACK FROM THE GATES OF KYIV. BECAUSE OF THEIR AMAZING VALOR OF PRESIDENT ZELENSKYY, WE SHOULD NOT BELIEVE THIS PROBLEM HAS GONE AWAY. ON THE CONTRARY, I AM AFRAID THAT PUTIN, AT GREAT COST TO HIMSELF AND HIS RUSSIAN MILITARY, IS CONTINUING TO CHEW THROUGH GROUND IN DONBASS. HE IS CONTINUING TO MAKE GRADUAL, SLOW, PALPABLE PROGRESS. IN THAT THOUGHT, IT IS VITAL THAT WE CONTINUE TO SUPPORT THE UKRAINIANS MILITARILY. INDEED, WHAT THEY NEED NOW IS THE TYPE OF ROCKETRY, A ROCKET SYSTEM, MLI'S, WHERE THEY ARE ABLE TO DEFEND THEMSELVES AGAINST THESE VERY BRUTAL RUSSIAN ARTILLERY. THAT IS WHERE THE WORLD NEEDS TO GO NOW. > > FINAL QUESTION. THIS IS ABOUT PRESIDENT ZELENSKYY. YOU HAVE BEEN -- STOOD SHOULDER TO SHOULDER WITH HIM. CERTAIN CALLS FROM EUROPE, FROM GERMANY, WOULD SETTLE WITH PUTIN, TRYING TO -- > > I WOULD SAY TO ANY SUCH PROPONENT OF A DEAL WITH PUTIN, HOW CAN YOU DEAL? HOW CAN YOU DEAL WITH A CROCODILE WHEN IT IS IN THE MIDDLE OF EATING YOUR LEFT LEG? WHAT IS THE NEGOTIATION? THAT IS WHAT PUTIN IS DOING. HE WILL TRY TO FREEZE THE CONFLICT. HE WILL TRY TO CALL FOR A CEASE-FIRE WELL HE REMAINS IN POSSESSION OF SUBSTANTIAL PARTS OF UKRAINE. I MAKE THAT POINT TO ALL MY FRIENDS AND COLLEAGUES IN THE G7 AND NATO. BY THE WAY, EVERYBODY GETS THAT. ONCE YOU GO THROUGH THE LOGIC, YOU CAN SEE IT IS VERY DIFFICULT TO BE A NEGOTIATED SOLUTION PAIRED WE DESPERATELY NEED IT TO END. THE WORLD NEEDS IT TO END. THE ONE-WAY WAY IT CAN END IS FOR PUTIN TO ACCEPT, LET HIM SAY, THE DENAZIFICATION OF UKRAINE HAS TAKEN PLACE. HE IS ABLE TO WITHDRAW DIGNITY AND HONOR. THAT WOULD BE -- THAT IS WHAT NEEDS TO HAPPEN. I AM NOT SAYING THERE WERE ANY NAZIS IN UKRAINE, BUT ONE OF THE INTERESTING THINGS ABOUT THE SITUATION IS THE STRONG SUPPORT THAT PUTIN COMMANDS IN RUSSIA FOR ANYTHING HE SAYS OR DOES. I THINK HE HAS THE POLITICAL MARGINAL MANEUVER TO MAKE IT -- AN END TO THIS. TOM: THE PRIME MINISTER OF THE UNITED KINGDOM IN CONVERSATION WITH OUR KITTY DONALDSON. ON THE RAILWAY ABOVE THE DARLINGTON, AS AN AMERICAN, YOU WONDER THE SUPPORT THAT THESE POLITICIANS ALL HAVE IN THE WEST IF THIS WAR DRAGS ON. MONTHS, OR EVEN YEARS. LISA: THAT IS THE REASON WHY THE TEMPORARY WINDFALL TAXES IMPORTANT, IT CATERS TO THAT POPULAR FEELING. IF PRICES GO UP, IF IT IS CONNECTED TO WHAT THEY ARE SEEING IN THE WAR IN UKRAINE, HOW MUCH DOES THAT HAVE TO BE OFFSET IN OTHER WAYS? THAT IS WHAT THEY ARE TRYING TO DO WITH THIS $6 MILLION INCOME TAX. TOM: WE DIDN'T TALK THAT MUCH ABOUT THE WAR, WHICH IS CLEARLY FRONT AND CENTER IN THE WORLD ECONOMIC FORUM. MY CONVERSATION WITH SIR LAWRENCE FREEDMAN, WHO WAS SHOCKING IN 2018, WHO PREDICTED SO MUCH OF WHAT WE SEE NOW. HE, LIKE ADMIRAL SERVETUS IN AMERICA, IS FOCUSED ON THE BLACK SEA, -- WRITING THIS MORNING ABOUT HOW ODESSA IS THE PIVOT POINT FOR TRYING TO GET FOOD OUT TO SOME OF THESE NATIONS. LISA: IT IS NOT JUST WESTERN NATIONS PEOPLE ARE SAYING DAVOS IS THE CENTER OF POLICE IT IS -- ELITISM. FRANKLY, A LOT OF THE DEVELOPING WORLD RELIES ON UKRAINIAN WHEAT. UKRAINIAN RICE, NOT RICE IS MUCH AS UKRAINIAN WHEAT AND UKRAINIAN CORN. HOW MUCH DO THEY TRY TO -- I SAID, NOT RICE. TOM: I ASKED THE FINANCE MINISTER FROM MALAYSIA, HOW IS THAT WHEAT CROP GOING? HE CROSSED HIS EYES, SUCH AN UGLY AMERICAN. LISA: TALK ABOUT BEING AN UGLY AMERICAN. TOM: SPEAKING OF BREAKFAST, LISA IS ALL YOGURT AND BERRIES. SHE BREAKS THE RULES PAIRED WE ARE HERE FOR ONE DAY, WE HOPE TO BE BACK SOON WITH JON FERRO. WE HAD TO TEST OUT THE PHARAOH BREAKFAST -- FERRO BREAKFAST. DO THEY EAT THIS EVERY DAY? LISA: MY OBSERVATION, THE EXILE A DIFFERENT COLOR. THE TOAST COMES ON SHELVES. A LITTLE RACK. TOM: ON RADIO, THIS IS A FULL ENGLISH BREAKFAST, 42 POUNDS OR WHATEVER. IGO COUNTERCLOCKWISE, WE DO NOT HAVE THE HOUR. THE MOST IMPORTANT THING, EVERYTHING HAS TO BE MUSHY GO SHE. THE MUSHROOMS ARE MOSHE GO SHE, THE TOMATOES ARE MUSHY GUSHY. LISA: A PIECE OF TOAST ON A SHELF. REALLY DELICIOUS. TOM: THE TYPICAL SURVEILLANCE BREAKFAST IS TANG AND A POP TART. SOME OF OUR CONTESTANTS STAY AT THE MED HOTEL, IN LONDON. MARKETS, A GOOD WEEK FOR EQUITIES. THE VIX, UNDER 28, 27.17. OIL, BRENT MOVING UP 117. TOM: "BLOOMBERG SURVEILLANCE " FROM QUEEN VICTORIA STREET IN LONDON. HELP ME WITH THE DATA CHECK. FUTURES UP 12. DOW FUTURES UP 35. VIX, THE 30 LEVEL DRIFTING AWAY. LISA: IT WILL BE THE FIRST WEEKLY GAIN IF IT HOLDS GOING BACK EIGHT WEEKS. THE STABILIT IN YIELDS IS NOT A COINCIDENCE. LOWER THAN WHERE IT HAS BEEN. 2.73%. THIS UNDERPINS A LOT OF THE QUIESCENCE WE HAVE SEEN THIS WEEK. TOM: PART OF THAT IS THE REAL YIELD, THE NOMINAL YIELD. YOU HAVE A RESIDUAL. ALL OF A SUDDEN, MAYBE NOT TODAY AS WE GO TO THE REAL YIELD THIS AFTERNOON, THE 10-YEAR REAL YIELD .10%. LISA: FIVE-YEAR REAL YIELDS ARE NEGATIVE AND ONLY HEADING WERE NEGATIVE. AT WHAT POINT DO WE SEE ACCOMMODATION RECONFIRMED IN MARKETS THAT THE FED WOULD LIKE TO SEE. TOM: WE WELCOME ALL OF YOU ON RADIO AND TELEVISION WORLDWIDE AS WE SHAKE AT OUR TIME FOR ONE DAY IN LONDON. I THINK IT IS THE JULIE. -- JUBILEE. LISA: ARE WE GOING TO HAVE ANOTHER BREAKFAST LIKE THAT? TOM: ONE OF OUR MOST IMPORTANT GUESTS BECAUSE HE IS THEORETICAL AND FOUNDATIONAL HE BASED. STEVEN MAJOR JOINS US. I GOT TO CUT TO THE CHASE. STEVEN: SO FAR SO GOOD. I CANNOT THINK FOR WHAT THEY SPEAK OF ME BUT I'M QUITE HAPPY. TOM: RESTRICTED IN HONG KONG. WE GET ALL THE NEWS AND WONDERFUL BRIEFS. STEPHEN ENGLE REPORTING. DO YOU FEEL RESTRICTED DAY-TO-DAY IN THE NEW HONG KONG? STEVEN: IT IS POSSIBLE TO MOVE AROUND QUITE FREELY. YOU HAVE TO WEAR A MASK THAT WE CAN DO WHAT WE NEED TO DO. I THINK SOME OF THE VIEW FROM OUTSIDE MAY NOT BE CONSISTENT WITH WHAT WE SEE INSIDE HONG KONG. TOM: FOR THOSE THAT ARE LEARNING FIXED INCOME, MANY GUESTS LOOK AT THE INFLATION ADJUSTMENT YIELD. SHOULD I BE LOOKING AT THE REAL YIELD OR STUDY THE NOMINAL YIELD? STEVEN: BOTH. THE ONE PIECE MISSING IS THE FORWARD REAL YIELD. I HEARD YOU TALKING ABOUT IT NOW. THE FIVE-YEAR FORWARD REAL YIELD. LET'S TAKE THE ONE-YOU'RE RIGHT. IT HAS MOVED FROM -150 TO +100 AND THE LAST SIX MONTHS. YOU CAN TAKE THAT FROM TIPS. FORWARD WILL ESTIMATE WHERE WE ARE GOING TO BE IN FIVE YEARS TIME. THERE'S BEEN A BIG TIGHTENING THAT YOU CANNOT SEE ON THE SPOT. THE SPOT MOVES BY LESS THAN THAT. FROM THE FED'S POINT OF VIEW, THEY LOOK AT THE FORWARD BREAKEVENS, THE FORWARD REAL, IT'S A BIT OF A WORRY. STRANGELY ENOUGH THE MARKET HAS TIGHTENED A LOT ALREADY. THEY HAVE ONLY DONE ONE SMALL 25 BASIS POINT RATE HIKE AND A 50. THAT'S ALL THEY'VE DONE. THEY ARE NOWHERE NEAR NEUTRAL ON THAT BASIS. THE FORWARD IS ALREADY SAYING THEY HAVE TIGHTENED. LISA: ARE YOU SAYING THE FED WILL NOT BE CONCERNED BY A LOOSENING AND FINANCIAL CONDITIONS THIS WEEK? IT'LL JUST BE A POSITIVE AND THE INCREDIBLE TIGHTENING THEY WERE GETTING CONCERNED ABOUT? STEVEN: I'M A BIT CONCERNED. THEY ARE FORECASTING LOWER YIELDS BY YEAR-END. I'M A BIT WORRIED IT'S HAPPENING TOO SOON. TO ANSWER YOUR QUESTION, THAT'S CONSISTENT WITH THE FINANCIAL CONDITIONS NOT TIGHTENING FURTHER. THEY HAVE ALREADY TIGHTENED QUITE A LOT. THE FED IS NOT WELL SERVED BY THE MARKET SOFTENING UP THE FINANCIAL CONDITIONS. THEY WANT YOU ALL TO THINK THEY ARE HAWKISH AND WILL HIKE LIKE CRAZY SO YOU WILL BEHAVE AND THE CONSUMER WILL CALM DOWN AND INFLATION WILL FALL BACK TO TARGET. THE TROUBLE IS WE WANT EVERYTHING NOW. LISA: IF YOU GO NOW, IT CHANGES BEHAVIOR LATER IN THE YEAR. IF WE SEE A RETURN TO FROTHY YOUR CONDITIONS, BUYING THE DIP MENTALITY, WHERE WOULD YOU TAKE THE 10-YEAR PROJECTION FOR THE END OF THE YEAR? IT IS CURRENTLY TWO .5%. STEVEN: I -- 2.5%. STEVEN: IT'S IMPORTANT TO UNDERSTAND IF THEY HIKE WITH THEIR EYES CLOSED AND THEY CARRY ON DOING IT IN THE NEXT YEAR, THE 10-YEAR TREASURY SHOULD BE 4%. IF THEY TAKE INTO ACCOUNT WE COULD HAVE A RECESSION BY 2024, THEY WILL BE BACK AT ZERO WITHIN THE NEXT YEAR OR SO. THE YIELD SHOULD BE BELOW 1%. THE 2.5% SINCE BETWEEN THOSE TWO YIELDS. THE HUMAN BRAIN IS NOT CLEVER ENOUGH TO COPE WITH THAT UNFORTUNATELY. WE WANT IT IN SIMPLE TERMS, A SIMPLE BASE CASE, A PATH. LISA: WHAT DO YOU DO THAT? STEVEN: THAT IS HOW MARKETS WORK. MARKETS ARE TRYING TO INCORPORATE AVAILABLE INFORMATION. THEY WILL JUMP FROM BEING HAWKISH TO DOVISH AND THERE IS A TRANSITION THAT IS GRADUAL. THE GROWTH RISKS ARE GROWING. THE INFLATION RAISK ARE MAYBE PEAKING. STOM: THE LAST TIME WE HAD A BOND BEAR MARKET IS BAD, BLESSED HAM WAS LOOKING AT RELEGATION -- WEST HAM WAS LOOKING AT RELEGATION. HAVE YOU SEEN A BOND BEAR MARKET PRICED DOWN LIKE WE SEE RIGHT NOW? STEVEN: THIS YEAR'S DECLINE ON PRICES, THE TOTAL RETURN, THE LOSSES HAVE BEEN THE BIGGEST ON RECORD FOR 40 YEARS. WE HAVE HAD TWO CONSECUTIVE YEARS LIKE THIS. THE FIRST TIME SINCE 1994 WHEN BOTH BONDS AND STOCKS HAVE GONE DOWN. IT'S IMPORTANT. IT IS NOT JUST THE BOND BEAR MARKET. WE ARE TALKING ABOUT THE STOCK BEAR MARKET AND ROLLING -- AND QUESTIONING THE ROLE OF 60-40. WE STUDY THINGS LIKE THESE DRAWDOWNS AND THE MOVE IN THE FORWARDS, I THINK BONDS ARE OFFERING MORE VALUE TO DIVERSIFIED IN AN EQUITY BOND PORTFOLIO THAN BEFORE. TOM: SPEAK TO PEOPLE WHO COULD CARE LESS ABOUT THE FORWARD MARKET, PAGE 14 OF YOUR 28 PAGE OUTLOOK. THERE IS SOME FORM OF FIXED INCOME. THEY ARE DOWN THREE YEARS COUPON AND SAYING HOW DO I REGROUP. WHAT IS THE THOUGHT PROCESS TO TRY TO CATCH UP? STEVEN: YOU WILL NOT GET IT BACK THIS YEAR. THAT IS HOW YOU HAVE TO THINK IN BONDS. BONDS ARE NOT ABOUT ALL THE ROCK 'N' ROLL YOU GET INEQUITIES AND TECH STOCKS AND BIG -- THEY ARE NOT THE SAME. BONDS ARE THERE TO BE BALLAST IN THE PORTFOLIO. THAT IS SOMETHING YOU HAVE TO ACCEPT IN THIS DOWN YEAR. THE WINTER NOW WITH FRESH CASH, -- YOU ENTER NOW WITH FRESH CASH, YOU GET 3% ON THE LONGER END. LISA: HOW MANY BUYERS WERE FROM JAPAN AND CHINA? ON A CURRENCY HEDGED TO BASIS YOU CAN GET LESS IN THE UNITED STATES RIGHT NOW THAN IN JAPAN. STEVEN: THEY WILL NOT BE COMING FROM JAPAN BECAUSE THE JAPANESE CURVE IS STEEP. IT MEANS THERE MARKET WORKS BETTER. IT MEANS THAT HEDGE DOES NOT WORK. THAT IS TRUE. MONEY MIGHT BE COMING FROM OTHER PARTS OF THE WORLD. YOU MENTIONED CHINA. CHINA SEEMS TO BE SLOWING DOWN. IS THERE A CAPITAL FLOW FROM THAT PART OF THE WORLD INTO THE U.S.? SOMETHING SEEMS TO BE HAPPENING. IF CHINA IS SLOWING DOWN, THAT'S IMPORTANT TO THE FED AS WELL. TOM: WE DON'T CARE WHAT YOU THINK ABOUT FIXED INCOME. EXCUSE ME. I DON'T GIVE A DAMN. LISA: WE HAVE ONE OF THE PREEMINENT MINES IN FIXED INCOME. TOM: DO PEOPLE REALLY EAT THIS IN ENGLAND? STEVEN: IF YOU WANT TO LIVE A LONG TIME. TOM: WHAT WAS THE TRADITION? STEVEN: WE DID NOT EAT THAT STUFF. MY FATHER MAY HAVE BUT IS NOT GOOD FOR YOU. YOU NEED TO STICK TO THEY HEALTHY -- TOM: CHURCHILL? IT'S LIKE A MOVIE OUT OF 1946 WITH WINSTON WITH A CIGAR IN HIS MOUTH. STEVEN: I LIKE YOUR COMMENT ABOUT THE EGGS. THEY ARE YELLOW BECAUSE THEY ARE PROPER EGGS. LISA: THEY ARE ORANGE. STEVEN: THEY ARE ORGANIC. TOM: PROPER EGGS. I MISS JON SO MUCH. LISA: HE ABANDONED US. TOM: THE VITALITY OF THE FOOD HERE, AND EUROPE IN GENERAL, THE BEST WAS IN INSTSTANBUL IN MY TRAVELS. STEVEN MAJOR, THANK YOU SO MUCH. I'M NOT HAVING A FULL ENGLISH TOMORROW. WE WILL DO A FULL ENGLISH DATA CHECK. WE CAN DO THAT. THE HEADLINE NUMBER FOR ME WITH RICHARD MAILER COMING UP HIS BRENT CRUDE. $116.85. LISA: WHAT DOES THIS MEAN FOR REFINED PRODUCTS? I'M CURIOUS HOW THE WINDFALL TAX PLAYS INTO THIS, WHETHER IT IS THE BEGINNING OF A HOST OF TAXES AROUND THE WORLD. EXACTLY. WHAT IS GOING TO BE THE CONSEQUENCE? DO YOU SEE MORE INVESTMENT IN OIL AND GAS PRODUCTION, OR LOOPHOLES ANY RETRACEMENT -- AND A RETRACEMENT BECAUSE THEY RAISE -- BECAUSE THERE IS A RESENTMENT? TOM: I TRIED TO PAY IN CRYPTO. WHAT A GRIM WEEK FOR CRYPTO. I HAVE LESS THAN SCOTT MINERD. HE SAYS UP TO $400,000. THEN $8,000 ON CRYPTO. LISA: IT HAS NOT BEEN THE SAFE ASSET A LOT OF PEOPLE EXPECTED. I THINK YOU SHOULD START THE TRIPLE LEVERAGED ALL CRYPTO FUND. TOM: WE TRIED THAT. COMING UP, ALINA POLYAKOVA, PRESIDENT OF THE CENTER FOR EUROPEAN POLICY ON UKRAINE. FROM A BEAUTIFUL LONDON, STAY WITH US ON RADIO AND TELEVISION. THIS IS BLOOMBERG. ♪ RITIKA: KEEPING YOU UP-TO-DATE WITH NEWS AROUND THE WORLD, BORIS JOHNSON PULLED NO PUNCHES WHEN BLOOMBERG ASKED ABOUT THE PROSPECT OF NEGOTIATING WITH VLADIMIR PUTIN. "HOW CAN YOU DEAL WITH A CROCODILE WHEN IT'S EATING YOUR LEFT LEG?" HE SAYS THE RUSSIAN PRESIDENT IS NOT TO BE TRUSTED. RUSSIAN OIL IS ON TANKERS AND HEADING TO INDIA AND CHINA. ASIA OVERTOOK EUROPE HAS THE LARGEST BUYER LAST MONTH AS THE NATIONS HAVE RESTRICTED RUSSIAN OIL AND GAS IMPORTS. CHINESE INDUSTRIAL FIRMS DECLINED LAST MONTH. THEY FELT A .5% IN -- 8.5% IN APRIL. FACTORY, PRODUCTION, LOGISTICS. A HEARTENING DEVELOPMENT FOR THE FEDERAL RESERVE BUT NOT FOR AMERICAN WORKERS. COMPANIES ARE BECOMING MORE CAUTIOUS AFTER HANDING OUT HEFTY SALARY INCREASES OVER THE LAST YEAR. ECONOMISTS EXPECT ANNUAL WAGE GROWTH HAD 5.2%, DOWN FROM 5.5% IN APRIL. WAGE GROWTH IS A BIG SOURCE OF INFLATION. TEXAS GOVERNOR GREG ABBOTT IS DROPPING PLANS TO MEET WITH THE NRA MEETING IN HOUSTON DAYS AFTER THE SCHOOL MASSACRE. ACCORDING TO THE DALLAS MORNING NEWS, ABBOTT WILL BE IN UVALDE AND WILL SEND IT TAKES MESSAGE TO THE NRA INSTEAD. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM READY COULD GO TO -- RITIKA GUPTA. THIS IS BLOOMBERG. ♪ > > EUROPE IS FINALLY CHANGING THEIR TOWN. THEY NEED A STRONGER EURO TO BRING DOWN INFLATION. I THINK THE EURO WILL FIND ITS WAY TO THE HIGHER RANGE. IT IS STILL GOING TO BE VERY MUCH UNDERVALUED. TOM: JEFFREY YU. HIS PAPER IS THE MOST CONTROVERSIAL SECURITY RESEARCH A GLOBAL WALL STREET. DR. YU WILL TELL YOU WHY YOU NEED TO CARE ABOUT THE PLAZA ACCORD. HE PUSHES AGAINST THE ZEITGEIST AND SAYS FORGET ABOUT THE EARLY 1980'S. IT IS NOT A PROPER ANALOG. HE SAYS NO. WE WELCOME YOU TO LONDON ON OUR WAY BACK TO SWITZERLAND. WE WILL BE IN NEW YORK ON MONDAY. WE ARE NOT WORKING MONDAY. LISA: I HAVE BEEN TRYING TO TELL YOU THAT. YOU SAY YOU WILL GET INTO THE OFFICE ANYWAY. TOM: WE WILL BE LOOKING FOR THAT ON MONDAY. TUESDAY WE START OUT. I BELIEVE THERE HAS BEEN A FERRO SIDING. -- SITING. ALINA POLYAKOVA JOINS US NOW, PRESIDENT OF THE CENTER FOR EUROPEAN POLICY ANALYSIS. YOU AND I HAVE THE HONOR OF SPEAKING AFTER A TREATMENT BY SIR LAWRENCE FRIEDMAN OF KING'S COLLEGE ON WAR AND THE UNIQUENESS OF UKRAINE. FRIEDMAN'S FOCUS ON THE BLACK SEA. ARE YOU? ALINA: ABSOLUTELY. FOR YEARS WE HAVE RAISED THE ALARM BELLS ABOUT HOW CRITICAL THE BLACK SEA IS FOR NATIONAL SECURITY. THE RUSSIAN BLOCKADE OF THE BLACK SEA IS RAISING FOOD PRICES ACROSS THE WORLD. IT IS CONTRIBUTING TO HUGE FOOD INSECURITY. THAT IS WHY IT SHOULD HAVE BEEN AN AREA OF FOCUS FOR A LONG TIME. TOM: DOES THE RUSSIAN NAVY HAVE ENOUGH CONTROL TO CONTROL THE BLACK SEA, TO CONTROL FOOD? IF THEY DO, HOW DOES NATO AND TURKEY RESPOND? ALINA: THEY HAVE ENOUGH CONTROL TO BLOCK UKRAINE FROM SENDING ANY GRAIN, CORN, EXPORTS OF ANY KIND. THEY ARE HOLDING UKRAINE HOSTAGE AND HOLDING THE WORLD'S FOOD SUPPLY HOSTAGE. THE RUSSIANS SAID, LOOK, IF YOU REMOVE SANCTIONS, WE MIGHT LET SOME SHIPS GO THROUGH. THAT IS A TERRORIST TACTIC. IN THE BLACK SEA TURKEY IS THE OTHER MAIN ACTOR, A NATO MEMBER STATE. UNFORTUNATELY WITHOUT A DIRECT CONFRONTATION WITH THE RUSSIAN NAVY IT IS HARD TO SEE HOW WE GET THE BLOCKADE OFF. RUSSIA DOES HAVE ESSENTIALLY DOMINANCE OVER THE BLACK SEA TO CONTROL THE PASSAGE OF SHIPS, TO CONTROL BASICALLY GLOBAL TRADE. LISA: WHAT IS THE REDLINE HERE? HOW DOES THIS LOOK BY YEAR-END IF THERE IS A PROBLEM WITH THE LACK OF FOOD IN CERTAIN PLACES? ALINA: I THINK AT SOME POINT NATO IS GOING TO HAVE TO ACT. UKRAINE HAS A LOW CAPACITY NAVY. LOW CAPACITY IN THE AIR AS WELL. WE HAVE NUMBNESS. AT THE END OF THE DAY WE HAVE THE RIGHT TO ENFORCE FREEDOM OF NAVIGATION. THE MONROE CONVENTION, WHICH COVERS INTERNATIONAL NAVY MOVEMENTS IN THE BLACK SEA DOES SPECIFY THERE SHOULD BE FREEDOM OF NAVIGATION IN INTERNATIONAL WATERS. RUSSIA IS VIOLATING THOSE RULES RIGHT NOW BUT THREATS ARE NOT GOING TO WORK. WE NEED TO SEE SOME REAL ACTION. WE NEED TO SEE SOME SHIPS, NATO SHIPS, U.K. SHIPS GOING THROUGH THOSE WATERS AND SAY WE ARE GOING TO ENFORCE NAVIGATION BECAUSE THAT IS THE LAW. IF YOU WANT TO HAVE A CONFRONTATION OVER THAT, WE WILL HAVE TO TALK ABOUT IT. RIGHT NOW IT DOES NOT SEEM TO HAVE AN END IN SIGHT. LISA: THIS IS TIPTOEING INTO A HOT WAR BETWEEN WESTERN NATIONS AND RUSSIA. AT WHAT POINT DO WE CROSS THAT LINE IF THERE ARE SHIFTS FROM NATO SENT TO THE BLACK SEA -- SHIPS FROM NATO SENT TO THE BLACK SEA? ALINA: THIS IS THE FOG OF WAR WE ARE IN. THERE IS A RISK OF CONFRONTATION IN THE BLACK SEA. THE BATTLE OVER SMALL, UNINHABITED SNAKE ISLAND HAS BECOME A CRITICAL ISSUE FOR THEIR BROADER BATTLING UKRAINE. -- BATTLE IN UKRAINE. RUSSIA HAS THE ADVANTAGE AFTER CONTROLLING CRIMEA FOR EIGHT YEARS. CRIMEA'S STRATEGIC POSITION IS ALLOWED IT PROJECT POWER ACROSS THE WATERWAY. WE HAVE TO THINK ABOUT WHAT THIS MEANS, BECAUSE WE ARE NOT JUST TALKING ABOUT UKRAINE OR THE BLACK SEA. WE ARE TALKING ABOUT GLOBAL FOOD SUPPLY AND FOOD CHAINS THAT WILL BE AFFECTING EUROPE, UNITED STATES, ALL OF US. WE HAVE TO START THINKING ABOUT WHAT IS THE BALANCE TO BE STRUCK. MY PREFERENCE IS THE RUSSIANS COME TO THE TABLE AND WE CAN ENGAGE IN DIPLOMACY OVER THIS ISSUE. THEY HAVE SHOWN VERY LITTLE INTEREST IN THAT. TOM: I ASKED SIR LAWRENCE FRIEDMAN A QUESTION. DID SO MUCH THINKING ABOUT THIS ACROSS THE ARK OF POST-WORLD WAR II EUROPE. I ASKED, HOW DO WAR'S END? WITH ALL YOUR KNOWLEDGE OF HOW WARS END, WHAT DO YOU GUESS TO BE THE OUTCOME OF THIS WAR IN UKRAINE? ALINA: WARS IN EUROPE AND THE 20TH CENTURY HAVE ENDED IN A NEGOTIATED SETTLEMENT AFTER AT THE FEET, A BIG MILITARY DEFEAT. WORLD WAR I, WORLD WAR II. IT IS HARD TO SAY IT ONLY ENDS IN NEGOTIATED AGREEMENT. THAT HAPPENS AFTER CAPITULATION. ONE SIDE WILL HAVE TO LOSE. THE UKRAINIANS SAY THEY WILL FIGHT TO THE LAST MAN STANDING. THE RUSSIANS ARE MAKING PROGRESS BUT THIS LOOKS LIKE IT WILL BE A VERY LONG GRIND THAT COULD LAST MANY YEARS WITHOUT EITHER SIDE ADMITTING OR SEEING THEMSELVES AS THE VICTOR OR LOSER. IT IS STILL IN OUR INTEREST TO ENSURE THE RUSSIANS LOSE. THAT IS THE ONLY WAY THEY WILL COME TO THE NEGOTIATING TABLE. THAT IS WHAT EUROPEAN HISTORY HAS SHOWN US OVER AND OVER AGAIN. LISA: QUICKLY HERE, WHAT ROLE DOES OIL PLAY? THE IDEA OF EUROPE LIMITING THEIR IMPORTS OF GAS FROM RUSSIA GOING TO HAVE ON THE DURATION OF THE CONFLICT? ALINA: ALL THESE KINDS OF SANCTIONS, PARTICULARLY ON OIL. GAS IS ACHILLES' HEEL OF THE RUSSIAN WAR MACHINE. THE RUSSIAN GOVERNMENT MAINTAINING ITS WAR EFFORT THROUGH ENERGY PAYMENTS IS RECEIVING. IT'S ABOUT TO DEFAULT IN THE NEXT SEVERAL MONTHS ON THOSE DEBT PAYMENTS BECAUSE OF THE U.S. ACTIONS ON SANCTIONS. ON OIL, THIS IS GOING TO BE A HIT IF EUROPE MOVES FORWARD WITH THIS. IT IS NOT GOING TO BUCKLE THE RUSSIAN ECONOMY. AT THE END OF THE DAY WHAT WILL HAPPEN IS PRESSURES WILL GO UP AND IN THE GRAND SCHEME OF THINGS THAT WILL BENEFIT RUSSIA AS ONE OF THE LARGEST OIL ENERGY EXPORTERS IN THE WORLD. IT'S A MIXED BAG HAS TO WHETHER THE OIL EMBARGO WILL AFFECT RUSSIA IN THE SHORT TERM. IN THE LONG-TERM IT MAY BENEFIT IT SLIGHTLY FROM RISING PRICES ON OIL. TOM: ALINA POLYAKOVA, THANK YOU SO MUCH. A WONDERFUL BRIEFING ON A FRIDAY. ALINA POLYAKOVA FROM THE CENTER FOR EUROPEAN POLICY ANALYSIS. I WANT TO HEAR THE DYNAMIC OF THE WEEK. DOW FUTURES OF 56. VIX, BIG DEAL. WE GO THE OTHER WAY. 20 92 AT 26 V -- 29 TO 26 VIX TODAY WOULD BE A GOOD DAY DAY IN THE WEEK. EURO, 106.99. > > CLEAR THINKING THE FED WILL BE TOO GENTLE WITH THE ECONOMY. > > BASICALLY A SOFT LANDING. > > THERE'S A LOT OF ROOM FOR STEAM TO COME OUT OF THE ECONOMY BEFORE YOU START GETTING BIG CUTBACKS. > > INFLATION IS HIGH BUT THIS IS THE FIRST TIME IN A COUPLE OF YEARS WHERE THERE ARE NO RESTRICTIONS. > > UNTIL WE GET A BETTER SENSE ON INFLATION, WE WILL BE FRAGILE. > > THIS IS "BLOOMBERG SURVEILLANCE." TOM: GOOD MORNING. FROM OUR STUDIOS IN LONDON, JONATHAN FERRO NOT WITH US AND RECOVERING FROM A FULL ENGLISH BREAKFAST. WE EXPECT TO SEE HIM ON TUESDAY AS WELL. WE ARE WRAPPING UP THE WEEK, TO GET TO THE JUNE MIDYEAR OUTLOOK TO GET TO THE JOBS REPORT. WE GO BACK TO AMERICA WITH CHAIRMAN POWELL, THE AMERICAN LABOR ECONOMY. LISA: LOW WE GOT YESTERDAY -- FROM WHAT WE GOT YESTERDAY THE LABOR MARKET IS STILL INCREDIBLY STRONG. IT'S A GREAT THING IF PEOPLE CAN GET JOBS BUT IT CREATES ANOTHER PROBLEM FOR THE FED TRYING TO THREAD A NEEDLE THAT IS HARD TO THREAT. TOM: I WILL STEAL FROM MOHAMED EL-ERIAN. KEY DECISIONS MATTER. HOW DO YOU MAKE A KEY DECISION? THE ROAD NOT TAKEN. MOHAMED EL-ERIAN DOING HIS ROBERT FROST IMITATION. THE KEY DECISIONS ARE IMPOSSIBLE GIVEN THE UNCERTAINTY. LISA: THAT'S THE REASON I FIND IT FASCINATING THAT JAY POWELL DID CAPTURE AS MUCH ATTENTION WHEN HE SAID THIS IS NOT GOING TO BE NUANCED. WE WILL NOT LOOK AT THE SPECIFIC DRIVERS OF INFLATION. WE WILL GO AT IT BECAUSE WE NEED PRICE STABILITY. IS IT A GOOD THING OR BAD THING YOU ARE SEEING AN EASING OF FINANCIAL CONDITIONS THIS WEEKEND PEOPLE EXPECT LESS FROM THE FED? TOM: FOR THOSE OF YOU IN RADIO, FOR ME TO TURN TO LISA -- EXIT STAGE LEFT. IF I FREEZE IN THIS POSITION CAN WE STILL DO THE SHOW? I DON'T KNOW. MY BACK -- WE ARE GETTING THERE. LISA: LET ME TELL YOU WHAT IS GOING ON. TOM: PARTICULARLY IN THE NEXT WEEK. LISA: THE FED IS UNDERSTATED THIS WEEK. WE GET U.S. PERSONAL INCOME AND SPENDING. I GO BACK TO BRIAN MOYNIHAN OF BANK OF AMERICA SAYING CONSUMERS WERE SPENDING 10% MORE IN THE FIRST TWO WEEKS OF MAY THEN IN THE SAME PERIOD LAST YEAR. 1% OF REAL SPENDING MORE. HOW MUCH DO WE SEE THAT PLAY OUT AT A TIME WHEN YOU CONTINUE TO SEE CONSUMERS HAVE PLENTY OF CASH IN THEIR COFFERS? UNIVERSITY OF MICHIGAN SENTIMENT SURVEY COMING IN, REMAINING THE LOWEST SINCE 2011. PEOPLE ARE SAYING LOTS OF THINGS BUT THEY ARE STILL GOING OUT AND BUYING. "BLOOMBERG SURVEILLANCE" FROM LONDON. WE ARE HAVING TEA AND SPEAKING WITH MOHAMED EL-ERIAN COMING UP, THE LONGTIME MEMBER OF PIMCO, LONGTIME THINKER WHO HAS INCREDIBLE VIEWS ON EVERYTHING. JORDAN ROCHESTER WILL GIVE US HIS SENSE ON THE DOLLAR AND CHRISTIAN MALEK OF J.P. MORGAN SECURITIES. TOM: INTERVIEW OF THE DAY. LISA: YOU HAVE GASOLINE PRICES RISING TREMENDOUSLY, ENERGY PRICES CAUSING A CONSUMPTION CRISIS IN THE U.K., AND HOW DO WE OFFSET AT A TIME OF ESCALATING CONFLICT IN UKRAINE DRIVEN BY RUSSIA. TOM: JORDAN ROCHESTER WILL JOIN US. THAT'S ABOUT DOLLAR DYNAMICS. CHRISTIAN MALEK WILL JOIN US FROM THE 100-PAGE OPUS FROM J.P. MORGAN. ONE OF OUR GREAT CONTRIBUTORS TO BLOOMBERG, THE GERMAN FROM THE UNIVERSITY OF CAMBRIDGE AND QUEENS COLLEGE AND ALL HIS WORK ON THE GAME THEORY OF THE GLOBAL SYSTEM, MOHAMED EL-ERIAN THIS MORNING. I LOVED YOUR NOTE BECAUSE IT IS FRONT AND CENTER RIGHT NOW. THE DOLLAR MATTERS AND A DOLLAR TOO STRONG GETS THE WAY OF A RECOVERY. ARE YET THE POINT WHERE IT'S A PROBLEM? MOMAHED: FIRST, WELCOME TO THE U.K. HAD THINGS FOR BRINGING US THE WEATHER. IT IS WONDERFUL TO HAVE YOU HERE. WE ARE NEAR THE POINT WHERE THE DOLLAR IS TOO STRONG FOR THE REST OF THE WORLD. NOT FOR THE U.S., BUT THE REST OF THE WORLD. IT IS THIS PHENOMENON I CALL LITTLE FIRES EVERYWHERE. WHETHER IT IS FOOD PRICES FOR OIL PRICES SOAR STRONG DOLLAR, THAT CONTRIBUTES TO THE LITTLE PRICES EVERYWHERE -- LITTLE FIRES EVERYWHERE. THE ANSWER IS IN THE HAND OF THE OTHER COUNTRIES, NOT THE U.S. THERE IS NOT T MUCH THE U.S. CAN DO BUT THERE ARE THINGS OTHER COUNTRIES CAN DO. TOM: AT THE PANEL YESTERDAY IN DAVOS, SIR LAWRENCE FRIEDMAN. IN THE MOST QUIET MOMENT IN THAT TOO SHORT AN HOUR HE LINK DOLLAR DYNAMICS INTO THE FOOD CRISIS AND THE MEMORY OF TUNISIA, THE ARAB SPRING. FOCUSED ON EGYPT, WHEN YOU LOOK AT THE FRAGILITY OF EGYPT AND THE MEMORY OF THE ARAB SPRING, WHAT IS THE MODEL TO HELP BEGIN TO SOLVE THE CRISIS? MOMAHED: IT'S A BIG ISSUE. THE IMF MONTHS AGO SAID A COST-OF-LIVING CRISIS IN THE WEST IS THE RISK OF FAMINE AND COMMODITY IMPORTING DEVELOPING COUNTRIES. THAT IS PROOF OF FRAGILE ECONOMIES. EGYPT, TURKEY, THE DECISION IS HOW MUCH YOU SUBSIDIZE HAVE MUCH YOU PASS ON TO THE CONSUMER? FOOD IS A PARTICULARLY DELICATE ISSUE. MOST COUNTRIES WILL END UP SUBSIDIZING. YOU ARE LIKELY TO GET A REPEAT OF 2011. HOWEVER, AND THIS IS IMPORTANT, YOU HAVE TO WORRY ABOUT THE FINANCES. IT'S A DIFFICULT ENVIRONMENT FOR DEVELOPING COUNTRIES, TOM. LISA: BEFORE WE MOVE ON TO WHAT IS GOING ON IN RATES AND MOVE AHEAD IN THIS ECONOMY, WHAT DO YOU THINK IN TERMS OF OFFSETTING THE COSTS? SOMETHING LIKE THE WINDFALL TAX ANNOUNCED IN THE UNITED KINGDOM? MOMAHED: I HAVE BEEN ARGUING FOR A WHILE THE RIGHT THING TO DO IS TO IMPOSE A WINDFALL TAX. TO USE THE PROCEEDS TO PROTECT THE MOST VULNERABLE SEGMENTS OF THE POPULATION. THAT IS WHAT THE U.K. DID YESTERDAY. IS THE WINDFALL TAX PERFECT? OF COURSE NOT. THERE ARE NO PERFECT SOLUTIONS IN THIS WORLD ANYMORE. IT IS BY FAR SUPERIOR TO EVERY OTHER SECOND-BEST SOLUTION. I THINK OF MORE COUNTRIES LOOK AT THIS AS A TEMPORARY MEASURE TO PROTECT THE MOST VULNERABLE SEGMENTS OF THE POPULATION. LISA: IS IT JUST GOING TO BE THE OIL AND GAS COMPANIES OR ARE THEY LOOKING AT COPPER AND ALL THE OTHER COMMODITIES IN ADDITION TO FOOD PRODUCERS? MOMAHED: I SUSPECT THEY WILL FOCUS ON OIL AND GAS. GOING FURTHER THAN THAT IT GETS REALLY TRICKY VERY QUICKLY. I SUSPECT IT WILL BE FOCUSED ON OIL AND GAS. LISA: MOVING FORWARD WE WERE TALKING IN DAVOS ABOUT THE BANNER HEADLINE ABOUT THE UKRAINIAN WORK, RUSSIA'S WAR IN UKRAINE. UNDER THE SURFACE IT WAS ALL ABOUT CHINA AND THE FACT THAT ANY PROLONGED SHUTDOWN COULD TORPEDO GLOBAL MOMENTUM. HOW CLOSELY ARE YOU WATCHING THAT? IF WE GET THE LOCKDOWNS CONTINUING UNTIL YEAR-END DOES THAT MEAN WE'LL BE CLOSE TO A GLOBAL RECESSION? MOMAHED: I'M WATCHING IT VERY CLOSELY. WHAT HAPPENS IN CHINA IMPACTS BOTH GLOBAL AGGREGATE DEMAND AND AGGREGATE SUPPLY. WE FORGET CHINA IS A MAJOR CONSUMER OF PRODUCTS ALSO MADE ELSEWHERE. WE SAW WITH THE RETAIL NUMBERS LOOKED LIKE. PRETTY HORRIBLE. WE ARE REMINDED HOW IMPORTANT CHINA IS IN THE SUPPLY CHAIN. I LOOK AT THIS CAREFULLY. THE CONCERN WE HAVE IS THE THREE MAJOR AREAS OF THE GLOBAL ECONOMY ARE SLOWING AT THE SAME TIME. THERE IS NO COMPENSATING LOCOMOTIVE ANYWHERE IN THE GLOBAL ECONOMY RIGHT NOW. WE HAVE TO BE CAREFUL WE DON'T GET THIS SELF SEATING PROCESS. -- SELF-SEEDING PROCESS. THE MARKETPLACE HAS EMBRACED A PAUSE IN SEPTEMBER. BE CAREFUL. THE ONLY REASON THE FED WILL PAUSE HIS DEMAND HAS COME DOWN REALLY FAST. THAT WILL NOT BE GOOD FOR RISK ASSETS. TOM: I WANT TO GO BACK TO THE ONLY GAME IN TOWN. WHY IS THIS GUY SO VISIBLE? WHAT IS SO SPECIAL ABOUT EL-ERI AN? HE HAS ARTICULATED GAME THEORY. ONE OF THE NUANCES OF THE ONLY GAME IN TOWN IS SEPARATING CHAIRMAN POWELL'S DESIRABLE FROM CHAIRMAN POWELL'S FEASIBLE. WHAT IS THE FEASIBLE SET RIGHT NOW FOR THE AMERICAN CENTRAL BANK? MOMAHED: I THINK AT BEST THE FEASIBLE SET IS A SOFT DISH LANDING -- SOFTISH LANDING. TIME HAS PASSED TRY SOFT LANDING. WE COULD HAVE DONE IT BUT IT IMPLY THE FED MOVING NINE MONTHS AGO. IT SHOULD HAVE AND DIDN'T. INSTEAD OF TIGHTENING INTO A GROWING AND DYNAMIC ECONOMY, IT IS TIGHTENING TO A SLOWING ECONOMY. IT IS DIFFICULT TO GET A SOFT LANDING. THE BEST YOU CAN HOPE FOR IS A SOFTISH LANDING. THE PROBABILITY IS NOT AS HIGH AS I WOULD LIKE IT TO BE. THE FED WILL HAVE TO DECIDE BETWEEN TWO POLICY MISTAKES. HIT THE BRAKES TOO HARD AND RISK OF RECESSION, OR TAP THE BRAKES, INCLUDING IN SEPTEMBER AND RISK HAVING INFLATION INTO 2023. TOM: STAN FISCHER IS THE GREAT NORTHSTAR, AN EXTRAORDINARY STATEMENT ABOUT THE GENTLEMAN IN 1998. WE HAVE A CONCEIT NOW OUR CURRENCIES ARE MORE FLOATING. CAN THE RELEASE VALVE FOR CHAIRMAN POWELL HAS HE APPROACHES THE FEASIBLE BE DOLLAR DYNAMICS BECAUSE WE HAVE A MORE OPEN CURRENCY SYSTEM? MOMAHED: IT IS NOT OPEN ENOUGH FOR THAT. THE SOLUTION TO ALL OUR ISSUES IS A SURGE OF PRODUCTIVITY. IF WE GET SIGNIFICANT PRODUCTIVITY GROWTH, WE CAN RECONCILE ALL SORTS OF DIFFICULT TRADE-OFFS. THE KEY ISSUE IS WHETHER WE GET A SURGE IN PRODUCTIVITY. YOU CAN GET THAT WITH OTHER THINGS HAPPENING UNDERNEATH. IT WOULD BE WONDERFUL TO HAVE LABOR PARTICIPATION GO UP, ESPECIALLY AMONG WOMEN. IT WOULD BE WONDERFUL TO HAVE SUPPLY CHAINS IMPROVING. IS ALL THAT GOING TO HAPPEN IN THE SHORT TERM? VERY UNLIKELY UNFORTUNATELY. LISA: YOU ARE TALKING ABOUT HOW A SOFTISH LANDING IS LOOKING LIKE THE MOST BEST OUTCOME. DO YOU THINK THE REASON DATA WE HAVE SEEN AND THE ASSUMPTION IN MARKETS THAT MOMENTUM IS WAITING, DO YOU THINK THAT GOT AHEAD OF ITSELF? THAT THERE HAS ALREADY BEEN A SLOWING THAT WILL MAKE IT EASIER FOR THE FED? MOMAHED: THE MARKETPLACE IS GOING THROUGH A PROCESS. WE HAD EIGHT WEEKS OF SUCCESSIVE DECLINES AND CLEARLY THERE ARE PEOPLE WHO ARE FINDING BARGAINS. THERE ARE SINGLE NAME BARGAINS. THE FACTORY HAD THE LARGEST INFLOW INTO THE EQUITY MARKET GLOBALLY FOR THE LAST 10 WEEKS IS SIGNIFICANT. WE ARE SEEING THE BALANCE. YOU'RE HAVING A TECHNICAL REACTION AFTER EIGHT STRAIGHT WEEKS. THAT WE UNDERSTAND. WHAT I DON'T UNDERSTAND IS THE NOTION THAT SUDDENLY THE FED WILL BE ABLE TO HIKE PRICES AND TAKE IT EASY. THAT CELIE REASON THAT HAPPENS, DEMAND COLLAPSES. EQUITIES WILL NOT DO WELL. YOU SAW IT HAPPENS WHEN TARGET ANNOUNCED THEY WERE BEING IMPACTED ON THE COST AND REVENUE SIDE. THE LAST THING EQUITY MARKETS NEED RIGHT NOW IS WORRIES ABOUT EARNINGS. TOM: MOHAMED EL-ERIAN WITH THE IDEA OF TECHNOLOGICAL PROCESS MOVING US FORWARD. HE'S AT THE UNIVERSITY OF CAMBRIDGE. FROM OUR STUDIOS IN LONDON, FUTURES UP 30. > > RATHER THAN USING ITS POWER TO REINFORCE AND REVITALIZE THE AGREEMENTS AND PRINCIPLES, THESE SITUATIONS THAT ENABLED SUCCESS, BEIJING IS UNDERMINING THEM. UNDER PRESIDENT XI, THE RULING CHINESE COMMON'S PARTY HAS BECOME AGGRESSIVE AT HOME AND MORE AGGRESSIVE ABROAD. TOM: ON A MAY AFTERNOON, THE SECRETARY OF STATE WITH A STRATEGIC STATEMENT BY THE BIDEN ADMINISTRATION ON CHINA. WHY THE ANTICIPATED. IT WILL BE DIGESTED IN BEIJING. THE IMMOVABLE FORCE ON THE CALENDAR HAVE A CHINESE MEETING IN LATER AUTUMN. JACK FITZPATRICK IN WASHINGTON. LISA AND I ARE OUT OF TOUCH WITH THE AGONY ACROSS AMERICA TODAY AND IT CENTERS ON THE NATIONAL RIFLE ASSOCIATION. THE HISTORY OF THE NRA IS YOUNG BOYS OUT IN THE WOODS WITH A SINGLE SHOT REMINGTON SHOOTING SQUIRRELS. THE MODERN REALITY IS QUITE DIFFERENT. WHAT WILL THE REALITY BE IF THE NRA MEETING -- AT THE NRA BEATING IN TEXAS? JACK: IT WILL BE INTERESTING TO WATCH EXACTLY WHAT THE REALITY IS, BECAUSE THE SHOOTING IN UVALDE HAS REQUIRED A RESPONSE FROM ACROSS THE AISLE. YOU WILL SEE FORMER PRESIDENT TRUMP SPEAK AT THE NRA EVENT. TEXAS GOVERNOR GREG ABBOTT, ACCORDING TO THE DALLAS MORNING NEWS, IS SUPPOSED TO PULL OUT IN-PERSON BUT GIVE A VIDEO ADDRESS. A BIT OF A HALF MEASURE IN TERMS OF EXACTLY WHAT HIS INVOLVEMENT WOULD BE. AT THE SAME TIME YOU ARE SEEING AN ATTEMPT ON CAPITOL HILL TO LEGISLATE IN RESPONSE TO THIS. JOHN CORNYN FROM TEXAS HAS BEEN DEPUTIZED TO BE THE LEAD FROM SENATE REPUBLICANS TO DO SOMETHING, BUT IT'S A VERY NARROW SCOPE THEY ARE TALKING ABOUT. THERE A NECESSITY FOR ACTION AND CAREFUL RHETORIC BUT YOU'RE GOING TO SEE STILL A STRONG CONNECTION BETWEEN REPUBLICANS AND THE NRA. TOM: IN THE TIME WE HAVE HERE I WANT TO ADDRESS THE GENTLEMAN FROM HOUSTON. JOHN CORNYN GREW UP PARTLY IN TOKYO. HE'S AN INTERNATIONALIST BY AMERICAN STANDARDS. UVA LAW SCHOOL. HE'S BEEN WITH THE TRADITION YEAR HE AND NOW THE ESTEEMED SENATOR FROM TEXAS. HOW DOES HE SPEAK TO THE STRIDENT REPUBLICANS AGAINST ANYTHING TO DO WITH GUN LEGISLATION? JACK: I THINK IN THIS CASE HE WOULD PROBABLY POINT OUT TO THEM THAT THERE IS REPUBLICAN SUPPORT FOR SOMETHING VERY NARROW ALONG THE LINES OF INCENTIVIZING STATES TO PUT IN THERE ON RED FLAG LAWS. MAYBE NOT EVEN A FEDERAL RED FLAG LAW. IF YOU ARE TALKING TO REAL SECOND MINUTE ADVOCATES, YOU ARE STILL NEGOTIATING SOMETHING THAT IS SO NARROWLY FOCUSED THAT THIS IS NOT SOMETHING YOU WOULD CALL AN ATTACK ON THE GUN LOBBY OR THE GUN INDUSTRY. I DON'T THINK THIS IS SOMETHING THAT WILL ENTIRELY ALIENATE HIM FROM THAT PART OF THE CONSERVATIVE AMERICA. LISA: IS THERE ANYONE LEFT IN WASHINGTON -- I BELIEVE CONGRESS IS GONE FOR 10 DAYS. THEY ARE DEALING WITH WHAT IS GOING ON IN UKRAINE AND CHINA AND THE ISSUES WE HAVE SEEN THEIR, AND NOW THE TRAGEDY IN TEXAS. JACK: THERE WAS DISCUSSION ABOUT SOME MEMBERS STAYING IN WASHINGTON TO KEEP TALKING ABOUT THIS GUN BILL. A LOT OF THE TIME WHEN THERE IS NEGOTIATION THEY ARE NOT HOLDING FOR VOTES THEY HAVE EACH OTHER ON SPEED DIAL. THERE IS ACTIVITY. I'M NOT ENTIRELY SURE IF SOME MEMBERS ARE GOING TO STAY TO HAVE SOME MEETINGS. THEY ARE GOING INTO RECESS AND THEY WILL NOT BE REAL LEGISLATIVE ACTIVITY. IT'S NOT AN IDEAL TIME PROBABLY FOR THEM TO MOSTLY LEAVE WASHINGTON. AT THE SAME TIME THEY CAN DO WORK AND ARE RESPECTED TO CONTINUE TO TRY TO NEGOTIATE SOMETHING NARROW ON GUNS. LISA: THEY WILL GO HOME AND TALK TO THEIR CONSTITUENTS. IN A RESTAURANT WERE CAFE PEOPLE WILL COME UP TO THEM. ARE THEY TALKING ABOUT TAXES? IS THERE A GROUNDSWELL OF SUPPORT OR IS IT INFLATION AND GAS PRICES SO HIGH? JACK: THE GUN ISSUE HAS GOTTEN ENOUGH OF A RESPONSE SO THAT IS CLEARLY A PRIORITY. YOU WILL SEE PRESIDENT BIDEN GO TO UVALDE ON SUNDAY. IT IS IN THE NEWS CYCLE ENOUGH SO THAT I DON'T THINK IT'S ENTIRELY WASHED OVER BY ALL THE OTHER ISSUES. FOR A LOT OF THESE ISSUES, ESPECIALLY THE DEMOCRATS WANT TO BRING UP THINGS LIKE INFLATION OR THE OVERRIDING CONCERN, I DON'T KNOW EXACTLY HOW LONG THE PRESSURE TO ACT ON A GUN BILL WILL LAST. IT IS THERE RIGHT NOW. TOM: WHAT IS IN ASSAULT RIFLE USED FOR, JACK? DO USE IT FOR PHEASANT HUNTING OR SQUIRREL HUNTING? MAYBE IT IS IN YOUR HOME AND YOU NEVER TAKE IT OUT. IT'S AN AR 15. I DON'T RECALL THIS IN MY YOUTH. JACK: THAT GETS AT WHAT YOU ALLUDED TO EARLIER ABOUT THE EVOLUTION OF THE NRA. I CAN'T TELL YOU FROM PERSONAL EXPERIENCE WHAT DO USE AN AR 15 FOR BUT I CAN TELL YOU IT'S A BIT MORE OF A CULTURAL ISSUE THAN JUST HUNTING. IT WAS 2016 WHEN TED CRUZ BRIBED BACON BY PUTTING IT AROUND THE MUZZLE OF AN AR 15 HAS A CAMPAIGN STUNT. THAT MAKE IT A LITTLE MORE TOWARD IT THEN SHOOTING PHEASANT. TOM: I LIKE A FOLDING WITH BREAKFAST. JACK, BRILLIANT AS ALWAYS IN WASHINGTON. TEXAS AND THE FORMER PRESIDENT. HOW HARD IS IT TO BE IN SWITZERLAND AND THE UNITED KINGDOM AND THEY HAVE OF SOCIETAL TRAGEDIES LOOKING BACK AT THE UNITED STATES? LISA: IT'S AN ANACHRONISM. IT IS SUCH AN ABERRATION. I WAS READING ABOUT HOW WHEN THE DEVELOPED WORLD UNITED STATES IS AN ABERRATION. THERE ARE OTHER NATIONS WITH THE SAME LEVEL OF GUN VIOLENCE BUT THEY ARE IN THE DEVELOPING WORLD. HOW DO YOU PARSE OUT THE GAP? WHAT IS GOING ON IN THE UNITED STATES? JACK: AS WE HAVE TALKED TO PEOPLE IN NEW YORK, THE BALANCED DEBATE HERE AWAY FROM THE STRIDENCY THAT JACK FITZPATRICK MENTIONED, THE CAMPAIGN STUFF, THEY DO GET REALLY HOT. YOU REALLY WONDER IF THE -- AT THE END OF THE DAY WHAT IS THE FIRST STEP FORWARD? THE INCREMENTAL STEP THE SENATOR FROM KENTUCKY WANTS TO TRY TO AGREE ON WHAT THE SENATOR FROM MANHATTAN AND BROOKLYN. LISA: PUTTING POLITICS ASIDE, NO ONE WANTS TO SEE KIDS KILLED OR GUNNED DOWN IN A CLASSROOM. IT IS JUST A PATHWAY TO GET THERE BUT IT'S BEEN A QUESTION FOR SO LONG. TOM: DATA CHECK. NEXT WEEK THE AMERICAN JOBS REPORT. THE ECB MEETING? IT IS OUT THERE. IT IS OUT THERE SOMEWHERE. FUTURES UP 7. DOW FUTURES UP 3. VIX, 27.24. LISA: HE DID NOT WANT TO BE WITH THIS BECAUSE WE WOULD HUMILIATE HIM. TOM: I HAD FISH AND CHIPS LAST NIGHT. HE EMAILED ME. TOM: "BLOOMBERG SURVEILLANCE" FROM SPECTACULAR STUDIOS. IF YOU ARE EVER IN LONDON, THE BEST SET OF STAIRS IN ALL OF LONDON. QUEEN VICTORIA STREET. GO AROUND THE CORNER ABOUT ONE FULL ENGLISH BREAKFAST. THERE IS A ROMAN MUSEUM. THE MUSEUM IS FANTASTIC. DID YOU SEE THAT? A CATERPILLAR BULLDOZER. HE'S OUTBACK DIGGING UP THE LONDON -- THIS WAS 10 YEARS AGO. FOUND ROMAN RUINS. THIS STAIRS DOWN TO THE ROMAN RUINS IS SOBERING ABOUT THE LENGTH OF SOIL ACROSS THE CENTURIES OF LONDON. THERE IS YOUR HISTORY LESSON THIS MORNING. ROMAINE BOSTICK IS ON WHAT? FUTURES UP 15. VIX, 27.21. THANK YOU SO MUCH FOR THE ADVICE. LOSE THE FULL ENGLISH. ROMAINE BOSTICK IN NEW YORK. ROMAINE: MARKETS CONTINUE TO OSCILLATE AROUND. IT'S ABOUT A LOT OF THE RETAILER STOCKS AND CONSUMER SPENDING AND HOW IT IS HOLDING UP. SALES GROWTH WAS UP PRETTY GOOD HERE THAT THERE WAS CONCERN ABOUT MARGINS. THEY ARE CONTINUING TO COMPRESS. THE STORY FOR A LOT OF RETAILERS, EVEN THE ONES THAT ARE SUPPOSED TO BE RECESSION PROOF. COSTCO SHARES DOWN ABOUT 1%. BIG LOTS, THOUGH SHARES DOWN 20%. COMP SALES ARE DOWN 14%. A SURPRISE LOSS FOR THE QUARTER. IT'S ABOUT MARGINS. IT'S ALSO ABOUT INVENTORY, JUMPING 50% IN THE LAST QUARTER. GAP INVENTORY LEVELS OF 34% YEAR-OVER-YEAR. NOW CONCERN ABOUT COMPANIES POSTING HIGH LEVELS ARE IN A POSITION TO START DISCOUNTING IN AN ENVIRONMENT WHERE THEY'RE BEING SQUEEZED. GAP SHARES DOWN 18%. AN UGLY REPORT. IT DID NOT PROVIDE CLARITY TO WHAT THE PATH FORWARD IS TO REVERSE THE TREND. A BRIGHT SPOT IS ALTA BEAUTY. EVERYONE IS BUYING BEAUTY PRODUCTS, GOING UP AND DOWN THE ROMAN STEPS. SHARES UP ABOUT 8%. THEY ARE SEEING NO SHOCK TO CONSUMER SPENDING. TOM: REOMAINE, 52 BOTTLES ON THE BATHROOM SINK. I HAVE NO IDEA ALTHOUGH ULTA BEAUTY IS MAKING A HAND OVER FIST. ROMAINE: THEY CONVINCE PEOPLE ALWAYS NEED MORE TO LOOK WELL. THEY ARE GREAT MARKETERS. KEEP AN EYE ON THE SOFTWARE STOCKS TODAY. YOU ARE KEEN ON THAT. A MISS BIG TIME ON THE BACKLOG GROWTH. TOPLINE GROWTH IS STILL PRETTY GOOD. INVESTORS REALLY PUNISH COMPANIES IF THEY DON'T POST PHENOMENAL GROWTH THEY ARE USED TO. A BRIGHT SPOT IS MARVELL TECHNOLOGY UP ABOUT 4% ON THE DAY. TOM: ROMAINE BOSTICK, THANK YOU SO MUCH. FIRST TIME BACK TO LONDON SINCE THE PANDEMIC. IN EVERY CASE TRIANGULATES. WHAT DO YOU DO -- WHAT YOU DO IN THE 40 CHANGE MARKET IS LOOK AT THE CURRENCY PAIR, TWO DIFFERENT CURRENCIES. PROS USE THE BLOOMBERG TO TRIANGULATE. A LOOK AT EURO-DOLLAR. DOLLAR-YEN. THEY BRING IT AROUND TO EURO-YEN AS WELL. JORDAN ROCHESTER IS JOINING US. GREAT TO CATCH UP WITH YOU THIS MORNING. IS IT TIME TO MAKE BIG FIGURE BETS? JORDAN: ABSOLUTELY. TOM: YOU WAKE UP AFTER YOUR FULL ENGLISH -- JORDAN: WE HAD 4% IN THE DOLLAR IN THE PAST FEW WEEKS. IT'S A VERY VOLATILE ENVIRONMENT. LISA: YOU LOOK AT ALL THE CALLS FOR PARITY THAT HAVE GONE THE WAY OF THE ENGLISH BREAKFAST FOR SOMEONE LIKE STEPHEN MAJOR. 107 AND SEEMS TO HAVE GOTTEN A FOOTHOLD. JORDAN: ONE OF THE BIGGEST FLAWS ARE THE BIG PARITY FIGURES. YOU LOOK AT EURO TODAY, THE BIG 4% RALLY HIGHER. WHAT IS STRANGE IS THE CHINESE ROOM THEN BE IS WEAKER -- RI NMINBI IS WEAKER. I'M SURPRISED BY THE U.S. RATE PRICING SOFTENING. THAT ALLOWED THE WEAKER DOLLAR. WE PROBABLY HAD TOO MUCH DOLLAR WEAKNESS HOW WE COULD SEE THE EURO GO DOWN LOWER NEXT WEEK. LISA: THAT IS YOUR CALL, RIGHT? EUROPE DOES NOT LOOK CHEAP EVEN THOUGH IT HAS BEEN CHEAPER THAN IT HAS BEEN IN YEARS. WHAT IS THE LEVEL YOU ARE TARGETING GIVING THE RESILIENCE WE HAVE SEEN OVER THE PAST FEW TRADING SESSIONS? JORDAN: IF YOU USE VALUATION MODELS, YOU HAVE TWO WAYS OF GIVING IT. CONSUMER PRICES OR BY PRODUCER PRICES. MOST OF THE TIME PRODUCER PRICES ARE THE THINGS YOU TRADE ON AN EXCHANGE. CONSUMER PRICES IN EUROPE IS NEARLY 40% HIGHER, WORSE THAN THE 1970'S. NOT THE SAME FOR THE U.S.. THAT HAS DEVALUED THE VALUE OF THE EURO. 109 IS WHERE I'M GETTING MY FAIR VALUE FOR THE EURO. I THINK GIVEN THE TRADE DEFICIT COLLAPSING, CHINA IS UNDER PRESSURE, THE FOOD CRISIS AND ENERGY CRISIS, EURO IS STILL POSSIBLE IN THE MONTH AHEAD. TOM: MOHAMED EL-ERIAN, GEORFFRY YU SAYING WE NEED TO LEARN LESSONS FROM THE PLAZA COURT. CONSENSUS SAYS NO, THIS TIME IS DIFFERENT. SHOULD WE WORRY ABOUT A DOLLAR SO STRONG FOR EM WE HAVE TO ADJUST THE DOLLAR? JORDAN: DO YOU THINK POLICYMAKERS CAN WORK TOGETHER TO ACHIEVE THAT? EVERYONE IS FACING INFLATION RIGHT NOW. YOU HAVE THE PLAZA ACCORD, I IMAGINE IT COULD WORK. ALL THE OTHER PARTNERS WOULD ALSO BE WONDERING ABOUT EM AS WELL. FOR CHINA AND THE U.S. TO CORRELATE ON CURRENCY MANIPULATION AFTER THE YEARS OF THE U.S. SAYING CHINA MANIPULATE CURRENCY, SEEMS LIKE A BIG STRETCH OF THE IMAGINATION. I COULD SEE IT ON THE EU-U.S. LEVEL. LISA: WHAT IS THE MAIN DRIVER IN CURRENCY VOLATILITY? HAS IT BEEN CENTRAL BANKS AND DIFFERENTIALS WERE ECONOMIC OUTLOOK? JORDAN: BOTH. IN TERMS OF WHAT HAS BEEN DRIVING THE MARKET, DRIVING THE MARKET AND CENTRAL BANKS, WE HAVE SEEN A FOOD CRISIS, AND ENERGY CRISIS. THAT TRANSLATES THE CENTRAL BANKS OVERREACTING THINKING THIS IS A GROWTH STOCK. BUT I THINK THAT'S WRONG. LISA: TRYING TO TALK DOWN THE CLOCK. > > SORRY FOR INTERRUPTING. I DID HEAR JORDAN DISCUSS THE DOLLAR. I BELIEVE YOU WILL BE BUYING PIPE TODAY. JORDAN: WE HAD A CHEEKY CONVERSATION ABOUT THE DOLLAR AND HE WAS RIGHT AND I WAS WRONG. LISA: WHAT WAS IT? JORDAN: IN TERMS OF MY THESIS, THE TRADE BAN HAS COLLAPSED BUT MARK IS LOOKING AT THE DOLLAR. I GOT THAT WRONG. MARK: WE HAVE TRADED THE STAGFLATION THEME MUCH QUICKER. DO WE HAVE ANOTHER WEEK OR TWO OF THAT THEME? JORDAN: MOST PEOPLE ARE ON HOLIDAY WITH THE QUEEN'S JUBILEE. WE HAVE EUROPEAN INFLATION NEXT WEEK. MARK: I WILL BE HAVING A PINT BY THEN. LISA: AND SOME VINDALOO TO GO WITH IT. TOM: FERRO'S IDEA. PULL THE OLD FART OFFSTAGE. MARK: MI DOING A GREAT JOB? TOM: I HAVE TO GET SOMETHING OUT OF THIS CONVERSATION. WHICH BEER WILL YOU QUAFF? MARK: AN ALE IN LONDON. I WILL RELY ON JORDAN'S GUIDANCE. JORDAN: I AM MORE OF A CAMDEN GUY. CAMDEN IPA. LISA: I APPRECIATE THE BET YOU GUYS HAD. YOU WILL GO INTO DIFFERENT THINGS. TOM: THOSE OF YOU GOING WHAT IN GODS'S NAME IS THIS ABOUT, THIS IS THE FUND AND SPIRIT OF WALL STREET, WAS A THINK IS PERCEIVED IN THE MEDIA WRONG. EVERYONE IS LIKE JORDAN WAS WRONG, SHOOT HIM. NO. PEOPLE GET IT WRONG ALL THE TIME. I GET IT WRONG. WAS HE LIKE WAY WRONG, WICKED WRONG? MARK: IF YOU'RE NOT GETTING IT WRONG, YOU NOT SAYING INTERESTING THINGS. JORDAN: PEOPLE LEARN FROM THOSE LESSONS. TOM: DO YOU THINK I LOOK GOOD AT A PODIUM? MARK: MI ALLOWED TO SAY NO COMMENT? I DON'T WANT TO LIVE LIVE ON THE AIR -- LIE LIVE ON THE AIR. LISA: CALM IS MOVING THE PODIUM BACK AND FORTH. JORDAN, THERE IS A QUESTION OF WHETHER BASICALLY THIS GOES TO A TIMING ISSUE. WHAT IS THE CORRECT TIMING NOW FOR CURRENCY BETS? ONE WEEK THAT SEEMS TO HAVE BACKFIRED FOR YOU THIS TIME? JORDAN: 4% IN TWO WEEKS. NEXT WEEK WE HAVE HALF THE U.K. ON HOLIDAY. I'M WORRIED THE EURO GOES HIGHER NEXT WEEK. TOM: ONE OF MY BEST CONVERSATIONS AND DAVOS WAS -- MARK, YOU ARE TRULY AN EXPERT. WHEN CHINA OPENS UP IN THE LOCKDOWN IS OVER, HOW TO THE CURRENCIES REACT TO A CHINA BOOM? MARK: I THINK IT WILL BE MASSIVE FOR THE REGION BUT THE QUESTION IS WHEN. WE CAN SEE THERE IS A MASSIVE REGIONAL DIVIDE AND HESITATION. TOM: IS HE WITH US THE NEXT BREAK? MARK: I JUST CRASHED TEMPORARILY. TOM: GOOD. MARK: I'M NOT WORKING HERE. TOM: COULD YOU IMAGINE WHAT A FULL ENGLISH PIZZA LOOKS LIKE? JORDAN ROCHESTER, THANK YOU. I THINK MARK CUDMORE THANK YOU. THIS IS WHAT THE PROS LOOK LIKE ON THE TOURNAMENT. A PRO DIALOGUE OF WHAT'S GOING ON. WE DEVOLVE DOWN TO DOW JONES FUTURES UP 3. THIS IS BLOOMBERG. GOOD MORNING. ♪ RITIKA: GIVING HIM UP-TO-DATE WITH NEWS FROM AROUND THE WORLD, I AM RITIKA GUPTA. PULLING NO PUNCHES WHEN BLOOMBERG BEST ABOUT THE NEGOTIATION WITH VLADIMIR PUTIN. THE BRITISH PRIME MINISTER RESPONDED, "HOW CAN YOU DEAL WITH A CROCODILE WHEN IT'S EATING YOUR LEFT LEG?" THE RUSSIAN OWNER OF THE SUPER YACHT LINKED TO BILLIONAIRE -- HAS LOST AN APPEAL TO KEEP THE U.S. FROM SEIZING IT. THE COURT OF APPEAL IN FIJI HAS DISMISSED IT. THE COUNTRIES HAVE BEEN GOING AFTER THE YACHT BECAUSE THE RUSSIAN TYCOON HAS BEEN PUT ON A SANCTIONS LIST. PROFIT SAID CHINESE INDUSTRIAL FIRMS DECLINED LAST MONTH. THEY FELL 8.5% IN APRIL FROM YOUR EARLIER. IT'S A HEARTENING DEVELOPMENT FOR THE FEDERAL RESERVE BUT MAYBE NOT FOR AMERICAN WORKERS. COMPANIES ARE MORE CAUTIOUS AFTER HANDING OUT HEFTY SALARY INCREASES OVER THE LAST YEAR. ECONOMISTS EXPECT ANNUAL WAGE GROWTH TO BE 2.2% COMPARED TO 2.5% IN APRIL. TEXAS GOVERNOR GREG ABBOTT HAS DROPPED PLANS TO ADDRESS THE NATIONAL RIFLE ASSOCIATION'S ANNUAL MEETING IN PERSON TODAY. THEY ARE MEETING JUST DAYS AFTER THE SCHOOL MASSACRE IN UVALDE, TEXAS. ABBAOTT WILL BE -- ABBOTT WILL BE IN UVALDE AND WILL SEND A TAPE SPEECH. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM RITIKA GUPTA. THIS IS BLOOMBERG. ♪ > > YOU HAVE TO ACKNOWLEDGE OIL AND GAS ARE CONTINUING TO GROW SHARPLY. INFLATION IS HIGH BUT THIS IS THE FIRST TIME IN A COUPLE OF YEARS WHERE THERE ARE NO RESTRICTIONS. PEOPLE ARE GOING TO BE DRIVING AND FLYING AS WELL. TOM: WHY DO PEOPLE WATCH "BLOOMBERG SURVEILLANCE?" FOR MARK CUDMORE. THANK YOU FOR THAT APPEARANCE MOMENTS AGO. THEY WATCH FOR WORLD-CLASS COVERAGE. THE JEWEL OF LONDON. BRILLIANT OF THE MICROECONOMICS OF ENERGY. IT WILL GO TO THE JEWEL OF NEW YORK, RITIKA GUPTA -- KRITI G UPTA. KRITI: I USED TO WORK FOR MARK CUDMORE. WE WILL TALK ABOUT A GALLON OF GAS. WHEN LOOKING AT IS THE AMOUNT OF WORK IN MINUTES AT A U.S. FEDERAL MINIMUM WAGE IT TAKES TO PAY FOR A GALLON OF GAS. 40 MINUTES. YOU HAVE TO WORK FOR 40 MINUTES TO GET ONE GALLON OF GAS. WHAT YOU NEED TO KNOW HERE IS THE LINE JUST GOES UPWARDS AND UPWARDS. YOU HAVE NOT SEEN THAT KIND OF ACCELERATION SINCE 2008. TOM: HELP ME. THIS IS THE SINGLE BEST CHART KRITI HAS EVER DONE. YOU'RE COMPARING FOR PEOPLE WHO SPEND A LOT OF MONEY ON FOOD AND A LOT OF MONEY ON HYDROCARBONS. KRITI: THIS IS IMPORTANT TALKING ABOUT THE LOWER INCOME PART OF THE COMMUNITY, THOSE HIT HARDEST BY INFLATION. HERE THE THEME. IF YOU'RE A WEALTHY CONSUMER, YOU ARE INSULATED TO SOME EXTENT FROM THE INFLATIONARY PRESSURES. ON THE OTHER SIDE OF THE SPECTRUM YOU ARE NOT. THINK ABOUT THE PEOPLE WHO HAVE TO GO GET GROCERIES AND FILL UP THE TANK AND NOW IT IS GETTING HARDER. TOM: WE MOVED TO WILL KENNEDY, EXECUTIVE EDITOR FOR ENERGY AND COMMODITIES. CHRISTIAN MALEK COMING UP IN THE NEXT HOUR. 100 PAGES FROM JP MORGAN ON THE PRICE OF BRENT GOING UP BECAUSE OF THE LACK OF ECONOMIC -- MICROECONOMIC -- IS IT SUPPLY OR DEMAND TAKING OFF? WILL: IT'S A BIT OF BOTH. WE ARE GETTING INTO THE END OF THE SEASON. BY MARIO DAY DRIVING SEASON. PEOPLE FLYING. WE HAVE STRONG DEMAND. SUPPLY JUST CANNOT REALLY RESPOND. THERE IS VERY LITTLE SPARE OIL SUPPLY CAPACITY IN THE WORLD. OPEC IS RELUCTANT TO USE IT. A LOT OF PEOPLE ARE RELUCTANT TO BUY RUSSIAN CRUDE. THE BIG PROBLEM IN THE NORTH AMERICAN MARKET IS THE LACK OF REFINING CAPACITY. THAT IS WHY YOU ARE SEEING GASOLINE PRICES, DIESEL PRICES RISE TO RECORDS EVEN THOUGH OIL IS A LONG WAY OFF THE RECORD. LISA: WHAT DOES A WINDFALL TAX OR SUBSIDIZED EFFORTS DO TO THAT DEMAND? HOW DOES THAT AFFECT THE SITUATION AND THE QUICKSAND OF HIGHER PRICES? WILL:WILL: A LOT OF GOVERNMENTS AROUND THE WORLD, THE U.K. AND PEOPLE CUTTING GASOLINE TAXES. OTHER EUROPEAN COUNTRIES SUBSIDIZING NATURAL GAS DEMAND. WHEN YOU SUBSIDIZE SOMETHING MAKE IT CHEAPER. YOU ARE ADDING FUEL TO THE FLAMES. THE MEASURES HELP PEOPLE BUT THEY DON'T SOLVE THE PROBLEM. WE HAVE A VERY TIGHT ENERGY MARKET GLOBALLY. PEOPLE ARE TALKING ABOUT SUBSIDIZING CONSUMPTION. IT IS STRANGE POLITICIANS ARE NOT TALKING MORE ABOUT HOW TO REDUCE CONSUMPTION AND MAKE THINGS MORE EFFICIENT. YES, THERE ARE DANGERS IN THESE MEASURES. LISA: ARE YOU THINK FINANCE IS RENEWABLE ENERGY SOURCES? COMING FROM DAVOS FOR EVERYONE WAS TALKING IN A THEORETICAL WAKE, ARE WE SEEING IT ON THE GROUND ACCELERATE IN THE WAKE OF THESE PRICE INCREASES? WILL: TO APPOINT. A LOT OF THESE TECHNOLOGIES, THE ECONOMICS MAKE A LOT OF SENSE. THERE WERE REAL PROBLEMS TO ACCELERATE THINGS. SUPPLY CHAINS HAVE HIT THE SOLAR INDUSTRY. A LOT OF MATERIALS ARE GOING TO EVS THAT ARE HARD TO FIND. IT IS HARD FOR CARMAKERS TO BUILD THINGS PEOPLE WANT TO BUY. YOU NEED A LOT OF PERMISSIONS IN EUROPE TO BUILD SOLAR AND WIND FARMS. IT TAKES YEARS. TOM: PAUL ABRAMOWITZ GET A DAILY LECTURE ON FERRO ON HYDROCARBONS IN LONDON. HE'S ALWAYS QUOTING THIS LME THING VERSUS WHAT WE DO IN CHICAGO. WAS HIS NAME? I WANT TO TALK ABOUT RACHEL GRANT. YOU GO TO THE BLOOMBERG CAN LOOK AT OIL. HERE IS RACHEL GRAHAM OUT OF MOSCOW, OUT OF COMMODITIES. SHE HAS FIVE CHARTS ON THIS DISASTER WE ARE IN RIGHT NOW. TELL US ABOUT THOSE FIVE CHARTS. WILL: > > NORWOOD GOING TO BE IN A RECESSION OR A ROCKY LANDING? I THINK SOFT LANDING IS OFF THE TABLE. > > THE CONSUMER WILL FOLLOW WHERE THE LABOR MARKET GOES AND THAT IS WHY I EMPHASIZE THE LABOR MARKET. > > THE INFLATION STORY AND PROBABLY MORE IMPORTANT THE JOBS STORY IS BUILD SOMETHING IN FLUX. > > IF THEY WANT TO GET INFLATION TO 2% WITHIN SIX MONTHS, EVEN ONE YEAR, THEY'RE GOING TO HAVE TO OVERDO IT. > > IF POWELL OVERSHOOT, WE WILL SEE A MATERIAL SLOWDOWN. > > THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, AND LISA ABRAMOWICZ. > > GOOD MORNING FROM LONDON, THIS IS "BLOOMBERG SURVEILLANCE" EN ROUTE -- ON BLOOMBERG RADIO. JON FERRO IS OFF BECAUSE HE DOES NOT WANT TO HAVE TO DEAL WITH OUR ENGLISH BREAKFAST REFERENCES TODAY AND HE WILL COME BACK ON TUESDAY AND TELL US ALL OF THE THINGS WE GOT WRONG I'M SURE. WE ARE COUNTDOWN TO THE CONSUMER IN THE UNITED STATES AND WE WILL GET TO SPENDING DATA HAIR IN ABOUT HALF -- DATA HERE AND HAVE IN OUR TIME THERE AND I WONDER WHAT THIS WILL SHOW IF IT CONFIRMS BANK OF AMERICA VIEW OF THE STRENGTH OF THE CONSUMER. TOM: THE CONSUMER IS A HUGE QUESTION HERE. WHAT I WOULD SAY, AND I WILL GO TO A COMMENT MADE BY THE GREAT ENVIRONMENTALIST AND ECONOMIST OF LONDON SCHOOL OF ECONOMICS, THIS ENTIRE WEEK WE HAVE HAD, PEOPLE ARE PUZZLED AND YOU ARE RIGHT, IN THAT THEY ARE NO MORE PUZZLED OVER THE CONSUMER THAN ANYTHING ELSE. PUZZLED. LISA: I THINK THAT'S THE BIGGEST TAKE AWAY FROM DAVO'S THIS YEAR, WHERE WE JUST CAME FROM, THAT THERE WAS SO MUCH BEARISHNESS THAT SOMEHOW THAT WAS THE CONSENSUS AND THAT IS PERHAPS THE OPTIMISM YOU SEE TODAY. POSSIBLY THE FIRST WEEKLY GAIN GOING BACK IN TWO WEEKS. TOM: AND BOND MARKET, WE MAKE JOKES ABOUT THE SEVEN-YEAR AUCTION BUT IT IS REAFFIRMING THE APPETITE OUT THERE GLOBALLY FOR U.S. PAPER. 2.72% AND THE 10 YEAR COMING OUT THE TAKE TO TAKE BUT A TWO WEEK BASIS. LISA: TOM KEENE CARES ABOUT BOND OPTIONS. TOM: I DO. . LISA: THAT'S MY BIGGEST TAKE AWAY. TOM: OUR SCHEDULE TO BE IN LONDON TODAY, MONDAY IS MEMORIAL DAY AND A FRACTURED UNITED STATES OF AMERICA. WE WILL BE IN TRANSIT AND JON FERRO IS SCHEDULED TO BE WITH US TUESDAY AS WELL AND WE WILL BEGIN AN EVENTFUL WEEK LOOKING AT THE AMERICAN LABOR ECONOMY AND ONTO A CRITICALLY IMPORTANT ECB MEETING. MAYBE THE ONE LOOK FORWARD TO THE MOST WITH CHRISTINE LAGARDE. WILL YOU GIVE US A BRIEF ARE THE HOUR? LISA: SURE. TOM: ARE YOU GOING TO DASH THE ETHRO? LISA: WE WILL BE LOOKING A PERSONAL CONCEPTION, PERSONAL SPENDING, AND PERSONAL INCOME AT 8:30. AT 10:00 A.M., WE GET UNIVERSITY OF MICHIGAN THE SENTIMENT WHICH WILL PROBABLY COME IN AROUND THE SAME LEVEL AS IT WAS BEFORE, THE WEAKEST LEVEL SINCE 2011 AND WE HAVE A SLEW OF INCREDIBLE GUESTS. CHRISTIAN MAY LIKE COMING UP WITH JP MORGAN AS WE TRY TO DISCERN THE DYNAMICS OF AN OIL MARKET, A CRUDE MARKET IN OIL. TOM: I TOLD MOHAMED EL-ERIAN THIS MAY BE A MORE IMPORTANT INTERVIEW THEN THE DOCTOR AND HANG UP THE PHONE -- HUNG UP THE PHONE. SHE NEVER HANGS UP THE PHONE. THIS IS NOT CONSUMER FINANCE, IT IS NOT LIGHTWEIGHT. WHEN YOU HAVE LIZ YOUNG SPIRIT TO YOUR INVESTMENT STRATEGY FROM HER WORK AT BNY MELLON, HER CHARTER FINANCIAL ANALYST WORK AS WELL, THRILLED TO HAVE HER TODAY BUT WITH A MUCH MORE IN THE TRENCHES VIEW. LIZ YOUNG, FORGET ABOUT THE SPREAD MARKET, FORGET ABOUT HYPER PRO FIXED INCOME ANALYSIS, HOW DO PEOPLE OUT THERE RECOVER MASSIVE BOND PRICE LOSSES? LIZ: THE MASSIVE BOND PRICE LOSSES EARLY OCCURRED EARLIER THIS YEAR. THE FIRST WAS REALLY PAINFUL AND PAINFUL FOR STOCKS. THAT WAS A TOUGH CORDED TO GET THERE WHERE YOU HAVE BOTH BONDS AND STOCKS GOING DOWN AT THE SAME TIME. EVERYBODY THAT HAD BEEN SCREAMING 60/40 IS DEAD IS IT SAYING I TOLD YOU SO. IT DID NOT WORK IN THE FIRST QUARTER BUT WE ARE IN A PLACE WERE BONDS HAD SOLD OFF MORE THAN STOCKS IN THE FIRST QUARTER AND IN THE SECOND QUARTER, THEY HAD A CHANCE TO RALLY BACK AT SOME OF THE DIVERSIFICATION BENEFITS HERE AGAIN, AT LEAST IN THE LAST MONTH OR SO. MOVING THROUGH THE REST OF THE YEAR, IT IS YET TO BE SEEN WHAT IS GOING TO HAPPEN. IT IS DEPENDENT ON WHAT THE FED ACTUALLY DOES AND HOW THE NARRATIVE SHIFTS. I THINK AS YOU HAVE ALREADY POINTED OUT, THE CONSUMER IS THE MOST IMPORTANT DATA POINT HERE. LISA: YOU'VE GONE FROM ADVISING ON INSTITUTIONAL INVESTORS AND RIGHT NOW AS SOPHIA YOU FEEL MORE WITH RETAIL INVESTORS AND FRANKLY YOUNGER ONES AT THAT HAS SOME OF THE TECH SAVVY PROVOSTS OF SOPHIA WILL CATER TO. HOW'S THE DIFFERENT AFTER ALL OF THE RETAIL INTEREST OF YOUNGER INDIVIDUALS? IS THAT SHIFTING AT ALL AS SOME OF THE TURMOIL OF 2022. LIZ: THE DIFFERENCE IN INVESTOR BASE HAS REALLY SHOWN A LOT OF DIFFERENT PREFERENCES FOR WHAT THEY WANT TO BE INVESTED IN. IT IS A MUCH MORE TECH SAVVY BASE, YOUNGER GENERATION IS MUCH MORE TECH SAVVY, JUST MORE USED TO THAT. THERE'S MORE INTEREST IN THE TITANS OF TECH AND INVESTING IN THINGS THAT ARE COMMUNICATIONS BASED. THEY ARE NOT AS INTERESTED IN TRADITIONAL FINANCE COMPANIES, THERE'S NOT A LOT OF INVESTMENT IN THINGS I BANKS OR FINANCE IN GENERAL. THERE ARE DIFFERENT PREFERENCES THERE. THE OTHER THING IS OBVIOUSLY A HUGE INTEREST IN CRYPTO AND A LOT OF OPINIONS ON WHAT CENTRAL BANKS CONTROL AND WHAT WE CAN DO IN THE ECONOMY AND THE CONTROL THAT WE ARE UNDER AS FAR AS CENTRAL BANKS GO AROUND THE WORLD. IT IS A COMPLETELY DIFFERENT NARRATIVE. THERE ARE DIFFERENT INTERESTS AND RISK APPETITES. I THINK THE INVESTOR TODAY, AND THIS IS NOT NECESSARILY YOUNGER INVESTORS, BUT A LOT OF INVESTORS TODAY HAVE BECOME MUCH MORE SHORT-TERM FOCUSED BECAUSE WE ARE HANGING ON DATA POINTS EVERY WEEK, WATCHING THE MARKET EVERY DAY. WHEN YOU HAVE BIG SWINGS LIKE THIS, HE CAUSES PEOPLE TO BE MORE SHORT-TERM FOCUS WHEREAS FINANCIAL ADVISORS AND MAY MORE EXPERIENCED INVESTORS ARE ONES OF YESTERDAY ARE MORE CONCERNED OF A FIVE TO 10 YEAR PERIOD DIVERSIFICATION, TRADITIONAL ASSET ALLOCATION. LISA: HOW DO YOU DIRECT THAT IN YOUR COMMENT CONSIDERING THE FACT THEY WILL POSSIBLY HAVE A SHORTER TIME HORIZON, GREATER RISK APPETITE AT A TIME WHEN WE ALSO ARE WATCHING TICK BY TICK WITH AN INCREDIBLE AMOUNT OF UNCERTAINTY AND HUMILITY, EACH DATA POINT, NOT KNOWING WHICH WAY THE FED WILL GO IN AND WHICH WAY THE ECONOMY WILL GO? LIZ: IF WE COMPARE THIS ENVIRONMENT TO SAY THE ENVIRONMENT OF 2020 WHEN A LOT OF THE NEWER INVESTORS CAME INTO THE SYSTEM AND WERE TRADING AND GOT REALLY INTERESTED IN IT, WHICH I THINK IS WONDERFUL, THIS HOWEVER IS AN ENVIRONMENT WHERE YOU NEED TO DO LESS. AS THINGS CHANGE ON A DAILY BASIS, YOU CAN FEEL LIKE YOU ARE WRONG ON A DAILY BASIS AND THAT IS WHEN YOU START TO MAKE A MISTAKE, THAT IS WHEN YOU START TO MAKE REACTIONARY MOVES IN YOUR PORTFOLIO, TRADING MOVES INSTEAD OF INVESTING MOVES. THIS IS A TIME WHERE IF YOU WANT TO BUY THINGS BECAUSE YOU HAVE CASH ON THE SIDELINES FROM EARLIER IN THE YEAR WHERE YOU TOOK PROFITS, THAT'S GREAT. START DRIPPING INTO SOME OF THE THINGS THAT LOOK INTERESTING AND WILL BE BARGAINS IN THREE YEARS TIME BUT THIS IS NOT A TIME WHERE YOU TRY TO CHASE AND CALL A BOTTOM, CALL A PEAK, CALL AN INFLECTION POINT BECAUSE IN FLEXION POINTS ARE HAPPENING DAILY. TOM: I WANT TO GO FRIDAY NERD ON YOU. I KNOW YOU CAN HANDLE THIS. IT WILL BE FUN. I WANT TO TALK ABOUT AS YOU MENTIONED EARLIER THE 60/40 DIVERSIFICATION MODEL WHICH CLEARLY HAS BEEN TESTED IN THE RECENT MONTHS. I WANT TO GO BACK TO PETER LYNCH OF FIDELITY, THE FAMOUS WORD, WORSEIFICATION. I WANT TO WITH THE MARKOWITZ TERRITORY ON HOW YOU DO THIS AND HOW YOU DIVERSIFY. WHAT HAVE WE LEARNED ABOUT THE DEWORSEIFICATION OF 60/40 IN THE LAST QUARTER? LIZ: WE'VE LEARNED IT IS ACTUALLY BACK AND IT IS WORKING AGAIN. THE REASON IT STARTED TO BE TALKED ABOUT THE 60/40 WAS DEAD BECAUSE WE WENT THROUGH A 40 YEAR RALLY IN BONDS. TOM: THANK YOU. LIZ: IT DIDN'T SEEM LIKE BONDS WOULD PROVIDE THE DIVERSIFICATION FOR THE DRAWDOWN IN EQUITIES. THE WHOLE POINT OF A 60/40 IS 60% EQUITIES. EQUITIES CAN HAVE DEEPER DRAWDOWNS THAN BONDS. THEY WANT TO BUFFER THE DRAWDOWN AND FOREIGN INVESTOR -- FOR AN INVESTOR, IT IS IMPORTANT TO AVOID THE HUGE LOSS IN STOCKS SO BONDS WERE SUPPOSED TO PROVIDE THAT. IF YOU REMEMBER THE LAST FIVE TO 10 YEARS, WE HAVE HAD THIS HUGE GROWTH IN ALTERNATIVE ASSETS. I WOULD PUT CRYPTO INTO THAT CATEGORY BUT ALTERNATIVE ASSETS, THINGS THAT CAN PROVIDE ANOTHER LAYER OF DIVERSIFICATION THAT ARE NOW AVAILABLE TO THE INDIVIDUAL INVESTOR. PREVIOUSLY, ALTERNATIVES WERE ONLY AVAILABLE TO INVESTORS WITH HIGH NET WORTH AND INSTITUTIONS. NOW THEY ARE AVAILABLE WIDELY. THE 60/40 HAS TURNED INTO MAY BE SOMETHING THAT INCLUDES I DON'T KNOW, MAYBE 10% OR 20% ALT DEPENDING ON THE INVESTOR BUT IT IS SOMETHING THAT IS MAY BE A LITTLE ANTIQUATED. BUT BONDS HAVE PROVIDED DIVERSIFICATION IN THE LAST FEW MONTHS. TOM: DID SHE JUST CALL ME ANTIQUATED? [LAUGHTER] LISA: I THINK SHE IS SAYING THOSE ARE. ARE YOU TRYING TO GET HER -- TOM: THANK YOU SO MUCH. SOFI THERE WITH A REAL EDGE TO THE CONSUMER AND TECHNOLOGY FOR IT. THAT WAS BRILLIANT AND THESE ARE REALLY IMPORTANT QUESTIONS. I THINK EVERYBODY KNOWS I'M NOT BIG ON 60/40. I HAD THE HONOR OF TALKING TO MARKOWITZ ABOUT THIS AND I'M NOT BIG ON THE 60/40 CERTITUDE. LISA: I THINK 60 FORM THE MEANS -- 60/40 MEANS SOMETHING FOR DIFFERENT PEOPLE. THEY TALK OF THE MIX OF THE 60 AND MIX OF THE 40 BUT WE ARE HEARING HOW MUCH IS A MIX OF EVERYTHING UNTIL YOU DISREGARD THE WHOLE THING IN GENERAL. TOM: I WILL GO WITH LIZ ANN SAUNDERS AT SCHWAB, SAY GOOD MORNING TO DR. ROSS AT M.I.T.. FACTOR ANALYSIS WAS REALLY IMPORTANT AS A BUFFET AGAINST THE MASSIVE VACATION OF THE BUSINESS. LISA: AND FRANK LEE THAT HAS BEEN UNDERSCORED IN THE PAST SIX MONTHS BECAUSE IT HAS ALL BEEN SECTOR BY SECTOR WHAT HAS DONE WELL AND WHAT HAS NOT DONE WELL. WHAT ARE YOU DOING? TOM: I JUST LEARNED HERE, IT IS LIKE AN OLD CHRYSLER VAN, I'VE GOT A COFFEE CUP SITTING HERE. LISA: IT IS REALLY LOVELY. TOM: I CAN PUT MY COFFEE CUP THERE. MY TANG, IT FITS THE TANG SIZE AS WELL. IT IS VERY COOL. [LAUGHTER] LISA: WE ARE ENJOYING LONDON. TOM: WE ARE ENJOYING LONDON. WE ARE EVEN ON SPEAKING TERMS, EVEN BETTER. DOW FUTURES UP 18, THIS IS AN IMPORTANT INTERVIEW AS WE TALKED TO JORDAN ROCHESTER, A DIFFERENT VIEW, GEORGE SARAH VALLAS, A GLOBAL HEAD OF FX ON DEUTSCHE BANK. ON RADIO AND TELEVISION, GOOD MORNING. ♪ RITIKA: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD, I'M RITIKA GUPTA. WES JOHNSON SAYS THERE IS NO POINT IN NEGOTIATING WITH VLADIMIR PUTIN. THE BRITISH PRIME MINISTERS SAT DOWN FOR AN INTERVIEW BLOOMBERG. HOW CAN YOU DEAL WITH A CROCODILE WHEN IT IS IN THE MIDDLE OF EATING HER LEFT LEG? WHAT'S THE NEGOTIATION? THAT IS WHAT PUTIN IS DOING. HE WILL TRY TO FREEZE THE CONFLICT, HE WILL TRY TO CALLS FOR A CEASE-FIRE -- CALLED FOR A CEASE-FIRE. RITIKA: HE ADDED MORE SOPHISTICATED ROCKET SYSTEMS BE SENT TO UKRAINE SO THEY CAN HIT RUSSIAN TARGETS FURTHER AWAY. IT IS THE LATEST U.S. CHALLENGE TO HIT CHINA, THE BIDEN ADMINISTRATION IN TAIWAN PLAN TO ANNOUNCE NEGOTIATIONS TO INCREASE ECONOMIC TIDES -- ECONOMIC TIES BETWEEN ENHANCING ECONOMIC COOPERATION AND SUPPLY-CHAIN RESILIENCY. A DEAL WOULD SHORT FORCE A TRADE AGREEMENT WITH TAIWAN. THE WHITE HOUSE ARE SCRIBBLING TO DO SOMETHING ABOUT THE RECORD HIGH GASOLINE PRICES IN AN ELECTION YEAR. BLOOMBERG LEARNED THE BIDEN ADMINISTRATION REACHED OUT TO THE OIL INDUSTRY ABOUT RESTARTING SHUTTERED REFINERIES. THE AVERAGE PRICE OF A GALLON OF UNLEADED GASOLINE SITS AT $4.60 WEDNESDAY. SENATE DEMOCRATS SAID THEY WERE A BIT MORE OPTIMISTIC ABOUT A COMPROMISE WITH REPUBLICANS ON GUN CONTROL LEGISLATION IN THE WAKE OF THE TEXAS SCHOOL MASSACRE. DEMOCRATS APPEAR TO BE WILLING TO ACCEPT INCREMENTAL STEPS. MANY STENT TEARS -- MANY SENATORS ARE GOING HOME FOR A RECESS. GLOBAL EQUITY FUNDS ITS OTHER INFLOWS -- BIGGEST INFLOWS IN WEEKS LED BY U.S. STOCKS, INVESTING $20 BILLION IN THE GLOBAL STOCKS IN THE WEEKS THAT ENDED WEST DAY -- ENDED WEDNESDAY. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON "BLOOMBERG QUICKTAKE," POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I AM RITIKA GUPTA. THIS IS BLOOMBERG. ♪ ANALYSIS, INSIGHT, FROM PLAYERS, WEEKDAYS. THIS IS BLOOMBERG. > > 109 IS WHERE I'M GETTING MY FAIR VALUE FOR THE EURO BUT I THINK, GIVEN THE TRADE LAPSING IN THE MAIN TRAIN PARTNER, CHINA, UNDER PRESSURE, HERO SUPREMACY IS STILL POSSIBLE IN THE MONTHS AHEAD. TOM: JORDAN ROCHESTER THERE WITH A GOOD CONVERSATION. WE ARE HAVING WONDERFUL DISCUSSIONS AND NO SURPRISE, IN LONDON, ON FOREIGN EXCHANGE. LISA ABRAMOWICZ AND TOM KEENE, JONATHAN FERRO SCHEDULED TO RETURN A NUMBER OF DAYS, LAID, SOMETHING ABOUT JET FUEL. WE LOOK FORWARD TO SEEING, I BELIEVE WE ALL GET TOGETHER AGAIN TUESDAY IN NEW YORK. THE HOMEWORK OF WHAT WE INVENTED AT "BLOOMBERG SURVEILLANCE," DIFFERENCE OF OPINION, HOW YOU WILL BE HIT OVER THE HEAD WITH A DIFFERENCE OF OPINION. GEORGE SARAH BELLUS HAS TO DO TAGTEAM WITH HOOPER, RUSKIN, AND THE REST OF THEM A DEUTSCHE BANK. SHE JOINS US THIS MORNING. GLOBAL FX RESEARCH. GEORGE, YOU SAY THIS IS THE MOTHER OF ALL SAFE HAVEN MOVES TO U.S. DOLLAR. WE ARE LOOKING AT EURO, LOOKING AT YEN, AND YOU SAY FOCUS ON THE FLOW TO DOLLARS. GEORGE: THAT'S RIGHT. IF YOU LOOK AT THE LAST SIX MONTHS, YOU CAN SEE IN THE DATA, YOU'VE SEEN A HUGE ACCUMULATION OF DOLLAR CASH BY INVESTORS. SO INVESTORS HAVE BEEN SELLING U.S. EQUITIES, SELLING THIS BUT THEY HAVE BEEN KEEPING THE DOLLAR CASH AND NOT ONLY THAT, ACCUMULATING EVEN MORE. WHEN YOU LOOK AT THE SIZE OF THAT ACCUMULATION, IT HAS REACHED HISTORICALLY HIGH LEVELS, SIMILAR TO COVID AND THE TRUMP TRADE WERE. SO THAT OUTLOOK FOR THE NEXT FEW MONTHS, THE SIMPLE POINT IS THE DOLLAR IS PRICING SO MUCH BAD NEWS IN THE MARKET IS SO OVERWEIGHT THE DOLLAR THAT RISK IS ANY SORT OF MARGIN AND EXTREME RISK PREMIUMS. TOM: WITH RESPECT TO YOUR BOSS WHO IS WORRIED ABOUT FISCAL -- AND DOLLAR STRENGTH GETTING OUT OF HAND, THERE ARE OTHERS PICKING UP ON THIS AND ARE LOOKING FOR REDOX OF THE PLAZA CORD. YOU GO THE OTHER WAY AND SAY WE WILL NOT SEE A REDUX OF PLAZA WITH THE DOLLAR, IT WILL HAPPEN. MAYBE WE NEED A MOTEL 6 AT NEWARK AIRPORT IN NEW JERSEY. HIGHER WE NOT GOING TO NEED A PLAZA ACCORD? GEORGE: I THINK THE SIMPLE ANSWER IS THE ECB. THE ECB WILL DO THE JOB AND AS WE'VE SEEN OVER THE LAST FEW WEEKS, THE ECB STARTING TO WAKE UP TO THE REALITY THAT RATES NEED TO BE RAISED QUICKLY. WE ARE ONLY IN INFLATION PRINT AWAY AND LET SEE WHAT HAPPENS NEXT WEEK BUT WE ARE ONLY IN INFLATION PRINT AWAY FROM A 50 BASIS POINT HIKE IN THE JULY MEETING IN THE MARKET HAS BEEN SO FOCUSED ON THE PRESENT -- THE FED STORY IT HAS MISSED THE EUROPEAN STORY. THE EUROPEAN STORY HAS A MIX OF VERY HIGH INFLATION BUT ALSO OUTPERFORMING GROWTH. IT IS SURPRISING HOW PESSIMISTIC THE MARKET IS CONSISTENTLY ON EUROPEAN GROWTH. IF YOU LOOK AT DATA SURPRISES, THEY ARE MOVING IN FAVOR OF EUROPE. CONSENSUS GDP FORECAST FOR THIS YEAR HIGHER IN EUROPE THAN THE U.S.. I BELIEVE IN THE FISCAL POLICY EUROPE HAS AN IMPORTANT FISCAL POLICY, IT HAS BEEN USING POLICY TO OFFSET THE ENERGY CROSS AND IT WILL HAVE MORE DEFENSE SPENDING, IT HAS THE NGU FUND AND I THINK THE STATE HAS BEEN SET FOR EUROPEAN CAPEX. I'M ON THE OPTIMISTIC END AS FAR AS THE EUROPEAN STORY GOES AND I THINK POTENTIALLY WE HAVE SIGNIFICANTLY MORE REPRICING TO HAVE FOR THE ECB. LISA: WHEN YOU SAY SIGNIFICANT MORE REPRICING, YOU ARE EVEN LOOKING OUT TO 110 AND POSSIBLY 120I BELIEVE GOING FORWARD VERSUS THE DOLLAR. HOW MUCH WOULD YOU HAVE TO SEE A WEAKENING TO CHANGE YOUR VIEW? GEORGE: I THINK IF YOU TAKE A STEP BACK AND LOOK AT THE EURO, UP UNTIL 2014, EVEN DURING THE EURO ZONE CRISIS, IT WAS AT A 120-140 RANGE. THEN THE ECB WENT NEGATIVE. -- NEGATIVE DURING 2014 TO 2015 AND THAT SHIFTED FROM 120 TO 140, DOWN TO ESSENTIALLY 103 AND 120. WHAT I MOST FOCUSED ON IS THE ENTIRE EUROPEAN RATE IS SHIFT BACK -- SHIFTED BACK. THAT SHOULD BE A SIGNIFICANT STRUCTURAL SUPPORT FOR THE EURO. DEMAND IS FOCUS ON THE DURATION IN THE ERIC -- THE EUROPEAN TRADE BALANCE. THE U.S. BALANCE IS DETERIORATING EVEN FASTER. I THINK THE STORY GOING FORWARD IS THE EFFECT OF POSITIVE RATES IN EUROPE AND WHAT IT DOES TO THE CAPITAL ACCOUNTS. LISA: THERE'S ALSO THIS WEIRD ASPECT OF THE DOLLAR WHICH IS THE COMMODITIES ARE PRICED IN IT. AS THE DOLLAR WEAKENS, AS YOU PREDICT, THAT WILL MEAN EVEN HIGHER COSTS TO FUEL, WHICH HAS BEEN ONE OF THE DRIVERS OF INFLATION IN THE EURO REGION. HOW MUCH IS THAT FACTORING INTO YOUR EXPECTATION? GEORGE: IT'S INTERESTING BECAUSE YOU FINALLY START TO SEE THE ECB DISCUSSIONS EVOLVE IN THE MENTION OF THE EURO SIGNIFICANTLY MORE. IN THE -- AND THE FRENCH CENTRAL BANK GOVERNOR A FEW WEEKS AGO HIGHLIGHTED THE EURO IN THE MIDDLE OF THE SPEECH AND WHEN IT GOES LOWER, YOU RAISE THE SENSES TO THE TOP OF THE SPEECH. A HIGHER EURO, THE CORRELATION HAS FLIPPED. WE HAVE BEEN SEEING STRONGER COMMODITIES BUT I WEEKEND EUROPE AT THE SAME TIME. IF THE EURO REVERSES COURSE AND STARTS DEPRECIATING, THE ECB IS VERY AWARE OF THAT AND REDUCES SOME OF THE INFLUENCES OF INFLATION PRESSURE. AS THE ECB IS NOW FOCUSED ON THE FACT IT RISKS BEING BEHIND THE CURVE, A SIMILAR SITUATION TO WHERE THE FED WAS A FEW MONTHS AGO. TOM: GEORGE SARAVELOS, THANK YOU SO MUCH FOR ALL YOUR WORK FOR US. TO YOU AND YOUR TEAM INCLUDING THE OUT OR SESSION CALL. I WANT TO GO BACK TO DAVOS AND AS GEORGE ALLUDED TO, YOU HAVE HUGE LEADERSHIP ON THIS. THAT IS LOCKED DOWN, CHINA, BORING, LET'S MOVE ON. YOU AND OTHERS HAVE SAID NO, IT WILL END, THEN WHAT? TO ME BESIDES THE ECB MEETING, WILL IT BE GOOD TO GET PHARAOH BACK? DO WE KNOW IT WE TALK ABOUT? LISA: WE'RE LOOKING FORWARD TO HAVING HIM BACK. TOM: BUT CHINA IS A BIG DEAL. LISA: ESPECIALLY AS WE GET MORE INSIGHT INTO WHAT SOME OF THESE LOCKDOWNS MEAN, WITH RESPECT TO SUPPLY CHAINS. TOM: BUT THEY WILL END. LISA: SO THEY WILL END, WHAT HAPPENS THEN? YOU HAVE A POPULATION NOT FULLY IMMUNIZED BUT HOW DO YOU GET THERE? AND WHAT KIND OF SOCIAL UNREST YOU GET ON THE WAY? I SAY THIS AS THERE'S AN ARTICLE TODAY ABOUT THE APPLE FACTORY, THE MANUFACTURERS AND HOW THERE ARE HUGE INCIDENCES OF UNREST IN SOME OF THESE PLACES BECAUSE PEOPLE HAVE BEEN QUARANTINED FROM THEIR FAMILY IS, THEY HAVE BEEN ISOLATED SO MUCH IT HAS BEEN PROBLEMATIC. TOM: IT IS TV AND WE MAKE JOKES ABOUT THIS BUT YOU ARE RIGHT, THIS IS NOT FUNNY. I'M SUGGESTING THEY DO NOT HAVE A CHOICE, THEY HAVE TO FIX THESE. THESE ARE IMMOVABLE FORCES FOR TOTALITARIAN REGIME. LISA: PERHAPS THIS IS WHY PREMIER LEAGUE OF CHENG WAS TALKING ABOUT HOW THIS WILL AFFECT THE ECONOMY IN SUCH A BIG WAY. THERE IS SOME SPECULATION THAT MAYBE THIS IS THE PREDECESSOR TO A SOFTENING. LISA: WE WILL SEE. THERE IS A LOT OUT THERE. BLOOMBERG WITH AN IMPORTANT ARTICLE TODAY, THE DOMESTIC VIEW FROM BEIJING, REALLY A MUST-READ. I'M TRYING TO GET THAT OUT ON TWITTER. GREEN ON THE SCREEN, FUTURES UP NINE, WE QUOTE THE DOW FUTURES ONLY WHEN FERRO IS NOT HERE. 27.18. STERLING, IT IS A FULL ENGLISH TOM: BLOOMBERG SURVEILLANCE FROM LONDON, LISA ABRAMOWICZ AND TOM KEENE, JONATHAN FERRO, THERE HAS BEEN A FERRO SIDING, SOMETHING ABOUT AC MILAN, I'D HAVE NO IDEA WHAT THAT MEANS. HE IS SCHEDULED TUESDAY IN AMERICA. WE DO HAVE MONDAY OFF BUT BLOOMBERG WILL BE MONITORING GLOBAL NEWS OF THE AMERICAN MEMORIAL DAY. THERE IS TODAY AND ON A FRIDAY, SORT OF GO, REALLY? THERE IS A TON OF AMERICAN ECONOMIC DATA BEGINNING TO COME OUT LOOKING AT THINGS LIKE RETAIL INVENTORIES, FAR MORE THE SPENDING INCOME, AND THE PCE DEFLATOR AS WELL. HERE IS IN NEW YORK MICHAEL MCKEE. MICHAEL: GOOD MORNING TOM AND LISA, LET'S TALK ABOUT THE DEAF LEADERS -- DEFLATOR'S FIRST. THE PCE DEFLATOR, THE HEADLINE NUMBER COMES IN UP POINT 2%. THAT IS SIGNIFICANTLY DOWN FROM .9% THE PRIOR MONTH AND THAT MAKES THE YEAR-OVER-YEAR HEADLINE NUMBER 6.3%. THE CORE, WHICH A LOT OF PEOPLE ARE FOLLOWING BECAUSE THEY THINK THE FED WILL BE MORE INTERESTED IN THAT GIVEN WHAT IS DRIVING INFLATION THESE DAYS, CORE UP WHEN 3%, SAME AS LAST MONTH BUT THAT PUSHES US DOWN TO A FOUR HANDLE, 4.9% FOR THE PCE CORE, DOWN FROM 5.2%. THE INFLATION NUMBERS SHOW A LITTLE BIT OF IMPROVEMENT. PERSONAL INCOME UP .4% ON THE MONTH, PERSONAL SPENDING U .9% ON THE MONTH, BOTH A TAKE DOWN FROM WHERE THEY WERE IN MARCH. BUT STILL HEALTHY NUMBERS, REAL PERSONAL SPENDING. THIS IS INTERESTING, UP 7%, UP ONLY .2% LAST MONTH AND THE ISSUE THERE IS THAT YOU HAVE TO SUBTRACT INFLATION FROM THE SPENDING NUMBERS. IT LOOKS LIKE SPENDING WAS REASONABLY STRONG, EVEN WITHOUT THAT. THE OTHER NUMBER OUT THIS MORNING IS ALSO GOOD NEWS, THE TRADE BALANCE FOR APRIL CAME IN AT $105 BILLION. IT WAS 105 -- 120.5 BILLION DOLLARS LAST MONTH AND TRADE SUBTRACTS FROM GDP, A BIG HEAD TO GDP LAST MONTH BECAUSE OF THE TRADE BALANCE DETERIORATING TO A RECORD LOW. SO WE SEE SOME IMPROVEMENT THERE. STILL BIG BUT MATHEMATICALLY IT WILL HELP. TOM: MICHAEL, THESE ARE FASCINATING DATA. I THINK WE WILL SEE A TURN IN THE MARKET WITH THE TWO YEAR YIELD GIVING ME A FRACTIONAL LEFT RIGHT NOW BUT I WOULD REALLY STAY TUNED TO SEE WITH THOSE YIELD DYNAMICS DO. MICHAEL, I WANT YOU TO DO WHAT YOU DO BEST, TAKE THE INFLATION DATA OF MR. POWELL'S PCE DEFLATOR AND BRING IT RIGHT OVER TO WHAT WE SEE AT 10:00 NEW YORK TIME WITH THE ONE YEAR AND FIVE TO 10 YEAR UNIVERSITY OF MICHIGAN GUESSTIMATES ON INFLATION. HOW DOES A PRO LIKE YOU LINK THOSE TWO TOGETHER? MICHAEL: IT HAS BEEN INTERESTING THE LAST COUPLE OF WEEKS WE HAVE SEEN INFLATION BREAK EVEN SMALL ON WALL STREET, FIVE AND 10 YEAR NUMBERS COMING DOWN AS THE MARKET SEEMS TO ACCEPT THE FACT THE FED CAN GET INFLATION UNDER CONTROL SO WE ARE WATCHING TO SEE WHERE THE CONSUMER IS AT THIS POINT. THE NEW YORK FED PUTS OUT A SURVEY OF CONSUMER EXPECTATIONS FOR INFLATION. IT FOUND THE LONG TERM THREE TO FIVE YEARS WAS 3%. CONSUMERS WERE PRETTY OPTIMISTIC ABOUT INFLATION COMING DOWN AS WELL. WE WILL SEE IF THAT GETS CONFIRMED BY THE UNIVERSITY OF MICHIGAN NUMBERS. TOM: IN ALL THOSE NUMBERS AND MAKE HE IS EXPERT AT THIS, I'M ONLY PRETENDING I'M DOING IT, I WILL SUGGEST 5.2% DOWN TO 4.9% ON THE PCE CORE DEFLATOR YEAR-OVER-YEAR, AT LEAST HE GETS MY ATTENTION. WITH AN EQUITY LEFT, FUTURES UP 13, DOW FUTURES UP 30. WE CONTINUE TO LOOK AT THE MARKETS. MICHAEL MCKEE, THANK YOU. WE SET ASIDE THE GLOBAL ECONOMY AND DO THIS WITH NEIL SHARING, ALWAYS A COMPLEX READABLE NOTE FROM CAPITAL ECONOMICS JOINING US IN OUR LONDON STUDIOS. NEIL, OF THE TRIANGLE, THE TRIPOD YOU ARE LOOKING AT OF GLOBAL ECONOMICS, WHAT INTERESTS ME IS YOUR STUDY OF REAL WAGES. WHAT I FIND FASCINATING IN THE UNITED STATES IS ON AN X AXIS, THE AREA UNDER THIS COLLAPSE IN THE REAL WAGE, BOY IS IT LONG. THE INTER-GRAND OF NEGATIVE REAL WAGES IS REALLY GETTING SUBSTANTIAL. HOW DOES THAT AFFECT BEHAVIOR IN THE NEXT YEAR? NEIL: WE'VE GOT A FLAVOR OF THAT IN THE DATA THAT HAS COME OUT. WE HAVE HAD PERSONAL CONSUMPTION GROW .9 PERCENT BUT INCOMES GROW MUCH LESS IN TERMS OF CONSUMPTION. CONSUMERS ARE DIPPING INTO THEIR SAVINGS. YOU'RE RIGHT THAT THERE HAS BEEN AN EROSION OF REAL WAGES IN THE U.S. AND I THINK THAT WILL START AWAY -- START TO WEIGH ON DEMAND. COMPARE THAT WITH WHAT THE FED IS DOING, HOUSING WILL SLOW, AND I THINK THERE WILL BE A RECESSION THOUGH. THE DATA WE HAVE THIS MORNING IS A TESTAMENT TO THAT. IF YOU'RE LOOKING FOR A RECESSION AND ARE CONCERNED ABOUT SQUEEZE OF REAL INCOMES, HERE IN EUROPE IS THE PLACE TO LOOK. IN TERMS OF TRADE SHOP EUROPE IS EXPERIENCING IS AN ORDER OF MAGNITUDE GREATER THAN THAT TO THE U.S.'S EXPERIENCE IS PRICED TO THE SURGEON THAT IS HEADING CONSUMERS IN EUROPE. LISA: I DO WANT TO FOLLOW ALONG WITH THAT. I WOULD LOVE TO GET YOUR SENSE OF WHAT IT DOES WHEN PEOPLE SEE REAL NEGATIVE WAGES. WE TALK ABOUT HOW THE CONSUMER CONTINUES TO SPEND IN THE UNITED STATES AND WE SEE THAT WITH A TUCK COMING IN FASTER THAN EXPECTED IN THE PRIOR MONTH. DOES IT MATTER THE EARNINGS ARE LESS ON AN INFLATION-ADJUSTED BASIS OR DO THEY HAVE SO MUCH CASH IN SAVINGS AND FRANKLY THE AVAILABILITY OF CREDIT TO GO OUT AND BUY WHATEVER THEY WANT THAT IT DOES NOT MATTER? NEIL: THE INTEREST IN THINGS IS A DIFFERENT STORY IN THE U.S. COMPARED WITH EUROZONE. IN THE U.S., THERE IS A LARGER FISCAL STIMULUS. IF YOU LOOK WHERE REAL INCOMES WILL BE, AT THE END OF THIS YEAR COMPARED TO THE PRE-PANDEMIC A LEVEL IN THE U.S., THEY WILL BE A BIT HIGHER DESPITE SURGE OF INFLATION WE HAVE HAD, JUST BECAUSE THE NORMAL INCOME GROWTH THROUGH THE PANDEMIC WAS SO STRONG. IN EUROPE, THEY WILL BE DIRE. LISA: IT IS VERY CONTROVERSIAL. YOU TALK ABOUT THE STIMULUS AND CHECKS AND A LOT OF PEOPLE BLAME THEM FOR THE INFLUX OF THE UNITED STATES TODAY. WHAT IS YOUR VIEW ON THE RAMIFICATION OF STIMULUS? WAS IT MORE INFLATIONARY THAN ANYTHING ELSE HAMPERING OF THE CONSUMER IN TERMS OF WHAT THEY CAN SPEND IN REAL TERMS OR WAS IT AN OFFICIAL IN TERMS OF THE SAVING THAT PEOPLE HAVE CURRENTLY? NEIL: I THINK I SEPARATE THE FISCAL STIMULUS FROM THE MONETARY STIMULUS. ON THE FISCAL SIDE, IN THE INITIAL PERIOD OF THE PANDEMIC, IT WAS ABSOLUTELY THE RIGHT THING TO DO. I THINK THE ISSUE TO MY MIND WAS IT PROBABLY WENT TOO FAR. THE THIRD ROUND WAS EXCESSIVE AND THAT IS WHEN IT ALL STARTED. SO IT WASN'T SO MUCH THE WRONG THING TO DO IN AND OF ITSELF, IT WAS THE SCALE I THINK WAS THE ISSUE. TOM: I WANT TO LOOK AT THE DATA THAT MICHAEL MCKEE WAS HELPING US WITH IN THE UNITED STATES. I THINK THIS IS SOMETHING VERY GERMANE TO A LONGER-TERM VIEW AS WELL. FOR THOSE OF YOU ON RADIO, WE SPIKE HIGHER IN THE FULL FAITH IN CREDIT YIELDS IN AMERICA AND AS WE HEARD FROM MICHAEL MCKEE, WHO WAS SPEAKING WHILE EVERYONE WAS ACTING, MAYBE NOT. THOSE YIELDS HAVE TURNED AROUND AND COME IN AND I THINK IT WILL BE FASCINATING TO SEE. TELL ME HOW IN LONG-TERM ECONOMICS YOU USE THE SHORT TERMISM OF THE BOND MARKETS TO TRY TO GUESS WHERE THE LONG-TERM ECONOMICS IS GOING. HOW DO YOU USE THE DAY-TO-DAY, MOMENT TO MOMENT FLUCTUATION TO OBSERVE THE CONFIDENCE OF WHERE WE ARE GOING? NEIL: I THINK IT IS DIFFICULT. I THINK WHAT YOU HAVE DESCRIBED SHOWS THE DANGER OF HAVING TOO MUCH CERTAINTY IN THE MARKETS. THEIR APPOINTMENT AND THEN DOWN THE OTHER. I THINK THE SHAPE OF THE CURB IS ALL FULLY -- IS ARGUABLY MORE IMPORTANT. WHETHER IT IS FLATTENING, STEEPING, WHETHER IT IS GOING TO THE LONG END OR THE SHORT END, WHAT THE MARKET HAS TOLD US OVER THE LAST THREE MONTHS REALLY IS THEY THINK THE FED HAS GOT THIS. SHORT END HAS COME DOWN, THE LONG AND HAS COME DOWN, THE RECESSION RISK HAS BEEN PRICED OUT A BIT OF THE BOND MARKET. INFLATION CONCERNS ARE DISSIPATING. I THINK THE INTERESTING POINT WILL BE DOES INFLATION COME DOWN FROM EIGHT TO FIVE, TO FOUR, ALMOST CERTAINLY. DOES THE FED HAVE TO GO AGAIN? LISA: JUST TO WRAP IT UP WITH YOUR FOCUS ON EUROPE, SAYING IT IS A DIFFERENT STORY HERE, SPEAK TO GEORGE SARAH BELLIS'S POINT, THAT WE HAVE MORE MOMENTUM IN THE REGION THAT A LOT OF PEOPLE EXPECTED AND HE THINKS FISCAL SPENDING WILL PROVIDE DISCOUNT. WHAT IS YOUR VIEW? NEIL: I THINK THERE IS TRUTH TO THE VIEW THAT INCOMING DATA IN THE EUROZONE HAS NOT BEEN AS BAD AS YOU MIGHT EXPECT. WE SO WE HAD THE PMI'S EARLIER THIS WEEK AND THEY HELD A BIT BETTER THAN WE HAVE ANTICIPATED AND MANY OTHERS ANTICIPATED. I COME BACK TO THE FUNDAMENTALS HERE WHICH IS THAT EUROPE, UNLIKE THE EURO S -- THE U.S., IS A HUGE NET ENERGY IMPULSE OR -- IMPORTER. THE TERMS OF TRADE HAVE COLLAPSED, THAT HAS MANIFESTED IN A HUGE SQUEEZE ON CONSUMERS AND THERE'S NOT MUCH FISCAL POLICY CAN DO TO OFFSET THAT. I THINK IN THE U.K., YESTERDAY IT ONLY OFFSETS ABOUT HALF OF THE SQUEEZE IN DISPOSABLE INCOMES. TOM: GET US TO THE DAY ON HARDER CARBONS AND JP MORGAN. WHAT IS YOUR CALL ON BRENT CRUDE ONE YEAR OUT AND WHY? NEIL: I THINK IT WILL STAY ELEVATED FOR THE NEXT SIX TO NINE MONTHS AND I THINK IT MIGHT START TO DIMINISH BUT IT WILL NOT COLLAPSE. TOM: IS $100 THE NEW $60? NEIL: I WOULD IMAGINE 12 MONTHS OUT BETWEEN $90 AND 100. LISA: THANK YOU. TOM: NEIL SHEARING OF CAPITAL ECONOMICS, HELPED US VERY MANY TIMES BEFORE INCLUDING ON NEW YEAR'S EVE SHOWS. EASILY WHEN IT SHOWS UP SOBER. LISA: WHAT HE IS SAYING ABOUT -- SAYING IS FASCINATING ABOUT THE IMPORTATION OF HYDROCARBONS IN EUROPE AND THIS MAKE ME WONDER WHAT THE CONSTRAINT IS AROUND THE DOLLAR WEAKENING TOO MUCH. BECAUSE THAT WILL ONLY? PRICES MORE. AND CREATE A REAL ISSUE. IT IS A COMPLICATED SCENARIO, BUT THE DIFFERENT OUTLOOKS FOR EUROPE AND THE U.S. CONTINUES TO BE A THEME. TOM: I WILL GO TO THE BACK END OF THE GDP EQUATION AND I THINK WE'RE LOOKING AT THIS HOLISTIC LEANNE I'M LOOKING AT IT AS DOMESTIC Y EQUALS C PLUS Y EQUALS G. THEN YOU HAVE THE NOISE ON THE BACKEND. AND DON'T OBSERVES WITH HIS CLASSIC OPTIMISM THAT IT IS ABOUT A RESILIENT AMERICAN ECONOMY, IT SERVICES BEING THE KEY DYNAMIC AS WE OPEN UP. WE ARE COMPLETELY FOCUSED ON GOODS NOW. LISA: A LOT OF PEOPLE WOULD AGREE WITH HIM THOUGH THE SERVICES OUT RECENTLY WAS NOT GOOD. IT CAME IN DISAPPOINTING SO THERE ARE THESE NOISY NUMBERS COMING OUT AND MAKING IT DIFFICULT. TOM: WAY TOO OPTIMISTIC THIS MORNING. WITHOUT QUESTION, OUR INTERVIEW OF THE DAY ON OIL, CHRISTIAN MAY LAKE OF JP MORGAN WITH THEIR IMPORTANT RESEARCH ON RESILIENT AND HIGHER OIL PRICES. FROM LONDON, LISA ABRAMOWICZ AND TOM KEENE, THIS IS BLOOMBERG. RITIKA: KEEPING YOU UP-TO-DATE FROM NEWS FROM AROUND THE WORLD, I'M RITIKA GUPTA. A BORIS JOHNSON PULLED NO PUNCHES WHEN BLOOMBERG ASKED ABOUT THE PROSPECT OF NEGOTIATING WITH VLADIMIR PUTIN, THE BRITISH PRIME MINISTER RESPONDING HOW CAN YOU DEAL WITH A CROCODILE WHEN IN THE MIDDLE -- WHEN IT IS IN THE MIDDLE OF EATING YOUR LEFT LEG. HE SAYS THE RUSSIAN PRESIDENT IS DO NOT BE TRUSTED. PROFITS THE CHINESE INDUSTRIAL FIRMS DECLINE LAST MONTH. PROFITS FELL 8.5% ON APRIL FROM A YEAR AGO. COVID OUTBREAKS AND LOCKDOWNS DISRUPTED FACTORY PRODUCTION, AND TRANSPORT LOGISTICS. FOR AMERICAN WORKERS SAYING COMPANIES ARE BECOMING MORE CAUTIOUS AFTER HANDING OUT HEFTY SALARY INCREASES OVER THE LAST YEAR. ECONOMISTS EXPECT DATA TO SHOW ANNUAL WAGE GROWTH THIS MONTH AS 5.2% DOWN FROM 5.5% IN APRIL. THE FED SEES WAGE GROWTH AS A BECAUSE OF INFLATION. GOVERNOR GREG ABBOTT HAS REPORTEDLY DROPPED PLANS TO ADDRESS THE NATIONAL RIFLE ASSOCIATION'S MEETING TODAY. THE NRA IS MEETING IN HOUSTON DAYS AFTER THE SCHOOL MASSACRE IN UVALDE, TEXAS. ACCORDING TO THE DALLAS MORNING NEWS, ABBOTT WILL BE IN UVALDE SENDING A MESSAGE TO THE NRA AND INSTEAD, FORMER PRESIDENT TRUMP WILL DELIVER HIS SPEECH IN PERSON. MOVIE THEATER OWNERS IN THE U.S. HOPE THE NEXT MOVIE, TOP GUN MAVERICK, GIVES THEM A SUPERSONIC BOOST. THE SEQUEL TO TOM CRUISE'S 1986 BLOCKBUSTER IS EXPECTED TO BRING IN $130 MILLION IN ITS OPENING WEEKEND. I WOULD MAKE IT THE THIRD BIGGEST BOX OFFICE OPENING SINCE THE START OF THE PANDEMIC OVER THE LAST FEW YEARS. MILLIONS OF CONSUMERS HAVE GOTTEN USED TO WATCHING MOVIES AT HOME ON STREAMING SERVICES. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON "BLOOMBERG QUICKTAKE," POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. > > I THINK THE FED IS GOING TO HAVE TO DECIDE BETWEEN TWO POLICY MISTAKES, AT THE BRAKES TOO HARD AND RISK RECESSION OR TAP THE BRAKES AND STOP -- AND HAVING INFLATION WELL INTO 2023. LISA: MOHAMED EL-ERIAN AND THE UNIVERSITY OF CAMBRIDGE. HE HUNG UP ON ME BECAUSE I CARE MORE ABOUT CHRISTIAN MAILING THAN I DO MOHAMED EL-ERIAN. I KNOW DR. EL-ERIAN AND HIS BUSY DAY I CAMBRIDGE WILL LISTEN INTO THESE IMPORTANT WORDS ON YOUR HEADACHE, MY HEADACHE, EVERYBODY'S HEADACHE GLOBALLY, GLOBAL ENERGY AND OIL. CHRISTIAN MAY LAKE OF GLOBAL ENERGY STRATEGIST AND JP MORGAN, THEIR LONDON SHOP DROP 100 PAGES ON WHERE WE ARE GOING AND THE VECTOR IS $150 A BARREL SOMEWHERE OUT THERE. IT IS THRILLED TO HAVE YOU JOIN US. CHRISTIAN, I WANT TO TALK ABOUT THE COMPLEX MICROECONOMICS HERE. WE HAVE LOTS OF PEOPLE LOOKING AT IT, ADD MORRISON OF CITIGROUP, JEFF CURRY, MICRO ECONOMIST AT GOLDMAN SACHS. WHAT IS THE DISTINCTION OF JP MORGAN RESEARCH AS EVERYONE LOOKS FOR A NEW ENERGY REGIME? CHRISTYAN: HE SORT OF SET IT IN THE QUESTION, WHICH IS COMMODITIES. IT IS NOT ABOUT COMMODITIES, IT IS ABOUT MOLECULES. ENERGY MOLECULES, HOW DO WE FIND JULES, WHETHER NEVER FORM IT IS, -- WHATEVER FORM IT IS, WHETHER IS CLEAN, FOSSIL FUEL, AND APPROACHING WITH A MUCH MORE HOLISTIC WAY. AS WE LOOK FOR JULES FOR ENERGY, WE ARE QUICKLY RUNNING SHORT INTO MAJOR DEFICITS OF ENERGY. TOM: I GOT INTERRUPTED BECAUSE THIS IS MASSIVE JARGON. JEWELS IS NOT AROUND THE CORNER WHERE YOU BUY TWO CARROTS OUT OF GUILT ON YOUR WAY BACK TO NEW YORK, IT IS JOULES, THERMODYNAMICS. CHRISTYAN: EXACTLY. WHEN WE THEN LOOK FOR ENERGY AND LOOK ACROSS ALL OF THE FUELS WE HAVE, BE IT OIL, GAS, RENEWABLES, THERE LIES THE ISSUE, THAT WHEN YOU TALK ABOUT HOW TO SOLVE FOR THE DEFICIT, YOU HAVE TO FIND ENERGY THAT CAN BE USED TO PRODUCE CHEMICALS AND PRODUCE HIGHS IN THE TESLA'S. EQUALLY YOU FIND ENERGY FOR THE E.M. WORLD THAT DOES NOT HAVE THE INFRASTRUCTURE AND WHAT THAT EFFECTIVELY MEANS IS BEING SURE ENERGY WE SEEM TO COME BACK TO FOSSIL FUELS. TOM: DID YOU SEE HOW HE GOT THE JAB IN ON TESLA? THE TIRES ARE MADE OF OIL. , DID YOU KNOW THAT? LISA: I THING WE HEARD THAT FROM BRIDGEWATER, EVEN THE RENEWABLES, YOU HAVE TO GET THE STUFF OUT OF THE GROUND FIRST. WHY AREN'T OIL PRICES HIGHER GIVEN YOUR THESIS? CHRISTYAN: WHEN YOU SORT OF RUN THROUGH THE DEFICITS IN DIFFERENT FUELS, WE ARE EFFECTIVELY FULLY LOADED OUT APART FROM OILS AND OIL, THERE IS STILL PAIRS -- STILL SPARE CAPACITY BUT THAT IS QUICKLY RUNNING DRY. OIL PRESSURE SHOULD BE HIGHER. THINKING ABOUT THE MARGINAL COST TO REDUCE THE OIL, IT IS GETTING CLOSE TO $100 AND THAT IS DIFFERENT THAN THE $40 YOU HEAR WHEN TALKING ABOUT IT ON THE GROUND. 1400 IS THE PRICE CASH FLOW NEEDED TO FEED THE EQUITY AND SHAREHOLDERS. NOW THE SOCIAL TAX AND WINDFALL, ALL OF THESE THINGS ARE INFLATIONARY BECAUSE YOU HAVE TO FEED ALL OF THESE MOUNDS BEFORE YOU PUT AN EXTRA DOLLAR INTO OIL CAPEX AND THAT IS AROUND 100. THEN YOU ADD 20 TO 30 IN TERMS OF WHAT IS THIS SPARE CAPACITY WORTH? HISTORICALLY IT HAS BEEN BETWEEN 30 AND $40. IN OTHER WORDS, THERE'S A LOT OF UPSIDE TO PRICES FROM HIM. LISA: TRANSLATE $125 PER BARREL INTO GASOLINE PRICES INTO THE REFINERIES. CHRISTYAN: OUR COMMODITIES TEAM HAS DONE THIS AND WE ARE HEADED TOWARD SIX DOLLARS POTENTIALLY. LISA: IN THE UNITED STATES? CHRISTYAN: ABSOLUTELY. YOU WILL SEE THIS PASS-THROUGH WITH RETAIL PRICES AND QUESTION IS HOW DOES AN WINDOWS MAN RESPOND -- DOES DEMAND RESPOND? WE HAVE NEVER BEEN BELOW 5% SPARE CAPACITY IN THE WORLD AND THAT EQUATES TO A BIGGER PREMIUM FOR OIL THEN WHAT YOU WOULD EXPECT IT TO BE GIVEN THAT IT DOES NOT COST THAT MUCH TO PRODUCE IT. TOM: YOU AND I HAD TO READ COVER TO COVER THE PRIZE YEARS AGO. YOU BUT THE PRIZE JUST TO WALK AROUND CAMPUS AND LOOK COOL, DIDN'T MATTER IF YOU READ IT. THE ANSWER AS JUERGEN WOULD SAY, THEY HAVE THE POWER OF THE PRIZE. WHAT IS THE POWER THE SAUDI SOUL GIVEN THE JP MORGAN VIEW -- SAUDIS HOLD GIVEN THE JP MORGAN VIEW? CHRISTYAN: WHEN WE LAUNCH OUR BULLISH VIEW 2020, I WAS SPEAKING TO THE SAUDIS AND THEY WERE STILL INVESTING IN THE WELLS SO THAT WHEN NEEDED THEY COULD SWITCH. I REMEMBER THE SUMMER OF 2020, WHY WOULD WE NEED THE WELLS? WE HAD TOO MUCH OIL, DEMAND IS 75 MILLION BARRELS, BUT THEY CONTINUED TO INVEST IN TOTAL CAPACITY. THERE WE ARE TWO YEARS LATER AND NOW WE NEED THOSE BARRELS AND THE ONLY ONE AVAILABLE ARE THE BARROWS BECAUSE THEY INVESTED WHEN EVERYONE WAS NOT ARE THE SAUDIS. LISA: IF WE GET SIX DOLLARS PER BARREL, SIX DOLLARS PER GALLON OF GASOLINE, I'M TRYING TO WRAP MY HEAD AROUND THAT. WE GET DEMAND DESTRUCTION? HAVE WE REACHED THAT POINT OR WILL IT KEEP CLIMBING? CHRISTYAN: SHORT ANSWER, NO. I THINK WE CAN COPE WITH THOSE PRICES, I THING WE CAN COPE WITH OIL PRICES SIGNIFICANTLY HIGHER OVER A PERIOD OF TIME. COMING BACK TO THE REPORT WE DID, ONE THING WE DISCOVERED IS THE RESILIENCE OF EMERGING MARKETS TO A HIGHER PRICES -- TO HIGHER PRICES. THIS IS NOT ABOUT WHY CYCLE TO WORK OR DO I DRIVE TO WORK. THIS IS ABOUT LIVING. WHEN YOU THINK ABOUT IN TERMS OF THE CONFLICT THEY HAVE, DO WE BUY OIL FOR THE SAKE OF OIL OR DO WE SUFFER THE CONSEQUENCES, HUNGER, RIOTS, REVOLUTIONS, WHATEVER. THAT IS A MUCH MORE DIFFICULT CROSSROADS AND THAT IS WHY WE SEE THE RESILIENCE -- WE THINK THE RESILIENCE WILL BE HIGHER. TOM: DO YOU SUPPORT THE WINDFALL PROFIT TAX? CHRISTYAN: I THINK ULTIMATELY IF IT HELPS CONSUMERS, YES, BUT THE PROBLEM IS ALL IT IS DOING IS CREATING INFLATIONARY BACKDROP FOR OIL. SOON OTHER MAJORS HAVE TO PAY MORE TAX WHEN THEY COULD HAVE OTHERWISE INVESTED AND ALL THAT DOES IS RAISE THE BREAKEVENS. REMEMBER ALL THE MOUTHS THEY HAVE TO FEED, WHETHER EQUITY, THE DEBT, THE PROJECT, YOU HAVE ANOTHER MOUTH TO FEED WHICH IS ADDITIONAL TAXES. SO AGAIN, WHAT DOES THE OIL PRICE NEED TO RAISE TO RAISE THE CAPEX IN OIL? IT HAS GONE UP SIGNIFICANTLY. TOM: THANK YOU FOR JOINING US. HE IS WITH JP MORGAN AS I SAID BEFORE, WE ALWAYS PROTECT THE COPYRIGHT OF ALL OF OUR GUESTS RESEARCH MATERIAL. I URGE YOU TO GO TO JP MORGAN AND GET YOUR HANDS ON THEIR IMPORTANT 100 PAGES. YOU AGREE OR DISAGREE WITH THAT, OTHER PEOPLE GO THOUGH OTHER WAY, BUT -- GO THE OTHER WAY BUT IT WILL MAKE YOU MORE INFORMED ON ECONOMICS. ARE WE DONE ON TV? LISA: WE ARE DONE ON TV. TOM: YOU AND I GOT THROUGH THE WEEK. WE ARE NOT ON SPEAKING TERMS BUT IT IS OK. LISA: WE ARE KIND OF SPEAKING NEXT TO EACH OTHER ON PODIUM, PODIA? [LAUGHTER] TOM: COMING UP, DAVID WESTIN WILL NOT GO LIGHT.

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'Bloomberg Surveillance Simulcast' Full Show 5/27/2022

Tom Keene, Jonathan Ferro and Lisa Abramowicz have the economy and the markets "under surveillance" as they cover the latest in finance, economics and investment, and talk with the leading voices shaping the conversation around world markets. This show is simulcast worldwide on Bloomberg Television and Radio. (Source: Bloomberg)

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"Bloomberg Markets" is focused on bringing you the most important global business and breaking markets news and information as it happens.
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