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Watch 'Bloomberg Surveillance Simulcast' Full Show 4/18/2022 - Bloomberg

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00:00> > MARKETS ARE MOVING QUITE A LOT. VOLATILITY IS HIGH. > > YOU HAVE TWO INVEST ALMOST IN ANY ENVIRONMENT. > > THE ISSUE FOR THE U.S. IS WHETHER OR NOT THE CONSUMER BUCKLES UNDER THE WEIGHT OF THE HIGH INFLATION. > > THERE IS AN INVISIBLE MOMENTUM TO THE GROWTH. > > THE UNDERLYING TREND WILL PROBABLY PEAK, WE WILL GET INFLATION BACK TO 2%. > > THIS IS "BLOOMBERG SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. JONATHAN: GOT TO REMEMBER HOW TO DO THIS. FROM NEW YORK CITY, FOR OUR AUDIENCE WILL LIE, GOOD MORNING. THIS IS "BLOOMBERG SURVEILLANCE" LIVE ON TV AND RADIO. FUTURES DOWN ABOUT ONE HALF OF 1% ON THE S & P. BIG BANK EARNINGS. TOM: AND THE BACKDROP IS FASCINATING. SO MUCH OF THIS IS THE UNCERTAINTY FOR THE AMERICAN ECONOMY. THIS MORNING, EVERYTHING IS ABOUT THE INFLATION WATCH THAT BRIAN MONAHAN AND ONE HAS TO GAUGE. JONATHAN: AND GUESS WHAT THE BANKS HAVE DONE -- NOTHING. B OF A HAS HAD ONE POSITIVE TRADING DAY FOR THE MONTH SO FAR. IT HAS BEEN TRICKY. TOM: AND SO MUCH OF THIS IS THE MACRO VIEW, THE MICRO VIEW. WE LEARNED IN PREVIOUS BANK EARNINGS IS TO GAUGE CUTTING EXPENSES. YOU SLOW DOWN IN BANKING, IN EQUITY AND FIXED INCOME, YOU START PEELING BACK AND SLOWING DOWN? WE DO NOT HAVE INDICATION OF THAT. MAYBE WE GET THAT THIS MORNING. JONATHAN: WHAT IS HAPPENING WITH THE BANKS ON WALL STREET. THE CURVE IS STEEPER, NOT FLATTER. THE GAP BETWEEN THE 2'S AND TENDS ARE WIDER -- 10'S ARE WIDER. LISA: I AM ALWAYS ON YIELDS WATCH, BECAUSE YOU ARE SEEING THE CONFLUENCE OF HIGHER INFLATION AND SLOWER GROWTH THAT IS NOT FOR THE BANKS, EVEN IF YOU HAVE HIGHER YIELDS, AND THAT SEEMS BE THE STORY WHETHER CHINA, EUROPE, OR U.S. JONATHAN: SHOULD WE TALK ABOUT THIS FROM JAN HATZIUS. WE ARE NOW ASSIGNED A ROUGHLY 15% CHANCE OF RECESSION OVER THE NEXT 12 MONTHS, 35% IN THE NEXT 24 MONTHS. SHALL WE CALL THAT A TEPID RECESSION WARNING FROM GOLDMAN OVER THE WEEKEND? LISA: I WOULD SAY, IF IT IS SURPRISING, IT IS SURPRISING IT IS ON A HIGHER CHANCE, GIVEN THE MARKETS AND THE SPECULATION. THE FACT THAT IT IS NOT HIGHER HAS COPY BOTH ATTENTION. BUT 35% -- YOU CAN SAY 100% CHANCE THE NEXT 10 YEARS? JONATHAN: USUALLY THEY SAY IT IS A 40% CHANCE. THE WORDS OF GOLDMAN, HARDPACKED TO A SOFT LANDING. TOM: THIS IS THE VALUE OUT OF SURVEILLANCE, AND YOU CAN SEE IT IN CHINA GDP. DR. HATZIUS KNOWS THERE IS THE OFFICIAL RECESSION, TWO QUARTERS NEGATIVE GDP, IT IS A LOT OF INERTIAL FORCE TO GET TO THAT OUTCOME. THE OTHER WAY TO LOOK AT IT IS JEFFREY FRANKEL OF HARVARD SUGGESTED IS MORE THAN A SIMPLE FORMULA, AND YOU HAVE TO FIX IN OTHER THINGS LIKE LABOR. HATZIUS WAS ON SET, AND HE WAS HEATED ABOUT AN OVERHEATED JOB ECONOMY. HOW DO YOU HAVE A RECESSION WITH A HATZIUS OVERHEATED JOB ECONOMY? JONATHAN: THANKS TO YOU, I ACTUALLY HAD A LOT OF PEOPLE ON THE COAST REACH OUT TO ME. [LAUGHTER] TOM: YOU AND I ARE SEEING A 40 DEGREE CHILL, AND FERRO IS WATCHING THE SUNSET -- LISA: YOU KNOW WHAT? NOT ANYMORE. GOOD TO HAVE YOU BACK. [LAUGHTER] JONATHAN: FUTURES DOWN HALF OF 1%. YIELDS UP BY A COUPLE BASIS POINTS. THE 10 YEAR, 2.85. LISA: HONESTLY, THAT IS AMAZING. IF YOU LOOK AT SIZE AND SCOPE, THAT IS THE HIGHEST SINCE GOING BACK TO 2018. IT IS BE DRIVEN BACK. -- AN 8:30 A.M. CALL. THIS COMES AS YOU SEE STOCKS ON THE BANKS FALL TO THE LOWEST GOING BACK TO MARCH OF 2021. WE HAVE HAD A WHOLE ROUND TRIP, DESPITE, AS YOU WERE TALKING ABOUT, WE HAVE BEEN GETTING THIS CURVE THAT IS ACTUALLY STEEPENING IN THE YIELD SPACE. DOES IT INDICATE A CERTAIN PESSIMISM OR IS THERE SOMETHING ELSE GOING ON? FRANKLY, A LOT OF PEOPLE ARE ASKING THAT. 10:00 A.M., HOUSING MARKET INDEX, THIS WILL BE INTERESTING. WE ARE SEEING IT COME OFF THE HIGHEST LEVELS ON RECORD GOING BACK TO THE 1980'S. THIS COMES AS HOMEBUILDERS LOOK AT HIGHER PRICES ACROSS THE WORLD AND A LACK OF CONVICTION IF THEY DO NOT BUILD. IF THEY HAVE LESS CONVICTION GOING FORWARD, THAT MEANS HOUSING PRICES COULD BE STICKIER BECAUSE SUPPLY CANNOT RESPOND IN TANDEM WITH INCREASING DEMAND, WHICH MAY NOT ROLL OVER AS QUICKLY AS SOME PEOPLE MAY SUGGEST IN THE FACE OF HIGH PRICES. AT 4:00 P.M., WE HEAR FROM THE ST. LOUIS FED PRESIDENT JIM BULLARD, SPEAKING AT A VIRTUAL EVENT. AND THIS COMES IF YOU LOOK AT REAL YIELDS -- REAL YIELDS, INFLATION-ADJUSTED BENCHMARK RATES, AT THE HIGHEST LEVELS GOING BACK TO MARCH OF 2020. THIS TELLS US THE FED IS GOING TO NORMALIZE. THE RUSSIAN IS HOW QUICKLY. JUST AS WE HAVE A ROSTER OF FED, JAY POWELL TALKING AHEAD OF THE QUIET PERIOD, HOW FAR ARE THEY WILLING TO GO GIVEN SOME OF THE UNCERTAINTY WE SAW FROM THE CHINA ECONOMIC DATA? JONATHAN: POWELL LATER THIS WEEK A LOOKING FORWARD TO IT. LET'S GET STRAIGHT TO THE MARKET COMPENSATION WITH RUSS KOESTERICH. YIELDS ARE HIGHER, THE CURVE STEEPER, BANKS ARE STRUGGLING. WHY? RUSS: GOOD MORNING. I THINK THERE ARE A FEW REASONS CREATING HEADWINDS FOR THE BANKS. YES, THE CURVE IS A BIT STEEPER TODAY, BUT AS WE ALL KNOW, 2'S/10'S MUCH FLATTER OVER THE LAST THREE OR FOUR MONTHS, AND THAT IS A HEADWIND FOR BANKS, PARTICULARLY SMALLER REGIONAL BANKS. THE CASES WE WILL NOT SEE A RECESSION, BUT TO STATE THE OBVIOUS, WE HAVE MORE AND MORE INVESTORS, MORE AND MORE PEOPLE TALKING ABOUT IT. IF YOU ARE WORRIED ABOUT A RECESSION, BANKS ARE NOT THE OBVIOUS PLAY. FINALLY, LILY THE ISSUE THAT IS TOP OF MIND FOR MOST INVESTORS IS INFLATION. IF YOU GO BACK AND USE HISTORY AS A PLAYBOOK, THERE ARE OTHER PARTS OF THE MARKET -- ENERGY, NATURAL RESOURCES -- THAT HAVE BEEN BETTER HEDGES THAN THE FINANCIALS. I THINK THE UNDERPERFORMANCE OF BANKS, GIVEN THE YIELD CURVE, GIVEN INFLATION, CONCERNS ABOUT WHETHER OR NOT THE FED SLOWS THE ECONOMY, IT SORT OF MAKES SENSE. TOM: WE GOT THE FIRST PRINT ON THE 10 YEAR REAL YIELD THIS MORNING, OFF TO A NEW NEGATIVE NUMBER. HOW DOES BEHAVIOR CHANGE WITH A 0 OR POSITIVE INFLATION-ADJUSTED YIELD? RUSS: I THINK YOU START TO SEE WHAT YOU HAVE ALREADY SEEN. AS FINANCIAL CONDITIONS HAVE TIGHTENED, AND REAL YIELDS ARE ONE OF THE BETTER MEASURES OF THAT, YOU HAVE SEEN A CHANGE IN INVESTOR WILLINGNESS TO LOOK AT LOAN DURATION ASSETS, EARLY GROWTH. HONESTLY, I THINK THIS WILL CONTINUE, BECAUSE PART OF THE CHALLENGE IS, AS YOU POINTED OUT, REAL YIELDS BACKED UP BY A BIT. THEY WERE NEGATIVE 1.10 A FEW DAYS AGO. BUT IF YOU COMPARE THIS TO THE AVERAGE BETWEEN THE END OF THE FINANCIAL CRISIS AND THE BEGINNING OF THE PANDEMIC, THEY AVERAGED ABOUT POSITIVE 35. WE ARE STILL A WAYS AWAY FROM THERE, WHICH MEANS IT IS LIKELY THAT, AS THE FED REMOVES ACCOMMODATION, WE CAN SEE REAL YIELDS BACKUP FURTHER. LISA: WHAT DOES THAT MEAN FOR THE NOMINAL YIELD CONSIDERING THE FACT A LOT OF PEOPLE ARE LOOKING AT THE TERMINAL RATE FOR THE FED THAT IS A HIGHER FIGURE THAN WHAT WE SAW PERHAPS A MONTH AGO? RUSS: I THINK THAT IS RIGHT, AND IF YOU GO BACK AND JUST USE A VERY SIMPLE -- THINK ABOUT THE 10 YEAR WILL MOVE TOWARDS THE TERMINAL RATE FOR THE FED'S FUND RATE, AND WE CAN ALL AGREE, WHATEVER WE THOUGHT IT WAS SIX MONTH AGO, IT IS HIGHER TODAY. IT IS NOT HARD TO GET TO A WORLD WHERE THE 10-YEAR IS TRADING AT 3% OR A BIT HIGHER. WE WERE THERE IN LATE 2018. AGAIN, THIS WAS NOT A HUGE NUMBER IN THE CONTEXT OF THE LAST 40, 50 YEARS. BUT FOR A MARKET HAS BECOME CONDITIONED TO LOW NOMINAL RATES AND NEGATIVE -- NEGATIVE REAL RATES, IT IS AN ADJUSTMENT, AND THIS IS PROBABLY THE MAIN REASON YOU HAVE SEEN THE VOLATILITY IN EQUITIES AND THE CHALLENGE FOR RISKY ASSETS. JONATHAN: HAVE YOU PUT ANY CASH TO WORK, GIVEN THE BUILD UP THAT POSITION OF THE LAST YOU MONTHS? RUSS: WE HAVE BEEN RUNNING WITH HIGH CASH. WE ARE STILL RUNNING WITH HIGH CASH. THE SHORT ANSWER IS NOT MUCH. WE ARE TRYING TO MANAGE ABSOLUTE RISKS AND PART OF THE CHALLENGES NOT JUST THAT YOU HAVE A WORLD IN WHICH FINANCIAL CONDITIONS ARE TIGHTENING, WHICH IS CREATING THE HEADWIND I SPOKE ABOUT, THE OTHER PROBLEM IS, AND WE SPOKE ABOUT THIS IN OTHER OUTCASTS, THERE ARE NOT THAT MANY GOOD HEDGES. -- IN OTHER BROADCASTS, THERE ARE NOT THAT MANY GOOD HEDGES. LOAN DURATION IS NOT ACTING AS THE TRADITIONAL HEDGE RULE IF A FEEL FOR MANY DECADES. IF YOU LOOK AT THE ASSET CLASS THAT HAS BEEN THE MOST NEGATIVELY CORRELATED WITH THE MARKET, IT IS THE DOLLAR. IN THIS ENVIRONMENT, IT STILL MAKES SENSE TO RUN WITH A LARGER CASH BALANCE. YOU WILL GET OPPORTUNITIES TO PUT THAT TO WORK LATER THIS YEAR, BUT FOR NOW, WE ARE SITTING WHERE WE ARE. JONATHAN: RUSS KOESTERICH THERE OF BLACKROCK. LET'S SIT ON FOREIGN EXCHANGE FOR A MOMENT. THE DOLLAR-YEN HAS NOT HAD A DOWN DAY, A DOWN-DOWN -- TOM: LISTEN TO YOU WITH YOUR BAD LANGUAGE -- JONATHAN: DOLLAR-YEN, THE CURRENCY PAIR ADVANCING. TOM: YOU ARE KILLING ME. YOU GOT TO GO STRONG AND WEAK. [LAUGHTER] WHAT ARE YOU, BRITISH? LET'S TRANSLATE THIS NOW. IT IS WEAK OR STRONG, THAT IS ALL IT IS. THE YOUNG USED TO BE STRONG, IT IS NOT. IT IS WEAK-WEAK. A 1.27 YEN WOULD BE A HUGE DEAL. WHAT CONCERNS ME IS FOREIGN-EXCHANGE OR LEADS TO OTHER REPAIRS, AND CRITICALLY CORRELATES OVER TO SELECTED COMMODITIES. JONATHAN: DO YOU THINK PEOPLE HAVE MISSED YOU ARE NOT TALKING OVER EACH OTHER? [LAUGHTER] TOM: MY WEEK WAS RUINED BECAUSE TOT DID NOT PLAY WELL. LISA: CAN I POINT OUT? IT TOOK 11 MINUTES. JONATHAN: TO BE FAIR, THAT IS NOT BAD. USUALLY IT TAKES ABOUT 20 SECONDS. [LAUGHTER] LISA: CONGRATULATIONS. JONATHAN: YIELD HIGHER BY A COUPLE BASIS POINTS. A WEAKER EURO. THIS IS BLOOMBERG. ♪ RITIKA: KEEPING YOU UP-TO-DATE WITH THE FIRST WORD, AND RITIKA GUPTA. DEFENDERS AND MARIUPOL HAVE BEEN ENCIRCLED BUT HAVE NOT SURRENDERED THE PORT CITY. THERE ARE WARNINGS OF A POSSIBLE NAVAL LANDING MISSION. MANY OF THE TROOPS IN MARIUPOL ARE REPORTED TO BE IN A GIANT SEAL WORK. AND GOLDMAN SAYS HISTORY SUGGESTS OF THE FEDERAL RESERVE WILL HAVE A TOUGH TIME CULLING INFLATION WITHOUT CAUSING A RETRACTION. CHIEF ECONOMIST JAN HATZIUS -- WILL HELP THE FED. CONSUMER SPENDING TOOK A DIVE IN MARCH AND UNEMPLOYMENT ROSE TO THE HIGHEST LEVEL SINCE THE EARLY PART OF THE PANDEMIC. RETAIL SALES CONTRACTED 3.5% FROM A YEAR AGO. IN THE U.K., PRIME MINISTER BORIS JOHNSON FACES ANOTHER ROCKY WEEK FOLLOWING NEWSPAPER REPORTS ABOUT THE PARTY GATE SCANDAL WITH STORY SAYING DOWNING STREET GATHERINGS TOOK ON A LOCK DOWN-BREAKING NATURE ONLY AFTER JOHNSON ARRIVED AND STARTED POURING DRINKS. AND THE EVERGREEN MARINE CONTAINER SHIP STUCK IN CHESAPEAKE THEY MUD FOR MORE THAN A MONTH IS MOVING AGAIN. SEVERAL ATTEMPTS TO MOVE IT USING TUGBOATS FAILED, SO THEY MOVED CONTAIN IS TO LIGHTEN THE LOAD. GLOBAL NEWS 24 HOURS A DAY ON AIR AND AT BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M RITIKA GUPTA. THIS IS BLOOMBERG. ♪ > > THE SITUATION IN MARIUPOL IS DIRE MILITARILY AND -- AFTER BUCHA, IT BECAME DIFFICULT AS CONTINUE TALKING WITH THE RUSSIANS, BUT AS MY PRESIDENT MENTIONED, MARIUPOL MAY BE THE REDLINE. JONATHAN: FEATURE SHAPING UP, NEGATIVE ON THE S & P, ON THE NASDAQ LAST WEEK, NEGATIVE ABOUT 2%. DOWN ANOTHER ONE -- DOWN ANOTHER -1.5% AT THE MOMENT. THE DOLLAR STRONGER AGAINST THE EURO AND THE YEN AS WELL. LATER THIS HOUR, 20 OR 30 MINUTES FROM NOW, BANK OF AMERICA WITH EARNINGS OUT. TOM: THEY HAVE A NUANCED, MAYBE NOT AS NUANCED AS USUAL, BUT IT WILL BE INTERESTING TO SEE OFF BANKING. I WAS -- WOULD SUGGEST BRIAN MOYNIHAN IS THE ONE WHO GETS OUT ON COST CUTTING CHAT MORE THAN ANYONE, AND MAYBE THAT IS WHAT IS ON THE CONFERENCE CALL. JONATHAN: THAT IS WHERE YOUR FOCUS IS ON. GET THE WAGES UP -- TOM: WHILE YOU WERE GONE, HSBC WAS MOVING FORWARD, PULLING OUT OF ASIA. NOW THEY ARE PULLING BACK INTO ASIA AND SAYING THEY HAVE TO BUILD OUT WEALTH MANAGEMENT IN ASIA. BUT I AM FACE NEEDED -- FASCINATED WHAT WOYNIHAN WILL DO ON THE CALL. JONATHAN: WHERE IS THE FAT TO CUT SOME OF THESE BANKS? TOM: THAT IS THE QUESTION. I DON'T KNOW. I AM JUST TRY TO GET MY TOASTER AT CHRISTMAS. JONATHAN: THEY ARE STILL GIVING THEM OUT? I AM NOT SURE THEY STILL NEED DEPOSITS. TOM: THEY DON'T, BUT WHEN YOU ARE IN TRIPLE LETTERS ALL CAPS, THAT IS WHAT YOU DO. RIGHT NOW, THIS IS AN IMPORTANT CONVERSATION. EMILY WILKINS JOINS US IN WASHINGTON AS, IN THE LAST HOUR, THE WASHINGTON POST AND OTHERS NOTE, WESTERN UKRAINE HIT BY MISSILES WITH THE FIRST REAL ATTACK THERE. IT REALLY BRINGS HOME THE DESPAIR NEWS OF WHAT PRESIDENT BIDEN HAS TO DEAL WITH IN UKRAINE. SIMPLY, THIS MONDAY, WHAT IS THE PRESIDENT'S PLAN? EMILY: THE PRESIDENT'S PLAN IS TO CONTINUE SENDING THAT AID. WE HEARD OVER THE WEEKEND THE WHITE HOUSE WOULD SEND $800 MILLION MORE FOR WEAPONS AND DEFENSE. THIS COMES AFTER PRESIDENT ZELENSKYY CALLED FOR A DIFFERENT KIND OF WEAPON, TO HAVE A HEAVIER ON THE GROUND FORCES, LONGER-RANGE MISSILES, ACKNOWLEDGING THE TONE OF THE WAR IS SHIFTING AS WE ARE PREPARING FOR PERHAPS A MUCH LONGER CONFLICT IN THE EASTERN PART OF THE REGION. WHAT WE ARE SEEING, THE HEADLINES AND STORIES OUT OF UKRAINE, LVIV, THIS WAS AN AREA NOT INITIALLY HIT A LOT, WAS NOT A MAIN TARGET, AND NOW YOU ARE SEEING THAT GOING AHEAD AND EXPANDING. CONGRESS IS STILL OUT THIS WEEK, BUT BIDEN HAS ABILITY TO CONTINUE TO MOVE ON A. TOM: YOU NAILED IT. CONGRESS IS OUT. GUESS WHAT -- RUSSIA IS NOT OUT. UKRAINE IS NOT OUT. IN TERMS OF BEING ON TOP OF THIS, WHAT IS OUR PLAN WITH ALLIES TO PROSECUTE THIS THING TO GET THE NEXT WEEKEND? EMILY: I THINK ONE OF THE BIG CHALLENGES RIGHT NOW HAS BEEN TRYING TO GET EUROPEAN COUNTRIES TO PUT A BAN ON RUSSIAN OIL. WE HAVE SEEN SANCTIONS HAVE NOT DONE WHAT IS NEEDED TO GET RUSSIA TO BACK OFF THAT PRESSURE. WE HAVE SEEN PEACE TALKS DEVOLVE. ZELENSKYY SAYS THEY ARE AT A DEAD-END. THEY COULD COMPLETELY AND IF -- END DEPENDING WHAT HAPPENS IN MARIUPOL. IT IS ON EUROPEAN ALLIES TO BAN OIL, FIND WAYS TO SUPPLY THEM WITH WHAT THEY NEED. LISA: THERE WORST NEWS OF PROTESTS IN LIBYA, THAT IS WHY THERE WAS A LIFT IN OIL PRICES. WHAT IS NEXT FOR THIS ADMINISTRATION, GIVEN THE FACT THAT PEOPLE WHO TRAVELED OVER THE EASTER WEEKEND AND THE UNITED STATES REALIZED THEY WERE SPENDING $100 TO FILL UP THEIR TANK? EMILY: I THINK YOU SAW THE ADMINISTRATION CAVE TO A LOT OF PRESSURE, SAYING THEY WOULD START ALLOWING DRILLING ON FEDERAL LANDS, THEY WOULD BEGIN HAVING PERMITS AGAIN. THIS IS SOMETHING THAT GOES DIRECTLY AGAINST WHAT BIDEN SAID ON THE CAMPAIGN TRAIL, THAT HE WOULD NOT ALLOW ANY DRILLING. BY DOING THIS, HE IS ANGERING A LOT OF THOSE ON THE LEFT WHO ARE VERY CONCERNED ABOUT THE ENVIRONMENT, WHO LOOKED UP TO BIDEN HAS A VERY GREEN PRESIDENT, BUT THE CURVE PRESSURE HAS LEAD BIDEN TO RETURN TO FOSSIL FUELS AND DRILLING, BECAUSE HE KNOWS GAS PRICES WILL BE A HUGE PROBLEM FOR AMERICANS RIGHT NOW, BUT LOOKING DOWN THE ROAD, DEMOCRATS ARE NOT LOOKING AT A GOOD MIDTERM SITUATION FOR THEM. IT ONLY GETS WORSE THE HIGHER THOSE GAS PRICES ARE. LISA: AND WHEN YOU SAY GAS, WE ARE TALKING GASOLINE PRICES, BUT ALSO NATURAL GAS PRICES REACHING THE HIGHEST IN MORE THAN A DECADE. HOW MUCH IS THERE A DISCUSSION TO TRY TO EXPORT FROM THE UNITED STATES AT A TIME WHEN YOU START TO HEAR PEOPLE TALK ABOUT MAYBE TWO YEARS BEFORE GERMANY CAN REMOVE RELIANCE ON RUSSIA? EMILY: THAT IS THE HUGE PROBLEM WITH EUROPE, A LOT OF THESE COUNTRIES CANNOT JUST MAKE THE CHANGE OVERNIGHT LIKE WE SAW WITH THE U.S. BANNING RUSSIAN OIL. THERE IS A DISCUSSION, BUT YOU HAVE TO WEIGH IT OUT. HOW MUCH OF THAT NATURAL GAS SHOULD BE GOING TO EUROPE, THERE HAS BEEN A LOT OF CONVERSATION, BUT ALSO HOW MUCH NEEDS TO STAY IN THE U.S. TO MAKE SURE PRICES HERE ARE NOT SKYROCKETING. TOM: ONE OF THE BIG ADVANTAGES IS WE HAVE TWO WOMEN WHO KNOW FARMS. MOMENTS AGO, CORN JUST WENT TO A RECORD HIGH, EIGHT CENT PER BUSHEL. WHO DOES THAT BENEFIT IN WASHINGTON? EMILY: I HAVE TO WONDER ALOUD A LITTLE IF THAT IS TIED AT ALL TO WHAT THE ADMINISTRATION RECENTLY DID ON BIOFUELS, ALLOWING BIOFUEL CELLS THAT WOULD HAVE STOPPED SEPTEMBER 1, TO CONTINUE THROUGH THE YEAR. THIS IS SOMETHING A LOT OF PEOPLE HAVE PUSHED FOR IN IOWA, IN THE U.S. TYING IT BACK TO THE ELECTIONS, THESE ARE KEY FOR DEMOCRATS. TOM: LISA, WEIGH IN HERE. LISA: ACTUALLY, WHEN I WORKED AT FARGO, ONE OF MY COLLEAGUES GOT THE SHEEP JOURNAL EVERY WEEK. FRANKLY, YOU HAVE NOT BEEN ABLE TO SEE SOME OF THE PLANTING GLOBALLY. WHEN WILL WE SEE THE TRADE-OFF BETWEEN FEEDING HOGS CORN AND PE OPLE CORN. I CAN TELL YOU ARE REALLY INTERESTED. JONATHAN: I WILL JUST SAY THANK YOU TO EMILY. HOPING WE DO NOT COME BACK OR THAT EXTRA QUESTION. [LAUGHTER] TOM: IT IS A 19 DEGREE LOW IN FARGO THIS MORNING. JONATHAN: LET ME ASK YOU THIS -- WALL STREET IS OBSESSED WITH THIS MECHANICAL PEAK IN YEAR-OVER-YEAR INFLATION THAT COULD BE KICKING IN AROUND ABOUT NOW. YOU THINK MAINSTREET FEELS AT THE SAME WAY? TOM: NO, TOTALLY DIFFERENT. I THINK IT IS COMPLETELY DIFFERENT. I GET THE YEAR-OVER-YEAR, AND WE WILL DO A VALLEY THERE WITH MICHELLE MEYER AND THE REST OF IT. THE PUBLIC IS FLAT ON ITS BACK. WHAT IS IMPORTANT HERE IS THE DECILES OF THE PUBLIC ARE FLAT ON THEIR BACK OVER THE INFLATION. IF YOU DO A CORE ANALYSIS WITH A BEVERAGE OF YOUR CHOICE NOW, YOU GET SLAPPED IN THE FACE. JONATHAN: MOVING AWAY FROM THE INFLATION CONVERSATION AND FOCUSING ON THE GROWTH FEARS FOR THE BACK HALF OF THIS YEAR? LISA: THE LONGER THIS PERSISTS, EVEN IF WE REACH A MECHANICAL PEAK, EVEN IF IT STAYS HIGH, THAT WILL AFFECT SENTIMENT, AFFECT BOTH. JONATHAN: IS MICHELLE BACK? THIS IS GOOD NEWS. LOOKING FORWARD TO THAT CONVERSATION IN A MOMENT. FEATURES ARE NEGATIVE, DOWN 0.6% OF THE NASDAQ, S & P DOWN 0.5%. THIS IS BLOOMBERG. JONATHAN: LIVE FROM NEW YORK CITY, HERE THE PRICE ACTION. FUTURES NEGATIVE .4% ON THE S & P. AND ON THE NASDAQ, TWO. THIS MORNING DOWN ABOUT .5%. HIGHER RATES. NOT A CYCLICAL STORY. CAPTURING THAT IS THE EQUITY PERFORMANCE. LET'S TAKE A LOOK AT CONSUMER STAPLES AS WELL. ON THE YEAR, THE BANKS DOWN AND DOWN HARD BY 14%. STAPLES HAVE HELD UP OK BY 2.5%. IT'S A RECENT STORY OVER THE LAST FEW WEEKS. BFA WILL REPORT EARNINGS -- B OF A WILL REPORT EARNINGS LATER. WE WILL WRAP UP A BANK EARNINGS FOR YOU IN JUST A MOMENT. THIS IS HAPPENING IN THE TREASURY MARKET. YIELDS UP. THAT'S A MOVE OF 50 BASIS POINTS FROM THE END OF MARCH. 10 YEAR YIELDS UP 50 BASIS POINTS IN A VERY SHORT AMOUNT OF TIME. THE YIELD CURVE HAS ACTUALLY BEEN STEEPENING. THE CURVE IS STEEPER, YIELDS ARE HIGHER AND THE BANKS ARE NOT RESPONDING. TOM: I GET ALL THE CURVE DYNAMICS BUT WHAT'S OVERWHELMING THAT IS THE INFLATION DYNAMIC. FINALLY WE ARE REALLY ON THE POSITIVE REAL YIELD WATCH IN AMERICA LIKE WE WERE IN GERMANY. JONATHAN: THIS IS EXACTLY WHAT MORGAN STANLEY ARE TALKING ABOUT. THAT'S ABOUT THE EQUITY MARKET IS PICKING UP ON RESEARCH. BECOMING REALLY DEFENSIVE IN A QUICK AMOUNT OF TIME. LISA: IT'S JUSTIFIED IF YOU LOOK AT THE DATA OVERNIGHT. JONATHAN: WHAT DID YOU THINK OF THE CHINESE DATA OVERNIGHT? LISA: DIPLOMATICALLY, NO. WE ARE NOT GETTING A CLEAN READ. ESPECIALLY THE FACT THAT UNEMPLOYMENT CAME IN SO BLEAK. IT IS HAVING A CLEAR IMPACT ON THE ECONOMY. ESPECIALLY BECAUSE THOSE LOT NOUNS ARE NOT ENDING RIGHT NOW. JONATHAN: TO REMEMBER WAITING FOR THE SUPPLY CHAIN TO EVOLVE TO WORK ITSELF OUT, FOR THE LABOR MARKET POST-SEPTEMBER. IT JUST DID NOT HAPPEN. LISA: NOW WE ARE TALKING ABOUT SUPPLY CHAIN DISRUPTIONS THAT MAY NEVER GO BACK. TOM: MICHELLE MEYER HAS CHANGED THE SHINGLE TOOK MASTERCARD ECONOMICS. SHE IS U.S. CHIEF ECONOMIST AT MASTERCARD IN ECONOMICS -- MASTERCARD ECONOMICS. YOU ARE ALL WALLET SHARE AND WALLET SHIFT. HOW MUCH IS MY WALLET SHIFTING AFTER THIS WEEKEND? > > IT'S WONDERFUL TO BE BACK ON WITH YOU. I'M HONORED TO BE ABLE TO REPRESENT THE MASTERCARD ECONOMICS INSTITUTE. IT REALLY IS ABOUT THE CONSUMER. THE CONSUMER IS THE PULSE ON THE ECONOMY. WE ARE PAYING ATTENTION TO WHETHER OR NOT YOU ARE SEEING THOSE WALLET SHARE SHIFTS. REALLY GET AN UNDERSTANDING OF THE TRENDS IN CONSUMER SPENDING ON A GRANULAR LEVEL IN TERMS OF THE DIFFERENT CATEGORIES. SPENDING ON EXPERIENCE, GOODS. AND CLEARLY SPENDING ON NECESSITIES. I THINK THAT'S ONE OF THE KEY STORIES RIGHT NOW IS WITH THE INFLATION STOCK OF NECESSITIES. FOOD, GASOLINE. -- SHOCK OF NECESSITIES. FOOD, GASOLINE. TOM: FOR YOU PARENTS OUT THERE, TUITION AND SUMMER BREAK. WHAT DO YOU LEARN FROM CHARGE CARD'S. WHEN YOU LOOK AT WHAT WE ACTUALLY DO WITH OUR VARIOUS AND SUNDRY CHARGE CARD, WHAT DOES IT TELL YOU ABOUT OUR SHARE IN SHIFT? > > CLEARLY THE DATA IS ROBUST AND THE MAIN DATA WE ARE LOOKING AT IS GOING TO BE ABLE TO CAPTURE ALL TYPES OF PAYMENTS TO SOME EXTENT SO IT'S A REALLY HOLISTIC VIEW OF THE CONSUMER AND RIGHT NOW YOU ARE SEEING THE CONSUMER GENERALLY STILL PLUGGING ALONG SPENDING VERY STRONGLY. WE ARE LOOKING AT NOMINAL SPENDING TRENDS AND THAT IS REFLECTING THIS INCREDIBLE INFLATION ENVIRONMENT. ONCE YOU ADJUST FOR THAT REAL SPENDING IS CLEARLY MORE MODEST GIVEN THE PRICE PRESSURE. BUT THE CONSUMER IS STILL OUT SPENDING ON A VARIETY OF ITEMS. EVEN DURABLE GOODS. FURNITURE SPENDING IS STILL LOOKING VERY STRONG. YOU MENTIONED MY LOVE FOR THE HOUSING MARKET WHICH STILL EXISTS. WE ARE LOOKING AT DETAILED SPENDS ON ITEMS WHICH ARE STILL LOOKING QUITE STRONG. LISA: TOM WAS TALKING ABOUT GENTILES OF INCOME -- KIN TILES -- QUINTILES OF INCOME. > > WHENEVER YOU ARE LOOKING AT A HIGH FREQUENCY DATA THAT IS NOT THE OFFICIAL STATS COMING OUT, YOU HAVE TO CONSIDER WHAT YOU ARE CAPTURING FOR THE BROAD ECONOMY. MY SENSE IS THAT IT IS A REALLY GOOD REPRESENTATION. I THINK THE GENERAL RISK IS THAT THE VERY TEARS ARE UNDERREPRESENTED IN THE MIDDLE OF THE POPULATION IS WHAT WE ARE GRASPING THERE. THAT'S GOING TO BE A REALLY HARD TO CAPTURE ANY HIGH-FREQUENCY DATA POINTS. LISA: FOR A LONG TIME PEOPLE DIDN'T HAVE TO DIG INTO THEIR SAVINGS. I WANT TO GET A SENSE OF WHETHER THE ONGOING SPENDING MOMENTUM WE ARE SEEING IS FROM PEOPLE COMING INTO THEIR SAVINGS OR WHETHER THEY ARE STARTING TO BORROW MORE AND COULD THAT GET CRIMPED BY HIGHER YIELDS. > > THE PAST YEAR WE HAD VERY LOW DEBT. MEANWHILE WE HAD AN EXTRAORDINARY AMOUNT OF SAVINGS GIVEN THE ENVIRONMENT WE WERE IN . THE FED'S HIKING INTEREST RATES. WE'RE NOT SEEING THE SAME DEGREE OF FISCAL STIMULUS. SAVINGS START TO GO DOWN AND LEVERAGE STARTS TO COME UP. I THINK THE SILVER LINE IS THAT AT LEAST WE HAVE THOSE BUFFERS AND THAT'S REALLY IMPORTANT TO KEEP IN MIND WHEN THINKING ABOUT HEADWINDS. TOM: BRIAN EMAILS IN FROM OVER BY HELLS KITCHEN. HE IS ASKING YOU WHAT IS THE CHANGE TO THE DURATION, THE X-AXIS OF YOUR INFLATION GAS. BRIAN WANTS TO KNOW THAT BEFORE 8:30 THIS MORNING, HELP. > > THE INFLATION STORY I THINK IS VERY CLEAR WHICH IS THAT WE ARE IN THE ENVIRONMENT WHERE INFLATION HAS RISEN MEANINGFULLY. TOM: CUT TO THE CHASE. DO YOU BUY THE STORY INFLATION IS GOING TO EASE UP? HE'S ON THE PHONE HERE. > > I THINK INFLATION IS GOING TO COME OFF THESE EXTRAORDINARY HIGHS. THERE IS A BROADENING OF PRICE PRESSURE AND CONSUMERS HAVE THE ABILITY TO SPEND MORE AS WELL SO YOU HAVE BOTH A WAGE PUSH AND A COST PUSH. WAS THAT A CLEAR ANSWER? JONATHAN: THANK YOU. GOOD TO CATCH UP AS ALWAYS. BANK OF AMERICA NUMBERS COMING IN JUST A MOMENT. REDFIN PUT OUT A REPORT AT THE BACK END OF LAST WEEK. SOME INTERESTING NUMBERS. I THOUGHT THIS STOOD OUT FOR ME. THE MONTHLY PAYMENTS ARE UP 35% YEAR-OVER-YEAR. A TYPICAL HOME BUYERS MONTHLY PAYMENT OF 35% YEAR-OVER-YEAR TO AN ALL-TIME HIGH. $2288. LISA: YOU ARE TALKING ABOUT HIGH MORTGAGE RATES AND PRINCIPAL PAYMENTS, THE ACTUAL COST OF HOMES CONTINUING TO GO UP. IT DOESN'T NECESSARILY MEAN THAT WE ARE GOING TO GET A BLOWOUT OF THE HOUSING MARKET AKIN TO WHAT WE SAW IN 2008. IT MEANS YOU'RE GOING TO GET LESS ACTIVITY IN SOME OF THESE BANKS. LES LENDING. THAT'S WHAT PEOPLE ARE LOOKING FOR IN TERMS OF BANK OF AMERICA'S EARNINGS. JONATHAN: HOUSE PRICES UP 17%. TOM: YOU GOT A DELAYED STATISTIC. IT'S EVEN AS HIGH AS 20%. HAVE WE SEEN ANY EVIDENCE THAT 5% MORTGAGES SLOW THINGS DOWN? JONATHAN: JUST A LITTLE BIT. LISTINGS HAVE COME DOWN AS WELL. YOU WONDER WHETHER PEOPLE THINK PERHAPS THEY WON'T GET AS MUCH FOR THEIR PROPERTY RIGHT NOW. TOM: THIS IS CRITICAL. YOU'VE REALLY GOT TO STUDY THE MARKET. LISA: I'M SURE SOMEBODY IS DOING THAT ON THE WEEKEND. HOMEBUILDER SENTIMENT IS GOING TO BE SO INTERESTING. THIS IS THE DIFFERENCE BETWEEN NOW AND 2007 BECAUSE FRANKLY THAT SUPPLY IS NOT COMING ON AS QUICKLY AS PEOPLE EXPECTED. JONATHAN: IT HAS BEEN TOUGH WITH YIELDS HIGHER. BANK OF AMERICA EARNINGS JUST AROUND THE CORNER. WE WILL BREAK THAT DOWN IN JUST A MOMENT. FROM NEW YORK, THIS IS BLOOMBERG. > > BILLIONAIRE -- HAS TRAVELED TO KIEV IN A BID TO RESTART PEACE TALKS BETWEEN RUSSIA AND UKRAINE. HE MET WITH UKRAINIAN NEGOTIATORS. HE HAS LONGTIME TIES TO VLADIMIR PUTIN AND TALKS STALLED AFTER EVIDENCE EMERGED OF RUSSIAN ATROCITIES AGAINST CIVILIANS. JEROME POWELL MAY REINFORCE BETS THAT THE FED WILL RAISE INTEREST RATES BY HALF A POINT NEXT MONTH. THE FED WILL -- FED CHAIR WILL TAKE PART IN PANEL. THE QUIET PERIOD STARTS MIDNIGHT FRIDAY. SHANGHAI HAS REPORTED FIRST DEATH IN THE MIDST OF CHINA'S BIGGEST COVID FLAREUP. TENS OF MILLIONS OF PEOPLE HAVE BEEN BARRED FROM LEAVING THEIR HOMES AS PART OF LOCKDOWN. THERE IS CRITICISM THAT CHINA IS INFLICTING TOO HEAVY A SOCIAL AND ECONOMIC TOLL. CHINA EASTERN ALLIES HAS RESUMED FLIGHTS. IT'S A SIGN THE AIRLINE IS WORKING TOWARDS PUTTING ITS ENTIRE FLEET OF BOEING 700 BACK IN THE AIR. CHINA GROUNDED MORE THAN 200 OF THE JETS. THERE IS A NEW TWIST IN THE BATTLE BETWEEN BILLIONAIRE CARL ICAHN AND SOUTHWEST GAS. SOUTHWEST WILL NOW EXPLORE A SALE OF THE COMPANY AND OTHER OPTIONS. LAST MONTH THEY CALLED HIS OFFER INADEQUATE. GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICKTAKE POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. THIS IS BLOOMBERG. ♪ JONATHAN: RAMPING UP EARNINGS ON WALL STREET WITH BANK OF AMERICA AND WE HAVE THE ESTIMATE 74. GET SOME WEAKNESS. 1.4 $6 BILLION AGAINST AN ESTIMATE OF 1.67. THERE HAS BEEN SOME FIRST-QUARTER QUARTER TRAINING REVENUE. ESTIMATE OF 4.25 BILLION. JUST ON THE BOND MARKET, SOME COMMENTARY FROM THE CFO. WE WEATHERED THE WORST BOND MARKET IN 40 YEARS. EVERY BANK HAS COME OUT AND SAID SOMETHING ABOUT RUSSIA. NO DIRECT MATERIAL EXPOSURE TO RUSSIA. WE ACHIEVED SOLID FIRST-QUARTER RESULTS CONTINUE MOMENTUM. IT'S BEEN A TOUGH MONTH FOR THIS STOCK. TOM: IT'S A REAL SIMPLE. THEY HAD THE CLEAREST EXPOSITION OF WHAT YOU DO IN 90 DAYS OF ANY MAJOR BANK. BURIED IN IT IS A STUNNING STATISTIC 53% OF WHAT THEY CALL SALES IS DIGITAL. THAT IS ABSOLUTELY EXTRAORDINARY. JONATHAN: THIS STEP GETS YOUR ATTENTION AND MINE, TOO. THIS HAS BEEN A TOUGH MARKET. LISA: WHICH TELLS YOU SOMETHING ABOUT THE TALENT AND I THINK THIS SPEAKS WELL FOR TRYING TO NAVIGATE THIS THAT SAW SUCH HUGE LOSSES. ONE OTHER ASPECT I THINK IS FASCINATING. AVERAGE LOANS AND LEASES WERE UP 8%. AVERAGE DEPOSITS UP 13% TO $2 TRILLION. TOM: A REASON THEY HAD ZERO TRADING DAYS IS MR. MOYNIHAN IS IN THE TRIPLE. WHAT IS THE DISTINCTION BETWEEN BANK OF AMERICA AND J.P. MORGAN? WHAT'S THE DIFFERENCE BETWEEN THE BANKS? LISA: BANK OF AMERICA IS VERY HEAVILY CONSUMER FOCUS. CONSUMER LOANS ONLY GREW BY 4% SO THAT EXPOSURE TO THE CONSUMER IS A VERY BIG DEAL FOR BANK OF AMERICA WHEN J.P. MORGAN HAS A MUCH BIGGER INVESTMENT BANK AND THAT ASSET AND WEALTH MANAGER. YOU SEE THE MARKET REALLY REWARDING THE WILL IS MISSES AS OPPOSED TO CONSUMER BUSINESSES, REWARDING THE BANKS THAT ARE ABLE TO CAPITALIZE ON THE WEALTHY CLIENT BASE WHICH ARE NOT REALLY SEEING IS THE REST OF THE AMERICAN CONSUMER BORROWING WHEN RATES ARE RISING. AND IT'S SLUGGISH WHEN YOU LOOK AT IT COMPARED TO THE COMMERCIAL SEGMENT HERE. JONATHAN: YOU'RE IN A POSITION TO WRAP UP EARNINGS SEASON FOR US. FOLD IN WHAT'S HAPPENED WITH BANK OF AMERICA. > > THIS IS ONE POINT THAT TOM IS LOOKING FOR ALL EARNINGS SEASON. BANK OF AMERICA 52% IS WAY BELOW WHAT ANALYSTS EXPECTED. TOM: WHAT DOES THAT MEAN? > > THE COSTS ARE NOT RISING TOO QUICKLY RELATIVE TO THE REVENUE THAT ANCHOR OF BRINGING IN. THE NET INCOME WAS WELL ABOVE EXPECTATIONS. THAT MEANS THEY ARE KEEPING COSTS IN LINE. BANK OF AMERICA'S HEADCOUNT HAS BEEN DECREASING RELATIVE TO A SLIGHT INCREASE AND WE ARE SEEING MORE DIGITAL UPTAKE AT BANK OF AMERICA. LISA: I'VE BEEN STRUCK WITH THE BEATS THAT WE HAVE SEEN FOR MOST OF THE BIG INVESTMENT BANKS. IF YOU LOOK AT BANK STOCKS MORE BROADLY, THEY CONTINUE TO GO DOWN. WHAT ARE INVESTORS LOOKING AT THAT PERHAPS ARE NOT REFLECTED IN THE BEATS THAT WE ARE SEEING FROM ALL OF THE MAJORS? > > YOU ARE LOOKING AT J.P. MORGAN AND MORGAN STANLEY. GOLDMAN SACHS JUSTIN LINE WHICH SHOWS YOU THAT A VERY HEAVILY WEIGHTED TRADING BUSINESS IS GOING TO BE FAIRLY VALUED HERE. PEOPLE ARE WORRIED ABOUT THE VOLATILITY IN MARKETS. THE POINT YOU GUYS WERE MAKING EARLIER ABOUT TRADING LOSSES, THE VALUE AT RISK FOR A LOT OF THESE BANKS HAS BEEN GOING UP AS THEY TRY TO MAKE MARKETS IN THIS VERY TUMULTUOUS TIME. SO THEN STEPPING IN HERE IS STILL SOMETHING THAT MAKES INVESTORS A BIT NERVOUS WHEN THEY ARE NOT CLEAR ABOUT WHAT THE LOSSES WILL LOOK LIKE AHEAD AND WE HAVE SEEN SOME MAJOR LOSSES. IF YOU LOOK PAST THE SECOND QUARTER, THE SECOND HALF OF THE YEAR IS STILL TOO UNCERTAIN TO SEE HOW CONSUMERS WILL REACT TO THOSE RATE RISES. JONATHAN: INVESTMENT BANKING ADVISORY. I'M SURPRISED TO READ THIS. B OF A NOTES A RECORD FIRST-QUARTER FOR ADVISORY FEES. > > IT JUMPED VERY SIGNIFICANTLY OVER AT MORGAN STANLEY AS WELL. THE REASON INVESTORS ARE REALLY SHAKING THIS OFFICE BECAUSE THERE'S A LOT OF TELEGRAPHING THAT INVESTORS, BIG CORPORATIONS ARE JUST PROLONGING THEIR DEALS. WE HAVE STILL SEEING VERY LARGE DEALS ANNOUNCED THIS YEAR. DEALS IN THE DEBT MARKET STARTED JUMPING BACK WHERE BANK OF AMERICA IS USUALLY TOP TWO ALONGSIDE JP MORGAN. JONATHAN: YOU MENTIONED THE KEYWORD INVESTORS. THE WAY INVESTORS SEE THINGS ARE NOT EXACTLY THE WAY CEO SEES THINGS. THE BANKS AREN'T REWARDING THEM AT ALL. INVESTORS RATHER. > > THESE BANKS ARE VERY SENSITIVE. THERE'S A LOT OF FEDERAL RESERVE RESEARCH THAT SHOWS THAT WHEN THE YIELD CURVE IS THIS FLAT, IT REALLY CAN INCENTIVIZE RISK-TAKING AS WELL AS A ROAD AND THAT INTEREST MARGINS THAT INVESTORS WERE LOOKING FOR TO BRING THOSE BANKS BACK UP. DONOVAN COAT WALL STREET CORRESPONDENT. I WILL GO THROUGH THE NUMBERS. 80 SINCE GETTING STUCK AN ESTIMATE OF 74. STOCK OVER THE LAST MONTH HAS BEEN REALLY DIFFICULT DID STRUGGLING ONE POSITIVE DAY THIS MONTH FOR BANK OF AMERICA. THIS MORNING IN THE PREMARKET IS DOING OK. TOM: I CAN'T CONVEY ENOUGH CARDS THAT ONE HAND WAS HANDED VERSUS DIAMOND WERE SO DIFFERENT. JAMIE DIMON WANTS TO DISAGREE WITH ME, I'M ALL EARS. PRICE-TO-BOOK IS SQUISHY RIGHT NOW WITH THE EARNINGS JUST COMING OUT BUT JP MORGAN IS JUST FLAT OUT THE PREMIER BANK IN THE WORLD IS A LOFTY 1.4 -- LOOK HOW CLOSE MOYNIHAN IS. 1.24. HE'S NEVER GOTTEN THE CREDIT FOR THE PIECES HE WAS HANDED THAT HE'S PUT TOGETHER OVER A GENERATION. IT'S AMAZING HOW HE'S CATCHING UP TO JP MORGAN'S PRICE. JONATHAN: FANTASTIC LEADERSHIP FROM BOTH OF THOSE MEN THAT YOU MENTIONED. THIS MARKET IS TELLING YOU SOMETHING AND THAT'S WHAT PIQUED MY INTEREST. THE BANK EARNINGS ARE NOT RESONATING WITH INVESTORS. BANK STOCKS HAVE BEEN A STRUGGLE. LISA: THEY ARE LOOKING TOWARDS SLOWER GROWTH AND WHAT THE READTHROUGH WILL BE. JONATHAN: > > MARKETS ARE MOVING QUITE A LOT. VOLATILITY IS HIGH, UNCERTAINTY IS HIGH. > > THE ISSUE FOR THE U.S. IS WHETHER OR NOT THE CONSUMER BUCKLES UNDER THE WEIGHT OF THE HIGH INFLATION. > > YOU HIT SHOCK AFTERSHOCK. > > THE TREND IN INFLATION IS GOING TO PEAK SOON. > > THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. JONATHAN: LIVE FROM NEW YORK CITY, GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE. I'M JONATHAN FERRO. TOM: WHAT I'M LOOKING AT TODAY IS A SET OF INFLATION STATISTICS THAT SAY INFLATION IS HERE. HOW ABOUT GOLD. WE JUST HAD A NEW HIGH ON CORN. THERE'S ALL THESE INDICATORS OF PRICES UP. JONATHAN: THE CONVERSATION ON WALL STREET IS MOVING. MAYBE THE MECHANICAL PEAK IS. ULTIMATELY THIS STORY WILL PERSIST THROUGH THE YEAR HIT. THEY THINK THAT'S GOING TO START HITTING GROWTH AND EARNINGS AS WELL. TOM: TO ME THE THING IN THE ECONOMIC NOTES THAT THERE IS THIS GAME WRAPPED INTO THE FED PARLOR GAME OF WHAT IS THE TIMING OF A PRESUMED THE CLIENT IN INFLATION. I GUESS WE HAVE EVIDENCE THAT'S PRESUMED. JONATHAN: WE CAN PLAY THE FED PARLOR GAME. BANKS AREN'T RALLYING ON THAT STORY. THEY AREN'T RALLYING ON THAT WHATSOEVER. THE NUMBERS AT B OF A THIS MORNING, IT'S A MISS ON INVESTMENT BANKING REVENUE. LOOK AT THE PERFORMANCE OF STOCK IN THE PREMARKET. THAT'S A STOCK THAT'S BEEN HAMMERED OVER THE LAST MONTH. LISA: IT'S NOT ENOUGH TO SHAKE THE FEELING THAT SIN WALL STREET. YOU HAVE AN INCREASE IN YIELDS THAT'S GOING TO REDUCE SOME OF THE BORROWING AND YOU HAVE A CONSUMER THAT'S GOING TO BE CRIMPED BY HIGHER HOUSING COSTS AND GAS PRICES. THIS DOESN'T LEAVE TO PREDICTABLE RETURNS. THAT IS THE STORY REGARDLESS OF WHAT THE EARNINGS HAVE SAID. JONATHAN: THE HOMEBUILDERS ARE CRUSHED BY MORE THAN 30% YEAR TO DATE. THE FORWARD LOOK FOR GROWTH. FOR THE FEDERAL RESERVE. THEY'VE GOT TO HIKE INTO SOME WEAKNESS INTO THE MINDS OF SOME PEOPLE. LISA: HERE'S WHAT I'M STRUGGLING WITH AS THE PERENNIAL BEAR OF THIS SHOW. IF YOU TALK TO MICHELLE MEYER ABOUT WHAT YOU ARE SEEING IN THE CONSUMER, YOU'RE STILL SEEING DYNAMISM AND SAVINGS. 2 TRILLION DOLLARS OF DEPOSITS AT BANK OF AMERICA. SO HOW QUICKLY DO WE GET TO A DOWNTURN? WHAT'S THE OUTLOOK FOR MARKETS OVER THE MEDIUM TERM? JONATHAN: I THOUGHT YOU WERE OFFERING A MORE BALANCED VIEW AND I SHOULD HAVE WAITED FOR THE CONCLUSION. THE NASDAQ DOWN ABOUT 75. YIELDS ARE HIGHER I A BASIS POINT. TOM: SWISS FRANC IS NOT GIVING ME MUCH THIS MORNING. I THINK POLITICALLY WHILE YOU WERE AWAY, THE JAPANESE GOVERNMENT WAS QUITE ACTIVE IN THEIR JAWBONING. IN 127 PRINT, WIKI AND IS SORT OF LIKE A 106 OR 105 WEEK EURO. IT'S WORTH WATCHING. JONATHAN: DOLLAR-YEN HIGHER FOR 12 STRAIGHT DAYS. LISA: THAT'S WHAT THEY ARE GRAPPLING WITH OVER IN JAPAN. WE GET THAT EARNINGS CALL FOR BANK OF AMERICA. JOHN HAS BEEN TALKING ABOUT THE SUBSECTOR OF THE S & P. THIS TANK INDEX IS BACK WHERE IT WAS A YEAR AGO. JUST GIVE YOU A SENSE OF HOW MUCH OF A ROUND-TRIP WE HAVE HAD IN SENTIMENT. WHEN YOU LOOK AT ONE INDICATOR OF GLOBAL MOMENTUM. THE HOUSING MARKET CONTINUES TO BE A MYSTERY. THE HOUSING MARKET INDEX TRACKS THE SENTIMENT OF HOMEBUILDERS. IT HAS TAKEN A HIT. HOW ARE THEY DEALING WITH THE FACT THAT THEY ARE FACING HIGHER COSTS FROM INPUTS LIKE WORKERS. WHAT DOES A 5% HANDLE OF THOSE MORTGAGE RATES REALLY MEAN FOR THE ACTIVITY IN THIS MARKET. ST. LOUIS FED PRESIDENT IS SPEAKING AT THE COUNCIL ON FOREIGN RELATIONS AHEAD OF THAT EVENT ON THURSDAY WERE WE GET JAY POWELL SPEAKING IN TANDEM WITH CHRISTINE LAGARDE. REAL YIELDS AND TO MEET THIS REALLY IS ONE OF THE UNDERPINNING STORIES OF ASSETS. REAL YIELDS ARE ALMOST ZERO FOR THE FIRST TIME GOING BACK TO THE HEART OF THE PANDEMIC IN 2020. ARE WE JUST WAITING FOR THAT INEVITABILITY. JONATHAN: TK, ARE YOU DOING YOUR TAXES? TOM: THAT WAS MIKE FROM A HELICOPTER PAD. HE SAYS STRONG AND WEAK CURRENCY. THIS IS A REALLY SERIOUS THING. CURRENCY PAIRS ARE ONE WAY OR THE OTHER WAY. THE CANADIAN BONUS ROUND IS BOTH WAYS. THE ANSWER IS THE ONLY WAY TO SAY THIS IN ENGLISH IS TO SAY JAPANESE YEN IS WEAK, NOT UP. WE ARE STICKLERS FOR THAT UNLESS WE ARE FROM LONDON, WHERE WE QUOTE IT DIFFERENTLY. JONATHAN: WE HAVE MISSED EACH OTHER. THE DERATING HAS BEEN MOST SEVERE WHILE DEFENSIVE AREAS HAVE ACTUALLY SEEN MULTIPLES EXPAND. THIS HAS BEEN A THEME FOR THE TEAM AT MORGAN STANLEY DID BIG DEFENSIVE SHIFT BENEATH THE SURFACE OF THE EQUITY MARKET. DAN, YOU HAVE BEEN RIGHT. THIS DEFENSIVE SHIFT. WHETHER THERE IS A TACTICAL OPPORTUNITY TO LEAN THE OTHER WAY. WHAT WOULD YOU SAY TO THOSE PEOPLE? > > NOT YET. AND GOOD MORNING. WE ARE NOT THERE YET. THE INTEREST RATE EXPECTATIONS HAVE COME A LONG WAY AS WE ALL KNOW FROM LAST FALL. THE MARKETS ARE NOW 9% OR 10% OFF THEIR JANUARY ALL-TIME HIGHS. IF WE ARE EXPECTING THESE RATE AND THE MARKETS DIGESTED THAT, WHAT CAN WE EXPECT FOR BALANCE SHEET REDUCTION BUT ALSO WHAT CAN WE THINK ABOUT IN TERMS OF THE HIT TO THE CONSUMER AND OUR ECONOMIST RECENTLY MARCHED DOWN HER GDP FORECAST FOR THE YEAR BY A PERCENTAGE POINT DUE TO HIGHER OIL AND GAS PRICES. WE ARE ENTERING A SEASONALLY WEEK PERIOD. WE ARE GOING TO HAVE SOME TAX BILLS COME DUE. LISA: WHEN YOU TAKE A LOOK AT 10 YEAR YIELDS, AT WHAT LEVEL DO THEY START TO MATTER? IT'S BECOME ALMOST OBSOLETE AT A TIME WHEN YIELDS HAVE GONE FAR FASTER AND HIGHER. WHAT ARE YOU LOOKING FOR HERE? > > YOU'VE GOT TO CONSIDER THE LEVEL IN THE SPEED AND THE PACE OF THE INCREASES. TO DATE WE HAVE SEEN EQUITY MARKETS DISCOUNT INCREDIBLY FAST PACE. WE'RE ARE JUST TALKING ABOUT HOW FAST THE PENDULUM SWUNG IN TERMS OF GREAT EXPECTATIONS. WE HAVE SEEN MOST OF THAT DISCOUNTED IN THE EQUITY MARKET. MIKE WILSON HAS BEEN ARGUING THAT THE HIGHER RATES ULTIMATELY GET TRANSLATED INTO LOWER MULTIPLES AND WE HAVE SEEN MULTIPLES COME DOWN QUITE A BIT FOR THE INDEX. WE THINK THERE COULD BE FURTHER DERATING TO GO. IF YOU GET THAT MUCH ABOVE 3%, THAT'S GOING TO TAKE ANOTHER MULTIPLE POINTS OUT OF THE INDEX. TOM: I LOOK AT SECTORS AND SIMPLY PUT, DO I WANT TO BE PASSIVE OR ACTIVE HERE? > > DEFINITELY A TIME TO BE ACTIVE. TOM: WHY? > > THE LAST SEVERAL YEARS WAS MARKED BY A TREMENDOUS WAVE FOR PASSIVE. FRANKLY THAT REPEATED THE PREVIOUS CYCLE. THAT WAS THE CASE UNTIL 2020. WE HAVE SEEN A TRUE REGIME SHIFT AT ALL LEVELS OF THE ECONOMY AND THE MARKET. OBVIOUSLY EVERYTHING GOING ON TRAGICALLY IN UKRAINE AS WELL. GIVEN HIGHER VOLATILITY AND THE CYCLE THAT'S APPROACHING LATE INNINGS, WE ARE SEEING GREATER DISPERSION BETWEEN STOCKS AND SECTORS AND YOU WANT TO BE VERY COGNITIVE OF WHICH SECTORS ARE OVERWEIGHT. THEY DON'T HAPPEN TO BE TREMENDOUSLY OVERWEIGHTED. JONATHAN: IS STRANGE TO SEE THIS WITH YIELDS OF 50 BASIS POINTS OVER THE LAST COUPLE OF WEEKS TO SEE THE DEFENSIVE DO SO WELL? WHAT DOES IT TELL YOU ABOUT WHERE WE ARE IN THE CYCLE? > > YOU ARE SEEING MIXED MESSAGES FROM THE BOND MARKET AND STOCK MARKET. WE HAVE OBSERVED WHEN YOU SEE THAT DIVERGENCE IN MESSAGE FROM BIG FIXED INCOME AND THE BOND MARKET AND STOCK MARKET -- THAT'S DEFENSIVE LEADERSHIP IS TELLING YOU THAT STOCKS ARE MORE WORRIED ABOUT GROWTH. THAT'S THE TRICKY TRADE-OFF THAT THE FED IS GOING TO CONSIDER OVER THE NEXT SEVERAL MONTHS. THEY HAVE TALKED AGGRESSIVELY ABOUT DOING EVERYTHING IT TAKES TO TAME THE INFLATION TIGER AND PUT IT BACK IN ITS CAGE. JONATHAN: MATT HORNBECK WILL BE JOINING US AT ABOUT 8:00 A.M. EASTERN TIME. FROM NEW YORK CITY, THIS IS BLOOMBERG. > > KEEPING UP-TO-DATE WITH NEWS FROM AROUND THE WORLD. DEFENDERS IN UKRAINE HAVE BEEN ENCIRCLED BY RUSSIAN FORCES BUT HAVE NOT SURRENDERED THE PORT CITY. A POSSIBLE NEIGHBOR LENDING OPERATION AND ADDITIONAL AIRSTRIKES. GOLDMAN SACHS SEES A 35% CHANCE OF THE U.S. RECESSION IN THE NEXT FEW YEARS. HISTORY SUGGESTS THE FED WILL HAVE A TOUGH TIME CALLING INFLATION WITHOUT CAUSING A CONTRACTION. POST-PANDEMIC MOBILIZATION -- NORMALIZATION WILL HELP THE FED. CHINA IS TAKING STRONGER MEASURES TO STABILIZE SUPPLY CHAINS. IT NOW TAKES ABOUT 115 DAYS ON AVERAGE AFTER THEY ARE PRODUCED IN A FACTORY IN CHINA. ANOTHER ROCKY WEEK FOLLOWING NEWSPAPER REPORTS. A DOWNING STREET GATHERING TOOK ON THE NATURE OF THE LOCKDOWN BREAKING PARTY ONLY AFTER JOHNSON ARRIVED AND STARTED POURING DRINKS. THE PRIME MINISTER'S OFFICE HAS DECLINED TO COMMENT. 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 RICK. THIS IS BLOOMBERG. SO OF COURSE WE WOULD BE HAPPY TO SEE HIM IN OUR COUNTRY AND IT WOULD BE AN IMPORTANT MESSAGE OF SUPPORT TO US. JONATHAN: WILL THE PREP -- PRESIDENT GO TO UKRAINE? GOOD MORNING. THE FOREIGN MINISTER OF UKRAINE. FUTURES THIS MORNING -.1% ON THE S & P. ELSEWHERE TO THE BOND MARKET YIELDS ARE HIGHER. HOW YIELDS ARE DOING NOTHING FOR THE BANKS. TAKE A LOOK AT BE OF A -- B OF A . SOME DECENT NUMBERS FOR THE FIRST QUARTER. OVER THE LAST MONTH INTO TODAY THAT STOCK IS DOWN BY 9%. TOM: WE WILL HAVE APPLE AND THE REST OF THE NEW BANKING PEOPLE OUT HERE. WE DID DISCUSS UKRAINE. GIVEN THE NEW WAR IN UKRAINE. I WANT TO TALK ABOUT THE NEW WAR IN WASHINGTON. WE ARE UPCOMING ON MAY 1. DOES ANYTHING GET DONE IN YOUR WASHINGTON BETWEEN MAY 1 IN THE FIRST TUESDAY OF NOVEMBER? > > IT'S GOING TO BE PRETTY DIFFICULT BECAUSE CONGRESS IS ONLY GOING TO HAVE ONE WEEK BACK IN SESSION. IF YOUR DEADLINES BE THROWN AROUND. IF THEY ARE GOING TO SELL THE SLIMMED-DOWN BUILD BACK BETTER PACKAGE. YOU HAVE ALSO HEARD JULY 4 AS A POTENTIAL CUT OFF. YOU ARE ABOUT TO SEE THE PRIMARY SEASON TAKE OFF. A LOT OF LAWMAKERS WILL START FACING ELECTIONS BACK HOME. SUDDENLY EVERYTHING IS UNDER SPOTLIGHT. IF ANY DECISION MIGHT TRIGGER A NEGATIVE AD AGAINST YOU, YOU WANT TO STAY AWAY FROM THAT AND THAT VOTE. TOM: WHICH IS THE ONE EMILY WILKINS IS FOCUSED ON? > > YOU GOT AN INTERESTING ONE IN WEST VIRGINIA WHERE YOU ARE SEEING A TRUMP BACKED INCUMBENT GO UP AGAINST ANOTHER INCUMBENT WHO SAYS HE BROUGHT BACK THE SPENDING TO WEST VIRGINIA BUT HE'S UP AGAINST THIS TRUMP ENDORSEMENT AND WE WILL SEE HOW THAT ENDORSED CANDIDATE DOES. YOU ARE SEEING ANOTHER REPUBLICAN ON REPUBLICAN PRIMARY IN ILLINOIS AND DOWN IN TEXAS YOU HAVE THAT RUNOFF. THAT HAS BEEN A VERY CLOSE RACE. IT WENT TO A RUNOFF. PROGRESSIVES ARE REALLY HOPING THEY CAN PICK UP A WIN THERE. LISA: I KEEP THINKING ABOUT CAMPAIGNING AND I WONDER WHERE THEY ARE GOING TO BE CAMPAIGNING THE ARE THEY GOING TO BE ON TWITTER, ESPECIALLY BECAUSE THERE IS POTENTIAL FOR DONALD TRUMP BE INVITED BACK ON. HOW MUCH FOCUS IN WASHINGTON IS THERE ON A NEW OWNER AND PRIVATIZATION OF TWITTER? > > WHEN NEWS LIKE THIS BREAKS DURING A CONGRESSIONAL RECESS, YOU DON'T GET THE IMMEDIATE RESPONSE FROM LAWMAKERS IF YOU ARE ABLE TO BUG THEM IN THE HALL. I HAVEN'T HEARD A LOT OF RESPONSE ON TWITTER. REPUBLICANS ARE CONCERNED ABOUT THE AMOUNT OF CENSURE GOING ON ON SOME OF THESE WEBSITES. THEY FEEL IT CONSERVATIVES ARE BEING TARGETED. I THINK IF REPUBLICANS TO GET CONTROL OF THE HOUSE IN NOVEMBER, WE ARE GOING TO SEE A LOT MORE ON THIS TOPIC ABOUT WHAT HAPPENS WITH BIG TECH. LISA: SOCIAL MEDIA HAS DRIVEN SOME OF THE CONVERSATION AROUND WHAT WE ARE SEEING IN UKRAINE. WE WOULDN'T BE SEEING SOME OF THE CATASTROPHIC CONSEQUENCES. THIS HAS NOT TRANSLATED INTO AN APPROVAL RATING FOR PRESIDENT BIDEN THAT IS ANYTHING OTHER THAN GOING LOWER AND LOWER. 33% IN THE LATEST POLL. HOW MUCH IS THIS GOING TO BE REFLECTED BY A MUCH MORE DOMESTIC MESSAGE AKIN TO WHAT YOU SAW IN THE FRENCH ELECTIONS? > > IT'S INTERESTING WHEN YOU LOOK AT BIDENS POLLING NUMBERS. IT DOES SEEM A GOOD CHUNK OF AMERICANS THINK HE'S DOING WELL ON THE UKRAINE ISSUES. THEY ARE DEALING WITH HIGH GAS PRICES, INCREASED INFLATION NUMBERS. EVEN THOUGH THE BIDEN ADMINISTRATION CAN POINT TO UNEMPLOYMENT, AT THE SAME POINT YOU ARE REALLY FEELING A LOT OF AMERICANS ARE FEELING THAT HIT IN THEIR WALLET. THERE IS DEFINITELY STILL WIDESPREAD SUPPORT FROM UKRAINE. JONATHAN: YOU TOUCHED ON SOMETHING THAT I THINK IS GOING TO BE FASCINATING, HOW WALL STREET TREATS THE STORY. MAYBE MAINSTREET IS STILL FOCUSED ON THE CUMULATIVE EFFECT OF HIGH INFLATION. LISA: HOW DO YOU DEAL WITH THE NUANCES OF HOW QUICKLY IT CAN GO DOWN? LET'S SAY WE GO FROM A .3% INFLATION RATE TO GOING DOWN TO 6%. IS THAT REALLY GOING TO MAKE PEOPLE FEEL THAT MUCH BETTER AND HOW DO YOU CALCULATE THAT IN TERMS OF CONSUMER SPENDING? JONATHAN: I WANT A PROPER READ ON CHINA. A NUMBER OF SEMICONDUCTOR COMPANIES -- SUPPLY CHAIN IMPACTS ARE RISING WITH COVID LOCKDOWNS BEING EXTENDED, CURTAILING PRODUCTION. DISRUPT SUPPLY CHAINS AND LOST PRODUCTION. THAT COULD BE THE STORY FOR THE REST OF THIS QUARTER. HOW DO WE DEAL WITH THE CHINA SITUATION WHICH I DON'T THINK IS GETTING ENOUGH PLAY. TOM: I WOULD GO TO THE TECH EARNINGS. WE ARE 10 DAYS FROM A LOT OF CLARITY ABOUT THAT MANUFACTURING CHALLENGE. JONATHAN: I KNOW YOU ARE LASER FOCUSED ON THAT SITUATION. LISA: WHEN YOU TAKE A LOOK AT THE DECELERATION, HOW EXACTLY ARE THEY GOING TO GET MOMENTUM. THEY ARE TRYING TO EASE FINANCIAL CONDITIONS. IT DOESN'T SEEM LIKE ANYTHING IS GOING TO RESTART THIS IN A MASSIVE WAY. JONATHAN: YIELDS ARE HIGHER BY ALMOST A BASIS POINT. YOUR DOLLARS UNCHANGED. JONATHAN: GOOD MORNING TO YOU ALL ON TV AND RADIO. A REAL DEFENSIVE BIAS IN THIS EQUITY MARKET. OVER THE LAST MONTH THROUGH APRIL ALONE, THE STAPLES ARE POSITIVE. HEALTH CARE POSITIVE UTILITIES POSITIVE RATE BANKS ARE NEGATIVE. APPLE AND BIG TECH. THE PERFORMANCE OF THE BIG BANKS IN THE PREMARKET LOOK LIKE THIS. B OF A IS JUST ABOUT POSITIVE. ONLY ONE POSITIVE DAY SO FAR THIS MONTH. JP MORGAN DOWN EVERY SINGLE DAY LAST WEEK. SLIGHTLY NEGATIVE THIS MORNING. PART OF THE STORY WE HAVE BEEN TALKING ABOUT IS NOT JUST A DEFENSIVE BIAS IN THE EQUITY MARKET. IT'S WHAT'S BEEN HAPPENING WITH THE YIELD CURVE. THESE BANKS HAVE NOT DELIVERED YOU POSITIVE RETURNS EVEN WITH THIS HAPPENING IN THE BOND MARKET. A 50 BASIS POINT MOVE ON THE 10 YEAR TREASURY. THE CURVE KICKING OFF APRIL. TOM: THE REAL YIELD COMING UP NEAR THE ZERO LEVEL WOULD BE A REAL HALLMARK. GREAT CHART FROM SCHWAB THIS MORNING. THE BULLS ARE LEAVING THE BUILDING. I WOULD REALLY GO TO DOMINIC CONSTANCE NOTE. HE IS HEATED ABOUT A REVERSAL IN YIELDS AND HE ALSO SAYS THAT SIMPLY PUT, THIS RECESSION ISN'T GOING TO HAPPEN. IT'S JUST GOING TO BE MORE STAGFLATION. JONATHAN: DID YOU JUST CALL THIS A BROWN MARKET? LISA: I'M FLATTERED THAT TOM THINKS OF ME AT ALL BUT I THINK I WOULDN'T SAY THAT I'M ALWAYS GLOOMY. I HOPE THAT THINGS TURN AROUND. JONATHAN: LET'S CHECK IN WITH ROMAIN. ROMAINE: IT WAS ONE OF THE WORST PERFORMING BANK STOCKS HEADING INTO THIS EARNINGS SEASON. THE SHARES ARE HIGHER BY ABOUT A PERSON ON THE DAY. AS WILL IS A SIGNIFICANT DROP IN CREDIT LOSSES. ABOUT A 10TH OF WHAT THE STREET HAD EXPECTED. THAT'S A LITTLE BIT OF OPTIMISM. THERE ARE STILL SOME BROADER ISSUES THEY WILL HAVE TO ADDRESS ON THE CONFERENCE CALL. THE BIG ISSUE THAT CAME UP HERE ON SOME OF THE CONFERENCE CALLS. ALL EYES REMAIN ON TWITTER. THOSE SHARES HIRE AS ELON MUSK TAKES TO TWITTER TO AIR OUT SOME OF HIS STRATEGY OR PLANS WITH REGARD TO WHAT HE WANTS TO DO WITH THE COMPANY. 47 BUCKS A SHARE WILL BELOW -- WELL BELOW THE OFFER PRICE. ON THURSDAY WHEN ELON MUSK HAD MADE THAT IT PUBLIC, AT NO POINT ON THURSDAY DID A TRADE ABOVE THAT LEVEL. A LOT OF QUESTIONS ABOUT VALUATION AND WHETHER HE'S BEING HONEST BROKER. THOSE ADRS DOWN ABOUT 18% HERE IN THE PREMARKET. TOM: WE SHIFT GEARS INTO THE EQUITY MARKET. LIQUIDITY IS FOR 25 DAYS OUT IS LONG-TERM. I LOVE WHAT YOU SAY ABOUT THE ACCLAIMED BLOOMBERG FUNCTION WHICH IS THE ACCUMULATED GUESSTIMATE OF WHERE WE ARE GOING VERSUS JUST WATCHING WHAT YIELD SAYS. WHICH MATTERS MORE RIGHT NOW? > > I THINK THE WORK FUNCTION IS MORE REFLECTIVE OF WHERE EXPECTATIONS WILL BE IN THE NEXT 12 MONTHS OR SO AND THAT'S PRETTY INTERESTING AT THIS POINT. IT'S NOT NECESSARILY REFLECTING WHERE YIELDS ARE IN THE MARKETPLACE. IT IS TO SOME DEGREE IN THE CREDIT MARKETS BECAUSE SPREADS HAVE INCREASED AND THEIR LARGE PRESENCE IN THE SHORT END OF THE YIELD CURVE. BUT IF YOU'RE LOOKING AT TREASURIES, YOU ARE NOT GETTING PAID FOR WHAT THE WORK FUNCTION IS TELLING YOU. TOM: YOU LIVE IN THE SHORT TERM SPACE. DO YOU BELIEVE IN INERTIAL FORCE WHERE THEY GO TOO FAR AND THEN COME BACK? > > WE DO BELIEVE IN THAT WE DON'T THINK THAT'S THE CURRENT SITUATION. WE HAVE SHORTENED OUR DURATION ON OUR BOND PORTFOLIO. THEY HAVE BEEN LESS THAN NEUTRAL FOR QUITE SOME TIME BUT WE HAVE TAKEN THEM LOWER AND THAT DURATION CALL AND THAT'S REFLECTIVE OF WHAT WE DON'T SEE AS OVERSHOT OF A BOND MARKET AT THIS POINT. LISA: THERE IS A SENSE IN A LOT OF BIG BUN STRATEGISTS THAT AROUND THE 2% LEVEL FOR THE FED FUNDS IT'S PROBABLY GOING TO BE ENOUGH TO CAUSE ENOUGH DAMAGE IN MARKETS FOR THEM TO PARE BACK THOSE RATES. WHY DO YOU PUSH BACK ON THAT IF YOU ARE LOOKING AT AN ACCURATE REFLECTION. > > 2% IS STILL ACCOMMODATIVE OR NEUTRAL. 2% TO 3% IS NEEDED BEFORE YOU BECOME RESTRICTIVE AND TIGHTENING IN A MONETARY SENSE. SO MANY PROBLEMS, SO MANY ISSUES CONTRIBUTING TO IT AT THIS POINT. LISA: WHAT'S YOUR SENSE -- CAN YOU SEE US GETTING TO A 4% LEVEL BY THE END OF NEXT YEAR? DO YOU THINK IT'S GOING TO BE MATERIALLY HIGHER? > > RUSSIA AND UKRAINE CERTAINLY IMPACTING THAT FROM A COMMODITIES PERSPECTIVE AND EVEN BROADER TERMS. SO I THINK IT'S A GLOBAL ECONOMIC SITUATION THAT WILL DICTATE WHETHER THAT INFLATIONARY ENVIRONMENT IS GOING TO START TO GO BACK TO SOMETHING MORE NORMALIZED. TOM: THE HERITAGE OF FEDERATED IS THE BUILDOUT OF MONEY MARKET FUNDS AS WELL. IT IS 1.00 SAFE IN MY MONEY MARKET FUND? > > ABSOLUTELY. SAFETY IS THE BASIC AND THE TENANTS OF THE MONEY MARKET INDUSTRY. AT THIS POINT DO NOT CAUSE ANY KIND OF A QUESTION IN. YOU DO KNOW THAT INSTITUTIONAL PRIME -- AFTER THE REFORMS WERE IMPLEMENTED AND WHEN THAT OCCURRED PAID THAT FOURTH DIGIT DOES MOVE. THE ROUNDING IF YOU ARE LOOKING AT IT TRUE DOLLAR IS NOT A ALL IN QUESTION. JONATHAN: THE CFO SAYING THE FOLLOWING. COMMERCIAL CONSUMER LOANS ABOVE PRE-PANDEMIC LEVELS. CONSUMERS AREN'T RESILIENT DESPITE A CHALLENGING ENVIRONMENT. LISA: WHY AREN'T PEOPLE MORE OPTIMISTIC ABOUT THE BANKS. THE PROSPECTS OF ONGOING EARNINGS MOMENTUM. THE REASON GOLDMAN SACHS PUT THE RECESSION RISK AT 35%. JONATHAN: THEY SAW RECORD QUARTER. JUST ON THIS INFLATION CONVERSATION, WHO ARE THE DATES FOR THE DIARY THAT I THINK MATTER. MAY 4 WE GET THE NEXT FED DECISION. YOU WILL TWO READINGS ON CPI. MAY 11 AND ANOTHER ONE ON JUNE 10. ARE WE GOING TO START TO SEE MORE OF THE TREND EMERGED ON THAT DECELERATION? TOM: I KNOW YOU MISSED IT AT THE CAPRI AT PUNTA CANA, YOU'VE GOT TO BELIEVE THOSE VECTORS CONTINUE. THEY ARE UNDERWAY AND THEY CONTINUE. BUT THERE'S A RAGING DEBATE'S OF COMING DOWN TO WHAT AND THAT'S THE NEXT DEBATE. WE'RE NOT GOING TO GET THE GLOOM AND DOOM OF 10%. BUT WHERE ARE WE GOING? IS IT SIX, IS IT FOUR? I DON'T HEAR ANYBODY TALKING ABOUT GETTING BACK TO 2% INFLATION. JONATHAN: NEXT YEAR THEY HAVE IT AT 2.6. THE YEAR AFTER 2.3. LISA: IMF OFFICIALS SAY IT LOOKS REALLY UNLIKELY. I'LL JUST SAY ABOUT THAT READING , PERHAPS IT CAME IN SOFTER THAN PEOPLE EXPECTED. THAT WAS SO IDIOSYNCRATIC IT IT WAS USED CAR PRICES THAT FELL. HOW MUCH CAN YOU REALLY LOOK AT AN AGGREGATE NUMBER WHEN YOU LOOK AT MOST COMPONENTS OF YOUR EXISTENCE RISING AT THE FASTEST PACE IN DECADES. JONATHAN: I WASHED SOME OF THE COVERAGE. JUST TO SEE WHAT THE DATA WAS. BUT IT WAS BRILLIANT. WELL DONE. SPECIAL MOMENT. LISA: THAT'S BAD. DOROTHY COTE AND LISA ABRAMOWICZ. BANK OF AMERICA POSITIVE BY A LITTLE MORE THAN 1% IN THE PREMARKET. THIS IS BLOOMBERG. ♪ > > KEEPING UP-TO-DATE WITH NEWS FROM AROUND THE WORLD. BILLIONAIRE ROMAN ABRAMOVICH HAS MET WITH UKRAINIAN NEGOTIATORS. HE HAS LONGTIME TIES TO VLADIMIR PUTIN. TALKS STALLED AFTER EVIDENCE EMERGED OF RUSSIAN ATROCITIES AGAINST CIVILIANS. JEROME POWELL MAY REINFORCE BETS THAT THE FED WILL RAISE RATES. THE FRED'S PREMEETING QUIET PERIOD STARTS MIDNIGHT ON FRIDAY. CHINA'S QUARTERLY PRODUCTION OF SEMICONDUCTORS TRUNK FOR THE FIRST TIME SINCE EARLY 2019. COVID LOCKDOWNS IN SHANGHAI AND OTHER REGIONS DISRUPTED MANUFACTURING. THERE'S ALSO BEEN A DROP IN DEMAND FOR CONSUMER ELECTRONICS. COMPANIES OWNED BY FAR RIGHT RADIO HOST ALEX JONES FILED FOR BANKRUPTCY AFTER BEING HIT BY A FLURRY OF LAWSUITS. ONE OF THEM IS HIS WEBSITE INFO WARS. JONES CALLED THE SANDY HOOK SHOOTING A HOAX. SEVERAL ATTEMPTS TO FREE THE SHIP USING TUGBOATS FAILED. GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICKTAKE POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. THIS IS BLOOMBERG. > > I THINK WE CAN ACHIEVE A SOFT LANDING. I THINK THIS IS A UNIQUE SET OF CIRCUMSTANCES. IT'S NOT GOING TO BE EASY. I'M NOT GOING TO PRETEND EVERYTHING GOES EXACTLY ACCORDING TO PLAN. BUT I THINK WE ARE IN A GOOD PLACE WITH MONETARY POLICY. JONATHAN: THAT WAS JOHN WILLIAMS IN NEW YORK, FED PRESIDENT. FUTURES ARE NEGATIVE FOLLOWING LAST WEEK'S DECLINE. WE ARE DOWN ANOTHER .25%. YIELDS OFF THE HIGHS OF THE SESSION ABOUT A BASIS POINT AT THE MOMENT. IN THE LAST COUPLE OF WEEKS YOU WOULD HAVE SEEN THE COLUMN FROM BIT -- BILL DUDLEY ON AN INEVITABLE HARD LANDING. HE DID NOT GIVE US THE WIN. THIS MORNING HE OFFERS US THE WIN. -- WHEN. TOM: HE IS AN ACADEMIC AND ALSO STEELED IN MARKET ECONOMICS. WHAT IS SO IMPORTANT IN SPEAKING TO THE FORMER PRESIDENT OF THE NEW YORK FED IS HE ADDRESSES WITH COURAGE NOT THE EASY GUESS OF THE 70'S BUT THINGS TO LEARN FROM THE 1960'S. WILLIAM DUDLEY, SENIOR ADVISOR TO BLOOMBERG ECONOMICS AND RIGHTS FOR US AT BURKE OPINION. ROBERT J SAMUELSON OF THE WASHINGTON POST AND HIS MAGISTERIAL THE GREAT INFLATION AND ITS AFTERMATH. WHY IS NOW LIKE WALTER HELLER AND VIETNAM? > > WE HAVE LOTS OF FISCAL STIMULUS LIKE YOU DID THEN. WE HAD VIETNAM WAR SPENDING. EVERYONE IS FOCUSED ON INFLATION AND HAS IT PIQUED. WHAT'S REALLY GOING ON IS THE LABOR MARKET HAS NOT BEEN THIS TYPE IN MANY DECADES. IF THE LIVE MARKET IS TOO TIGHT, WAGES WILL CONTINUE TO STRENGTHEN AND IF THEY DO, WE'RE NOT GOING TO GO BACK TO 2% INFLATION. TOM: THAT INTERNET GOLDMAN SACHS SAID THAT ON THE SHOW A COUPLE DAYS AGO. THE LABOR MARKET IS SHOCKINGLY TIGHT. DOES THAT LEAD TO THE WAGE SPIRAL MICHELLE MEYER JUST SPOKE ABOUT? > > WE HAVE A LOT OF OTHER FACTORS PUSHING INFLATION DOWN. THE KEY THING TO FOCUS ON IS IF THE LABOR MARKET IS THIS TIGHT, WHAT'S GOING TO HAPPEN TO WAGE INFLATION. FIVE AND WAGE INFLATION IS NOT CONSISTENT WITH 2% INFLATION OBJECTIVE. YOU NEED TO PUSH THE UNEMPLOYMENT RATE UP AND THAT'S THE PROBLEM. EVERY TIME THE FEDERAL RESERVE HAD TO PUSH THE UNEMPLOYMENT RATE UP, THEY HAVE ENDED UP IN FULL-SCALE RECESSION. IT'S NOT GOING TO OCCUR IN THE NEAR TERM BECAUSE THE FED HAS NOT YET MADE MONETARY POLICY TIGHT. IT MIGHT NOT EVEN HAPPEN IN 2020 THREE BECAUSE WE DON'T KNOW HOW AGGRESSIVE THEY ARE GOING TO BE IN TERMS OF TIGHTENING MONETARY POLICY. INFLATION WILL GET MORE ENTRENCHED AND THEY WILL HAVE TO DO IT LATER SO A HARD LANDING IS INEVITABLE WHETHER IT HAPPENS IN 23 OR 24. JONATHAN: HOW DO YOU THINK THEY WILL RESPOND TO A MECHANICAL PECAN INFLATION THIS YEAR? > > THEY ARE GOING TO TAKE SOME SIGNALS FROM THE FACT THAT INFLATION IS COMING DOWN. IF INFLATION IS 8% PER YEAR AND THEN 2% BECAUSE ALL THE TRANSITORY FACTORS ARE WASHING OUT, THE AVERAGE IS STILL FIVE. THE UNEMPLOYMENT RATE IS ALREADY AT 3.6%. IT DOESN'T REALLY MATTER WHAT HAPPENS TO TRANSITORY OR HEADLINE INFLATION. YOU HAVE TO LOOK AT WHAT'S ACTUALLY GOING ON WITH THE TIGHTNESS OF THE MARKET. LISA: YOU ARE SUGGESTING THAT PERHAPS THE FED SHOULD CAUSE THE HARD LANDING SOONER AND CLOSER TO NOW AND WAIT BECAUSE THE CONSEQUENCES WILL BE THAT MUCH WORSE. IS THAT ACCURATE? > > I DON'T KNOW IF THEY SHOULD TRY TO CAUSE THE RECESSION. THEY SHOULD ALWAYS GO FOR A SOFT LANDING. BUT THEY NEED TO MAKE MONETARY POLICY TIGHTER SOONER. THE DISCUSSION ABOUT WHETHER THE FED HAS DONE A GOOD JOB OR BAD JOB IS THE TIMING. WE ARE STILL AT A QUARTER PERCENT TO HAVE PERCENT -- THE FED IS LATE. THEY KNOW THEY ARE LATE. THAT'S WHY WE'RE TALKING ABOUT 50 BASIS POINT RATE HIKE. THE FED WANTS TO GET TO NEUTRAL VERY QUICKLY BUT THEY HAVEN'T SIGNALED MUCH APPETITE FOR GOING BEYOND THAT. THE MONETARY POLICY ANTICIPATED AT THE END OF 2023 IS A VERY MODESTLY TIGHT MONETARY POLICY SETTING. LISA: I'M LOOKING AT THE PAGE THAT FORECASTS WERE INTEREST RATES WILL BE. IT'S CURRENTLY ABOVE 2.3%. STRATEGISTS SAY THIS IS PRICED IN. WHAT SHOULD PEOPLE BE PRICING IN IF YOUR WORLD WHERE THE ONE IN WHICH THE FED MOVED AT AN APPROPRIATE RATE? > > THE FED NEEDS TO MAKE MONETARY POLICY TYPE AND THAT REQUIRES SHORT-TERM RATES OF AT LEAST 4%. IF INFLATION IS RUNNING 3%, THEN NEUTRAL IS NOT 2.5%. IT REALLY DEPENDS ON WHERE INFLATION IS. PEOPLE ACT AS IF THE NEUTRAL FEDERAL FUNDS RATE DOESN'T MATTER FOR WHAT INFLATION IS. JONATHAN: DO YOU ANTICIPATE THE LONGER THEY WAIT, THE HIGHER THE PEKIN THE FEDS RATE WILL HAVE TO BE? > > YES. THE LONGER WE SIT WITH A TIGHT LABOR MARKET, THE MORE UPWARD PRESSURE WILL BE ON WAGES. THAT WILL FEED INTO PRICES SO THE UNDERLYING INFLATION RATE WILL DRIFT HIGHER. EACH CYCLE INFLATION RATCHETED HIGHER BECAUSE THE FEDERAL RESERVE DID NOT ADDRESS THE ISSUE FORCEFULLY SOON ENOUGH. SO IF THEY DELAY THEY WILL ALSO HAVE TO DO MORE. JONATHAN: FANTASTIC. BILL DUDLEY. FORMER NEW YORK FED PRESIDENT AND PROVOCATIVE WRITER. THE FED'S CHOICE IS CLEAR. HIGHER UNEMPLOYMENT SHOULD BE RELATIVELY MODEST. IF IT WAITS AND ALLOWS INFLATION EXPECTATIONS TO GET OUT OF HAND, THE BILL WILL BE MUCH HIGHER. TOM: THIS IS A REALLY IMPORTANT ESSAY. WHAT CAPTURES THIS BEAUTIFUL IS ROBERT SAMUELSON'S PHRASE FROM THE 1960'S PRECARIOUS PROSPERITY. THE BOTTOM LINE IS EVERYBODY FELT PROSPEROUS BUT WERE YOU WITHOUT INFLATION? WE ARE THERE. JONATHAN: THE SLOWER THE FED, THE HARDER THE LANDING WILL BE. LISA: I'M THINKING WHAT THIS MEANS FOR FED OFFICIALS WHO COME OUT INTERVIEW AFTER INTERVIEW SAYING A SOFT LANDING AS POSSIBLE. IS THAT GOING TO BE DETRIMENTAL LONGER-TERM WHEN INFLATION IS NOTHING IF NOT EASY RIGHT NOW? JONATHAN: WHAT DID THEY SAY ABOUT OFFICIALS, POLICYMAKERS AND POLITICIANS? YOU HAVE TO GET GOOD AT LYING. LISA: THIS IS A NEW CALCULUS WE HAVE NOT SEEN FOR DECADES AND IT CREATES A VERY DIFFICULT POSITION THE POLICYMAKER. JONATHAN: MATT HORNBECK OF MORGAN STANLEY. WITH YIELDS UP 50 BASIS POINTS ON A TENURE. THIS MONTH ALONE. ON RADIO AND TV. > > THERE IS A MOMENTUM TO SUSTAINED GROWTH AT THIS POINT BUT YOU HIT SHOCK AFTERSHOCK. > > WE HAVE TO GET THROUGH THESE NEXT COUPLE MONTHS, AND WE WILL BE HURT BY IT. > > THE FED WILL TIGHTEN. > > TODAY LOOKS -- > > FROM A MONETARY POLICY POINT OF VIEW IT MAKE SENSE FOR US TO MOVE EXPEDITIOUSLY. > > THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO,, AND LISA -- JONATHAN FERRO, TOM KEENE AND LISA ABRAMOWICZ. TOM: KAILEY LEINZ WILL NOT JOIN US. SHE IS STILL ON SABBATICAL. JONATHAN: 2 THINGS CATCH MY ATTENTION. UTILITIES ARE OUTPERFORMING, THE BANKS ARE UNDERPERFORMING. BACK IN THE YIELD CURVE THROUGH APRIL A BIG MOVE FOR THE 10 YEAR. TOM: YOU LITERALLY SAY TO YOURSELF " HOW FAR ARE WE FROM A 3 YEAR 10 YIELD?" YOU LOOK AT THE MOMENTUM THAT IS HERE, AND A LOT OF PEOPLE SAYING " THE MOMENTUM PULLS BACK, IT ANDS -- ENDS." JONATHAN: MUCH MORE INTERESTED IN THE BACK HALF OF THIS YEAR, MANY PEOPLE ARE. WHAT I'M INTERESTED IN IS HOW THE FED WILL RESPOND. I LOOK FOR GUIDANCE FROM FED OFFICIALS. RESPOND TO A MECHANICAL PECAN INFLATIONARY YEAR-OVER-YEAR -- EAK -- MECHANICAL PEAK IN INFLATION YEAR-OVER-YEAR. TOM: END-OF-THE-YEAR, JULY 27, SEPTEMBER 21 FED, THE ECB HAS THE SAME CALENDAR. IT IS A TOTAL MYSTERY. LISA: THEY HAVE A MORE DIFFICULT SCENARIO. WHAT A WAY TO START THE SHOW. YOU HAVE" LISA ABRAMOWICZ, I FORGET YOUR NAME-- IT IS FAIR THE ECB IS IN A WORSE POSITION. DOES THE FED TO HAVE TO GET MORE PESSIMISTIC AND HAVE A LESS SANGUINE VIEW OF THE ECONOMY MOVING FORWARD TO CURTAIL INFLATION? TOM: I THINK IT IS INCREDIBLE HOW THESE 70'S GLOOM AFTER THE 1960'S REALITY. JONATHAN: IT'S MORE LIKELY IN 2023 OR 2024. DO YOU WANT TO TALK ABOUT THE EURO? OTHER WAYS TO DEFER TO GUY JOHNSON. HE IS FANTASTIC. TOM: HE SLIPPED INTO THE GERMAN ACCENT. IT WAS INCREDIBLE. JONATHAN: AN AMAZING STORY. [LAUGHTER] JONATHAN: I LOVE WINDING YOU UP ABOUT THAT. [LAUGHTER] JONATHAN: IF PEOPLE W HAVE JUST TURNED AND THEY HAVE NO IDEA WHY THAT IS FUNNY. ALMOST UNCHANGED, UP A COUPLE OF BASIS POINTS. TOM: WE WILL STOP THE SHOW NOW. WHAT WE LIKE IS -- MICHELLE MEYER WAS WITH US EARLIER ON CORE KNOWLEDGE. I WILL ASK THE FIRST QUESTION TO MATTHEW HORN BOK, GLOBAL HEAD OF MICROSTRATEGY, LONG AGO AND FAR AWAY OFF THE MORGAN STANLEY DESK IN TOKYO TRADING GOVERNMENT BONDS. OFF YOUR REMIT, WHAT -- AT WHAT POINT DOES YEN BECOME PROBLEMATIC FOR THE GLOBAL FINANCIAL SYSTEM? IS IT 127 WEAKER YEN OR IS IT 130? > > MY JAPANESE GOVERNMENT BOND TRADING DAYS WERE QUITE SOME TIME AGO BUT IT WILL TAKE MORE THAN JUST A NUMBER ON A SCREEN TO CHANGE THE COUNTRY OF JAPAN. PEOPLE THERE, CONSUMERS HAVE BEEN THINKING ABOUT UNCHANGED PRICES OR PRICES THAT ARE LITTLE CHANGED FOR DECADES NOW. IT WILL TAKE MORE THAN A 130 HANDLE ON DOLLAR-YEN TO GET CUSTOMERS THINKING ABOUT SUSTAINABLY HIGHER INFLATION FOR THE GOODS AND SERVICES THEY CONSUME. IT IS MORE THAN JUST ONE NUMBER ON THE SCREEN. JONATHAN: MY CAREER ADVICE TO LAZY COLLEGE GRADUATES WHO WANT TO JUMP ON WALL STREET, TRADE JAPANESE BONDS. SOME DAYS YOU DO NOT EVEN GET A TRADE ON A JAPANESE 10 YEAR. LISA: WHAT KIND OF CAREER ADVICES THAT? -- ADVICE IS THAT? JONATHAN: MONTH TODAY, UP 50 BASIS POINTS ON THE 10 YEAR, OBSESSED WITH CURVE INVERSION. FOR YOU AND THE TEAM, WHAT IS THE READ ON WHAT HAS BEEN GOING ON? MATTHEW: THE REALITY IS THERE ARE ONLY 2 BUYERS OF THE U.S. TREASURY MARKET. ONE IS CORPORATE PENSION PLANS, FUNDS THAT ARE PUTTING ASSETS INTO A BOOK IN ORDER TO DECREASE LONGER-TERM LIABILITIES. THE OTHER BUYER IS THE BUYER WHO BELIEVES WE WILL BE IN RECESSION IN 12 MONTHS. THERE ARE NOT ENOUGH PEOPLE WHO REALLY TRULY BELIEVE THAT. THE PENSION FUNDS ARE NOT PARTICULARLY ACTIVE IN THE FIRST HALF OF THE MONTH. FOR PEOPLE LOOKING FOR THE CURVE TO FLATTEN, AS WE ARE, THE PROBABILITY THAT THE YIELD CURVE FLATTENS IN THE FIRST HALF OF THE MONTH IS NOT HIGH. THAT IS PART OF THE ISSUE. THERE ARE NO BUYERS. THOSE THAT ARE THERE ARE NOT THERE IN THE FIRST HALF OF THE MONTH. LISA: WE HEARD FROM BILL DUDLEY ABOUT HOW THE FED IS NOT GOING FAR ENOUGH FAST ENOUGH. EVEN THOUGH YOU HEAR A LOT OF PEOPLE SAY " IT IS WISHFUL THINKING THE FED WILL EVER GO BEYOND 2%." WHY WOULD YOU PUSH BACK WITH A MORE APPROPRIATE RATE BEING CLOSER TO 4% GIVEN WHERE WE ARE SEEING CPI COME IN? MATTHEW: A LOT OF EVIDENCE THAT DAY 3% SAID FUNDS RATE IS THAT BAD -- THAT A 3% FED FUNDS RATE IS NOT BAD, YOU DID NOT SEE THAT MUCH SLOWING IN THE U.S. ECONOMY ON YOUR OWN. YOU NEEDED THE GLOBAL ECONOMY BLOWING BACK THEN IN ORDER TO PUT DOWNWARD PRESSURE ON ECONOMIC ACTIVITY IN THE UNITED STATES. THE RATE WAS NOT DOING IT. I THINK PEOPLE WHO ARE LOOKING FOR A 3% FUNDS RATE AS MORGAN STANLEY ECONOMISTS ARE OR SOMEONE LIKE BILL DUDLEY WHO IS LOOKING FOR A HIGHER RATE, THEY HAVE HISTORY ON THEIR SIDE, IN MY OPINION. LISA: DO YOU AGREE THAT THE SOONER THE FED MOVES THE BETTER IT WILL BE IN THE LONGER-TERM AND THE LESS PAIN THERE WILL BE IN TERMS OF HOW HIGH THE FED WILL HAVE TO RAISE RATES? MATTHEW: I DO AGREE. I THINK THE FED NEEDS TO READJUST POLICY TO THE CURRENT CIRCUMSTANCES, WHICH ARE DIFFERENT THAN WHAT THEY THOUGHT THEY WERE GOING TO BE ABOUT A YEAR BACK. I THINK THE FED NEEDS TO GET THE POLICY RATE UP FASTER, PERHAPS EVEN FASTER THAN THE MARKETS ARE CURRENTLY PRICING IN, THE MARKETS ALREADY HAVE QUITE A BIT PRICED IN I. THINK IT WOULD BEHOOVE THE FED TOM: I WANT YOU TO GO DOWN TO GO -- THIS MORNING I WANT YOU TO EXPLAIN TO GLOBAL WALL STREET WHY JAPAN STILL MATTERS. CHANNEL ROBBIE FELDMAN ON THIS. MATTHEW: YOU ARE TAKING ME BACK TO MY GLORY DAYS IN JAPAN. JAPAN MATTERS ULTIMATELY BECAUSE IT IS THE ANCHOR OF -- THE GLOBAL ANCHOR AROUND INTEREST RATES. THAT IS THE WAY I HAVE BEEN LOOKING AT IT EVER SINCE I STARTED MY CAREER'TOKYU -- MY CAREER AT MORGAN STANLEY'S TOKYO OFFICE. IF THE BANK OF JAPAN WERE TO CHANGE THEIR YIELD CURVE CONTROL POLICY, IF WE DID SEE MATERIALLY HIGHER INTEREST RATES IN JAPAN, THAT WOULD HAVE A BIG IMPACT ON INTEREST RATES IN EUROPE, THE UNITED STATES, SO IT IS A VERY IMPORTANT BOND MARKET. THERE IS A TREMENDOUS AMOUNT OF MONEY, INVESTMENT DOLLARS THAT MAKE THEIR WAY AROUND THE WORLD EVERY MONTH, AND IF THOSE DOLLARS DECIDE THEY CAN STAY IN JAPAN, THAT WILL HAVE A BIG IMPACT ON GLOBAL BOND MARKETS AND CURRENCY MARKETS. JONATHAN: BRILLIANT. MATT HORNBACH OF GLO.MORGAN STANLEY -- MATT HORNBACH OF MORGAN STANLEY. TOM: IN THAT CONVERSATION, THAT WAS JUST A JEWEL OF A CONVERSATION WITH HORNBACH. YOU NAILED IT. IT IS AN ARTIFICIAL MARKET. I HAVE ALWAYS BEEN MORE STRIDENT ON THIS. THEY ARE YIELD CURVE CONTROL POLICY IS NOT IN ANY OF THE TEXTBOOKS I HAVE. TO ME IT IS A STRUCTURED FICTION. I UNDERSTAND A LOT OF PEOPLE IN AUTHORITY WOULD SAY " YOU ARE WRONG ABOUT THAT." JONATHAN: YOU AND I SAID THE SAME THING OVER THE LAST COUPLE OF YEARS. WE TOUCHED ON IT., JOKED ABOUT IT -- WE TOUCHED ON IT, JOKED ABOUT IT, BUT THERE ARE SOME DAYS WHERE YOU DO NOT GET ANY TRADING. LISA: OVERNIGHT " RECENT YEN MOVES HAS BEEN RAPID. IS SIGNIFICANTLY WEEK YEN -- WEAK YEN," BUT HE REINFORCED THE NEED FOR THEIR POLICY. JONATHAN: WE WERE TALKING ABOUT GETTING OUT OF THE LAST DECADE, NOW WE ARE ALMOST 10 YEARS INTO THIS EXPERIMENT TOO. LISA: WE ARE SEEING A SHIFT. JONATHAN: PERHAPS. FUTURES DOWN A THIRD OF 1%. NASDAQ DOWN HALF OF 1%. THIS IS BLOOMBERG. ♪ > > KEEPING UP-TO-DATE WITH NEWS FROM AROUND THE WORLD, I'M RITIKA GUPTA. ENCIRCLED BY RUSSIAN FORCES, UKRAINIANS HAVE NOT SURRENDERED. UKRAINIAN OFFICIALS HAVE WARNED OF ADDITIONAL AIRSTRIKES. MANY REMAINING TROOPS IN MAR IUPOL ARE SHELTERING WITHIN A GIANT STEELWORKS. HISTORY SUGGESTS THE FEDERAL RESERVE WILL HAVE A HARD TIME CALMING INFLATION WITHOUT CAUSING A CONTRACTION. IT IS NOT INEVITABLE BECAUSE THOSE PANDEMIC NORMALIZATIONS IN GOODS PRICES WILL HELP THE FED. U.S. AND TREASURY OFFICIALS SAY THAT CONGRESS IS TO BLAME FOR INTERNAL REVENUES -- LAWMAKERS HAVE SERIOUSLY UNDERFUNDED THE AGENCY AND THAT LED TO THE DEPARTURE OF PERSONNEL. THERE IS A NEW TWIST -- THERE IS AN INDICATION OF INTEREST WELL IN -- SOUTHWEST WILL NOW EXPLORE A SALE OF THE COMPANY AND OTHER OPTIONS. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, I'M READY GO GROUP THAT. > > INFLATION IS PROBABLY PEEKING IN THE U.S. BUT NOT ELSEWHERE. YOU GET TO THE POINT WHERE THERE WILL BE DEBT PROBLEMS, BUT IT IS NOT BECAUSE THEY DID NOT GET IT RIGHT, IT IS BECAUSE THE WORLD IS HARD. JONATHAN: THE WORLD IS HARD TO. THAT IS THE VIEW OF ADAM POSEN. FUTURES ARE DOWN. YIELD IS HIGHER NOW BY TWO BASIS POINTS. CREW POSITIVE ABOUT A QUARTER OF 1%. AT THE MOMENT, JUST GETTING SOME PICTURES AND COMING FROM RUSSIA, VLADIMIR PUTIN SPEAKING IN A TELEVISED LINK WITH OFFICIALS. HIS VIEW, THE RUBLE HAS RECOVERED. TOM: VERY DIFFERENT BODY LANGUAGE THEN WHEN MR. PUT WAS AT THE COSMODROME -- MR. PUTIN WAS AT THE COSMODROME. THE FLAG BEHIND HIM, HE HAS PAPERS IN HIS HANDS, AND HE IS DEMONSTRABLY AND GAUGED -ENGAGED- -- DEMONSTRABLY ENGAGED. A PHOTO PUBLISHED THIS MORNING APPEARS TO SHOW THE SHIP THAT WENT DOWN DAYS AGO, LISTING UNDER PART UNDER HEAVY DAMAGE. IT IS OUT THERE. ALINA POLLOCK OF WHICH JOINS US NOW. SINCE THE LAST TIME WE HAVE SEEN YOU, THINGS HAVE CHANGED. THE FLAGSHIP OF THE RUSSIAN NAVY HAS SUNK. HOW DOES THAT CHANGE MR. PUTIN'S BODY LANGUAGE? > > THE THINKING OF -- SINKING OF THE MOSKVA WAS A BIG HIT TO RUSSIA. WE SEE THE TALKING HEADS IN THE RUSSIAN STATE CONTROLLED BEING REALLY CRITICAL OF THE SINKING OF THIS FLAGSHIP VESSEL. THIS IS THE LARGEST SHIP OPERATING IN THE BLACK SEA. WHAT WE HAVE SEEN SINCE THEN IS PUTIN DOUBLE DOWN ON THEIR ATTACKS ON UKRAINE. TODAY WE SAW A RUSSIA HIT WITH MISSILES THE WESTERN CITY OF LVIV. TOM: DOES UKRAINE DOUBLE DOWN? IS UKRAINE MORE ABLE TO -- DO YOU PERCEIVE THAT THEY ARE ENGAGED AND READY ON THIS MONDAY? > > THEY HAVE BEEN GETTING READY. PRESIDENT ZELENSKYY HAS BEEN MAKING HIS ROUNDS WITH ALL THE WESTERN CAPITALS. THE SITUATION WE ARE SEEING NOW IS THE WINDOW IS NARROW. WE CANNOT TAKE IT FOR GRANTED THAT WE HAVE BEEN ABLE, THE UNITED STATES AND ALLIES, HAVE BEEN ABLE TO GET THOSE WEAPONS INTO UKRAINE. NOW RUSSIA IS TARGETING THOSE MILITARY ROUTES SWITCH WILL BECOME INCREASINGLY DIFFICULT. UKRAINIANS ARE TIRED. THEY KNOW WHAT IS COMING -- . THEY ARE GETTING -- THEY KNOW WHAT IS COMING, A HUGE NEW OFFENSIVE. THEY ARE GETTING READY. LISA: CAN YOU GIVE US A SENSE OF WHAT HAPPENS WHEN NORA IF MARIU POL FALLS? IT PROVIDES A LAND BRIDGE TO CRIMEA AND TO THE DONBASS REGION. HOW MUCH WILL THAT BE A GAME CHANGER WHEN THAT OCCURS? ALINA: IT IS A TONE MANY PEOPLE HAD NOT HEARD OF ON -- TOWN MANY PEOPLE HAD NOT HEARD OF UNTIL IT BECAME A TACTICAL TOWN. IT WILL BE A GAME CHANGER FROM A MILITARY PERSPECTIVE. THE MAIN REASON FOR THAT IS BECAUSE RIGHT NOW THE ONLY THING THAT STANDS BETWEEN RUSSIA'S EASTERN FRONT AND SOUTHERN FRONT, WHERE THEY HAVE ACCESS FROM THE SEA, CRIMEA, WHERE THEY CAN DO AN AMPHIBIOUS LANDING, THE ONLY THING STANDING BETWEEN THEM COMBINING THEIR FORCES IS MARIUPOL. AS SOON AS THAT HAPPENS, RUSSIA WILL BE ABLE TO THEN PUT MARINES AND TO AND FROM CRIMEA, AND THEY WILL BE ABLE TO COMBINE ON THE SOUTHERN AND EASTERN FRONT END CUT OFF ANY UKRAINIAN TROOPS THAT HAVE BEEN ABLE TO GET IN SO FAR. LISA: WHAT DOES THIS MEAN IN TERMS OF THE LONGER TERM ALSO? VLADIMIR PUTIN SAYS THAT WAS GAME OVER FOR PEACE TALKS. GIVEN THE HUMANITARIAN CRIMES THE WEST IS LOOKING AT HAVE BEEN STARK HOW DOES THIS MOVE THE CONFLICT FORWARD IN TERMS OF NATO'S INVOLVEMENT? ALINA: IT WOULD GIVE RUSSIA A BIG UPPER HAND. IT ALSO MAKES THE OPTIONS FOR NEGOTIATIONS MORE LIMITED. THEY WERE ALREADY LIMITED TO BEGIN WITH, BUT CLEARLY WE ARE UNCOVERING IN AREAS WHERE THE RUSSIAN TROOPS DID LEAVE AROUND KYIV, -- IT WAS ATROCIOUS. IT IS LIKELY NOT EVEN THE TIP OF THE ICEBERG. I THINK IT WILL BE A PROLONGED CONFLICT AND GENERAL MILLEY'S SAID THIS A COUPLE OF WEEKS AGO. WE ARE NOT LOOKING AT WEEKS OR MONTHS -- WE ARE LOOKING AT YEARS. JONATHAN: THANK YOU. ALINA, CENTER OF EUROPEAN POLICY ANALYSIS. WE HEARD FROM BANK OF AMERICA THIS MORNING. THIS REDUCTION OF RUSSIA EXPOSURE FROM 90% AT ITS PEAK YEARS AGO. MANY BANKS, BANK OF AMERICA BEING ONE OF THEM, HAVE BACKED AWAY AND A BIG WAY OVER THE PAST DECADE. TOM: I HAD A CONVERSATION WITH KEN LEWIS IN SINGAPORE ABOUT THIS. BANK OF AMERICA WAS THE LEAST RETICENT TO SAY " WE HAVE TO BE NUMBER TWO AND BELGIUM. LET'S GO!" THEY WERE THE MOST RETICENT TO DO THAT. MAYBE THIS RUSSIA MARKDOWN IS PAYING OFF. I DO NOT BUY IT. NO. I DO NOT BY THE GLOOM. I THINK WE WILL STAY GLOBALIZED. THE CONVERSATION YOU MISSED ON SABBATICAL, THEY NUDGED THAT CONVERSATION WITH THEIR IMMENSE ABILITIES TOWARDS A NEW GLOBALIZATION. JONATHAN: I HAD NO IDEA THEY WERE MARRIED. LISA: THEY ARE ADORABLE. TOM: YOU HAVE A CHOICE -- WATCH THE VIEW OR US! JONATHAN: I LIKE THE VIEW AT TIMES, TOM. TOM: I LIKE WILL BE GOLDBERG. -- I LIKE WHOOPI GOLDBERG. THE HIGHLIGHT OF THE WEEK, WE DO NOT HAVE THE PHOTOGRAPH FOR IT, WEARING THE JERSEY -- IT IS OUT THERE IN THE ZEITGEIST. SHE EMAILED ME THE PHOTO. JONATHAN: WHAT DOES SHE SAY? WILL WE HAVE A GROUP OUTING TO THE U.S. OPEN LATER THIS YEAR? TOM: I DON'T KNOW. JONATHAN: GOOD MORNING TO YOU ALL. KICKING OFF A BRAND-NEW PUDDING WEEK STATESIDE. FUTURES ARE NEGATIVE BY A QUARTER OF 1%. FOLLOWING LAST WEEK'S LOSSES OF 3%-ISH POINTS, BANK OF AMERICA IS UP AROUND 1% BANK OF AMERICA IS UP AROUND 1%. , A LITTLE SOFT -- THEIR STOCK HAS STRUGGLED. TODAY, POSITIVE BY 1%. ONLY ONE DAY THIS MONTH THEY HAVE TRADED POSITIVE. TOM: WE WILL HAVE ALL THAT COVERAGE FOR YOU. THANK YOU FOR YOUR COMMENTS ON THEIR COVERAGE ON THURSDAY FROM THE PRE-MEETINGS OF THE INTERNATIONAL MONETARY FUND. THERE IS SO MUCH GOING ON. AT LEAST JON AND I IN TRANSIT FELT LIKE WE HAD TO GET OUT IN FRONT OF THE SPRING MEETINGS. WHEN YOU HAVE JUERGEN AND OTHERS, SOME GUESTS HAVE TO WAIT. JOHN LIPSKY HAS WAITED FOR US THIS MORNING WITH JOHNS HOPKINS SCHOOL OF ADVANCED INTERNATIONAL SERVICE. DR. LIPSKY, THANK YOU FOR JOINING THIS MORNING. JOHN, WE ARE DROWNING IN ONCE IN A LIFETIME EVENTS, AND YOU WRITE AS ONLY YOU CAN DO WITH YOUR YEARS, OF THE NEW BREADBASKET THREAT. FRAME THE BREADBASKET THREAT FOR ALL OF US. > > VERY SIMPLY, THE WAR IN UKRAINE IS LOOKING LIKE IT IS GOING TO MAKE A SERIOUS AND POTENTIALLY LARGE DISRUPTION IN BREAD MARKETS. RUSSIA AND UKRAINE ARE LARGE BREAD IMPARTS -- EXPORTS. THIS IS A POTENTIALLY SERIOUS THREAT LONG-TERM AS WELL. RIGHT NOW WE HAVE TO DEAL WITH THE DISRUPTIONS IN FOOD MARKETS AND THE RISE IN FOOD PRICES THAT ARE PUTTING STRAINS ON MANY ON MANY. TOM: YOU GAVE A FAMOUS SPEECH I WANT YOU TO GIVE THAT SAME SPEECH THIS MORNING ABOUT WHAT OUR NEW FRACTURED GLOBALISM LOOKS LIKE. DR. LIPSKY: THAT IS AN OPEN QUESTION AND ONE THAT WAS PUT STARKLY BY TREASURY SECRETARY YELLEN LAST WEEK IN WHICH SHE SAID IT IS TIME FOR COUNTRIES TO LINE UP IN THE CONTEXT OF THE CURRENT WAR AND TALKED ABOUT REFRAMING THE WORLD TRADE SYSTEM ON WHAT SHE REFERRED TO AS A PL URI-LATERAL FRIEND BASIS. COUNTRIES POLITICALLY GET TOGETHER. THAT IS VERY MUCH A NEW MESSAGE FROM THE EXPANSION OF THE WTO TO A VIRTUALLY GLOBAL ORGANIZATION. THIS IS REALLY AN UNKNOWN. THE G20 FINANCE MINISTERS AND CENTRAL BANKERS ARE SET TO MEET WEDNESDAY AND THURSDAY. THE INTERNATIONAL MONETARY COMMITTEE MEETS THURSDAY. WE SAW PRESIDENT BIDEN SAYING EARLIER THAT RUSSIA SHOULD BE THROWN OUT. OF THE G20 -- THROWN OUT OF THE G20. LISA: WHAT IS THE CALCULUS FOR IMF OFFICIALS AS TO WHO TO KEEP IN THE CLUB AS THEY TRANSITION INTO A PLURALISTIC, NOT GLOBALIST TICK, WORLD? -- NOT GLOBALISTIC, WORLD? DR. LIPSKY: THEY HAVE LEGAL OBLIGATIONS. THE DECISIONS OF THESE INSTITUTIONS HAVE THE FORCE OF INTERNATIONAL LAW. IN THE SHORT RUN, THE RUSSIAN AUTHORITIES WILL BE PARTICIPATING IN THE MEETINGS THIS WEEK. HOW THAT GOES WILL BE INTERESTING. MORE QUESTIONABLE, THE G20 IS SIMPLY A VOLUNTARY GROUP. IT IS 19 COUNTRIES PLUS THE EUROPEAN UNION. THERE IS NO TREATY UNDERNEATH IT. THERE IS NO FORMAL OBLIGATION. LET'S SEE IF THERE IS A WILLINGNESS TO KEEP THIS INSTITUTIONAL, WHICH WAS THE INSTITUTIONAL RESULT OF THE GLOBAL FINANCIAL CRISIS. LISA: WHAT ARE YOU LOOKING FOR IN TERMS OF HOW THE IMF DIRECTS FUNDING? WHAT IS THE MOST EFFECTIVE USE OF IMF FUNDS TO COMBAT HUNGER AND SOME OF THE INFLATION WE ARE SEEING IN CERTAIN NATIONS? DR. LIPSKY: ALREADY IN RESPONSE TO COVID THE FUND WELL EPSOM SHORT-TERM LENDING -- DEVELOPED SOME SHORT-TERM LENDING SCHEMES. BEFORE THE FUND RIGHT NOW LOOKING TOWARDS THE LONGER-TERM STRAINS, THWE IMF HAS CREATED A RESILIENCY TRUST, PROVIDING SUPPORT FOR THE LOWEST INCOME COUNTRIES. THIS WILL BE FUNDED BY DONATIONS OF SPECIAL DRAWING RIGHTS. THERE WAS A NEW DISTRIBUTION OF $650 BILLION. MUCH OF IT WENT TO THE WEALTHIER COUNTRIES. THEY ARE BEING ASKED TO DONATE TO THIS NEW IMF FACILITY THAT WILL PROVIDE NEW FUNDING FOR LOW INCOME COUNTRIES. LET'S SEE WHAT HAPPENS. TO QUALIFY HOWEVER FOR THIS FUNDING, COUNTRIES HAVE TO HEAD THE A TRADITIONAL FUND STABILIZATION PROGRAM. IT IS NOT JUST A HANDOUT. YOU HAVE TO PUT POLICIES IN PLACE THAT WILL BE SUSTAINABLE. TOM: LONG AGO AND FAR AWAY IN A BOOK THAT SOLD 12 COPIES, U.N. JIM GLASSMAN ABSOLUTELY NAILED THE LABOR TRANSFORMATION THAT WAS TO COME FROM TECHNOLOGY. WE ARE NOW AT A POINT WHERE IT IS STUNNING THE NEED FOR TECHNOLOGY AND THE TECHNOLOGY HAVES THE TECHNOLOGY HAS NOTS. WHAT DO THE NEXT 10 YEARS LOOK LIKE IN LABOR AND TECHNOLOGY? DR. LIPSKY: GREAT QUESTION. THERE IS NO OBVIOUS RIGHT ANSWER. LET ME SAY ONE THING IN RESPONSE TO THE CURRENT SHORT-TERM SITUATION IN THE U.S. -- WITH WAGES, THE LABOR SECTOR, AND INFLATION. A FEW MINUTES AGO YOU SPOKE TO BILL DUDLEY ABOUT WHAT IS HAPPENING IN THE PROSPECTS FOR THE U.S.. SO FAR WHAT YOU HAVE SEEN IS WAGE AGAINS LAGGED BEHIND -- WAGE GAINS LAGGED BEHIND INFLATION. PEOPLE EXPECT INFLATION TO COME BACK DOWN TO PREVIOUS RATES. IF INFLATION EXPECTATIONS AND THE GENERAL PUBLIC DETERIORATE, THEY WILL HAVE A DIFFERENT VIEW ABOUT WAGES AND WE WILL HAVE A DIFFERENT VIEW ABOUT INFLATION. IN THE NEAR-TERM IS THE NEED FOR CLIMATE, FOR ENERGY, SHIFTING ENERGY SOURCES IS GOING TO REQUIRE MASSIVE INFRASTRUCTURE AND OTHER FORMS OF CAPITAL EQUIPMENT. WHERE THE FUNDING IS GOING TO COME FROM IS AN OPEN QUESTION. IT IS NOT GOING TO BE COMING PRIMARILY FROM GOVERNMENTS. THERE IS GOING TO HAVE TO BE A MAJOR RESTRUCTURING FROM CAPITAL SOURCES GLOBALLY FROM PRIVATE SECTORS BASICALLY. THIS IS GOING TO BE A DISCUSSION OF GREAT IMPORTANCE, NOT JUST OF THIS WEEK IN WASHINGTON BUT ONGOING. HOW TO MAKE SURE CAPITAL MARKETS DIRECT THE INVESTMENTS TO THEIR MOST EFFECTIVE LONG-TERM USE. JONATHAN: DEEPLY THOUGHTFUL STUFF. JOHN LIPSKY, THE FORMER IMF MANAGING DIRECTOR. WE CAUGHT UP WITH BILL EARLIER THIS MORNING, THE FORMER NEW YORK FED PRESIDENT. THE HEADLINES ON THAT PIECE ARE AVAILABLE ON THE BLOOMBERG TERMINAL. LISA: WE HAVE HEARD HIM COME OUT AND SAY THAT THE FED IS LONG BEHIND THE CURVE. MATTHEW HORNBACH SEEMED TO ECHO WHAT STANLEY WAS SAYING. THAT STILL MAY NOT BE ENOUGH. WHEN YOU TAKE A LOOK AT WHERE INFLATION IS AND HOW SLOWLY IT WILL GET LOWER FROM 8%. JONATHAN: ABRAMO, YOU TEED UP THIS MORNING. LAGARDE -- SIMPLY THIS IS A WIDE-OPEN, WIDE OPEN FOR THEM TO ADDRESS WHAT NEEDS TO BE ADDRESSED. LISA: HOW DID THEY SHAPE THE POLICY RESPONSE TO INFLATION AT A TIME OF SLOWING GROWTH? IT IS WHAT CENTRAL BANKS DO NOT WANT TO HAVE TO DO AND YET BOTH CENTRAL BANKS FIND THEMSELVES IN A SIMILAR PLACE WITH THE ECB FACING SLOWER GROWTH THAN THE U.S.. JONATHAN: ARE YOU WATCHING THE EASTER EGG ROLE AT THE WHITE HOUSE? LISA: HE HAS PARTICIPATING. TOM: THE EASTER EGG ROLE YESTERDAY FOR ME WAS SWISS CHOCOLATE. JONATHAN: CAN YOU EXPLAIN WHAT AN EASTER EGG ROLE IS? TOM: IT IS A GREAT TRADITION THAT GOES BACK TO GEORGE WASHINGTON. YOU GO OUT ON THE LAWN AND THE YOUNG CHERUBS GO AFTER. TO BE SERIOUS, THIS IS PEOPLE WORKING BACKBREAKING HOURS WHO DO NOT SEE THEIR KIDS ENOUGH. IT IS A GREAT EXCUSE. IT IS A GREAT TRADITION. WITH SITTING ROOM, PUBLISHES REAFFIRMS BANK OF AMERICA WENT UP WITH A 3% PRICE TARGET. JONATHAN: DO SOMEONE IN THE ADMINISTRATION STILL DRESS UP AS THE EASTER BUNNY? WE HAVE AN EASTER EGG IN THE U.K.. WHAT IS AN EASTER EGG ROLL? YOU CAN'T EXPLAIN IT! I WILL EXPECT AT HISTORY FROM YOU, TOM. TOM: IT WAS A SCARRED CHILDHOOD. MY MOTHER STOLE THEM ALL. JONATHAN: IT SOUNDS DEEPLY DEPRESSING. TOM: TRAUMATIC. JONATHAN: IT CLEARLY HAD A BIG EFFECT ON YOU LATER IN LIFE. TOM KEENE, LISA ABRAMOWICZ, TOM FARRELL -- JONATHAN FERRO. THIS IS BLOOMBERG. ♪ > > KEEPING YOU UP-TO-DATE WITH THE NEWS FROM AROUND THE WORLD, I'M RITIKA GUPTA. IN A BID TO RESTART PEACE STOCKS BETWEEN RUSSIA AND UKRAINE, THEY MET WITH UKRAINIAN NEGOTIATORS. THEY TALKED AFTER EVIDENCE OF WAR CRIMES EMERGED. THE CENTRAL BANK FOUND NO CLEAR WORLD TURN IT IS TO THE MAJOR RESERVE CURRENCIES. THE BANK OF RUSSIA HOLDS ONLY GOLD AND YUAN. THAT MADE IT POSSIBLE FOR INTERNATIONAL GOVERNMENTS TO SEIZE HALF -- JEROME POWELL MAY REINFORCE BETS THAT THE FED WILL RAISE INTEREST RATES BY HALF A POINT NEXT MONTH. THE FED'S PRE-MEETING BEGINS AT MIDNIGHT FRIDAY. CHINA AND ITS ALLIES HAVE RESUMED FLIGHTS. THE AIRLINE IS WORKING TO PUT ITS ENTIRE FLEET OF BOEING 737'S BACK IN THE AIR. THE CAUSE OF THE DISASTER HAS NOT YET BEEN DETERMINED. POWERED BY MORE THAN -- I'M RITIKA GUPTA THIS IS BLOOMBERG. > > WE DO NOT REALLY KNOW HOW AGGRESSIVE THIS WILL BE, BUT IF THE FED DELAYS ALL THAT MEANS IS THAT INFLATION WILL GET MORE ENTRENCHED AND THEY WILL HAVE TO DO MORE LATER. TOM: WILLIAM DUDLEY, SENIOR ADVISOR WRITING FOR BLOOMBERG OPINION. I STILL HAVE NOT HAD TIME TO GET IT ON TWITTER, BUT I WELL. HE HARKENS -- I WILL. HE HAS BEEN DEAD ON FOR 12 MONTHS. YOU REALLY WONDER WHAT KIND OF INFLATION AND DURATION WE WILL SEE. PART OF THAT IS THE GLOBAL ECONOMY AND THE SHOCK AND ESTIMATES OF CHINA GDP HAS PULLED OVER THE MARKETS. > > CHINA'S YIELD PREMIUM TO TREASURIES HAS COMPLETELY DISAPPEARED. TREASURIES OFFER MORE YIELD THAN THEIR CHINESE COUNTERPARTS. THERE IS TWO REASONS FOR THIS. EXPECTATIONS OF SLOWER GROWTH IN CHINA, THE IDEA THERE IS CONSUMER STRENGTH IN CHINA, AND THE COVID LOCKDOWNS IN SHANGHAI ALONE, YOU HAD A PUSH TO RESTART FACTORIES THERE. TESLA ALSO LOOKING TO RESTART ITS FACTORIES AMID THIS ROUTER PUNCH -- BROADER PUSH. THEY WERE EXPECTED TO CUT THEIR RESERVE RATIO. THEY DID NOT REDUCE RATES. THEY ONLY CUT THE RESERVE RATIO. THE FED IS HIKING FAR MORE AGGRESSIVELY. THAT IS CAUSING THE FIELD DIFFERENTIAL THAT IS DISAPPEARING. TOM: AFTER OUR VISIT WITH THE MANAGING DIRECTOR OF THE IMF LAST WEEK, DAMIAN SASSOWER JOINS US. I WANT TO TALK ABOUT THE SRI LANKAN RUPEE AS THEY ARE ECONOMIC AND POLITICAL EXPERIMENT COLLAPSES. EVERY SINGLE GUEST AT THE IMF WAS FOCUSED ON THEIR MEETING WITH SRI LANKA IN WASHINGTON. WE HAVE TO GO TO CHINA. HIS CHINA GROWING? > > IT WAS NOT CONSTRUCTIVE -- IS CHINA GROWING? > > IT WAS NOT CONSTRUCTIVE. IT IS THE ACTIVITY DATA THAT HAS GOTTEN EVERYONE'S ATTRACTION. IT IS SAD THAT WE HAVE UNEMPLOYMENT AT THE HIGHEST IN TWO YEARS IN CHINA. NEW HOME SALES, 29% TO YEAR-OVER-YEAR AND PROPERTY INVESTMENTS ARE NOW BACK DOWN IN CONTRACTION AFTER RISING THE LAST 2 MONTHS. TOM: CHINA'S 6.37 IS IMMOVABLE. IS THERE A CHANCE A GOES LIKE THE SRI LANKAN RUPEE? > > NO. TOM: LISA, HELP ME! > > I'M JUST MAKING A JOKE. IF YOU LOOK AT DEBT GDP IN CHINA, IT JUMP TO THE HIGHEST SINCE 2020. IF YOU LOOK AT LEVERAGE IN THE WORLD'S SECOND-LARGEST ECONOMY, IT DOES NOT BODE WELL. THEY HAVE TO MAKE PAYMENTS ON $92 BILLION OF DEBT. THAT IS A LOT OF MONEY THEY NEED TO COME UP WITH. LISA: WHEN YOU TALK ABOUT HOW IT WAS NOT NECESSARILY A GOOD LUCK, WE STILL HAD OUTPERFORMANCE WHEN IT CAME TO THE OFFICIAL GDP NUMBERS. YOU THINK CHINESE OFFICIALS RECOGNIZE THE DEGREE OF STIMULUS WILL BE NECESSARY IN ORDER TO GET NEAR THEIR GROWTH CHARTER FOR THIS YEAR? DAMIAN: THEY DO NOT CARE. IF THERE IS ONE THING WE HAVE SEEN FROM BEIJING IS THE THOUGHTS AND VIEWS OF INVESTORS ARE THE LAST THINGS ON THEIR MINDS. THE INTERESTING THING ABOUT THE DIFFERENTIALS ON THE BOARD, IF YOU LOOK BACK OVER THE PAST 3 YEARS WE HAVE SEEN INVESTMENT INTO THE CHINESE LOCAL BOND MARKET. NOW THAT THOSE YIELD DIFFERENTIALS HAVE FLIPPED IN FAVOR OF THE U.S., THAT IS A PRETTY BIG DEAL. WE HAVE HEARD A LOT ABOUT THE DECLINE IN THE DOLLAR AND THE FACT THAT EVERYTHING GOING ON WITH RUSSIA HAS -- IF YOU CAN MAKE MORE MONEY BY KEEPING YOUR MONEY IN DOLLARS, THEN MOVING AT ABROAD INTO ANOTHER CURRENCY, INVESTORS WILL TAKE A NOTICE. LISA: CHINA IS A LOT LESS INVESTABLE BECAUSE NOT ONLY DO YOU HAVE THE COVID 0 POLICIES AND WHAT MIGHT HAPPEN WITH SUPPLY CHAIN, BUT HOW OFTEN DO YOU HEAR THAT IN CONVERSATION WITH INVESTORS? DAMIAN: IT IS A RISK AND FRANKLY IT IS A RISK FROM THE PERSPECTIVE OF FOREIGN CREDITORS WHO MIGHT REALIZE SOME OF THE BUSINESSES THERE DOING BUSINESS WITH IN CHINA MIGHT BE SUSCEPTIBLE TO SANCTIONS FROM THE U.S.. OIL PRICES, AT LEAST HEATING OIL PRICES OUT OF RUSSIA -- CHINA IS IN AN ADVANTAGEOUS POSITION TO BUY THOSE COMMODITIES ON THE CHEAP FROM RUSSIA. WE ARE NOT SEEING THE SAME PACE OF ACTIVITY BETWEEN CHINA AND RUSSIA SINCE THE SANCTIONS SET. TOM: MR. PUTIN WITH AN APPEARANCE THIS MORNING ON ECONOMICS. IS HE TALKING WITHIN A MARKET WHERE PROS LIKE YOU PRESUME A DEFAULT? DAMIAN: NO ONE IS TALKING ABOUT THE DERIVATIVES COMMITTEE ON RUSSIAN RAIL. THEY RULED IT WAS A DEFAULT LAST WEEK. WHAT IS INTERESTING IS THEY DID NOT HAVE THE OPTION YET. IT WAS ONLY $41 MILLION OUTSTANDING, SO THERE IS STILL A A LOT OF UNCERTAINTY ABOUT WHAT A DEFAULT REALLY IS. THE EU WILL NOT ALLOWED THE MAJOR RATING AGENCIES TO RATE RUSSIAN DEBT. CAN THEY EVEN PUT INTO DEFAULT REMAINS TO BE SEEN. RUSSIAN SOVEREIGN CDF IS PRICED VISIBLY. IT IS PRICED AT A 99% CHANCE OF DEFAULT IN THE NEXT YEAR. THE CORPORATE CDS IS COMING ALONG. TOM: BLACK-MARKET ARGENTINA IS WAY UP. WHAT IS THE REAL RUBLE? DAMIAN: I DON'T KNOW WHAT IT IS. TOM: CAN WE SAY THAT? DAMIAN: GRAY MARKET. I HAVE SOME GRAY HAIR COMING IN. TOM: 81 RIGHT NOW. WHAT IS THE REAL NUMBER? DAMIAN: I WOULD BE GUESSING THAT I WOULD SAY SOMEWHERE IN THE 120'S RIGHT NOW. TOM: ALWAYS ILLUMINATING THERE ON THE SRI LANKAN RUPEE. LISA: HE TALKED THE WHOLE TIME ABOUT CHINA AND RUSSIA. TOM: THAT WAS THE NUMBER ONE TOPIC OUT THE IMF. NEXT 00--THE MEETINGS BEGIN MONDAY WITH SRI LANKA. LISA: TO PROVIDE BACKGROUND FOR PEOPLE SRI LANKA DECIDED NOT TO PAY CERTAIN PAYMENTS IN ORDER TO SAVE MONEY IN ORDER TO BUY FOOD AND GAS, AND THAT I THINK IS THE UNDERSCORE HERE. THEY MADE THIS CALCULUS. THEY WILL NOT BE ALONE GOING FORWARD. TOM: JUST LOOK AT EGYPT. EGYPT IS THE REAL DEAL. WE WILL HAVE AN INTERNATIONAL BET THIS WEEK. MUCH MORE COMING UP ON EARNINGS AS WELL. STAY WITH US. FUTURES -13. THIS IS BLOOMBERG.

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