>> I THINK THE FED NEEDS TO BE
MARKET BASED. >> STAYING HIGHER FOR TOO LONG. >> WE EXPECT DATA THAT WILL BE
FORTHCOMING TO GIVE THEM CONFIDENCE.
IT IS THE FED'S JOB TO TAKE THE DATA PRETTY MUCH AT FACE VALUE. >> THE BEST THING IS TO TRULY
LOOK AT THE DATA AND STANDBY THAT.
NO MATTER WHAT DATA COME YOU'RE GOING TO GET CRITICIZED ON THE
TIMING. >> I'M NOT AS CONCERNED ABOUT
THE FED CUTTING RATES. AS LONG AS THE ECONOMY REMAIN
STRONG, THOSE EARNINGS WILL BE THERE. >> THIS IS "BLOOMBERG
SURVEILLANCE
." JONATHAN: A NEW TRADING WEEK, FRESHMEN,
CLEAN SLATE FOR ANOTHER QUARTER AND LEAVING BEHIND Q1 AND
HITTING THE GROUND RUNNING IN Q2. GOOD MORNING, GOOD MORNING.
THIS IS "BLOOMBERG SURVEILLANCE."
A STACKED SHOW FOR THE FIRST HOUR FOR THE MONTH OF APRIL.
I AM JONATHAN: ALONGSIDE -- I AM JONATHAN
ALONGSIDE ANNE-MARIE. LISA NEEDING THE EXTRA WEEK
BECAUSE THE WEEK LOOKS LIKE THIS. PMI AND I SAID DATA TODAY,
TUESDAY, JOBS DATA. WEDNESDAY, ADP JOBS.
COMMON'S FROM POWELL. FRIDAY, U.S.
PAYROLL TO ROUND
OUT THE WEEK. IF YOU WANT A SNEAK PEAK IN A
NEXT WEEK, WE HAVE CPI AND BANK EARNINGS KICKING OFF AS WELL.
THAT IS QUITE A START TO Q2. ANNMARIE:
IT FEELS LIKE WE JUST HEARD FROM CHAIRMAN POWELL AND WE DID.
HE WILL BE SPEAKING HEAD OF THE JOBS NUMBER.
LOOKING FOR 200,000 TO BE ADDED. WHAT IS INTERESTING SINCE THE
START OF 2023, THOSE PAYROLL REPORTS HAVE BEEN REVISED SEVEN
TIMES. JONATHAN: LET'S TALK ABOUT THE START OF
2023. JANUARY DATA, BOOMING. THERE IS A FEELING FEBRUARY DID
NOT CONFIRM THE
BOOM OF JANUARY. WHAT ARE WE EXPECTING FOR THE
MARCH DATA WE ARE SEEING THIS MONTH? >> JUST GOING TO THE EARNINGS
CALLS COME I THINK LIKE THINGS ARE PRETTY STRONG.
I DON'T FEEL THERE IS ANY IMMINENT CLIFF WE ARE ABOUT TO
FOLLOW. LABOR SEEMS TO BE PRETTY TIGHT.
COMPANIES ARE BEING PICKY. I DON'T THINK THERE'S BEEN ANY
BIG CHANGE. I FEEL LIKE WE ARE EXITING THAT
POINT WHERE EVERYONE IS SINGLY ECONOMY STINGS.
IT IS, OH MY GOD, THE FED CAN POSSIBLY CUT?
THAT IS WHERE WE ARE. JONATHAN: WE HAVE -- MAC
RO ECONOMICS
REFER TO JANUARY AS A FLUTE. AFTER WHAT WE HAVE SEEN THE
LAST MONTH OR SO, WOULD YOU REFER TO THE JANUARY DATA AS A
BIT OF A FLUKE? >> THERE WERE SOME BUMPS IN THE
ROAD. I THINK WE ARE THE SAME THING
FROM POWELL. I DON'T KNOW IF WE CAN HANDLE
TOO MANY BUMPS BUT I THINK A COUPLE WERE TO BE EXPECTED.
ANNMARIE: WHAT IS INTERESTING AS IT WAS
REVISED HIGHER WHEN YOU LOOK AT THAT PCE.
IT WAS HIGHER THAN INFLATION THAN THEY HAD THOUGHT.
IT POWELL ALMOST MOVED TOWARD WALLER. WHAT HE HAD TO
SAY WAS
INFORMATION THEY ARE IN NO RUSH TO CUT RATES. JONATHAN:
LET'S START THIS MORNING WITH PRICE ACTION. LOOKING AT THE S&P 500.
ON MARKET YIELDS, LITTLE BIT HIGHER. VIRTUALLY UNCHANGED.
FX MARKET, EURO GOING NOWHERE. COMING UP, TERRY HAINES. WE BEGIN WITH OUR TOP STORY,
SETTING UP THE FIRST TRADING DAY OFQ2. RBC RAISING THE PRICE TARGET TO
5300 FROM 5150. THE STORY WE SEE IN THE DATA
TODAY IS THAT THE STRONG MOVE OBSERVED IN THE S&P 500 SO FAR
THIS YEAR HAS BEEN DESERVED. A SOME OF OUR WORK
SUGGEST
GAMES MAY BE TOUGHER TO COME BY FROM HERE AND THAT THE STOCK
MARKET NEEDS A BREATHER. LORI, LET'S GET INTO THE
UPGRADE. IT IS SUBTLE. YOU HAVE A RANGE OF MODELS TO
WORK THROUGH. WHICH IS THE MORE CONSTRUCTIVE
IN WHICH IS LESS SO CONSTRUCTIVE ONE? >> THE LEASE CONSTRUCTIVE IS
SENTIMENT. WE THOUGHT SENTIMENT WAS A
PROBLEM FOR A COUPLE OF MONTHS. WE ARE HANGING OUT AT ONE
STANDARD DEVIATION ABOVE THE LONG-TERM AVERAGE ON THE AAI
SURVEY. THE MORE CONSTRUCTIVE DATA
POINTS I WOULD SAY ONE IS O
UR EARNINGS YIELD GAP ANALYSIS.
IF YOU LOOK AT WHEN IT IS FLAT AND GO BACK TO THE LATE 1980'S,
AVERAGE RETURN IS ABOUT YOUR TEAM PERCENT.
THAT CAN GET YOU NORTH OF 5400. IF YOU LOOK AT THE ONE THAT IS
CHANGED MOST SINCE THE START OF THE YEAR, AS HAD THE MOST
BULLISH MOVE, IS THE ECONOMIC DATA.
CONSENSUS WAS LOOKING FOR 1.3% ON GDP FOR THIS YEAR.
STOCKS DON'T DO WELL IN THAT KIND OF ENVIRONMENT.
THERE IS THIS CONSTANT OH MY GOD, ARE WE ABOUT TO HAVE A
RECESSION? THAT IS WHAT WE HAVE BASICALLY
BEE
N HEARING THE LAST YEAR OR SO. NOW THE DATE OF ITS TO ABOUT
2.1% THIS YEAR. 2% TO 4%, A FAVORABLE RANGE FOR
STOCKS. AVERAGE RETURN IS 12%. THAT IS WHAT WE HAVE BAKED IN.
YOUR MOST BULLISH, NOT BAKED INTO OUR MODEL BUT IT GOES TO
SHOW 2% TO 4%, PEOPLE FEEL GOOD. JONATHAN:
ENERGY START TO PICK UP. THE BANKS START TO PICK UP.
TECH PUTTING MUCH DID NOTHING LAST MONTH.
TO THINK THAT A SUSTAINABLE TREND? >> WE DOWNGRADED TECH BACK IN
JANUARY. WE LOOK AT MEDIAN PE MULTIPLES
WHEN WE PICK SECTORS. I KNOW
THE MARKET IS
TECHNICALLY CAP WAITED. BUT PORTFOLIO MANAGERS ARE
PICKING INDIVIDUAL STOCKS. IF YOU LOOK BACK TO 6, 9 MONTHS
AGO MEDIAN WAS AROUND LONG-TERM AVERAGE IN TERMS OF FORWARD PE
AND THAT SHOT UP AT THE END OF THE YEAR AND WAS ALMOST AS
EXPENSIVE AS THE INDUSTRIAL SECTOR, ONE OF THE WORST WE SAW.
I'M UNEVEN TALKING -- I'M NOT EVEN TALKING BANK.
ENERGY ARE VERY CHEAP. FINANCIALS ARE CHEAP.
MATERIALS HAS BEEN ON THE MOVE. EVEN UTILITIES HAD A GOOD END
TO THE MONTH AND A COUPLE BOOKS AGO I
T STARTED LOOKING REALLY
GOOD. ANNMARIE: WE HAVE HAD A NUMBER OF FALSE
STARTS. IS THIS A REAL ROTATION? >> I THINK IT IS.
WE ARE SEEING IT IN TERMS OF SO MANY PARTS OF THE MARKET.
EVEN SMALL CAPS RELATIVE TO LARGE CAPS ARE TRYING TO MAKE A
STAND. THAT IS WHERE YOU COULD HAVE
THE MOST ACCUSATIONS OF A HEAD FAKE.
WE THINK IT LOOKS EXCITING AND IT GETS KNOCKED DOWN BUT I
THINK THESE THINGS IN ENERGY AND MATERIALS REALLY GENERATING
SOME TRUE EXCITEMENT. JONATHAN: Q4, KINDA BIZARRE, THE NATURE
OF SEE
M TO SHIFT. CAN YOU WALK US THROUGH THE
RELATIONSHIP AND WHAT HAPPENED AND RATE PRICING AND DEVELOPED
IN EQUITIES? >> WE SAW A STRANGE
RELATIONSHIP AFTER SVB. IF YOU LOOK AT TENURE, IT WAS
EQUATING TO GROWTH OUTPERFORMANCE RELATIVE TO
VALUE. I THINK THERE WERE A LOT OF
THINGS THAT DROVE THE BIG CAP TECH STOCKS THAT I THINK ONE
WAS BETTER BALANCE SHEETS. MAG7. THEY BASICALLY DON'T HAVE
BALANCE SHEETS AS A BASKETBALL'S OF THE REST OF THE
MARKET HAS REGULAR MONTHS OF DEBT.
LAST YEAR WHEN WE WERE SE
EING -- ONE OF THE SAFETY TRADES WAS
GOING INTO BIG TECH. NOW I THINK WE'RE STARTING TO
SEE SORT OF A DIFFERENT KIND OF FED NARRATIVE EVOLVED THIS YEAR.
THERE HAS BEEN RISING ANGST. I THINK THE CUTS ARE ON THE TABLE.
MAYBE THAT IS GOING TO BREAK. WE WILL SEE.
I THINK OF THE FED CAN THREAD THE NEEDLE -- A TOUGH SENTENCE
TO SAY -- AND WE CAN SORT OF GET TO THE CUTS, INTEREST RATES
CAN COME DOWN, THE ECONOMY IS KIND OF A SHOW ME STORY.
WE STAYED ABOUT 2%. I THINK YOU WILL SEE THINGS
THAT FINANCIALS
DO WELL. TYPICALLY WHEN INTEREST RATES
TO GO UP FOR THE SECTORS BUT I THINK IF INTEREST RATES COME
DOWN AND WE DON'T KILL THE ECONOMY, EITHER PHYSICAL --
CYCLICAL ROTATION. JONATHAN: IT KINDA FEELS LIKE NOW, MAYBE
THEY DON'T. >> I THINK WHAT YOU WANT IS A
HIGHER RATE ENVIRONMENT THAN WHAT WE HAVE HAD IN PAST CYCLES.
I THINK YOU WANT THEM TO COME DOWN A LITTLE SO WE CAN
PRESERVE THE ECONOMY. I THINK THEY TURN INTO A BORING
TRADE WHERE THEY ARE THE PLUMBING OF THE ECONOMY.
IF THE ECONOMY IS HUMMI
NG ALONG, THEN THEY DO WELL.
BUT THEN YOU HAVE HIGHER RATES THAN YOU'VE HAD IN THE PAST AND
THAT IS ALSO GOOD FOR THEM. GOLDILOCKS. JONATHAN:
TOWARDS ENERGY, TOWARDS BANKS OVER THE LAST MONTH AND PEOPLE
START TO THINK ABOUT THE ROTATION AWAY FROM LARGE CAPS
AND MAYBE TOWARD SMALL CAPS. LOOKING FOR THAT MOVE IN SMALL
CAPS TO CONTINUE. IS THAT SOMETHING YOU CAN GET
BEHIND? >> I THINK IT SHOULD.
I THEN SAYING THIS FOR A WHILE BUT I THINK IF YOU LOOK AT
VALUATION DATA, 15 TIMES PE ON RUSSELL 2000, T
ENDS TO TOP
AROUND 19,000 OR 20, WAS DOWN AROUND 11 LAST YEAR.
YOU SEE THE SAME THINGS ON THE FTC POSITIONING DATA. DOWN AROUND 2022, THEY WERE
RECESSIONARY IN TERMS OF HOW BAD THEY WERE.
WE ARE BACK TO NET LONG TERRITORY, THREE ARE HIGH.
IF YOU LOOK AT NASDAQ FUTURES POSITIONING, BASICALLY BACK TO
ALL-TIME HIGHS OR EVEN A LITTLE ABOVE THEM UNCERTAIN INDICATORS.
I SEE A CATCH OF TRADE IN SMALL CAPS AND I DO THINK THEY ARE
BELLWETHER. ANNMARIE: WHEN YOU ARE LOOKING AT YOUR
MODELS, THIS IS BASED O
N INFLATION MODERATING.
WHAT HAPPENS IF IT DOES NOT MODERATE? >> THAT IS ONE OF THE REASONS I
THINK ENERGY AND MATERIALS HAVE DONE SO WELL.
THERE IS SOME CYCLICALITY BUT THERE ARE ALSO INFLATION HEDGES
TO SOME EXTENT. I THINK YOU'LL SEE CERTAIN
SECTORS LIKE THAT DO WELL. BUT IF WE GO BACK TO THIS
ENVIRONMENT WHERE PEOPLE ARE STARTING TO FREAK OUT ABOUT
BALANCE SHEETS AND INTEREST RATES ARE GOING TO MOVE UP AND
WE START TALKING ABOUT HIKES AGAIN, IT COULD FEEL PEOPLE TO
GO BACK TO THOSE BALANCE S
HEETS WHICH COULD BENEFIT. ANNMARIE:
WHETHER OR NOT ENERGY -- IT IS THE SECTOR TO BUY? >> I THINK SO.
WE LEFT IT AS OVERWEIGHT AT THE BEGINNING OF THE YEAR AND I WAS
A LITTLE UNCOMFORTABLE BUT MY ANALYSTS LIKED IT, THE DIVIDEND
YIELDS WERE HIGH, BALANCE SHEETS HAVE BEEN CLEANED UP.
I SAID, ALL MY BEDSIDE MAKING ON POSITIONING CALLS ARE ABOUT
INFLATION MODERATING IN THE FED CUTTING AND THE ECONOMY TAKING
UP. WHAT IF WE ARE WRONG ON THAT?
ENERGY SEEMS A NICE WHAT HAVE IN YOUR BACK POCKET. JONATHAN
:
WHAT IS THE DIFFERENCE BETWEEN IRRATIONAL EXUBERANCE AND
RATIONAL EXUBERANCE? HOW FAR AWAY ARE WE FROM ONE
AND CLOSE TOGETHER? >> KEEP AN EYE ON AAII.
IF YOU GET TO TWO -- I THINK IT WOULD BE A SIGN OF IRRATIONAL
EXUBERANCE THERE. WE LOOK AT IT AT THE CFTC DATA,
BACK TO EARLY JANUARY 2018 HIGHS. THOSE STATS MAKE IT VERY
UNCOMFORTABLE. AAII SAYS WE HAVE A LITTLE ROOM
TO GO BEFORE THINGS GET SILLY. JONATHAN:
THIS HIGH-YIELD CREDIT MAKE YOU UNCOMFORTABLE?
YOU CAN BASICALLY SAY IT IS REFLECTING ST
RENGTH OR
REFLECTING MAYBE INVESTORS TAKING THINGS TOO FAR. >> I WOULD GO TOWARD THE
STRENGTH CATEGORY. I'M NOT AN EXPERT ON THAT.
WE DO TALK TO OUR CREW AT THE RBC DESK AND THEY TELL ME THE
SAME THINGS I SEE ON SMALL-CAP BALANCE SHEET DATA, WHICH IS
THINGS ARE NOT AS BAD AS THEY HAVE BEEN IN PAST CYCLES.
THERE ARE SOME SECTOR DIFFERENCES AS WELL.
I TEND TO LEAN MORE TOWARD IT IS A SIGN OF STRENGTH ARGUMENT.
JONATHAN: Q2. LORI CALVASINA IS GOING TO
STICK WITH THIS. LET'S GET AN UPDATE ON STORIES
ELSEWHERE. HERE IS YOUR BLOOMBERG BRIEF. >> SALVAGE SPECIALISTS ARE
STARTING THE DAUNTING TASK OF CLEARING DEBRIS FROM THE
DESTROYED FRANCIS SCOTT KEY BRIDGE IN BALTIMORE.
PORTS ARE MODIFYING THEIR OPERATIONS TO ABSORB.
THE FALLOUT IS EXPECTED TO BE LARGELY CONTAINED AS
NEIGHBORING HIS LIPS WITH SPARE CAPACITY TWEAK THEIR SCHEDULES.
TURKISH PRESIDENT ERDOGAN SUFFERED AN HISTORIC DEFEAT AT
THE BALANCE -- BALLOT BOX. HIS PARTY FELL BEHIND THE
COUNTRY'S MAIN OPPOSITION, THE REPUBLICAN PEOPLE'S PAR
TY.
HIS RULING PARTY IS THE LOWEST ON RECORD AS A NATION BATTLES
RAMPANT INFLATION AND THE HIGHEST BORROWING COSTS AS THE
PRESIDENT TOOK POWER MORE THAN TWO DIGGS AGO.
CHINA'S FACTORY ACTIVITY BE EXPECTATIONS, BOOSTING OPTIMISM
ABOUT THE COUNTRY'S ABILITY TO MEET ITS AMBITIOUS 5% GROWTH
THIS YEAR. THE MANUFACTURING INDEX ROSE TO
51.1 ON MONDAY TO COME THE FIFTH MONTH ABOVE THE 50 MARK
WHICH INDICATES EXPANSION. THE LONGEST STREAK IN MORE THAN
TWO YEARS. THAT IS YOUR BLOOMBERG BRIEF.
JONATHAN: UP
NEXT, BIDEN'S GROWING HAS
ADVANTAGE. PRES. BIDEN:
A REAL INFLECTION POINT IN HISTORY. JONATHAN: GOOD MORNING.
♪ JONATHAN:
LIVE FROM NEW YORK CITY, GOOD MORNING. CLOSING OUT MARCH, CLOSING OUT
Q1 WITH A GAIN OF MORE THAN 10% FOR THE PIERCED QUARTER --
FIRST QUARTER. BIDEN'S GROWING HAS ADVANTAGE.
PRES. BIDEN: I THINK OUR DEMOCRACY IS AT
STAKE. WE'RE AT A REAL INFLECTION
POINT IN HISTORY. THINGS ARE CHANGING.
THIS GUY DENIES THERE'S GLOBAL WARMING.
THIS GUY WAS TO GET RID OF NOT ONLY ROE V.
WADE
COME HE WAS TO GET RID OF THE ABILITY OF ANYWHERE IN
AMERICA TO CHOOSE. ALL OF THE THINGS HE IS DOING,
THEY'RE SO OLD. SPEAKING OF OLD. JONATHAN:
PRESIDENT BIDEN EXTENDED HIS WARCHEST LEAD OVER DONALD TRUMP
AFTER RAISING $25 MILLION IN A STAR-STUDDED MANHATTAN
FUNDRAISER. JOINING US NOW IS TERRY HAINES.
YOU'VE BEEN SAYING FOR A WHILE MAYBE THE FORMER HAS TOPPED OUT.
ARE YOU SEEING THAT IN THE POLLS? >> I THINK SO.
THE WAY I LOOK AT THE ELECTION IS THERE IS FIVE PHASES OF IT.
THE BAD NEWS IS, IT
IS GOING TO GO ON FOR A VERY LONG TIME.
THE GOOD NEWS, WE'RE INTO THE THIRD PHASE ALREADY.
IN THE RUN-UP TO THE CONVENTION PHASE. PART OF THAT, YOU'RE GOING TO
SEE THE POLLS SETTLE OUT A LITTLE BIT INTO WHAT MOST
PEOPLE THINK THEY ARE, WHICH IS INSTINCTIVELY, WHICH IS PRETTY
EVEN RAISE. IN THAT PHASE, WHAT YOU'RE
GOING TO CI THINK IS BIDEN START MAKING A CASE ABOUT WHY
HE SHOULD BE ELECTED, WHAT HE IS THE SAFER PAIR OF HANDS AND
AT THE SAME TIME YOU WILL GOING TO SEE TRUMP DISADVANTAGES OF
TOPPI
NG OUT HAPPENING AS WELL WITH CONTINUED SPLIT REPUBLICAN PARTY AND CONTINUED
INDEPENDENTS THAT ARE NOT FOR HIM.
HE NEEDS BOTH OF THOSE TO BE STRONG FOR HIM IN ORDER TO WIN.
ANNMARIE: ONE BID DISADVANTAGE TRUMP HAS
IS THE CAMPAIGN FUNDING. IN THE MONEY YOU CAN USE TO
CAMPAIGN AROUND THE COUNTRY. BIDEN IS BEATING HIM BY
MILLIONS OF DOLLARS. BUT THE BIDEN CAMPAIGN USING
THIS CORRECTLY? >> TWO THINGS.
THREE THINGS REALLY ON THAT. I AM NOT WOWED BY $25 MILLION
IN MANHATTAN WITH THREE PRESIDENTS WHEN
THE ENTIRE
FINANCIAL SYSTEM IS BASICALLY IN THE MAJOR BANKS ARE
BASICALLY DOWN THE STREET. I SEE PEOPLE HEDGING BETS THERE
A LITTLE BIT. SECONDLY, WHAT DEMOCRATS TEND
TO DO IS PLEDGE MONEY. PLEDGE VERSUS HOW MUCH MONEY IS
ACTUALLY COMING IN IS A SUBJECT THAT WE ALL NEED TO PAY CLOSE
ATTENTION TO. FINALLY, WHERE THEY OUGHT TO
PUT IT? IN THE GET OUT THE VOTE EFFORTS.
HILLARY CLINTON HAD MORE MONEY THAN DONALD TRUMP EIGHT YEARS
AGO. THAT COUNTED FOR NOTHING LARGELY BECAUSE IT WASN'T
ALLOCATED WELL.
BIDEN IS IN THE POSITION OF
NEEDING EVERY SINGLE VOTE IF HE IS GOING TO WIN.
THE OTHER PRIORITY THEY WILL USE IT FOR, FRANKLY, IS WHAT
GETS CALLED CANDIDATE SUPPRESSION.
MAKING SURE THE THIRD PARTY VOTERS ARE AS MINIMIZED --
THIRD-PARTY CANDIDATES I SHOULD SAY ARE AS MINIMIZED AS
POSSIBLE. ANNMARIE: WE HAVE AN UPDATE IN TERMS OF
AVP PICK FOR RFK. WHO DOES HE DRAW FROM NOW?
IS IT GOING TO BE TRUMP OR BIDEN ? >> WELL, I THINK HE PROBABLY
DRAWS MORE FROM BIDEN BUT I THINK WE LEARNED A LOT ABOUT
KE
NNEDY IN THE LAST WEEK AND NONE OF IT IS GOOD FOR KENNEDY.
KENNEDY -- TWO THINGS. ONE, HE BASICALLY DECIDED TO
BECOME A NICHE CANDIDATE INSTEAD OF A BROAD-BASED
CHALLENGER. NUMBER TWO, HE HAD A CHOICE
ABOUT WHETHER TO BROADEN HIS APPEAL OR NOT.
HE HAS CHOSEN NOT TO BUY PICKING WHAT I THINK, FRANKLY,
IS THE WACKIEST VICE PRESIDENTIAL CANDIDATE NOMINEE
IN AMERICAN HISTORY. I DON'T SAY THAT LIGHTLY.
WHAT YOU HAVE GOT IS A NICHE CANDIDATE CROWTHER PROCLAIMED
HE IS NICHE AND PROBABLY CLAIMING HE DOES
N'T HAVE ANY
MONEY. MEANWHILE, HE IS A PROBLEM
GETTING ON THE BALLOT AND HE IS A HUGE PROBLEM, TO YOUR POINT,
GETTING A MESSAGE THAT IS GOING TO APPEAL TO A LOT OF PEOPLE. MY TWO CENTS, BIDEN I THINK HAS
HIM DOWN AND OVER THE NEXT SIX MONTHS, BIDEN WILL GO IN FOR
THE KILL AND TRY TO WRING OUT ANY SERIOUS CHALLENGE THAT
KENNEDY MIGHT POSE. >> I GET TONS OF QUESTIONS.
THE OTHER QUESTION HE ASKED ME IS HOW CONFIDENT ARE WE WERE
WHAT ARE OUR EXHIBIT PATIENTS REGARDING CONGRESS?
MOST FOLKS OUTSIDE OF
THE U.S. THINK WE ARE GOING EVER
REPUBLICAN SWEEP. I TELL THEM NOT SO FAST. I
WONDER IF YOU HAVE ANY UPDATED THOUGHTS ON CONGRESS? >> TWO THINGS.
ONE IS THERE IS A GREAT HUNGER IN THE AMERICAN PUBLIC FOR AN
ALTERNATIVE TO TRUMP VERSUS BIDEN. AND AN OPPORTUNITY FOR A
THIRD-PARTY CANDIDATE. BUT THAT IS NOT HAPPENING.
I WON'T REPEAT WHAT I SAID EARLIER. SECONDLY IN CONGRESS, THE WORD
"CONTROL" GETS THEY NEED AROUND A LOT AND
THAT IS THE WRONG WORD. YOU CAN SEE THIS TODAY.
THERE ARE MAJORITIES IN C
ONGRESS BUT THERE IS
DEFINITELY NOT CONTROL. WHAT YOU'RE GOING TO GET IN
2025 IS MORE OF THE SAME. THE PARTIES I THINK RIGHT NOW
ARE LIKELIER THAN NOT TO FLIP WHERE YOU GET A SMALL
REPUBLICAN MAJORITY IN THE SENATE, VERY SMALL DEMOCRATIC
MAJORITY IN THE HOUSE. BUTNET NET, WHAT YOU'RE GOING
IN A FISCALLY AND A LOT OF OTHER WAYS IS VERY MUCH THE
SAME KIND OF CONGRESS YOU HAVE GOT TODAY THAT IS NOT GOING TO
DO WITH THE FISCAL ISSUES IF PEOPLE ARE ARRESTED OF
--ARRESTIVE AND WILL CONTINUE TO THE HAL
F MEASURES WE HAVE
SEEN IN AMERICAN FOREIGN POLICY AT THE TIME WHERE THERE IS A
HEIST GEOPOLITICAL RISK IN 50 YEARS. >> HOW MUCH DO YOU TRUST
POLLING DATA RIGHT NOW? THERE'S BEEN A LOT OF
SKEPTICISM AROUND IT. NOW THAT BIDEN IS STARTING TO
LOOK A LITTLE BIT BETTER, DO YOU DISCOUNT THAT AT ALL OR CAN
WE TRUST THE POLLS RIGHT NOW? >> I WOULD NEVER SUGGEST ANYONE
TRUST IT. I WOULD PARTICULARLY URGE
PEOPLE NOT TO LOOK AT NATIONAL POLLS.
THEY'RE NOT ONLY BEAUTY CONTEST POLLS, BUT THE PRESIDENT IS
ELE
CTED IN THE ELECTORAL COLLEGE. THUS THE ATTENTION TO
BATTLEGROUNDS. GENERALLY SPEAKING, THE LAST
TIME POLLS WERE PRETTY ACCURATE ON BIDEN, THEY TENDED TO
UNDERCOUNT TRUMP SLIGHTLY. I WOULD LOOK FOR POSTERS TO TRY
TO ATTACK THAT A LITTLE BIT AND CORRECT IT.
I WOULD BE LOOKING AT BATTLEGROUNDS ALMOST
EXCLUSIVELY WHERE I AN INVESTOR. WHAT I TRUST THEM? NO.
WILL THEY GIVE YOU? ? A SENSE OF SENTIMENT SURE.
JONATHAN: INDUSTRY LEADING THOUGHTS ON
THE FORMAL PRESIDENT AND MAKING -- FORMER PRESIDENT AND
MAKING
OUT HE IS NOT THE CANDIDATE PREVIOUSLY.
WHAT YOU THINK IS CHANGING? >> FUNDAMENTALLY, EIGHT YEARS
AGO HE WAS SEEN AS A CHANGE AGENT AND PEOPLE WERE SO
FRUSTRATED THEY WERE WILLING TO TAKE A CHANCE ON BREAKING SOME
CHINA. IN ORDER TO HAVE CHANGE HAPPEN. THIS TIMEOUT, AFTER EIGHT
YEARS, WHATEVER ELSE HE IS, HE ISN'T A CHANGE AGENT NUMBER ONE.
NUMBER TWO, THE TRUMP BASE I THINK DEMONSTRABLY IS NOT
GETTING ANY BIGGER. YOU CAN SEE THAT FROM PRIMARY
ELECTION DATA. THIRDLY, FRANKLY, PEOPLE ARE
G
ETTING TIRED OF THE ACT. AND BEYOND THAT, I THINK YOU
HAVE A REPUBLICAN PARTY THAT IS MORE THAN READY TO MOVE PAST
HIM NEW MATTER WHETHER YOU ARE A TRUMP ACCOLADE OR NOT.
JONATHAN: TERRY HAINES. WE STARTED Q1 I TALKING
ABOUTLORI'S QUOTE. IS IT THE SAME IN Q2? >> THERE IS THE ECLIPSE NEXT
WEEK SO PEOPLE ARE GOING TO BE FORCING THEMSELVES.
MAYBE A GOOD ANALOGY FOR THE MARKET.
I TALK TO CLIENTS AND THEY DON'T WANT TO BE TALKING ABOUT
THIS BUT THERE ARE GETTING QUESTIONS AND HAVING TO PUT OUT
PAPERS
AND START THINKING ABOUT INVESTMENT ALLOCATIONS.
I DO WORRY ABOUT THE NON-US INVESTOR WHO HAS BEEN SETTING
UP FOR A RED SWEET. THAT SEEMS LIKE A PRO U.S.
TRADE. I SAW SOME HEADLINE TALKING
ABOUT INTEREST PICKING UP IN EUROPE. IF ELECTION DYNAMICS ARE
CHANGING, DOES IT CALL THEM TO PULL OUT OF -- CAUSE THEM TO
PULL OUT OF THE U.S.? IS OR SOMETHING ELSE UNDER THE
SURFACE TOO? JONATHAN: THE STRUGGLE, STILL SO EARLY IN
THE YEAR. WE THINK ABOUT WHO THE VP IS
GOING TO BE FOR THE FORMER PRESIDENT.
IT
IS NOT GOING TO END ANYTIME SOON.
HE IS GOING TO DRAW THIS OUT. WHICH IS WHAT YOU SAID A MONTH
AGO. ANNMARIE: IT MEANS HE'S GOING TO GET A
LOT MORE ATTENTION, GET HIS NAME IDEA.
HE IS GOING TO FLOAT SOME PEOPLE AND SEE WHAT PART OF
THOSE INDIVIDUALS OUTSIDE HIS BASE POTENTIALLY FLOCK TO HIS
VP. JONATHAN: EQUITY FUTURES ARE POSITIVE.
COMING UP NEXT, CHINA'S FACTORY BEATING EXPECTATION.
THIS IS "BLOOMBERG." JONATHAN:
EQUITY FUTURES POSITIVE ON S&P. ON THE NASDAQ, THERE IS YOUR
OUTPERFORMANCE ON TH
E SMALL CAPS.
WE WILL ASK THE QUESTION, IS IT REAL OR NOT A LOT.
IN THE BOND MARKET, THINGS JUST STABILIZING ON THE TWO-YEAR. 4.5 917.
THE INTERESTING BREAKOUT THE LAST FOUR WEEKS HAS BEEN IN THE
COMMODITY MARKETS. COPPER HAS BROKEN OUT.
GOLD, ALL-TIME HIGHS. COPPER UP. ENERGY BREAKING OUT. ENERGY STOCKS UP BY SOMETHING
LIKE 10%. ANNMARIE: I AM STUNNED BY BRENT CRUDE.
JONATHAN, WHEN I LOOK AT A NUMBER LIKE THAT, THIS HAS TO
BE A HEADACHE FOR THE WHITE HOUSE. DO THEY HAVE TO THINK OF A
DRAWDOWN?
THIS IS THE WORST TIMING THIS
ADMINISTRATION COULD POTENTIALLY HAVE FOR A BREAKOUT.
JONATHAN: IS IT JUST A SUPPLY-SIDE STORY? SUBTLE SIGNS THAT MAY BE THEY
START TO REBOUND. ANNMARIE: ABSOLUTELY.
YOU ARE SEEING A PICKUP IN CHINA.
OPEC HAS BEEN RATCHETING BACK PRODUCTION.
WE WILL GET A MEETING ON WEDNESDAY WHERE THEY WILL BE
FOUR THAT WE ARE KEEPING SOME OF THAT PRODUCTION.
PART OF IT HAS TO DO WITH THE FACT THAT THE SUPPLY IS COMING
THE USA. JONATHAN: WTI -- UNDER SURVEILLANCE, BUSY
WEEK FOR FED
DATA. WE WILL HEAR FROM THEM EVERY
DAY THIS WEEK. ANOTHER ROUND OF JOBLESS CLAIMS
FOLLOWED BY THE MAIN EVENT, PAYROLLS ON FRIDAY. 200,000 FOR THE MONTH OF MARCH.
I WANT TO TALK ABOUT THE DATA. WHAT IS MORE IMPORTANT TO YOU?
YOU GET THE FEELING THAT MAYBE THINGS ARE SHIFTING AWAY FROM
API AND SHIFTING MORE TOWARDS PEOPLES. >> I WOULD SAY IT IS STILL
ABOUT INFLATION DATA. I THINK ON THE JOBS DATA, WE
HAVE TALKED A LOT ABOUT SMALL CAPS AND ONE THING WE HAVE SEEN
HISTORICALLY IS WHEN YOU GET THE NE
GATIVE INFLECTIONS, THAT
TENDS TO BE CLOSE TO THE SMALL-CAP PERFORMANCE.
IT IS AN IDEA THAT THE CYCLICAL PARTS OF THE MARKET BAKE IN
PAIN EARLY. AND THEN YOU GO AHEAD AND BUY
IT ON THE DISCOUNT. I AM A LITTLE LESS CONCERNED
ABOUT THE LABOR MARKET DATA. THAT NEWS COULD END UP BEING
GOOD NEWS FOR THE FED CALL, SO I HAVE A HARD TIME.
IF WE DO NOT GET THE BAD NEWS AND THEY COOPERATE, THEY COULD
STILL CUT. ANNMARIE:
JAY POWELL SAID HE WILL NOT SEE OVERREACTING WHEN IT COMES TO
CPI, BUT WHAT HAPPENS I
F IT IS NOT TWO MONTHS AND THAT CPI
GIVES US INSIGHT INTO IF IT IS MORE STICKY. >> THAT IS FAIR.
IF YOU GO BACK TO THE 1940'S, WE DID SEE INFLATION AND AND
FLOW. I DO THINK THAT THEY ARE RIGHT
TO BE VIGILANT, GOING FORWARD. THIS FED HAS GOTTEN SO.
I DO NOT BLAME THEM FOR BEING CAUTIOUS. JONATHAN: YOU WILL GET CPI AND SOME BANK
EARNINGS AS WELL. OFFICIALS ARE SAID TO OPEN A
TEMPORARY CHANNEL. THIS IS PART OF A PHASED
APPROACH AS THEY SCRAMBLE TO REMOVE DEBRIS.
DEPARTMENT OF TRANSPORTATION ANNOUNC
ING $60 MILLION GOING
TOWARDS WE BUILDING THE BRIDGE. THE BIDEN ADMINISTRATION
CALLING ON CONGRESS TO FUND THE REST. WE WERE TALKING ABOUT THE
DIFFERENCE BETWEEN HAVING THE MAJORITY AND HAVING CONTROL.
WHO HAS CONTROL OF THE ISSUE AT THE MOMENT? ANNMARIE:
THIS ISSUE WILL BE BIOTIN REMINDING CONGRESS THAT THEY
NEED TO ACT. TAKE A LOOK AT WHAT MARYLAND
GOVERNMENT SAID OVER THE WEEKEND. HE SAID THIS WOULD IMPACT AN
AUTO DEALER IN OHIO AND A RESTAURANT OWNER IN TENNESSEE.
HE SAID THIS IS NOT A MARYL
AND ISSUE. THIS IS A NATIONAL ISSUE
BECAUSE THIS IS WHAT THE ISSUE IS GOING TO BE.
YES, TECHNICALLY THE REPUBLICANS HAVE CONTROL OF THE
HOUSE THAT THEY CANNOT GET ANYTHING THROUGH WITHOUT
DEMOCRATS SUPPORTING. JONATHAN: WAS IT A CHALLENGE TO GOODS
DISINFLATION? A STEP BACK IN THE LAST FEW
MONTHS. HOW MUCH OF A CHALLENGE IS IT? >> IT IS SOMETHING THAT YOU
WANT TO HAVE REASONS TO BE VIGILANT THERE. GOODS INFLATION COMING UP WEST
MAY BE A LITTLE BIT OF A BIGGER BUMP. I THINK IT IS AN IMPORTANT
ISSU
E. WE WILL HAVE TO SEE HOW IT
PLAYS OUT. I THINK IT BRINGS THE VOID
INFRASTRUCTURE DISCUSSION BACK INTO FOCUS. IT HAS INTERESTING
RAMIFICATIONS DOWN THE ROAD. AT LEAST HE HAS DONE SOMETHING
ON THAT FRONT. I THINK WE ALL ASSUMED EVER WE GET OUT OF, MAYBE IT IS AN
INTERESTING AREA OF BIPARTISAN AGREEMENT STARTING TO EMERGE.
JONATHAN: THAT IS A GOOD POINT. MAJOR BUMPS IN THE ROAD OVER IN
CHINA. CHINESE STOCKS GAINING. RISING TO 51.1, MARKING THE
SIXTH STRAIGHT MONTH. TROUBLES REMAIN IN THE PROPERTY
SECTOR. THE VALUE OF NEW-HOME SALES
SLIDING 46% FROM A YEAR EARLIER. ENDA CURRAN JOINS US TO BREAK
DOWN SOME OF THE DATA. LET'S TALK ABOUT THIS.
YOU HAVE THE OFFICIAL READ. WHAT ARE THEY SAYING, I WONDER. >> THEY ARE SAYING IT IS
LOOKING FIRMER IN CHINA NOW. BOTH IN POSITIVE TERRITORY,
BOTH BEATING EXPECTATIONS. WHEN YOU LOOK AT THE DATA, THEY
ARE SUGGESTING THAT NEW EXPORT ORDERS ARE DOING WELL ALSO.
THERE IS MOMENTUM. THAT GELS WITH THE IDEA THAT
CHINA'S EXPLOITS ARE RECOVERING AS WELL.
IT LO
OKS LIKE THE INDUSTRIAL PART OF THE ECONOMY IS DOING OK.
THE BIG QUESTION WILL BE WHETHER THIS INDUSTRIAL UPSWING
PROVES TO BE SUSTAINABLE. WE HAD A FORESTALL, BUT RIGHT
NOW IT LOOKS LIKE A POSITIVE PART OF THE ECONOMY FOR SURE.
JONATHAN: COPPER BACKS UP AT REBOUND AS
WELL. WHAT IS IRON ORE TELLING YOU,
GIVEN THE PLUNGE THAT WE HAVE SEEN OVER THE LAST MONTH? >> IT IS A CURIOUS PROXY. WHERE IRON ORE WAS GOING, THAT
IS WHERE CHINA'S ECONOMY WAS GOING, BUT IRON ORE FIRED ALL
EXPECTATION. THIS YAKYM
THE STORY IS MEANT
TO BE ONE OF PUTTING MORE SUPPORT INTO THE ECONOMY. AS YOU MENTIONED, IT IS NOT
BEING TRANSLATED INTO COMMODITY PRICE OR THE IRON ORE PRICE.
PROBABLY SPEAKING, THERE ARE CONCERNS ABOUT HOW MUCH
STOCKPILING THERE IS. DO NOT STRAY TOO FAR FROM NOT
TARGET. MANY WILL TELL YOU THAT EVEN
THOUGH IT IS AMBITIOUS, IT WILL HAVE SOME FLOW TO COMMODITY
MARKET. ANNMARIE: WE ARE LOOKING AT THE NUMBERS
COMING OUT OF CHINA. IS THIS THE RESURGENCE, COMING
OUT OF COVID, THAT EVERYONE WAS WAITI
NG FOR? >> THAT IS A GOOD QUESTION.
THE CONSUMER SIDE OF THINGS IS FAIRLY DOWNBEAT.
THE ONGOING SENTIMENT IS IN THE DOLDRUMS, SO TO SPEAK.
HOUSING DEMAND HAS YET TO TURN A CORNER. LET'S NOT FORGET THAT THERE ARE
CONTENTIONS. PLENTY OF RIVAL TRADING
GOVERNMENTS ARE DOING WELL AND QUESTIONING WHETHER CHINESE
PRODUCTS ARE BEING DUMPED INTO MARKET AND WHETHER OR NOT THAT
IS IMPACTING THEIR OWN PRODUCTION. IT COULD END UP STOKING MORE
POLITICAL TENSION. I WOULD SAY THIS IS A BRIGHT
SPOT BUT WE STILL
HAVE A LONG WAY TO GO. ANNMARIE:
WHEN IT COMES TO ESTATE AND PROP MARKET, WHAT CAN THEY DO
TO PROP THIS UP? >> AGAIN, A LOT OF OBSERVERS
WAITING FOR THIS REBOUND HAVE WONDERED WHY HAVE THEY NOT
TAKEN MORE STEPS TO GET THE REAL ESTATE STORY GOING AGAIN?
IT GOES BACK TO WHAT CAN THEY DO TO TACKLE BAD DEBT? WHAT CAN THEY DO THOSE PROPERTY
DEVELOPERS? RECAPITALIZE AND GET THEM GOING
AGAIN. THEY HAVE BEEN TAKING INCREMENTAL STEPS TO BRING DOWN
COSTS AND MAKE IT EASIER TO GET FINANCE THING.
UNTIL THEY
REALLY DO SO THE PROPERTY STORY, THEN IT WILL
REMAIN AS A DEADLY ON THE CONSUMER STORY. WHEN YOU LOOK AT CHINA'S
ECONOMY , IT IS REAL ESTATE AND ASKING WHEN WILL IT TURN WARNER?
JONATHAN: I WANT TO TALK ABOUT OTTO'S. THE AUTO SECTOR IN CHINA RIGHT
NOW. THIS IS HOW THE MARKET HAS RESPONDED.
ANNOUNCING A PLAN TODAY THAT PROVIDES UP TO 1,000,000,001 --
ONE BILLION YOU AND -- YUAN. BETTER TRADE-IN FOR CUSTOMERS'
USED CARS. SOME OF THOSE MANUFACTURERS
WILL BRING THE CHALLENGE TO THE U.S.
WALK US THR
OUGH HOW THE TENSION IS BUILDING ACROSS THE WORLD
RIGHT NOW FROM THE U.S., TO EUROPE, TO CHINA. PLEX THERE IS A VIEW -- I
REMEMBER SPEAKING TO AN INDUSTRIAL EXECUTIVE LAST YEAR,
MAKING THE POINT THAT IT WAS DURING THE COVID YEARS THAT THE
REST OF THE WORLD MISSED A STEP AND CHINA RAISED THEIR HEAD ON
THE EV FRONT. THEY WERE VERY WITH A HUGE
MARKET SPACE THERE, THE SHIFT TO THE EV SPACE IS VERY MUCH TO
HOMEGROWN COMPANY. WE ARE SEEING THOSE TENSIONS
WITH WORRIES ABOUT CHEAPER CHINESE COMPETITORS
AND HOW DO
GOVERNMENTS TACKLE THAT? IT IS ONE OF THE HOT BUTTON
POLITICAL TOPICS IN EUROPE AND ELSEWHERE, HOW TO HANDLE AND
COMPETE WITH EV'S. THE INDUSTRIAL PRODUCTION
RECOVERY STORY IS ABOUT SOLAR PANELS AND KEEP TECH COMPONENTS
AS WELL. THEY DUMPING ON THE MARKETS
HERE? WHAT WILL THAT MEAN POLITICALLY?
THIS REMAIN A KEY TOPIC. JONATHAN:
ANNMARIE IS THE FRONTLINE RIGHT NOW. ANNMARIE: IT IS NOT JUST EV SHE WAS
TALKING ABOUT. SHE WAS TALKING ABOUT SOLAR
PANELS. MOST ECONOMIES THE WEST THINK
THAT
THEY ARE DUMPING IT. THEY SAY IT IS THE LAST WHICH
THEY SAY IS VERY RICH. THEY SAY IT IS THE U.S.
THAT IS THE PROBLEM. JONATHAN: THEY ARE DRIPPING WITH IRONY. A LITTLE BIT LATER IN THE
PROGRAM, WE CAN GET THAT PICTURE AND COMPARE IT TO THE
MODEL THREE TESLA. THEY LOOK LIKE THE SAME VEHICLE.
IF I HAD TOLD YOU THAT WAS A TESLA, WOULD YOU BELIEVE ME?
ANNMARIE: YES, ESPECIALLY WHEN YOU DO NOT
SEE ANY BATHING. MAYBE THE COLOR.
I DO NOT THINK TESLA DOES THAT COLOR. JONATHAN:
LET'S GIVE AN UPDATE ON S
TORIES ELSEWHERE. >> THE BANK OF JAPAN'S LOVE --
SUPPLY OF BONDS IS SET TO SHRINK.
THEY ARE ESTIMATED TO FALL BELOW THE AMOUNTS OF MATURING
DEBT FOR THE JULY TO SEPTEMBER PERIOD.
THEY ARE SPECULATED TO START SLOWING THIS MONTH.
50% OF ALL OUTSTANDING DEBT. IT WILL NOT LIKELY MID -- THIS
INTERBANK IS KEEPING PLANS IN PLACE TO OFFER CHEAP LOANS,
ENCOURAGING BANKS TO PURCHASE DEBT. A BREACH OF DATA AT AT&T IS
AFFECTING CURRENT AND FORMER CUSTOMERS.
THE DATA LEAKED ON THE DARK WEB AND INCLUDES PERSO
NAL
INFORMATION LIKE SOCIAL SECURITY NUMBERS.
THE SOURCE OF THE DATA IS STILL BEING INVESTIGATED AND IT IS
NOT KNOWN WHETHER IT CAME FROM THE COMPANY OR A VENDOR. BACK IN FEBRUARY, IT
EXPERIENCED THE WIDESPREAD OUTAGE THAT TOOK HOURS TO
RESOLVE AND IS NOW BEING INVESTIGATED BY THE FEDERAL
GOVERNMENT YET TESLA IS INCREASING THE PRICE OF ITS
MOST POPULAR SPORTS UTILITY VEHICLE. THEY ARE NOW $1000 MORE
EXPENSIVE. THE HIKE WAS WIDELY TELEGRAPHED
FROM THE. CHINA'S AUTOMAKERS ARE PILING
INTO TAKE ADVA
NTAGE. THAT IS YOUR BLOOMBERG BRIEF.
JONATHAN: UP NEXT, A PATIENT JAY POWELL. >> GROWTH UNDER 2% THIS YEAR IS ROUGHLY WHAT THIS YEAR LOOKS
LIKE. WE ARE NOT IN A HURRY TO CUT.
JONATHAN: THIS IS BLOOMBERG. ♪ JONATHAN:
LIVE FROM NEW YORK CITY, EQUITIES BOUNCING BACK.
ADDING SOME WEIGHT TO THE PRESENT RALLY OF MORE THAN 10%. LET'S CHECK IN ON BYD UNIT
SALES. UP 46% YEAR ON YEAR. THE GROWTH IS NOMINAL. THIS IS WHERE THE COMPETITION
IS RIGHT NOW IN A MAJOR WAY. ANNMARIE:
IT IS WHY YOU SEE THE U.S. POT
ENTIALLY ADDING MORE AND NOT
ALLOWING CHINA'S VEHICLES TO COME IN.
THEY WANT TO MAKE SURE THAT THEY CAN HAVE THEIR OWN
AUTOMAKERS COMPETITIVE. BUT JONATHAN, LOOK AT THESE
NUMBERS HAPPENING IN CHINA. YOU ARE SEEING THEM CUT PRICES
JUST REMAIN COMPETITIVE. JONATHAN:
UNDER SURVEILLANCE THIS MORNING, A PATIENT CHAIR POWELL.
>> THE ECONOMY IS STRONG. WE SAW GROWTH OVER 3%. MANY SEE FORECASTERS -- THAT
MEANS WE DO NOT NEED TO BE IN A HURRY TO CUT.
CAN RATE AND BECOME MORE CONFIDENT THAT INFLATION IS
C
OMING DOWN ON A SUSTAINABLE BASIS. JONATHAN: REINFORCING BETS THE CENTRAL
BANK WILL CUT RATES LATER THIS YEAR.
WE WILL HEAR FROM HIM LATER ON WEDNESDAY.
MIKE MCKEE JOINS US AROUND THE TABLE. YOU DREW THE SHORT STRAW.
ANY CHANGE ON THE DATA GOING INTO THE -- INTO THE WEEKEND?
MIKE: NO CHANGES. IT CAME AND LITTLE BELOW WHAT
HE FORECASTED. BASICALLY WHAT WE ARE SEEING IS
INFLATION IS CONTINUING TO COME DOWN, BUT IT HAS SLOWED ITS
PROGRESSION. TOWEL WAS ASKED, WHY DON'T YOU
CUT ANYWAY? HE SAID, WE D
O NOT WANT TO MOVE
THE MARKETS AROUND. WE DO NOT WANT A LOT OF
VOLATILITY. WE WANT PEOPLE TO THINK WE ARE
MOVING IN THE RIGHT DIRECTION AT THE RIGHT TIME.
WE ARE GOING TO BE CAREFUL. HE JUST JUSTIFIED IT. >> WAITING TO SEE IF FEBRUARY
CONFIRMS OR NOT. THE SPIKE IN JANUARY IS SAID TO
BE A ONE-OFF FLUKE. IS THAT HOW YOU CHARACTERIZE IT?
>> A FLUKE IN TERMS OF THE EXTRA ADDED, BUT WE ARE STILL
SEEING STRENGTH IN HIRING. STRENGTH IN SPENDING. THE PCE SPENDING NUMBERS CAME
IN , A PHENOMENAL TURNAROUN
D FROM JANUARY.
WE ARE SEEING THE U.S. ECONOMY RUNNING AHEAD OF
POTENTIAL GROWTH, WHICH IS A WARNING SIGN FOR A FED WORRIED
ABOUT INFLATION. >> WHAT DO YOU THINK IS MORE
IMPORTANT OVER THE NEXT COUPLE OF WEEKS? >> THE JOB NUMBERS WILL ADD TO
HOW STRONG THE ECONOMY IS, BUT THERE WILL BE A LOT OF DATA TO
ABSORB. THAT IS WHAT THEY HAVE BEEN
LOOKING AT. THEY WILL PUSH. JONATHAN:
A LOT OF PEOPLE ARE ASKING THAT QUESTION BECAUSE THERE SEEMS TO
BE AN EMPHASIS ON THE LABOR MARKET. WHAT DO YOU MAKE OF TH
AT SHIFT,
IF WE CAN CALL IT A SHIFT? >> I DO NOT KNOW IF IT IS A
SHIFT AS MUCH AS AN INSURANCE STATEMENT.
WE ARE FOCUSED ON CUTTING RATES. IF WE HAD A SITUATION WHERE THE
ECONOMY WAS GOING INTO RECESSION , WE WOULD CUT RATES
MUCH FASTER. HE IS AVOIDING USING THE WORD
RECESSION. ANNMARIE: THEY TALKED ABOUT DIVIDING
CRITICS INTO EQUAL PARTS, SAYING THOSE WHO THINK WE
SHOULD CUT, STAY THE SAME OR HIKE. IF THAT IS WHERE YOU ARE,
WOULDN'T THAT SHOW THE FED AT A PERFECT POSITION? MIKE: IT SHOULD, BUT
IT IS ALWAYS THE
FED'S FALL. YOU DO HAVE HALF THE PEOPLE
THINKING THAT THE FED NEEDS TO CUT AND HALF OF THEM THINKING
THAT IT NEEDS TO RAISE. YOU CAN SAY THAT PLAYING OUT ON
SOCIAL MEDIA. THEY DO FEEL LIKE THEY ARE IN A
GOOD POSITION BECAUSE THE ECONOMY IS STRONG BUT INFLATION
IS STILL GOING DOWN AT THIS POINT. JONATHAN: WHAT IS THE DISTANCE BETWEEN
THE REST OF THE COMMITTEE? MIKE: BASICALLY EVERYONE IS MOVING IN
THAT DIRECTION. IT IS PUSHING PEOPLE.
WE SAW IN MARCH THAT A NUMBER OF PEOPLE HAD M
OVED UP AND THEY
WOULD NOT BE WILLING TO CUT. IF THE ECONOMY CONTINUES ALONG
THIS PATH, YOU PROBABLY WILL SEE A TWO DOT PLOT. JONATHAN: HOW DIFFERENT WITH THE
CONVERSATION HAVE BEEN IF WE DID GET THE SHIFT FROM THREE TO
TWO? LORI:
I DO NOT THINK IT WOULD HAVE BEEN ENOUGH TO PREDICT THE
BUBBLE, BUT IT COULD HAVE DAMPENED ENTHUSIASM A LITTLE
BIT. WE HAVE RUN THE NUMBERS AND IF
WE RUN OUR VALUATION MODEL THROUGH THAT STRESS TESTS, I DO
NOT THINK -- IF WE TAKE THEM ALL OUT, I DO NOT THINK IT
KILLS T
HE MARKET, BUT IT COULD FLATTEN US FOR A LITTLE BIT.
JONATHAN: CAN I BRING UP THAT? WHAT IS THE DIFFERENCE BETWEEN
THE TWO? LORI: WHEN YOU ASK, I STARTED BACK IN
10,000. THESE COMPANIES HAD THE EARNINGS TO BACK UP THE
VALUATIONS. THE EARNINGS GROWTH ADVANTAGE
IS ACCELERATING. THERE IS RATIONALITY BUT IT IS
NOT A STUPID MARKET. JONATHAN:
MIKE MCKEE BREAKING DOWN THE ECONOMY. THANK YOU VERY MUCH.
COMING UP FOR THE NEXT HOUR, WE WILL CATCH UP. AROUND THE TABLE FOR THE NEXT
50 MINUTES OR SO. AND ED
FROM COLUMBIA.
PEOPLE TALK ABOUT THE POTENTIAL THAT ISRAEL MAKES A MOVE IN THE
NEXT FEW WEEKS. ANNMARIE: AXIOS SPEAKING ABOUT TALKING TO
THE BIDEN ADMINISTRATION TODAY. THEY GO IN, IT IS THE WAY THAT
THEY GO IN THAT MATTERS. JONATHAN:
ADDING TO THE RALLY, CLOSING OUT Q1 WITH ALL-TIME HIGHS.
THE SECOND HOUR OF BLOOMBERG SURVEILLANCE, UP NEXT. ♪ THE >> CHAIR POWELL WILL HAVE
SOME COMMUNICATION CHALLENGES AHEAD. >> THEY HAVE A COMMUNICATION
PROBLEM RIGHT NOW. THE MARKETS ARE REALLY
DEPENDENT ON THE
M BEING DOVISH. >> IT IS POSSIBLE THAT THEY
START TO CUT AND THE ECONOMY STARTS TO ACCELERATE. >> THIS IS BLOOMBERG
SURVEILLANCE. JONATHAN:
LEAVING BEHIND SOLID GAINS. GOOD MORNING.
THIS IS BLOOMBERG SURVEILLANCE. THE SECOND HOUR BEGINS NOW.
ALONGSIDE ANNMARIE HORDERN, I AM JONATHAN FERRO. IF YOU ARE STARVED FOR FED
SPEAK THIS WEEK, YOU WILL NOT BE ON A DIET.
LOOK AT THIS LINEUP. BARKIN AGAIN ON FRIDAY AND A
WHOLE LOT MORE. IT IS PAYROLLS FRIDAY.
YOUR EQUITY MARKET ON THE S&P 500 ON THE FIRST TR
ADING DAY OF
APRIL, EQUITIES LOOK LIKE THIS. CLOSING OUT AT ALL-TIME HIGHS. PLENTY TO TALK ABOUT THIS HOUR.
WE WILL CATCH UP. SCRAMBLING TO ABSORB CARGO. AXIOS REPORTING THE U.S.
AND ISRAEL WILL HOLD A VIRTUAL MEETING TODAY. AND LIKING LONG AND BONDS.
KICKING OFF THE SECOND QUARTER. JP LOW SKI THANKS THE RALLY CAN
EXTEND, WRITING, WE ARE OPTIMISTIC NOT ONLY ABOUT 24,
BUT THE OTHER YEARS AS WELL. THE DIFFERENCE IS THAT THIS
TIME, IT IS GLOBAL. JAY JOINS US RIGHT NOW.
DOES THE ECONOMIC DATA BACK S
OME OF THAT UP THIS MORNING? >> I THINK IT DOES.
IT IS NOT ONLY THE DATA. WE VOTE A PIECE CALLED LISTEN
TO STOCKS. WE WANT TO PAY ATTENTION TO
WHAT THE MARKET ARE TELLING US. IT IS NOT JUST STOCKS BUT
CREDIT. AND COMMODITIES RIGHT NOW ARE
BIG. IT IS NOT JUST ENERGY. IT IS NOT JUST GOLD OR COPPER.
IT IS ALL OF IT. THAT IS TELLING US THAT THERE
IS AN OPPORTUNITY AND THE GLOBAL ECONOMY, AS WE HAVE BEEN
SAYING SINCE THE FALL IS EARLY CYCLE. JONATHAN:
HOW WOULD YOU FRAME IT? >> I WOULD FRAME IT AS BO
TH. THE FACT IS THAT MOST PEOPLE
HAVE NOT BEEN INVESTING IN ECONOMIES.
NOW WE ARE COMING TO A POINT WHERE THAT LACK OF INVESTMENT
IS GOING TO BITE AT THE SAME TIME A GLOBAL ECONOMY IS
SETTING UP FOR A CONSIDERABLE PERIOD OF GOOD ECONOMIC NEWS.
THAT COMBINATION AND THE FACT THAT VERY FEW PEOPLE ARE
INVESTED THERE AND UNDERSTAND THAT COMMODITIES ARE THE BEST
ASSET CLASS IN THE WORLD ON THE YEAR TO DATE. COMMODITIES, PEOPLE.
IT IS SIMPLY BUYING THE STUFF THAT PEOPLE STILL USE.
NOT MUCH IS HINGED ON
CHINA BECAUSE IT HAS BEEN A WEEK
STORY AND COMMODITIES HAVE DONE WELL. THEY ARE FORWARD-LOOKING MECHANISMS. THEY KNOW MORE THAN
YOU, ME, EVEN YOU, JOHN. COMMODITIES ARE THE WORLD'S
BEST-PERFORMING ASSET CLASS. PMI IS BETTER-THAN-EXPECTED.
RAISING THE ESTIMATE. YOU ARE TALKING ABOUT THE
SECOND BIGGEST ECONOMY IN THE WORLD LOOKING LIKE IT IS
STARTING TO PICK UP. JONATHAN:
I GUESS THE CAVEAT AROUND THAT IS IT DEPENDS WHEN YOU GET
EXPOSURE TO IT. I'M GOING TO SHARE THIS WITH
THE AUDIENCE. WE KNOW T
HE DISCREPANCY, ONE
THAT WILL INCREASINGLY HAVE ALL OF CHINA TO DOMINATE.
THAT IS DOMINANT. CAN YOU BUILD THAT UP A LITTLE
MORE? >> I ALSO WROTE A COUPLE MONTHS
AGO A PRO TO. WHEN YOU HEAR ON INVESTABLE,
INVEST. IT CANNOT GET ANY WORSE. I THINK THE POINT ABOUT THE
TECH IS REALLY INTERESTING. THERE ARE A LOT OF THINGS
SETTING UP TO CREATE A BIG OPPORTUNITY.
MARKETS HAVE ALREADY MOVED IN TECH.
YOU WANT TO BE LOOKING FOR NEW AREAS OF OPPORTUNITY.
IT ALLOWS US TO GO FROM POINT A TO POINT B, ETC. WE
HAVE BEEN TRYING TO FREEZE
CHINA OUT OF ADVANCED TECHNOLOGY.
THEY GOT THE MESSAGE. THEY HAD TO BUILD THEIR OWN. NOW THEY ARE SAYING, FINE, YOU
CANNOT PLAY IN OUR TEXT SPACE. DO YOU WANT TO BE INVESTED IN A
MARKET OF 1.4 BILLION PEOPLE GROWING AT 6% PER ANNUM WITH A
MARKET THAT IS DOUBLE THE SIZE OF THE U.S., 10 PSI RUSH 10
TIMES THE SIZE OF JAPAN AND TRADES AT A DISCOUNT? TENCENT TRADES -- CHINA OVERALL
TRADES AT NINE TIMES EARNINGS. NOBODY OWNS IT.
I THINK IT IS AN INTERESTING STORY IN THE SEGW
AY.
K WEB CAN DOUBLE. AND DOUBLE AGAIN, AND STILL NOT
GET TO THE LEVEL OF 2021. THE 2021 HI WAS $121.
THAT COMMENT TO ME IS A NO-BRAINER.
FULL DISCLOSURE, WE OWN IT. JONATHAN:
HE WILL JOIN US IN THE PROGRAM THE NEXT HOUR.
HOW IMPORTANT IS THAT PHRASE GOING TO BE IN YEARS TO COME? >> OUR FRAMEWORK IS REGIONAL
INTEGRATION IN THE THREE MAIN REGIONS.
ALL OF THIS STUFF IS HAPPENING AS ONE WOULD EXPECT. SUPPLY CHAIN, REGIONALIZATION,
DEVELOPMENT. EVERYBODY NEEDS AI AND CLIMATE
PROOF, EVERYONE NEEDS EL
ECTRIC VEHICLES AND BATTERIES.
THESE ARE THINGS THAT ARE DRIVING INTEGRATION. I THINK CHINA IS IN A MUCH
STRONGER POSITION THAT PEOPLE -- THEN PEOPLE GIVE IT CREDIT
FOR. THE REASON THEY WILL DOMINATE
IS THE BIGGEST, FASTEST GROWING REGION. >> IT IS STRIKING THAT YOU HAVE
SUCH CONVICTION IN CHINA. WE ARE HEARING THAT THEY ARE
JUST GOING TO UP THE ANTE. WE ARE LISTENING TO SEE IF THEY
WILL SANCTION THE CHIPMAKERS. HOW MUCH DOES THAT CONCERN YOU? >> THERE IS A RACE GOING ON.
THEY ARE TRYING TO GET
INDEPENDENT AND WE ARE RACING
TO FREEZE THEM OUT. THE POINT THAT WE SEE IS THE
U.S. TRYING TO FREEZE CHINA IS ALREADY IN THE PRICE.
ANYBODY WHO DOES NOT WANT TO INVEST IN CHINA IS ALREADY
GONE, LONG GONE. FINE. WE DO NOT NEED THEM TO COME IN. I WILL TAKE THE FIRST DOUBLE
AND LEAVE THE SECOND TO SOMEBODY ELSE. >> A TARIFF WALL DOES NOT
MATTER? >> SURE, IT WILL MATTER.
ANNMARIE: BUT IF THEY BUILD WITHIN. >> I DO NOT THINK HE WANT TO
BET AGAINST THEIR ABILITY TO CONSTRUCT WHAT THEY NEED TO IN
-- WH
AT THEY NEED TO CONSTRUCT. JONATHAN:
WHAT ARE THE RISK FACTORS AROUND THIS? >> IF THE FORMER PRESIDENT
WINS, AS I HAVE SET ON THIS SHOW, I BELIEVE JOE BIDEN WILL
WIN BY A LANDSLIDE, BUT IF THEY WERE TO IMPLEMENT THE TARIFF
STRUCTURES THEY TALKED ABOUT, THAT WILL SET THE CHINESE
MARKET BACK. BY THE SAME TOKEN, AS WE
ADVANCE, CHINA'S OWN DYNAMICS SHOULD GET BETTER.
IT SHOULD BE BETTER DEALT WITH TO FOCUS ON MOVING FURTHER DOWN
THE ROAD. WE HAVE THE ABILITY TO CHANGE
OUR MIND AND POSITIONS. WE WILL
LOOK AT THAT WHEN THE
TIME COMES, BUT THAT IS A BIG WORRY BECAUSE EVERYTHING ELSE
IS IN THE PRICE. ALIBABA DOES NOT GROW AS MUCH
AS IT DID BEFORE. THE SAME IS HAPPENING IN THE
U.S. TEXT SPACE. THE OTHER POINT IS THAT THESE
COMPANIES IN CHINA ARE JUST LIKE THE U.S. COMPANIES.
THEY ARE CASH MAKING MACHINES AND THEY ARE PAYING DIVIDENDS.
I THINK THE RISK REWARD IS SOME OF THE BEST IN THE WORLD
BECAUSE THE RISK IS ALREADY IN THE PRICE AND THE REWARD IS
STARTING TO MATERIALIZE. JONATHAN:
I'M SURE YO
U HAVE CONVERTED A FEW NONBELIEVERS. IT IS 2025 AND 2020 SIX.
WHY HAS THIS BEEN EXTRAPOLATED OUT? IT FEELS MUCH MORE LONGER-TERM. >> WE PUT OUT A PIECE IN THE
BEGINNING OF NOVEMBER. THE TITLE WAS, SURPRISE,
SURPRISE. WE HAD LOWER INFLATION, SOONER
THAN EXPECTED, BETTER PRODUCTIVITY GROWTH.
ALL OF THOSE PLAYING OUT WITH A RETURN TO STABILITY ARGUMENT.
LOOK AT THE MOVE, LOOK AT THE FED. WITH ALL RESPECT, I PAY
VIRTUALLY NO ATTENTION TO THAT ANYMORE. JONATHAN: WE JUST HAD AN EIGHT MINUTE
CONVERSATI
ON AND THAT IS HOW LONG IT TOOK FOR YOU TO MENTION
THE FEDERAL RESERVE IN YOUR WHOLE THESIS. >> IT DOES NOT MATTER.
THE IMPORTANT THING IS THAT THE FED AND THE MARKETS ARE IN SYNC
AFTER BEING OUT OF SYNC. NOW WE ARE BOTH AT THREE AND
GUESS WHAT, THAT HAPPENED WITHOUT A RIPPLE OF MARKET ON
THESE. THAT IS ONE OF THE THING THAT
TELLS ME THAT THIS MARKET IS A STRONG MARKET.
IN OUR VIEW, WE ARE EARLY CYCLE AND HAVE MADE A RETURN TO
STABILITY. THE FED IS OUR FRIEND NOW.
THE REST OF THE WORLD IS PICKIN
G UP. WE LOOK AT 2023 TO 2027, THAT
BODY OF TIME IS VERY MUCH I CAN -- YOU HAD PRODUCTIVITY
INSPIRED GROWTH, LOWER INFLATION, GOOD EARNINGS GROWTH.
THIS TIME IT IS GLOBAL AND IT IS GLOBAL BECAUSE OF THE
MATERIAL AND THE FACT THAT EVERYBODY HAS TO SPEND ON AI,
ON CLIMATE, ON ELECTRIC VEHICLES.
YOU ARE A MUCH MORE STABLE GLOBAL.
YOU NOW HAVE THREE CENTERS THAT WILL BE GROWING INDEPENDENTLY
OF EACH OTHER. THE QUESTION IS, WHO BALANCES
BEST IN THE PRIVATE AND PUBLIC SECTOR?
THESE ARE HUGE INVESTMENT
S, GAME CHANGING INVESTMENTS.
WHO MANAGES THAT BEST? THAT IS ONE OF THE REASONS WHY
WE LIKE EUROPE. EUROPE HAS MORE EXPERIENCE THAN
ANY REGION, AND GETTING EVERYBODY ON THE SAME PAGE.
LOOK AT THE U.S. AND CONGRESS. NOT REALLY AN EXAMPLE OF GREAT
GOVERNANCE. LOOK AT CHINA STUMBLING AFTER A
REALLY GOOD RUN. CHINA DOMINATES, THE FASTEST
GROWING REGION IN THE WORLD. WE LOOK AT EUROPE, INTEGRATING AND BEING FORCED BY CONFLICT TO
INTEGRATE, MULTIPLE COUNTRIES SPENDING TOGETHER, RAISING DEBT
TOGETHER,
SO YOU WILL SEE THAT CAPITAL MARKET INTEGRATION.
WE LOOK AT THE AMERICAS AND WE SEE MEXICO, WHICH WE HAVE -- IT
IS THE FLAGSHIP. BIGGEST BENEFICIARY OF WHAT IS
GOING ON IN THE AMERICAS. WE INVESTED IN POLAND AND WE
ARE INVESTED IN CHINA. FOR US, IT IS AN EXCITING BLUE
SKY PERIOD AHEAD. THE FACT THAT MOST PEOPLE ARE
NOT THERE, PEOPLE HAVE GOTTEN ONTO THE TACTICAL TRADE.
IF YOU ARE NOT ON THE TACTICAL TRADE, YOU ARE PROBABLY NOT
WORKING ANYMORE, BUT TO US COME THE GOOD NEWS IS THAT WE SEE
THE PROC
ESS MOVING FOR MULTIPLE YEARS AND WE ARE STILL EARLY IN
THAT. WE ARE ALREADY DOUBLE WEIGHTED
COMMODITIES. WE ARE JUST MOVING FROM POINT A
TO POINT -- POINT B. >> IS STICKING WITH US THROUGH
THE REST OF THIS HOUR. POSITIVE BY ONE THIRD OF 1%.
WITH AN UPDATE, HERE IS YOUR BLOOMBERG BRIEF. >> THE TURKISH PRESIDENT
SUFFERING A STRIKE BEAT. FALLING BEHIND THE MAIN
OPPOSITION, THE REPUBLICAN PEOPLE'S PARTY OVER THE WEEKEND.
SUPPORT FOR THE RULING PARTY IS AT ITS LOWEST ON RECORD AS THE
NATION BATTLES
RAMPANT INFLATION AND HIGHEST BORROWING
COSTS SINCE THE PRESIDENT SWEPT TO POWER.
SPECIALISTS ARE STARTING THE DAUNTING TASK OF CLEARING
DEBRIS FROM THE FRANCIS SCOTT KEY BRIDGE.
THEY ARE MODIFYING THEIR OPERATIONS TO DIVERT CARGO FROM
BALTIMORE HARGER -- HARBOR. AND EPS HAS ANNOUNCED AN
EXPANSION OF ITS PARTNERSHIP WITH THE U.S. POSTAL SERVICE.
AFTER AN INITIAL TRANSITION PERIOD, IT WILL BECOME THE
PRIMARY AIR CARGO PROVIDER. JONATHAN:
UP NEXT, RACING TO REOPEN THE PULTE -- PORT OF BALTIMORE. >
> THAT IS THE MAIN WAY TO GET
INTO THE PORT OF BALTIMORE. IT IS IMPORTANT TO GET THAT
PORT BACK UP AND RUNNING AS QUICKLY AS POSSIBLE. JONATHAN:
GOOD MORNING. ♪ JONATHAN:
EQUITIES DOING OK ON THE S&P 500. JUST ABOUT UNCHANGED. UNDER SURVEILLANCE THIS MORNING.
RACING TO REOPEN THE PORT OF BALTIMORE. >> THAT IS THE ONLY WAY TO GET
INTO MOST OF THE PORT OF BALTIMORE.
IT IS IMPORTANT TO OUR NATIONAL SUPPLY CHAINS TO GET THAT PORT
BACK UP AND RUNNING. THE WORK IS ALREADY GETTING
UNDERWAY. JONATHAN: T
HE LATEST THIS MORNING,
ESTABLISHING A TEMPORARY CHANNEL TO ACCESS THE PORT OF
BALTIMORE AS OTHER PORTS SCRAMBLE TO MODIFY OPERATIONS. THIS IS FOLLOWING CAN YOU TALK
TO US ABOUT HOW EASIER IT IS TO REDISTRIBUTE SOME OF THE CARGO
THAT WAS MEANT FOR THE PORT AND TAKING IT ELSEWHERE? >> IT IS A LARGE PORT, BUT NOT
ONE OF THE LARGEST ONES IN THE U.S.
IT IS A BIG PLAYER IN EXPORT:. PART OF IT COULD GO TELENOR FOR.
DOES A LOT OF BUSINESS WITH AUTOMOBILES AND CONSTRUCTION
EQUIPMENT. NONSELF WILL PROBAB
LY HAVE TO
MOVE TO PHILLY OR NEW JERSEY. YOU WILL SEE THOSE TYPES OF
PRODUCTS BE MOVED. ON AN INTERMODAL BASIS, IT IS
NOT A MAJOR CONTAINER PORT. IT IS MAY NUMBER 11 OR 10.
BUT IT COULD GET EASILY ABSORBED IN THE PORT OF NEW
YORK OR PHILLY. THIS IS GOING TO BE A
SHORT-TERM KIND OF DISTURBING UNTIL THE CHANNEL IS CLEAR.
IT IS UNKNOWN HOW LONG THAT WILL TAKE.
WE HAVE SEEN ESTIMATES BETWEEN SIX TO 12 WEEKS.
I AM A LITTLE BIT OF A PESSIMIST, SO MAYBE MORE.
THE IMPACT WILL BE FELT ON SUPPLY CHAINS, B
UT IT WILL NOT
BE A MAJOR BLOW LIKE WHEN WE WERE HANDLING THE PANDEMIC.
IT WOULD BE LESS OF AN IMPACT FROM WHAT WE ARE SEEING IN THE
SUEZ CANAL WERE WITH THE WHO THE REBELS. >> THE ALTERNATIVE CHANNEL,
THIS IS WHAT THEY WANT TO TRY TO ESTABLISH.
THEY TALK ABOUT THIS BEING FOR COMMERCIALLY ESSENTIAL VESSELS.
WHAT DOES THAT MEAN, EXACTLY? WHAT IS DEEMED ESSENTIAL? >> THAT IS A FANTASTIC QUESTION
AND I DO NOT KNOW THE ANSWER TO THAT.
I WOULD IMAGINE PRODUCTS LIKE HEALTH CARE PRODUCTS AND THINGS
THA
T WE NEED, NOT THINGS THAT WE WANT. I DO NOT KNOW HOW THEY WOULD
FIND THOSE NEEDLES IN A HAYSTACK .
IT MIGHT BE VERY HARD FOR THEM TO DO THAT.
I THINK WHAT THEY WILL DO IS TRY TO FIND SOME PRIORITY FOR
SOME FREIGHT THAT NEEDS TO GET IN AND OUT THE PORT, BUT IT
REMAINS TO BE SEEN. >> HOW MUCH DO YOU THINK THE
FOCUS ON GETTING THE PORT UP AND RUNNING PLAYS OFF OF THE
ABILITY OF PENNSYLVANIA AND GOVERNOR SCHAPIRO TO REOPEN 95
IN SUCH A QUICK PERIOD OF TIME? IT SEEMS U.S.
OFFICIALS ARE MORE FOCUSED
ON BEING ABLE TO USE THESE CRISES
AS DEMONSTRATIONS OF ABILITY TO GET THINGS DONE RATHER THAN
HUGE PROBLEMS THAT ARE GOING TO TAKE FOREVER TO FIX.
IS THAT YOUR SINS AS WELL? >> AT A TIME -- THIS IS A
REACTION RATHER THAN SOMETHING BEING PROACTIVE.
THE HIGHWAY THAT STRETCHED ALONG THE BRIDGE IS KIND OF
SMALL COMPARED TO I-95 OR THE BW PARKWAY.
THOSE HIGHWAYS WILL SEE MORE TRAFFIC. IT WILL NOT IMPACT MORE TRUCK
TRAFFIC AS FAR AS THEM HAVING TO GO TO DIFFERENT ROUTE. THE IMPACT ON HIGHWAYS IS
PROBA
BLY NOT GOING TO BE THAT MEANINGFUL.
IT WILL IMPACT THE PEOPLE WHO USE THE BRIDGE EVERY DAY MORE
SO THAN TRUCK TRAFFIC. JONATHAN:
THE CONVERSATION STARTED ABOUT REBELS IN THE RED SEA AND THEN
THE CONVERSATION SHIFTED TO THE PANAMA CANAL.
WHERE ARE FREIGHT RATE? WE TALKED ABOUT HOW IT COULD BE
TEMPORARY. HAS IT BEEN TEMPORARY? >> OUR THESIS HAS BEEN THAT
THESE LOCATIONS ARE SHORT-TERM IN NATURE.
THEY CREATE KNEE-JERK REACTIONS TO RATES. RATES ARE DOWN ABOUT 50% FROM
LAST YEAR. THE -- TRANSATLANTI
C ARE UP. WHAT WE ARE SEEING ON THE
TRANSPACIFIC SIDE, THEY PEAKED BACK DURING THE PANDEMIC AND IT
HAS BEEN A SLOW REVERSION. THE SUPPLY DEMAND DYNAMICS ARE
NOT FAVORABLE. A LOT OF SUPPLY COMING ONTO THE
MARKET. WE SHOULD SEE CONTINUED
DEFLATIONARY PRESSURES AS IT REALLY. WHEN YOU ARE LOOKING AT
TRUCKLOAD RATE, A TOTALLY DIFFERENT MARKET, BUT SPOT
RATES RIGHT NOW ARE PRETTY DEPRESSED AND POISED TO
REBOUND, BUT WE ARE STILL ALONG THE BOTTOM.
WE EXPECT RATES TO START INCHING UP HIGHER WITH MORE
ME
ANINGFUL DIRECTION IN THE SECOND QUARTER.
THAT SHOULD BE GOOD FOR TRUCKING COMPANIES. JONATHAN:
GOOD TO TOUCH BASE WITH YOU. WE REFLECTED ON THIS LAST WEEK.
IS SOME -- IS EVERYTHING MORE FRAGILE OR ARE BAD THINGS
HAPPENING MORE OFTEN? ANNMARIE: WHAT I FIND INTERESTING IS THAT
A LOT OF THESE PORTS HAD PEAK CAPACITY DURING COVID AND THEY
STARTED TO LESSEN THAT, SO THEY CAN ABSORB SOME OF THE SHOCKS.
JONATHAN: THE U.S. AND ISRAEL WILL MEET VIRTUALLY
TODAY AS THE PRIME MINISTER PROMISES TO PRESS ON
IN RUSSIA. JONATHAN: DOUBLE-DIGIT GAINS.
LET'S JUST SAY THAT WAS LARGELY UNEXPECTED. EQUITY FEATURES POSITIVE.
ONE THIRD OF 1% ON THE NASDAQ. THE NASDAQ IN MARCH DID
BASICALLY NOTHING. I DO NOT THINK ENOUGH IS TALKED
ABOUT WITH THAT. ELSEWHERE, THE BANKS. >> ABSOLUTELY.
IT IS THE WAY THE MARKET IS MOVING. PEOPLE ARE LOOKING FOR
OPPORTUNITIES. THINGS GET EXPLOITED THESE DAYS.
IT WAS TECH. THE THINGS THAT WORKED OVER THE
LAST MONTH OR SO IS COPPER AND ENERGY. COPPER MINORS ARE UP. IT IS THAT TYPE
OF MARKETPLACE
WHERE THINGS GO FROM POINT A TO POINT B. >> I WILL GO STRAIGHT TO THE
COMMODITIES BOARD. COPYRIGHT NOW IS VERY CLOSE.
I WANT TO TALK ABOUT GOLD. WHAT DO YOU THINK IS GOING ON
WITH GOLD? WHAT IS UNDERPINNING THAT? >> GOLD IS BREAKING OUT.
MULTIPLE ARE BREAKING OUT AT THE SAME TIME, SUGGESTING IT IS
A STRONG MOVE. PEOPLE ARE UNDER CAP -- UNDER
ALLOCATED. FOR GOLD IN PARTICULAR, WHAT IS
INTERESTING IS THAT THE BIGGEST BUYERS OF GOLD ARE OTHER
CENTRAL BANKS. THIS IS ANOTHER EXAMPLE OF
THE
U.S. SANCTION POLICY MAY BE SHOOTING
ITSELF IN THE FOOT A LITTLE BIT. YOU SEE A LITTLE DENT OF DOLLAR
EROSION. YOU SEE EVERY DAY TALK ABOUT
TAKING RUSSIAN ASSETS AND USING THEM TO REBUILD UKRAINE.
MAYBE A GOOD POLICY MOVE, BUT IT MAKES OTHER BANKS AND
MANAGERS THINK ABOUT HOW MUCH THEY WANT TO HAVE EXPOSED THERE.
JONATHAN: HOW RELEVANT IS IT TO THIS?
THERE IS A SENSE IN SOME QUARTERS.
MOHAMMED WAS TALKING ABOUT ACCEPTING THE HIGHER INFLATION
RATE, GOING BEYOND 2.0. DOES THAT GET BAKED INTO
THE
COMMODITY PRICE AS WELL? >> FOR GOLD IT IS THE RATES. IT OPENS THE DOOR FOR GOLD TO
START TO MOVE. ONE OF THE THINGS WE ARE
WAITING TO SEE IS FOR THE DOLLAR TO ROLL OVER.
IT GIVES OTHER PARTS OF THE WORLD BANK EMERGING-MARKET, AN
OPPORTUNITY TO MOVE AS WELL. THAT IS THE SECOND PART OF THE
STORY. GOLD IS MOVING FIRST. THE RATE
CUT CYCLE WILL BE THE MOST SYNCHRONIZED SINCE 2008.
THEY ARE GOING TO CUT. THAT DOOR OPENS AND GOLD IS
OPPORTUNITY TO MOVE ON. JONATHAN: MAYBE HIKING RATES. THE DOLLAR-
YEN HAS DONE
VIRTUALLY NOTHING ALL MORNING. POSITIVE BY 0.9%.
NO SHORTAGE OF FED SPEAK THIS WEEK. SCHEDULED TO SPEAK AT 19
EVENTS. REITERATING THAT THE CENTRAL
BANK IS NOT IN ANY RUSH TO CUT RATES ANYTIME SOON.
REPORTS COMING OUT AHEAD OF PAYROLLS. YOU WILL HEAR FROM THEM.
THE LIST GOES ON AND ON THROUGHOUT THE WEEK. ANNMARIE:
WE ALREADY HEARD FROM POWELL. I WISH HE WAS SPEAKING FRIDAY
AGAIN AFTER THE JOBS REPORT. OUR SURVEY IS EXPECTING 200,000
JONATHAN: I WILL NOT EVEN ASK WHAT HE
THINKS ABOUT
THE FEDERAL RESERVE, JUST NEXT STORY. $1000 MORE EXPENSIVE.
THE WEBSITE DISPLAYED THE HIGHER PRICES IN THE U.S.
AND CHINA. MONEY COUNTER TO OFFERS. I IMAGINE THIS WAS TO BUY AHEAD
OF THE PRICING INCREASE. THE PRICING WAS INTENSE.
THEY HAVE COME OUT AND ANNOUNCED A PLAN THAT DIVIDES
GRAFT TO 130 $8 MILLION FOR DRIVERS OF GASOLINE CARS TO
MAKE A SWITCH. ANOTHER COMPANY CAME OUT AND
SAID THEY WOULD COVER THE COST OF PURCHASES AND SELECTED
MODELS, PLUS SELECTED TRADE-INS. YOU THINK OF A MORE COMPET
ITIVE
MARKET THAN THE CHINESE AUTO MARKET? >> WHAT I LOVE ABOUT THAT IS
THAT THEY ARE COMMUNISTS. HOW DOES THAT EVEN WORK?
IT IS REALLY INTERESTING. TO US, THEY HAD PRODUCTION IN
SHANGHAI AND PRODUCTION IN THE AMERICAS. NOW YOU SEE THEM DOING THE SAME
THING, SETTING UP A PLANT IN HUNGARY, WANTING TO SET UP A
PLANT IN MEXICO. TESLA IS REALLY AN INTERESTING
FIGHT TO SEE. BYD IS LIKE LEADING AND. AND DOING FINE IN CHINA AGAINST
TESLA. THEY ARE PRICING THE SAME.
ELECTRIC AND ICE IS THE SAME PRICE.
T
HAT WILL BE A KILLER FOR THE REST OF THE AUTOMAKERS AROUND
THE WORLD. ANNMARIE: TIER POINT, THIS HYBRID PUSH
THAT PEOPLE ARE LOOKING AT. IT WAS FLAGGED, BUT IT COMES AS
THEY TOLD EMPLOYEES THEY WILL NOT PRODUCE AS MANY.
THEY WENT FROM A 6.5 DAY WORKWEEK. JONATHAN:
THE DIFFICULTY OF DOMINATING THREE OF THOSE MARKETS
SIMULTANEOUSLY. WE GET THE SENSE THAT
GOVERNMENTS ARE BASICALLY DETERMINED NOT TO ALLOW BYD TO
SUCCEED MYSTICALLY. WE SPEAK TO THE CAR COMPANIES
AND THIS IS WHAT IT SOUNDS LIKE ON REC
ORD.
ON THE RECORD, THEY ARE WILLING TO COMPETE. WHAT WE ARE HEARING FROM
OFFICIALS. ARE THERE COMPANIES THAT CAN BE
SUCCESSFUL SIMULTANEOUSLY? >> THE BEST COMPANIES WILL BE
THE COMPANIES THAT ARE ABLE TO DO THAT. THEY ARE THINKING. THEY ARE PARTICIPATING THROUGH
FORD. THEY HOPE TO BE ABLE TO PUT A
PLANT IN MEXICO. THE CHALLENGE WILL BE THE
DRIVER IS THE CLIMATE AND WE NEED TO DEAL WITH CLIMATE AND
GET OUR NUMBERS ON THE CLIMATE. THE CHINESE HAVE DOMINATED THE
RENEWABLE PRODUCT LINE. SO, HOW DO
YOU SQUARE THAT UP?
WE NEED TO DO THIS MANY PEOPLE EASE TO HIT OUR CARBON NEUTRAL
TARGETS. THE CHEAPEST ARE CHINESE, AND
THEREFORE WHAT DO WE DO? I THINK THAT IS A POLICY
QUESTION. THE WORLD IS MOVING IN THIS
TRI-PULLER PROCESS, AND THESE COMPANIES ARE THE ONES THAT ARE
LEADING THE CHARGE. JONATHAN: A BIG STORY THIS YEAR. U.S. AND ISRAEL SET TO MEET TO
DISCUSS ALTERNATIVE PROPOSALS. THE MEETING FOLLOWING COMMENTS
FROM BENJAMIN NETANYAHU SAYING THEY ARE PREPARED TO MOVE MORE
THAN ONE MILLION PALE
STINIAN CIVILIANS OUT BEFORE LAUNCHING
AN ATTACK ON THE SOUTHERN GAZA CITY. JOINING US IS THE SENIOR ADVISOR FOR THE PROJECT AND A
FORMER SENIOR U.S. INTELLIGENCE OFFICIAL.
CAN YOU TALK TO US ABOUT ALTERNATIVES?
WHAT DO YOU EXPECT THE ALTERNATIVES ARE? >> THE NATURE OF THE TALKS TELL
YOU SOMETHING ABOUT THE ALTERNATIVES. THIS IS AN INTERAGENCY TEAM LED
BY THE NATIONAL SECURITY ADVISOR.
IT IS NOT TACTICAL OPERATIONS. THEY DO NOT NEED TO WORK IN
THOSE AREAS. THEY NEED TO FOCUS ON THE INNER
CITY WH
ERE THE TUNNELS ARE LOCATED.
THE QUESTION BECOMES, HOW DO YOU MOVE PORTIONS OF THE
POPULATION TO OPEN UP AREAS OF THE CITY, LIKELY IN A STAGED
PROGRESSION? THE CHALLENGE IS THAT HAMAS'S
PRIMARY DEFENSE IS TO FIGHT FROM BEHIND CIVILIANS BECAUSE
CIVILIAN CASUALTIES CREATES PRESSURE THAT RESTRAINTS ISRAEL.
ANNMARIE: IS THE MEETING POLITICAL?
HAS ANY OTHER NETWORKED AND MATERIALIZED? >> THE POLITICAL PRESSURE
PLACED ON ISRAEL IS CERTAINLY GENUINE, BUT IT IS MEANT TO
ENSURE THAT THE ADMINISTRATION IS
CONDUCTED IN SUCH WAY THAT
PRODUCES THE LEAST AMOUNT OF HOSTAGES. THE CHALLENGE OF HOW TO BE
INVOLVED ENOUGH TO SAVE LIVES BUT NOT DEEPLY ENOUGH THAT IT
IS PART OF AN OPERATION THAT WILL INEVITABLY LEAD TO
CASUALTY, IF ONLY BECAUSE HAMAS PROPAGANDA NO CLAIM IT.
ANNMARIE: OVER THE WEEKEND, THE
WASHINGTON POST REPORTED THAT THEY QUIETLY SIGNED OFF ON
ANOTHER ROUND OF WARPLANES AND BONDS HEADED TO JERUSALEM AND
TEL AVIV. >> THE WEAPONRY PROVIDED TO ISRAEL PRIMARILY CONSISTED OF
EXPLOSIVES THAT ARE
CRITICAL IN BRINGING DOWN TUNNELS.
IT CAN BE USED IN A WAY TO MINIMIZE CIVILIAN CASUALTIES.
THE BIDEN ADMINISTRATION CAN SLOW THE DELIVERIES.
THEY NEED THIS TO WORK AGAINST IRANIAN OPERATIONS IN SYRIA.
IT IS UNLIKELY THE U.S. WILL CUT A, BUT THEY CAN
CONSTRAIN IT. ANNMARIE: IF WE ARE LOOKING AT FUTURE
AID, DO YOU THINK THIS ADMINISTRATION WOULD SIGN OFF
ON WHAT SOME PROGRESSIVES IN THEIR OWN PARTY ONE, WHICH IS
STRINGS ATTACHED TO WEAPONS GOING TO ISRAEL? >> IT IS UNLIKELY BUT ONLY
BECAUSE OF T
HE COMPLEXITY OF THE STATEMENT.
IF THE STRINGS ARE THE ISRAEL WITHDRAWS FROM GAZA, THEN THEY
WILL PROBABLY PUSH OUT THE PALESTINIAN AUTHORITY, WHICH
LEAVES A HAMAS STATE IN GAZA ON THE BORDER OF JORDAN, WHICH IS
A SOMEWHAT FRAGILE STATE. THEY HAVE A COMPLEX
GEOPOLITICAL DYNAMIC, BUT CONCERNS OVER CIVILIAN LOSSES
ARE GENUINE. JONATHAN: THE PRESIDENT APPEARS TO HAVE
SET A BED LINE. WHAT DO YOU THINK THE
CONSEQUENCES ACTUALLY ARE IF THEY CROSS THAT PERCEIVED BED
LINE? WHAT KIND OF CHANGE IN POLICY
WOULD IT GENERATE? >> THE BED LINE IS DIFFICULT TO
UNDERSTAND BECAUSE U.S. SUPPORTS ISRAEL ERADICATING
HAMAS, IT IS JUST ABOUT HOW IT IS DONE. AS LONG AS THEY DO NOT CREATE
HUGE CASUALTIES. IF ISRAEL CROSSES THE LINE, I
THINK YOU WOULD SEE A LARGER DEPOSIT IN AID. WE SAW A DISPUTE OVER A $10
BILLION A PACKAGE. IT WAS MATTEL UNTIL THE ISRAELI
GOVERNMENT MADE EXCEPTIONS. IT HAS BEEN REALLY CHALLENGED
AND EVEN STAYING BY THIS EVENT AND IT WILL TAKE SOME TIME TO
RECOVER. JONATHAN:
WONDERFUL TO GET Y
OUR VIEW ON THIS STORY. >> OPENAI IS EXPANDING IT
FOOTPRINT. THEY ARE SET TO OPEN AN OFFICE
IN TOKYO. IT WILL BE THE COMPANY'S FIRST
LOCATION IN ASIA AFTER OPENING BRANCHES IN DUBLIN LAST YEAR.
THEY HAVE BEEN IN TALKS TO RAISE. A BIG DATA BREACH IS AFFECTING
MORE THAN 70 MILLION CUSTOMERS. THE COMPANY SAYS THE DATA
LEAKED ON THE DARK WEB INCLUDES PERSONAL INFORMATION LIKE
SOCIAL SECURITY. THE SOURCE OF THE DATA IS STILL
BEING INVESTIGATED AND IT IS NOT KNOWN WHETHER HE CAME FROM
A COMPANY OR A V
ENDOR. BACK IN FEBRUARY, THEY
EXPERIENCED THE WIDESPREAD OUTAGE THAT TOOK HOURS TO
RESOLVE AND IS NOW BEING INVESTIGATED BY THE FEDERAL
GOVERNMENT. IN THE MARCH MADNESS TOURNAMENT, THE MEN'S TEAM
CONTINUING THEIR SHOCKING RUN WITH A WIN OVER DUKE.
THE VICTORY HAS THE WOLFPACK BACK IN THE FINAL FOUR FOR THE
FIRST TIME SINCE IT WON THE CHAMPIONSHIP IN 1983. THE WOMEN'S TOURNAMENT, FACING
OFF TONIGHT IN A REMATCH OF LAST YEAR'S NATIONAL
CHAMPIONSHIP GAME. JONATHAN: THIS IS WHERE THE MAN FROM DUKE
S
AYS HE DOES NOT CARE ABOUT BASKETBALL, RIGHT? >> MORE THAN I DO ABOUT THE
FED, A DISAPPOINTING OUTCOME, BUT I AM FOCUSED ON DUKE
FOOTBALL. WE ARE FOOTBALL FOCUSED HERE.
JONATHAN: I HAVE TO DO THIS EVERY YEAR.
I THINK WE DO THAT EVERY YEAR. FINAL FOUR.
I WAS MESSAGING HIM YESTERDAY. I SAID SEMIFINALS AND HE SAID
NO, IT IS THE FINAL FOUR. I'M ADJUSTING.
CHAIR POWELL STICKING TO THE SCRIPT.
FLEX INFLATION HAS BEEN COMING DOWN.
WE WILL BE CAREFUL ABOUT THIS DECISION BECAUSE WE CAN BE.
JONATHAN: FIND
ING A WAY TO WEIGH IN ON
FED SPEAK. THIS IS BLOOMBERG. JONATHAN: EQUITIES ON THE S&P.
THE SILENCE AROUND THE TABLE. FUTURES POSITIVE.
THEY ARE SO EXCITED ABOUT SPORTS AND BASEBALL. POSITIVE ONE THIRD OF 1% YIELDS
ABOUT UNCHANGED. UNDER SURVEILLANCE THIS MORNING
FOR SOME OF US AT LEAST. CHAIRMAN POWELL STICKING TO THE
SCRIPT. >> WE DO NOT SEE IT APPROPRIATE
THAT WE WOULD BEGIN TO REDUCE INTEREST RATES UNTIL THE
COMMITTEE IS CONFIDENT THAT INFLATION IS MOVING DOWN TO 2%
ON A STEADY BASIS. >> WE CO
ULD HOLD RATES WHERE
THEY ARE FOR LONGER. LABOR MARKET IS STRONG RIGHT
NOW AND INFLATION HAS BEEN COMING DOWN.
WE WILL BE CAREFUL ABOUT THE DECISION BECAUSE WE CAN BE.
JONATHAN: INFLATION DATA COMING IN LINE
WITH EXPECTATIONS. ED WRITING THIS.
I SUSPECT WE ARE UNDERPRICING HOW MUCH EASING IS LIKELY TO BE
NECESSARY TO OFFSET THE NORMALIZATION THIS YEAR.
I LIKE OWNING LONG AND BONDS WITH THIS BACKDROP.
AND IS WITH US AROUND THE TABLE. GOOD MORNING.
THERE IS ANOTHER THING I WANT TO USE OF YEARS ON
THE FRAMING
OF THE POLICY. AS THE FED MOVED FROM LOOKING AT REAL RATE SETTINGS TO MAKING
RATE NORMALIZATION CONTINGENT. HOW WOULD YOU ANSWER YOUR OWN
QUESTION? >> NOT YET.
THE FOCUS REMAINS FIRMLY ON INFLATION AND THE JUDGMENT --
WE SAW CHAIRMAN POWELL REITERATED THAT. ONCE WE START FOCUSING ON
UNEMPLOYMENT, THE BUYER FOR STARTING THOSE RATE CUTS GOES
UP SIGNIFICANTLY HIGHER. JONATHAN: CPI NEXT WEEK.
IS CPI STILL THE BIGGEST NUMBER? ? DEFINITELY.
I THINK THAT IS RIGHT. THIS IS THE STRUGGLE THAT
THE
FED IS HAVING AT THE MOMENT. THEY ARE SO FOCUSED ON
SHORT-TERM DATA AND SHORT-TERM INFLATION DATA. THERE IS NOT REALLY A GREAT
FRAMEWORK FOR THIS ENVIRONMENT. WE ARE FEELING OUR WAY OUT IN
THE DARK AND THAT IS WHAT THE FED HAS REITERATED FOR US A
NUMBER OF TIMES. OUR WHEELBASE IN THE RIGHT
PLACE? THIS IS THE BIG QUESTION. THEY ARE SHYING AWAY FROM THAT
LATER QUESTION AND WE ARE FOCUSING ON SHORT-TERM
INFLATION. >> I HAVE TWO QUESTIONS FOR YOU.
ONE COULD ARGUE THAT MONETARY POLICY IS SUPERIOR
TIGHT.
WE KNOW WHAT HAPPENED AT THAT POINT IN TIME.
SECOND QUESTION, OUR FIRM IS BULLISH ON COMMODITIES.
DO YOU HAVE A COMMODITY VIEW BUILT INTO THAT?
IF THEY GO UP, DOES THAT MAKE YEAR LONG AND BUYING
RECOMMENDATION LESS ATTRACTIVE? >> COMMODITIES SPACE IS REALLY
INTERESTING AT THE MOMENT. GROWTH WAS SURPRISED SO
CONSISTENTLY OVER THE LAST YEAR AND A HALF. IF YOU LOOK AT THE SPAN OF THE
LAST SIX MONTHS, THEY WILL HAVE DOUBLED. FROM BELOW ONE TO A NEXUS, THIS
IS A FANTASTIC BACKDROP AND A LOT O
F IT HAS BEEN LED GLOBALLY
AND NOW POTENTIALLY ACCELERATING.
A PRETTY DECENT BACKDROP FOR COMMODITIES.
WHERE IT STARTS TO DISCONNECT FROM THE FED STRATEGIES, AND
NOT FED INTO UNDERLYING INFLATION.
WHILE PRICES BACK TO 12 MONTH HIGHS AND YET THEY HAVE
CONTINUED TO SYSTEMATICALLY DECLINE.
SQUEEZING OUT THAT LAST BIT. A FANTASTIC SPACE.
REMIND ME OF YOUR FIRST QUESTION. >> THE SPREAD OF FED FUNDS. >> THE QUESTION IS, WHAT IS THE
BENCHMARK FOR THAT? THIS IS VERY GET INTO THE
NEUTRAL RATE CONVERSATIO
N FOR THE FED. IT CLEARLY LOOKS LIKE IT HAS
DRIFTED HIGHER COMPARED TO FEBRUARY PRE-COVID. >> WE HEARD LAST WEEK, BUT
MAYBE LOOKING AT THE BROADER END, TWO REASONS, ONE SUPPLY
AND ANOTHER THE LIMIT OF EASING COMPARED TO WHAT YOU MIGHT GET
ELSEWHERE. HOW DO YOU THINK ABOUT THAT
VERSUS WHAT IS HAPPENING ABROAD? >> THE KEY DIFFERENTIATOR IS
THE DOMESTIC GROWTH STORY IN THE U.S.
WE ARE A RELATIVELY CLOSED ECONOMY AND HAVE NOT BEEN
IMPACTED TO THE SAME EXTENT BY THE ENERGY PRICE SHOCK. WE HAVE SEEN T
HAT IN THE
MANUFACTURING STORY IN EUROPE. WHERE I THINK IT GETS MORE
INTERESTING IS THE JUDGMENT CALL OF WHETHER WE CAN CONTINUE
TO SURPRISE GROWTH TO THE UPSIDE. WE SHUFFLED IN A WAY TO GROW
FASTER POST-COVID. SOME OF THE GROWTH THAT WE BROUGHT FORWARD -- THIS DINING
WHEEL WEIGHTS ARE A LITTLE BIT MORE ATTRACTIVE. >> I LIKE THAT BECAUSE IT
EXTENDS THE STORY. WE HAVE A VIEW WHERE IT IS A
CERTAIN PERIOD IN THE U.S. WHERE WE HAVE SEVERAL YEARS OF
SOLID ECONOMIC ACTIVITY AHEAD OF US. WE ARE SET UP
SUCH THAT RATES
COULD BE CUT IN 2025 AND THAT BACKDROP REINFORCES A PRETTY
POSITIVE OUTLOOK AND PROBABLY REINFORCES THE NON-US PLAY
BECAUSE THAT SHOULD LEAD TO DOLLAR WEAKNESS.
WHAT IS THE VIEW OF THE DOLLAR, GIVEN YOUR EXPECTATIONS?
OUR VIEW IS THAT WILL BE THE SECOND LEG FOR THE COMMODITY
CAKE, ETC. >> IT BEGINS WITH AGGRESSIVE
RATINGS. SOME OF THE MIDCYCLE
ADJUSTMENTS PROBABLY NOT GOING TO DO IT.
THEY WILL NEED TO DO A LITTLE BIT MORE.
THE OUTLIER EVENT IS A RISK OFF ENVIRONMENT.
THAT IS VERY
DIFFICULT TO PREDICT.
VALUATIONS RIGHT NOW ARE A LITTLE BIT ON THE RICH SIDE.
WHAT KNOCKS THAT OFF COURSE, I HAVE NO IDEA. JONATHAN: THANK YOU, SIR.
THANK YOU FOR THE LAST HOUR. ENJOYED THIS.
EVERY SINGLE MONTH. I LOVE IT. POSITIVE WITH A QUARTER OF 1%.
FORMER NEW YORK FED PRESIDENT BILL DUDLEY.
AND FORMER FED VICE CHAIR. A WHOLE LOT MORE STILL TO COME
IN THE THIRD HOUR OF BLOOMBERG SURVEILLANCE, UP NEXT. ♪ >> I THINK THE FED NEEDS TO BE
MARKET BASED AND NOT ACADEMIC BASE. >> THEY NEED TO CUT B
EFORE THEY
RISK STAYING HIGHER FOR TOO LONG. >> WE EXPECT DATA FORTHCOMING
TO GIVE THEM CONFIDENCE AND IT IS THE FED'S JOB TO TAKE THE
DATA AT FACE VALUE. >> THE BEST THING IS TO LOOK AT
THE DATA AND STANDBY THAT. NO MATTER WHAT THEY DO THEY
WILL GET CRITICIZED. >> I'M NOT CONCERNED ABOUT THE
FED CUTTING RATES. >> THIS IS "BLOOMBERG
SURVEILLANCE" WITH JONATHAN FERRO, LISA
ABRAMOWICZ, AND ANNMARIE HORDERN. JONATHAN: ENDING Q1 WITH EQUITIES
ALL-TIME HIGHS AND HIGH YIELD SPREADS AT MULTIYEAR HIGHS.
IF BRAMO WAS HERE SHE WOULD SAY
WHAT COULD GO WRONG? THE THIRD HOUR OF BLOOMBERG
SURVEILLANCE GREAT -- BEGINS RIGHT NOW.
WE ARE TOGETHER WITH PETER TCHIR OF ACADEMY SECURITIES.
LISA WILL BE BACK TOMORROW MORNING.
LET'S GET STRAIGHT INTO Q2. THIS IS WHAT WE ARE LOOKING FOR.
MONDAY PMI'S, THE ISM. TOMORROW THE JOLTS REPORT.
ADP ON WEDNESDAY TOGETHER WITH CHAIRMAN POWELL SPEAKING.
THURSDAY JOBLESS CLAIMS. FRIDAY THE PAYROLL REPORT.
NEXT WEEK, CPI AND BANK EARNINGS ON DECK.
EQUITIES KICKING OFF Q2
LOOK LIKE THIS ON THE S&P 500. FUTURES POSITIVE .25%.
YIELDS HIGHER BY A SINGLE BASIS POINT. COMING UP THIS HOUR, PETER
TCHIR OF ACADEMY SECURITIES ON WHY THE WATER -- ON WHY THE
MARKET COULD BE HEADED FOR A BIG ROTATION.
BILL DUDLEY SINGH LAST YEAR'S BANK RUNS COULD HAPPEN AGAIN,
AND FORMER FED VICE CHAIR AT RANDY QUARLES ON THE PATH
FORWARD. THE EQUITY MARKET RALLY CONTINUING AFTER THE S&P POSTED
ITS FIFTH STRAIGHT MONTH OF GAINS.
PETER TCHIR SAYING HE IS READY FOR ROTATION.
HE WRITES "I'M SO
SICK OF HEARING ABOUT THE MAGNIFICENT
SEVEN, FAB FOUR, OR WHATEVER. IT IS TIME -- I AM LOOKING FOR
ANYTHING TO STEER ME AWAY FROM THAT. THE RUSSELL 2000 SUDDENLY
OUTPERFORMING IS INTERESTING." PETER JOINS US AROUND THE TABLE
FOR MORE. IS IT MORE THAN JUST INTERESTING?
IS IT THE REAL DEAL? PETER: I'VE BEEN THINKING ABOUT THIS
MARKET AS ANYTHING DEPUTIZED INTO AI HAS BEEN DRIVING THE
MARKET. FOR THE LAST WEEK THE RUSSELL
2000 IS LITTLE BIT BETTER. PEOPLE ARE STARTING TO SAY
MAYBE BANKING IS OK, CO
MMERCIAL REAL ESTATE, BIOTECH HAS HAD
ITS UPS AND DOWNS. UNLIKE NOVEMBER WHEN WE SAW THE
ROTATION WITH STRONG GAINS, THIS TIME WE MIGHT GET TEPID
GAINS IN THE RUSSELL 2000 AND A SMALL PULLBACK IN THE NASDAQ.
JONATHAN: IS THE ROTATION ABOUT LOSING
LESS OR MAKING MORE? PETER: I THINK IT WILL BE ABOUT LOSING
LESS. WHERE A LOT OF THE FROTH IS HIS
IN THE NASDAQ 100. IT IS REALLY UNCHANGED IN ABOUT
A MONTH. IT KEEPS COMING UP. MAYBE IT IS A NEW HIGH.
UNLIKE THE S&P. THERE IS ROOM FOR THAT TO
TOPPLE AS
PEOPLE QUESTION WHETHER WE HAVE OVEREXTENDED ON
AI? AI WILL DRIVE THE FUTURE BUT THE QUESTION IS ARE YOU GETTING
IN A IN TODAY'S PRICING AND I'M NOT SURE EVERYONE IS GETTING
THAT. IF YOU SEE A PULLBACK THERE
IT'LL BE THE RUSSELL 2000. PEOPLE ARE LOOKING WHERE TO PUT
MONEY AT ALL-TIME HIGHS. ANNMARIE:
I WILL ASK YOU THE QUESTION I ASKED LORI CALVASINA.
WE HAD SO MANY ROTATIONAL FALL STARTS. WHAT MAKES YOU HAVE THE
CONVICTION THIS COULD BE AT? PETER:
IN THE FALL WE HAD A 22% RISE IN THE RUSSELL 2
000 VERSUS 11
AND THE NASDAQ. THAT IS THE SORT OF THING I'M
LOOKING AT. PEOPLE ARE GETTING TIRED ABOUT
THE SAME STORY. I HAVE COMMITTED TO AI, WHERE
WILL I PUT MY MONEY? YOU START PUTTING MONEY
ELSEWHERE. YOU SEE ENERGY DO WELL, MINING
IS DOING WELL. WE HAVE BANK EARNINGS NEXT WEEK.
REGIONALS DO WELL. THAT IS WHAT DRIVES IT.
ANNMARIE: JAY PELOSKY WAS TALKING ABOUT
ENERGY. HE ALSO LIKE SOFT COMMODITIES.
ARE YOU SEEING THE ENTIRE COMMODITY LANDSCAPE PUSH HIGHER?
PETER: I AM HARD COMMODITIES. ENERG
Y HAS BEEN THE BIG FOCUS.
WE ARE UNDERSTANDING THAT IF WE WANT SUSTAINABLE ENERGY WE HAVE
TO BUILD UP SUSTAINABLE ENERGY MORE RAPIDLY AND THAT WILL
REQUIRE COMMODITIES. WE ALSO UNDERSTAND WE NEED
TRADITIONAL ENERGY FOR THE NEXT 20 TO 30 YEARS.
THAT WILL BE BILLED OUT. THAT IS WHY THINK HARD
COMMODITY AND ENERGY IS BETTER. I'M NOT SURE ABOUT THE ACTS
STUFF. -- ABOUT THE AG STUFF? JONATHAN:
ARE YOU DOING THIS THROUGH THE EQUITY MARKET? PETER:
I PREFER THE EQUITIES. OUR STORY HAS BEEN ENERGY
COMPAN
IES OF THE FUTURE OF THE ENERGY COMPANIES OF TODAY.
PEOPLE SAY IT WILL ALL BE ABOUT WIND FARMS -- PEOPLE REALIZING
THE TRADITIONAL COMPANIES HAVE THE RESOURCES TO PROVIDE ENERGY
TODAY AND THE SKILLS TO PROVIDE ENERGY IN THE FUTURE, THAT IS
WHERE THE BIG BET IS. JONATHAN: STARTING TO SEE ENERGY PICK UP
10%. YOU HAVE AN INTERESTING TAKE ON
THE FEDERAL RESERVE. WE HAVE HEARD ECHOES OF THIS.
THEY HAVE NOT OFFICIALLY CHANGE THEIR TARGET BUT THEY SEEM TO
BE WILLING TO EASE MONETARY POLICY EVEN WHILE I
NFLATION
REMAINS CLOSER TO 3% THAN 2%. WHAT IS 100 BASIS POINTS
BETWEEN FRIENDS? PETER: I DO NOT THINK IT CHANGES THAT
MUCH. WE STARTED THE YEAR AT SIX RATE
CUTS AND WENT DOWN TO AS LOW AS 2.5. WE CAN MANAGE AROUND THAT. THERE IS LITTLE BIT OF FROTH
AND MAYBE IT IS DESERVED AS YOU SEE POWELL SHIFT HIS NARRATIVE
TO THINGS THAT ALLOW HIM TO CUT. NOBODY IS TALKING ABOUT THE
MARKETING THE WORK. IN NOVEMBER WHEN THE YIELDS
WERE HIGH -- NOW THE MARKET HAS UNDONE ALL OF THE WORK.
IT SEEMS TO ME THEY AR
E CONSTANTLY LOOKING TO PIVOT TO
SOME EXCUSE TO BE EASY. IF YOU ARE THE PERSON IN CHARGE
OF THE FED YOU DO NOT WANT TO BE THE ONE WHO DRIVES US INTO
RECESSION. NOW HE HAS FIGURED OUT A NEW
RATIONALE. YOU THINK JONATHAN: JONATHAN:
-- DO YOU THINK THE FED IS WORKING AGAINST THE MARKET OR
THE MARKET IS WORKING AGAINST THE FED? PETER:
I THINK WE ARE OK RIGHT NOW. THERE IS A DECENT BALANCE.
KNOW WHAT IS GOING CRAZY. WE ARE SAYING IT IS PROBABLY
THE END OF THE HIKING CYCLE. HAVING SAID THAT, AS SOME O
F
THIS DATA COMES THROUGH, WE MIGHT SEE A RESURGENCE.
THE OTHER TOPIC IS AS WE ARE SEEING INFLATION COMING DOWN,
PEOPLE ARE QUESTIONING DID WE EVER MANAGE TO MONITOR
INFLATION FOR LAST THREE YEARS? ARE WE HEAVILY UNDERSTATING?
YOU GO TO THE STORES AND IT IS NOT LOOK LIKE THINGS ARE UP 3%
OR 4% AND PEOPLE ARE QUESTIONING THE STARTING LEVEL
FROM THIS DECLINE. ANNMARIE: IF THE FED IS TRYING TO FIND AN
EXCUSE TO CUT, WHAT COULD THEY USE IN JUNE?
SAY THEY WANTED TO CUT IN JUNE BUT INFLATION IS STILL
ON THIS
PATH WHERE IT IS NOT EXACTLY WHERE THEY WANT IT TO BE BUT IT
IS MODERATING. IS THAT ENOUGH? PETER: I THINK IT COULD BE.
THEY WILL SAY IT IS LONG LAG TIMES THAT WE HAVE TO GET AHEAD
OF THIS. BEHIND THE SCENES, IF THEY CAN
AVOID CUTTING IN SEPTEMBER AND NOVEMBER THEY WOULD PREFER TO
DO THAT. IF YOU WANT TO GET TWO CUTS
DONE EARLY THIS YEAR YOU DO JUNE AND JULY AND LET THE
MARKETS ADAPT THAN THE NEXT ONE COMES IN DECEMBER IF WE ARE
STILL THERE. ANNMARIE: JOHN ASKED EARLIER, WHAT IS
MORE IMP
ORTANT, THE PAYROLLS NUMBERS ON FRIDAY OR INFLATION
NEXT WEEK? PETER: I THINK IT IS THE PAYROLLS.
THE MARKET HAS BEEN DRIVEN MUCH MORE BY THE GROWTH IN THE
ECONOMY AND IS ABOUT THE SPENDING ON THE AI.
OUR COMPANIES BENEFITING FROM THE AI, RAI COMPANIES GROWING?
ANNMARIE: WHAT ABOUT FOR THE FED? PETER:
I THINK FOR THE FED IT WILL BE THE JOBS NUMBER.
I THINK THEY ARE IN THE MODE WHERE THEY WILL CLOSE THEIR
EYES AND SAY IT IS GOOD ENOUGH. JONATHAN:
THAT WAS MY SENSE OF THINGS AS WELL.
THAT IS NOT T
HE ANSWER I GOT. THE ANSWER I GOT WAS CPI WAS
IMPORTANT. ED WAS TALKING UP CPI BEING
MORE IMPORTANT THAN PAYROLLS. WHAT I AM HEARING FROM CHAIRMAN
POWELL'S HE COULD BE WILLING TO MOVE EARLIER IF YOU SEE
SOMETHING HAPPEN WITH THE LABOR MARKET.
WHAT YOU SEE WITH THAT IN TERMS OF THE SHIFT OF EMPHASIS? PETER:
ONE OF OUR THEORIES INTO THE END OF THIS YEAR IS IN 2023 HE
WAS HAPPY TO CAUSE A RECESSION. IT WAS NOT HIS FIRST CHOICE BUT
IF HE GOT A RECESSION NOW. THERE IS NO WAY HE WANTS TO
CREATE AN ELE
CTION -- TO CREATE A RECESSION IN ELECTION YEAR
BECAUSE THAT HANDS THE INCUMBENT A LOSS.
THAT IS WHY THE BALANCE THIS YEAR IS IT IS MUCH MORE ABOUT
JOBS. JONATHAN: YOU INTRODUCE POLITICS.
DO YOU THINK HE IS WORRIED ABOUT THE INCUMBENT LOSING?
PETER: I THINK HE WANTS TO BE AS INDEPENDENT OF CAUSING AN
ELECTION RESULT AS HE POSSIBLY CAN, SO KEEPING THE ECONOMY ON
A STEADY FLOW. JONATHAN: THINKING ABOUT POLITICS SO HE
DOES NOT HAVE TO THINK ABOUT POLITICS? PETER: KIND OF.
ANNMARIE: YOUR TIMELINE SA
YS THEY NEED TO
MOVE SO THEY DO NOT LOOK LIKE THE CARE ABOUT POLITICS, BUT
NOT MOVING TO LOOK LIKE POLITICS, THEY DO CARE ABOUT
POLITICS. PETER: YOU HAVE ELIZABETH WARREN
WRITING LETTERS, YOU HAVE THE CURRENT PRESIDENT, NEW OF THE
FORMER PRESIDENT ON SOCIAL MEDIA. LET POLITICS TAKE CARE OF
ITSELF. JONATHAN: A BIG PART OF THIS IS THE BIG
ROTATION, WHETHER IT IS MAKING MORE OR LOSING LESS.
YOU SAID IT IS POTENTIALLY ABOUT LOSING LESS.
WHICH PART OF THE MARKET DO YOU THINK IS MOST VULNERABLE?
THE W
AY WE ARE SET UP, AND COMMODITY MARKETS WE HAVE
THINGS AT MULTI-YEAR HIGHS. GOLD IS AT AN ALL-TIME HIGH.
EQUITIES AT RECORD HIGHS. WHAT YOU THINK IS VULNERABLE?
WHERE WILL THE LOSSES BE? PETER: I THINK THE NASDAQ 100 IS THE
MOST SUSCEPTIBLE. YOU WILL HAVE INDIVIDUAL STOCKS.
THEY TRADE LEVERAGED ETF'S, WHICH SEEMS INSANE TO ME.
IT IS THERE. PEOPLE ARE TRADING THIS.
JONATHAN: IS THERE BECAUSE PEOPLE WANT IT.
PETER: IT SEEMS LIKE MEME STOCK STUFF.
I THINK THOSE THINGS START PULLING BACK.
I THINK CR
EDIT IS FINE. I THINK CREDIT IS GOOD.
SEPARATE FROM EVERYTHING ELSE PEOPLE SHOULD BE ALLOCATING TO
CREDIT IN TERMS OF MUNIS, AGENCY DEBT, THEN CREDIT. YOU'VE TECHNICALLY BETTER
GOVERNANCE AT THESE ENTITIES THAN YOU DO AT OF D.C..
JONATHAN: YOU WILL STICK WITH US.
THAT RAISES THE QUESTION ABOUT TREASURIES WE WILL HIT LATER.
EQUITIES PULLING BACK THE TOUCH. LET'S GET YOU IN UPDATE ON
STORIES ELSEWHERE. HERE IS YOUR BLOOMBERG BRIEF.
YAHAIRA: A MASSIVE SALVAGING EFFORT IS
UNDERWAY WITH CREWS CLEARIN
G DEBRIS FROM THE DESTROYED
FRANCIS SCOTT KEY BRIDGE IN BALTIMORE.
THIS AS PORTS ALONG THE U.S. EAST COAST ARE MODERATING THEIR
OPERATIONS TO ABSORB CARGO DIVERTED FROM BALTIMORE HARBOR.
THE FALLOUT IS EXPECTED TO BE CONTAINED AS NEIGHBORING
FACILITIES WITH SPARE CAPACITIES TWEAK THEIR
SCHEDULES. UPS ANNOUNCES IS EXPANDING ITS
PARTNERSHIP WITH THE U.S. POSTAL SERVICE.
AFTER A TRANSITION PERIOD IT WILL BECOME THE PRIMARY AIR
CARRIER. THIS AS FEDEX SAYS IT WAS
UNABLE TO REACH AN AGREEMENT TO EXTEN
D ITS CONTRACT WITH THE
U.S. AGENCY. GOLD IS HITTING ANOTHER RECORD
ON BETS THE FEDERAL RESERVE IS GETTING CLOSER TO CUTTING RATES
THIS YEAR. JUMPING AS MUCH AS 1.6% FROM
THURSDAY'S CLOSE. STRONG BUYING FROM CENTRAL
BANKS, PARTICULARLY IN CHINA. CONSUMERS DRAGGING UP DEMAND TO
MAKE ONGOING PROBLEMS IN THE WORLD'S SECOND-LARGEST ECONOMY.
JONATHAN: A SERIES OF ALL-TIME HIGHS OVER
THE LAST MONTH. UP NEXT, PREVENTING THE NEXT
BANKING CRISIS. >> WE FEEL VERY GOOD.
THERE BEEN THOUSANDS OF BANKS THAT F
AIL. THAT IS WHAT HAPPENS.
ON THE OTHER HAND, THE QUALITY OF THE BANKING SYSTEM IS STRONG.
JONATHAN: THAT CONVERSATION JUST AROUND
THE CORNER. LIVE FROM NEW YORK, THIS IS
BLOOMBERG. JONATHAN:
LOOKING FORWARD TO HAVING LISA WITH US TOMORROW MORNING GOING
TO PAYROLLS ON FRIDAY. THE ESTIMATE 200,000.
GOLDMAN FORECASTS PAYROLLS ROSE 215,000 IN MARCH.
MORE COVERAGE ON THAT THROUGHOUT THE WEEK.
EQUITIES ON THE S&P 500 JUST ABOUT POSITIVE .1%.
YIELDS CREEPING A LABATT HIGHER IN THE LAST 30 MINUTES OR S
O,
UP THREE BASIS POINTS. ON THE 10 YEAR, 4.2359.
PREVENTING THE NEXT BANKING CRISIS. >> COMMERCIAL REAL ESTATE IS A
SLOW BURN. IT IS A CLASSIC BURN. LATE 80'S AND EARLY 90'S WE HAD
A COMMERCIAL REAL ESTATE RECESSION.
DOES THAT MEAN BANKS MIGHT FAIL? THERE BEEN THOUSANDS OF BANKS
THAT FAIL OVER LAST 30 OR 40 YEARS. THAT IS WHAT HAPPENS.
ON THE OTHER HAND THE QUALITY OF THE BANKING SYSTEM IS STRONG.
JONATHAN: THE LATEST THIS MORNING.
ONE YEAR ON FROM SILICON VALLEY BANK WORRIES LINGER OVER A
CRIS
IS IN THE FINANCIAL SECTOR. BILL DUDLEY SINGH AND OTHER RUN
COULD HAPPEN, SAYING "REGULATORS HAVE BEEN FOCUSED
PRIMARILY ON SECURING LOSS ABSORBING CAPITAL AT THE
LARGEST FINANCIAL INSTITUTIONS. LESS ATTENTION HAS BEEN PAID TO
THE PROBLEM THAT PRECIPITATED LAST BRINGS BANKING CRISIS."
BILL IS WITH US FOR MORE. LET'S START THERE AND THEN WE
CAN LEAN INTO MONETARY POLICY. LET'S START WITH THE STRESS OF
THE SPRING OF 2023. WHAT WAS BEHIND THAT AND WHAT
HAVEN'T WE DONE TO ADDRESS IT? BILL:
THE PROBL
EM WITH SILICON VALLEY BANK FAILED.
THE PROBLEM WITH THE CONTAGION IS THAT GENERATED IN OTHER
BANKS. WHAT WE FORESAW AT THE TIME WAS
DEPOSITOR OUTFLOWS WERE MUCH FASTER THAN ANYONE HAD
ANTICIPATED. IT WAS THE MOST RAPID DEMISE OF
A BANK WE'VE EVER SEEN IN TERMS OF MONEY GOING OUT THE DOOR.
EVERYONE WAS FOCUSING ON INCREASING CAPITAL.
THEY WERE NOT FOCUSED ON HOW TO DO WITH THAT CONTAGION PROBLEM.
WE NEED TO BUILD UP THE FED'S LENDER OF LAST RESORT FUNCTION
SODAS POSITIVE SAID THEY DO NOT RUN.
ON
E WAY TO DO THAT IS TO PLEDGE TO THE DISCOUNT WINDOW OF THE
FED EQUAL TO LIABILITIES. IF YOU LET YOUR DEPOSITORS KNOW
THAT IS THE CASE THEY DO NOT HAVE A REASON TO RUN.
THE CONTAGION ISSUE WE NEED TO ADDRESS LAST MARCH. JONATHAN:
DO YOU THINK THE KEYS TO ANSWERING THAT QUESTION ARE AT
THE FED OR ELSEWHERE? I AM THINKING MORE ABOUT
DEPOSIT INSURANCE. IS THAT SOMETHING WE NEED TO
CHANGE QUICKLY? PETER: YOU COULD RAISE INSURANCE BUT
THAT WOULD REQUIRE CONGRESSIONAL REGULATION.
THE OTHER PROBLEM IS
THAT INCREASES WHAT CONGRESS CALLS
THE MORAL HAZARD. WE SAW DURING THE
SAVINGS-AND-LOAN CRISIS THAT SAVINGS AND LOANS WITH LOTS OF
INSURANCE DEPOSITS TAKES LOTS OF CRAZY RISKS. I THINK ADDRESSING CONTAGION IN
THE UNDERLYING FUNCTION IS A BETTER WAY TO GO TO GUARD
AGAINST THAT RISK-TAKING. PETER: MY QUESTION WOULD BE WHILE THE
FED IS SOMEWHAT REACTIONARY, MY SENSE IS THEY LEARN FROM 2007
2008 TO ASK MORE AGGRESSIVELY AND MORE QUICKLY.
DOES THAT FIX THE PROBLEM OR SHOULD THERE BE MORE DONE
PREEMPT
IVELY? BILL: I LIKE TO FIX QUESTIONS BEFORE
RATHER THAN AFTER THE FACT. WE SAW AN AWKWARD RESULT IN
MARCH 2023 WHEN WE HAD THIS ISSUE OF THE SYSTEMIC RISK
PERCEPTION THAT COULD ONLY BE INVOKED AFTER A BANK FAILED TO
ENSURE ALL THE DEPOSITORS. JANET YELLEN AND JAY POWELL
WERE SAYING THE BANKS WERE STRONG AND RESILIENT BUT THEY
CANNOT GUARANTEE ALL DEPOSITS SHOULD BE INSURED. THEY CAN ONLY BE EVOKED WHEN A
BANK FAILS ON A CASE-BY-CASE BASIS.
THIS IS THE WAY OF REASSURING PEOPLE A SOLVENT BANK WILL
NOT
BE SUBJECT TO RUNS THAT DEPLETE ITS CASH.
THE REASON PEOPLE RUN IS IT IS INEXPENSIVE AND DOES NOT COPS
MUCH TO RUN -- DOES NOT COST MUCH TO RUN.
IF BANKS HAVE ENOUGH COLLATERAL TO COVER THEIR DEPOSITS THERE'S
NO REASON TO RUN. PETER: IS THERE ANY RISK WE HAVE
PUSHED TOO FAR IN TERMS OF SOME OF THE REGULATIONS WHERE WE ARE
FORCING BANKS TO HAVE MORE TREASURY WHICH CAUSES SOME OF
THE PROBLEMS IN SILICON VALLEY BANK BUT HAS TURNED THE PRIVATE
CREDIT INDUSTRY AROUND WHERE THAT IS WHERE MORE PEO
PLE ARE
TURNING TO AS BANKS ARE RESTRICTED OR UNCOMFORTABLE
WITH THE CURRENT REGULATIONS? BILL:
YOU ARE ON A VERY IMPORTANT POINT.
ONE WAY YOU COULD RESPOND IS TO RAISE LIQUIDITY BUFFERS BANKS
HAVE TO HOLD. IF YOU DO THAT THEN THEY HAVE
TO HOLD A LOT MORE. SECURITIES BECOME LESS LIKE
BANKS AND CANNOT PERFORM THEIR ROLE. PILING ON MORE AND MORE REGULATION ON BANKS IS NOT THE
WAY TO GO BECAUSE IT MAKES BANKS LESS COMPETITIVE WITH THE
NON-BANK FINANCIAL SECTOR. ANNMARIE:
THE DATE REGULATION -- DID
THE DEREGULATION REGULATION 2018
HAVE A MEANINGFUL IMPACT ON THE FAILURE OF SILICON VALLEY BANK?
BILL: SILICON VALLEY BANK WOULD'VE
BEEN MORE TIGHTLY REGULATED IF IT HAD TO ROLL BACK THE SIZE,
THE SIZES WHERE YOU ARE SUBJECT TO POTENTIAL REGULATION.
THAT CONTRIBUTED. WHAT SURPRISED PEOPLE IS HOW
FAST THIS HAPPENED. TYPICALLY TAKE SEVERAL WEEKS
FOR A BANK TO GO FROM FAILED TO TROUBLE.
SILICON VALLEY BANK WAS A COUPLE OF DAYS AND THEY WERE
GONE. JONATHAN: CAN I TALK TO ABOUT EVERYTHING
ELSE? I AM
SEEING EQUITY MARKETS ALL-TIME HIGHS.
HOW DO YOU THINK THIS FOMC IS THINKING ABOUT FINANCIAL
CONDITIONS BEYOND WHAT THEY LOOK AT?
LOOKING AT EQUITY MARKETS AND HIGH YIELD SPREADS.
WHEN YOU HEAR THE CHAIRMAN TALK ABOUT FINANCIAL CONDITIONS, HE
SAYS THEY ARE TIGHT. MARKET PARTICIPANT SAY
SOMETHING ELSE. BILL: I WAS SURPRISED TO HIS ANSWER
AT THE PRESS CONFERENCE. HE DID NOT REALLY WANT TO TALK
ABOUT FINANCIAL CONDITIONS WHERE IN THE PAST HE IS TALKED
ABOUT FINANCIAL CONDITIONS A LOT AND IMPLIED FI
NANCIAL
CONDITIONS WERE STILL TIGHT. I DO NOT SEE THAT.
THE STOCK MARKET IS UP DRAMATICALLY.
MORTGAGE RATES ARE DOWN. SINCE OCTOBER WE HAVE HAD A
DRAMATIC EASING IN CONDITIONS. MONETARY POLICY VERSUS THE
EASING OF FINANCIAL CONDITIONS. IF YOU WANT TO FIGURE OUT THE
IMPULSIVE MONETARY POLICY YOU HAVE TO FIGURE OUT THE BALANCE.
MY FEELING IS MONETARY POLICY IS NOT EXERTING THAT MUCH
STRAIN ON THE ECONOMY AND THAT IS WHY THE FED HAS BEEN ON THE
PATH OF HAVING TO STAY HIGHER FOR LONGER. ANOTHER ASPE
CT IS THE NEUTRAL
POLICY RATES POLICY IS HIGHER THAN FED OFFICIALS ARE ASSUMING.
THE FIT THINKS THE FEDERAL FUNDS RATE WILL GO BACK TO 2.6%.
IF YOU LOOK AT THE MARKET EXPECTATIONS OF WHERE IT SURE
IT'S WILL GO. THEY HAVE THEM COMING DOWN 3.6%.
THERE IS A 100 BASIS POINTS GAP BETWEEN WHERE THE MARKET THINKS
IT IS HEADING IN WHERE THE FIT THINKS IT IS HEADING. JONATHAN:
THIS WAS WONDERFUL. A GREAT PIECE ON BLOOMBERG
OPINION AND THE BLOOMBERG TERMINAL.
THAT WAS THE FORMER NEW YORK FED PRESIDENT BIL
L DUDLEY.
LET'S TALK ABOUT THE SPREAD WHERE THE FIT THINKS WE ARE
COMING DOWN TO AND WHERE THE MARKET THINKS LONGER-TERM
NEUTRAL IS. PETER: THE FED HAS A LONG HISTORY OF
BEING OVERLY OPTIMISTIC, WHETHER IT IS TRANSITORY OR
INFLATION LONG-TERM AVERAGES. WE ARE IN THE BUSINESS OF BEING
OPTIMISTIC. THEY BELIEVE THEIR POLICIES
WILL WORK. I WILL BET AGAINST THEM.
JONATHAN: YOU THINK THERE'S A DIFFERENCE
BETWEEN WHAT THEY BELIEVE IN WHAT THEY WANT TO PUBLICLY
EXPRESS? IF THEY START FLIRTING WITH 4%
IT
COULD RUN COUNTER TO WHAT THEY ARE TRYING TO ACHIEVE.
PETER: WHEN THEY DID THE DOT PLOT IT
SEEMED LEGIT AND THEN ALL OF A SUDDEN YOU HAVE ALL OF THESE
CUTS. THEY COMMUTED -- THEY COMMUNICATED LET'S NOT GO CRAZY
ON THE CUTS. EVERYTHING OUT OF THE FED IS A
MESSAGING TOOL. I THINK YOU GET WHAT THEY WANT
TO BELIEVE MIXED IN WITH WHAT THEY REALLY BELIEVE. JONATHAN:
I GET THE SENSE THEY HAVE BEEN WRONG ABOUT SO MANY THINGS, AS
WE ALL HAVE BEEN, BECAUSE IT HAS BEEN A DIFFICULT CYCLE TO
READ. THIS IS N
OT A TOPIC THEY'RE
PREPARED TO ENGAGE WITH. PETER: I AGREE WITH YOU THEY HAVE HAD
AN INCREDIBLY DIFFICULT JOB. I AM ALWAYS BASHING THE FED --
I THINK THEY DO THE BEST THEY CAN. IT IS A DIFFICULT ECONOMY.
ONE THING ECONOMISTS GET WRONG MORE THAN ANYTHING ELSE IS
STARTING CONDITIONS MATTER. WE ARE TRYING TO LOOK AT THESE
HISTORICAL THINGS. 20 YEARS AGO THIS HAPPENED.
CHINA IS EMERGING. TECHNOLOGY IS CHANGING.
WE ARE GOING THROUGH DEGLOBALIZATION.
THE STARTING CONDITIONS ARE CHANGING DRAMATICALLY A
ND I
THINK THE STARTING CONDITIONS ARE IT IS NEGATIVE AS WE HAVE
SEEN IN A LONG TIME. JONATHAN: IS THAT A LOW BAR FOR UPSIDE
SURPRISES? PETER: TO BE THE BIGGEST DISCONNECT IN
THE ECONOMY IS PEOPLE STILL WANT TO BELIEVE IT IS
GLOBALIZATION AND CHINA'S WORKING WITH US.
I AM ON THE OTHER SEIDA THAT. -- I AM ON THE OTHERS OF THAT.
JONATHAN: PETER WILL STICK WITH US.
LIVE FROM NEW YORK CITY COME EQUITY FUTURES POSITIVE.
THIS IS BLOOMBERG. ♪ JONATHAN:
BEGINNING Q2 IN POSITIVE TERRITORY ON THE S&P BY 0
.1%.
THE RUSSELL UP BY ABOUT .3%. A LITTLE BIT OF OUTPERFORMANCE.
IT WAS BIGGER EARLIER IN THE SESSION.
I CAN TELL YOU ABOUT THE LONG END OF THE CURVE, UP FOUR BASIS
POINTS THIS MORNING. YOU THEORY IS LATER THIS YEAR,
SUPPLY REASSERTS ITSELF. ONE? WHY? >> WE GO BACK TO THE STORIES
THAT DROVE US TO 5%. YOU SEE ALL THOSE THINGS
PLAYING TOGETHER. I THINK COMMODITIES WILL
CONTINUE TO BE A GOOD STORY. WHEN YOU START LOOKING AT ALL
THE THINGS GOING ON, THE ENERGY USAGE IS INCREASING IN THIS
COUNTRY. I
T IS THE FIRST TIME IN A WHILE
WE HAVE HAD ENERGY INCREASES IN DEMAND THAT IS LARGELY AI AND
DATACENTER RELATED. I THINK THAT WILL BE A
CONTINUING STORY. I THINK THAT IS GOING TO PUSH
ON YIELDS. I DO NOT SEE THAT CHANGING.
THE FRONT END WILL BE CONTROLLED BY THE THE FEDS. I WOULD LIKE TO SEE TWOS AND
TENS GET BACK TO ZERO. JONATHAN: AI YOU ARE SAYING WILL BE
BULLISH FOR ENERGY AND BE PRODUCING HIGH-YIELD.
CAN YOU DEVELOP THAT FURTHER? PETER:
THE AMOUNT OF ENERGY BEING CONSUMED BY DATA CENTERS IS
VERY HIGH. THERE IS A LOT OF SHIFTS WHERE
PEOPLE ARE LOOKING TO LOCATE THESE DATA CENTERS WHERE CHEAP
ENERGY IS SO I THINK YOU MIGHT SEE GEOGRAPHIC SHIFTS OF HOW
AND WHERE PEOPLE DO BUSINESS. THE AMOUNT OF DATA BEING USED
IS GROWING EXPONENTIALLY WITH AI. THAT IS CREATING HUGE DEMAND
FOR UTILITIES AND ENERGY AWAY FROM OIL.
EV'S, SAME SORT OF THING. IT HAS BEEN SLOWING BUT IS
STILL A GROWING MARKET. YOU WILL HAVE MORE DEMAND FOR
ELECTRICITY. I THINK THAT WILL PUSH ENERGY
RISES HIGHER. MOST OF OU
R ENERGY IS STILL
TRADITIONAL SOURCES SO THAT IS GREAT FOR COMMODITIES.
THAT WILL BE DOWN TO AI NEAR TERM.
WITH CRYPTO, CRYPTO COULD GO GLOBAL.
I THINK PEOPLE ARE MUCH MORE AWARE OF THE RISK OF HAVING A
DATACENTER NOT IN THE U.S. OR CANADA, SOMEPLACE YOU CAN
TRUST YOU ARE NOT GOING TO SEE DATA CENTERS POP UP ALL OVER
THE GLOBE AS PEOPLE ARE BECOMING MORE CONCERNED, WHY IS
MY DATA IN THAT COUNTRY? I WANT IT DOMICILED HERE.
THAT SORT OF NATIONAL SECURITY THE ENERGY MARKET A LOT.
JONATHAN: WHAT DO
YOU WANT TO OWN? PETER:
YOU WANT TO ONLY HARD COMMODITIES AND ENERGY.
WE ARE IN THE MIDST OF REBUILDING SOCIETY.
A LOT OF IT WILL BE DOMESTIC. THAT WILL CREATE UNDERLYING
INFLATION PRESSURE. THAT IS WHAT YOU WANT TO OWN AS
WE BECOME MORE INDEPENDENT ACROSS THE BOARD. JONATHAN:
NOTHING HAPPENING IN FOREIGN EXCHANGE CAN RIVAL THE
CONVERSATION WE HAVE HAD. THE EURO AGAINST THE DOLLAR,
-.1%. THE AUSTRIAN CENTRAL BANK GOVERNORS EARLIER IN EUROPE
TALKING ABOUT THE ECB SAYING THE EUROPEAN ECONOMY IS GR
OWING
AT A SLOWER PACE THAN THE U.S. I THINK THAT IS IN LINE WITH
CONSENSUS GOING 324. THE U.S. AND ISRAEL SET TO MEET
VIRTUALLY TODAY TO DISCUSS THE ALTERNATIVE PROPOSALS TO AN
INVASION OF RAFAH. THE MEETING FOLLOWING COMMENTS
FROM BENJAMIN NETANYAHU SAYING THEY ARE PREPARING TO MOVE MORE
THAN ONE MILLION PALESTINIAN CIVILIANS OUT BEFORE LAUNCHING
AN ATTACK ON THE CITY. I WANT TO TALK ABOUT WHAT THE
GENERALS ARE TELLING YOU. WHAT ARE THEY SAYING? PETER:
FROM DAY ONE, WE SAID THIS WOULD BE A DIF
FICULT THING.
FALLUJAH WAS A DIFFICULT BATTLE FOR US TO WIN.
WE HAD IT EASIER BECAUSE CIVILIANS HAD BEEN TAKEN AWAY.
YOU KNEW MOST PEOPLE OR HOSTILE COMBATANTS.
THERE WAS NOT THE TUNNEL SYSTEM. NONE OF THIS IS SURPRISING IT
IS THAT DIFFICULT. I THINK IT IS A GOOD STEP IF
THEY CAN MOVE THE CIVILIANS OUT. IF ISRAEL IS INTENT ON
DESTROYING THESE FIGHTING FORCES, IT WILL BE A LONG AND
PROBABLY BRUTAL PROCESS UNFORTUNATELY. >> IF THEY ARE ABLE TO REMOVE
CIVILIANS, AND BIDEN HAS MADE THAT A REDLINE CO
NDITION FOR
ISRAEL TO GO INTO RAW FOR, HOW LONG UNTIL ISRAEL CAN SAY IT
ITS VICTORY, WE HAVE GOTTEN RID OF HAMAS? PETER:
YOU CAN DO THINGS. THE ONLY WAY TO KNOW IS YOU
HAVE TO GO DOOR TO DOOR CHECKING HOUSES.
IT IS A VERY SLOW PROCESS, ESPECIALLY IF YOU HAVE TUNNELS
SO PEOPLE CAN SHIFT AROUND. IT WILL NOT BE EASY. EVEN WHEN YOU THINK VICTORY IS
ACHIEVED, IT WILL TAKE MONTHS TO CLEAR IT OUT.
ANY HOPE THIS WILL END QUICKLY IS OUT OF PLACE.
THAT IS WHY WE THINK THIS IS LAUGHING LONGER AND ONE REASO
N
I REMAIN WORRIED WE ARE GOING TO DRAG IRAN INTO THIS AND THAT
WILL JACK THE PRICES OF OIL HIGHER. JONATHAN: BASE CASE?
PETER: YOU WATCH WHAT IS GOING ON WITH
THE HOUTHIS. THEY HAVE BEEN VERY SUCCESSFUL.
WE HAVE LAUNCHED ATTACKS AGAINST THEM BUT THEY ARE STILL
ATTACKING SHIPPING. THEY HAVE BECOME VERY GOOD AT
WHAT THEY DO. THEY TAKE UNSOPHISTICATED
WEAPONRY, THEY MOVE IT AROUND, THEY HIDE, THEY LAUNCH, THEY
DISAPPEAR. WE ARE SPENDING MILLION DOLLAR
MISSILES TRYING TO SHOOT DOWN $10,000 DRONES.
THEY ARE VERY GOOD AT THIS. UNLESS SOMETHING CHANGES WHERE
WE STRIKE FEAR INTO THESE COUNTRIES, THESE PROXIES, THIS
CONTINUES UNFORTUNATELY. JONATHAN:
WHAT DOES THAT LOOK LIKE? BUILD THAT OUT A LITTLE MORE.
CONTINUATION OF TENSION WITH PROXIES? PETER:
I THINK IT CONTINUES TENSIONS WITH PROXIES.
WE WOULD LIKE TO KEEP IT THAT WAY AS LONG AS POSSIBLE. IRAN IS A SIGNIFICANT PART OF
KEEPING OIL PRICES LOWER. NO ONE WANTS THAT COMING INTO
ELECTION YEAR. EVERYONE IS LIKE LET'S KEEP
THIS TO PROXIES AND
PLAY IT EVEN IF WE KNOW THERE IS MORE
INVOLVEMENT PRETTY JONATHAN: FASCINATING.
COMMENTARY FROM THE FED EVERY DAY THIS WEEK.
ANOTHER ROUND OF JOBLESS CLAIMS THURSDAY FOLLOWED BY ON FRIDAY.
GREGORY DACO SAYING THE ECONOMY IS GENTLY DECELERATED. INFLATION STICKINESS IS A RISK
BUT NOT OUR BASE CASE. GREG, GOOD MORNING.
THIS RUNS COUNTER TO WHAT WE HEARD FROM BILL DUFFY. YOU THINK WE ARE ON THE PATH TO
2% INFLATION? GREG: WE ARE SEEING SIGNS OF
DECELERATION IN THE LABOR MARKET. WE ARE SEEING LABOR D
EMAND
EASE, WHETHER IT IS THE HIRING RATE, THE PACE OF JOB GROWTH
WITH REVISIONS. WE WERE TALKING ABOUT NOISE AND
IS IN THE DATA. WE SAW IT IN REVISIONS.
ALL OF THOSE FACTORS POINT TO A GENTLY EASING U.S.
ECONOMY THAT PUTS MORE PRESSURE ON CONSUMERS WHEN IT COMES TO
SPENDING. PETER: WHEN YOU CUT IN MAY, JUNE, NOT
CUT? GREG: I THINK IT IS MORE LIKELY NOW
WE WILL SEE THE FED EASING JUNE. GIVEN WHAT WE SAW IN THE MARCH
PROJECTIONS AND DOT PLOT, WE HAVE A NUMBER OF POLICYMAKERS
STILL LEANING ON THE
HAWKISH SIDE.
WE KNOW THE DOT PLOT IS CLOSE TO MOVING BACK TO TWO RATE CUTS
THIS YEAR. WE THINK THE ONSET WILL BE JUNE.
THERE MIGHT BE SIGNALING IN THE POLICY STATEMENT FROM A
NEGATIVE STATEMENT SAYING THE COMMITTEE WILL NOT CONSIDER
EASING TO SAYING THE POLICY COMMITTEE WILL START TO EASE
WHEN IT SEE IS SUFFICIENT CONFIDENCE WE ARE MOVING IN THE
RIGHT DIRECTION. PETER: THAT IS INTERESTING.
I LIKE TO BE CONTRARIAN. THEY WERE PRICING IN SIX OR
SEVEN CUTS AND NOW WE ARE DOWN TO TWO OR THREE.
WILL
IT BE FEWER OR MORE? DO WE HAVE IT RIGHT FOR A
CHANGE? GREG: THE VOLATILITY IS INTERESTING
TO NOTE. EVERY DATA LEASE IS SCRUTINIZED
WITH TOO MUCH ATTENTION IN MY OPINION. JANUARY VOLATILITY MEANS THERE
IS RAPID REPRICING HAPPENING ON A DAY TO DAY BASIS PRETTY THAT
IS NOT A NORMAL ENVIRONMENT. AT THE DATA STARTS TO
STABILIZE, WE WILL SEE MARKETS IN THE FED REALIGN TOWARD A
MORE GRADUAL EASING OF MONETARY POLICY AND I WOULD STILL EXPECT
ABOUT THREE RATE CUTS THIS YEAR. I DO NOT BUY THE STORY
INFLA
TION IS ENTRENCHED NOR THE STORY THE ECONOMY IS RICK SELL
RATING AND THAT WILL FEED INTO HIGHER INFLATIONARY PRESSURES. >> THE RISE IN COMMODITY
PRICES, HOW MUCH CANNOT HURT THE FED HAS THEY TRY TO HAVE
THE SOFT LANDING? GREG: WE USED TO SAY COMMODITIES
PRICES WERE TRANSITORY. WE ARE IN AN ENVIRONMENT WHERE
BECAUSE INFLATION IS HIGHER THAN 2%, WE ARE SEEING
PRESSURES LEAD TO POTENTIALLY TIGHTER FED POLICY DOWN THE
ROAD. IT IS NOT JUST THE FED. IT IS THE ECB AND OTHER CENTRAL
BANKS AFFECTED BY HI
GHER COMMODITIES PRICES BECAUSE THEY
PUT PRESSURE ON INFLATION. IF WE SEE AN ENVIRONMENT WHERE
COMMODITIES PRICES CONTINUE TO PUSH UP, THAT WILL LEAD TO
HIGHER ENERGY PRICE INFLATION AND WILL LEAD TO HIGHER
HEADLIGNE INFLATION WHICH WILL BE A CONCERN FOR THE FED.
JONATHAN: SOME PEOPLE DO NOT BUY IT AFTER
CHAIRMAN POWELL'S PERFORMANCE IN THE NEWS CONFERENCE.
SOME PEOPLE BELIEVE MAYBE THIS FED IS WILLING TO TOLERATE
HIGHER INFLATION WHICH IS WHY WE HAVE GOLD AT ALL-TIME HIGHS,
WHETHER IT IS THE CO
NVERSATION ABOUT GOING HIGHER AND STARTING
TO PRICE IN 3% INFLATION FOR LONGER.
WHY ARE THOSE PEOPLE WRONG? GREG:
I DO NOT THINK IT IS WRONG. WE ARE COMING FROM ABOVE THE 2%
TARGET WHEN IT COMES TO INFLATION.
IT IS TRUE WE WILL SEE MORE TIME BEFORE WE GET DOWN TOWARDS
THE 2% TARGET. BECAUSE WE ARE STARTING FROM
ABOVE THE TARGET AND POLICY IS RESTRICTED AT THIS STAGE, THIS
ENVIRONMENT WHERE YOU MODERATING GROWTH AND MORE
PRICING SENSITIVITY DOES ALLOW THE FED TO GRADUALLY EASE
POLICY AND FOCUS ON
CORE INFLATION WHICH HAS BEEN A KEY
FOCUS OF THE FED. WE ARE SEEING CORE INFLATION
MOVE DOWN TOWARD 2.5%. IT HAS BEEN A KEY PILLAR OF
ATTENTION FOR FED POLICYMAKERS. I THINK WE WILL CONTINUE TO DO
SO. PETER: THE MARKET SEEMS TO VIEW THE
SLOWING CHINESE ECONOMY MIGHT BE GOOD AND PROVIDE DEFLATION.
I DO NOT THINK IT IS TALKING AND OFF ABOUT INDIA'S RISE.
WHAT SURPRISES DO YOU SEE THAT COULD CREATE A BIG INFLATION
SPIKE OR DEFLATIONARY? ABIGAIL: I THINK WEEK -- GREG:
I THINK FROM A CYCLICAL PERSPE
CTIVE, WE ARE SEEING
SLOWING GROWTH IN THE U.S. WE ARE SEEING FAIRLY MODERATE
GROWTH ACROSS THE GLOBE. THAT IS DISINFLATIONARY
SHORT-TERM. IN THE LONGER RUN, WE HAVE
FACTORS LIKELY TO BE MORE INFLATIONARY.
WE ARE SEEING SUPPLY CHAIN SHOCKS LIKE IN BALTIMORE.
THESE IN THE PAST MIGHT NOT HAVE AS MUCH OF A CONSEQUENCE.
ADD THAT TO OTHER ISSUES, WE HAVE STRUCTURAL INFLATION WITH
GENAI AND CAPITAL INFLATION THAT ARE ALL INFLATIONARY.
WE WILL LIKELY LIST INFLATION OVER THE 2% TARGET WHICH IS WHY
I THI
NK THE FED MAY CONSIDER ADDING A BAND AROUND THE 2%.
IT MIGHT BE 2%. WE MIGHT NEED A BAND AROUND IT. >> 2.5% OR 3%? GREG:
WE DO NOT KNOW BUT THE FED WILL BE IMPLEMENTING THE REVISION OF
THE FRAMEWORK PUT IN PLACE BEFORE WHICH IT HAS DONE AT THE
WORST TIME. WE ARE LIKELY TO SEEK SOME KIND
OF WIGGLE ROOM, PERHAPS AROUND 2% WHICH WOULD OFFER MORE
FLEXIBILITY. JONATHAN: IF THEY DO THAT, DOES IT MAKE
IT HARDER TO HIT 2%? GREG: YOU DO NOT WANT TO BE MOVING
THE GOALPOST CLOSER. BUT YOU DO WANT TO CONSI
DER
THAT WHEN YOU HAVE ACHIEVED SOME FORM OF BEING CLOSE TO THE
2% TARGET, THAT IS WHY I THINK THIS IS NOT A STORY FOR 2024.
THIS IS A STORY FOR 20 WHEN WE ARE CLOSER TO THE FED TARGET OF
AROUND 2%. -- THIS IS A STORY FOR 2025
WHEN WE ARE CLOSER TO THE FED TARGET OF 2%. >> AT&T DOWN IN PREMARKET
TRADING AFTER THE TELECOM GIANT SAID CURRENT AND FORMER
CUSTOMER DATA WAS LEAKED ONTO THE DARK WEB.
THIS INCLUDES PERSONAL INFORMATION SUCH AS SOCIAL
SECURITY NUMBERS. AT&T SAYS THE SOURCE IS BEING
INVES
TIGATED AND IT IS NOT KNOWN WHETHER IT CAME FROM THE
COMPANY OR A VENDOR. IT IS NOT THE FIRST ISSUE THIS
YEAR FOR AT&T. IN FEBRUARY, IT VARIANTS A
WIDESPREAD OUTAGE NOW BEING INVESTIGATED BY THE FEDERAL
GOVERNMENT. THE NORTH CAROLINA STATE MEN'S
TEAM CONTINUING THEIR SUCKING RUN WITH THE -- SHOCKING WRONG
WITH THE -- SHOCKING RUN WITH THE WIN OVER DUKE. IN THE WOMEN'S TOURNAMENT,
CAITLIN CLARK AND ANGEL REESE FACE-OFF TONIGHT IN A REMATCH
OF LAST YEAR'S NATIONAL CHAMPIONSHIP GAME.
LIBERTY MEDIA
WILL BUY THE MOTORCYCLE RACING LEAGUE AND A
$3.8 BILLION DEAL. THEY ARE BUYING THE EXCLUSIVE
RIGHTS HOLDER. THE DEAL MAY DRAW SCRUTINY FROM
ANTITRUST REGULATORS GIVEN IT WILL MERGE TWO INFLUENTIAL
SPORTS BUSINESSES. LIBERTY SAYS IT IS FUNDING THE
DEAL WAS A MIXTURE OF CASH AND DEBT AND EXPECTS TO CLOSE BY
THE END OF THIS YEAR. JONATHAN: BASICALLY, WE ARE GOING TO GET
ANOTHER NETFLIX SHELL BUT THIS TIME ABOUT MOTOR GP. >> LIBERTY WILL NOT BE THE
FIRST COMPANY TO OWN BOTH. A PRIVATE EQUITY FIRM OW
NED BOTH FIRST. MOTOR GP AND F1.
THE E.U. AND HE REGULATORS SAID YOU HAVE
TO BREAK IT UP. JONATHAN: NEXT, THE BALANCING ACT FOR
CHAIR POWELL. >> MY PERSONAL OPINION IS SMALL
MONETARY POLICY IS NOT EXERTING MUCH RESTRAINT ON THE
ECONOMY THAT IS WHY THE FED IS ON THE PATH OF HIGHER FOR
LONGER. JONATHAN: THAT CONVERSATION UP NEXT. JONATHAN:
THE FIRST TRADING DAY OF Q2 42 MINUTES AWAY.
EQUITY FUTURES POSITIVE 5.1%. UP .4% ON THE S&P. THE BALANCING ACT FOR CHAIR
POWELL. >> RIGHT NOW, THERE IS A BATTL
E
GOING ON WITH MONETARY POLICY VERSUS THE EASING OF FINANCIAL
CONDITIONS. MONETARY POLICY IS NOT EXERTING
MUCH RESTRAINT ON THE ECONOMY. THAT IS WHY THE FED HAS BEEN ON
THE PATH OF HAVING HIGHER FOR LONGER. THE FED THINKS THE FEDERAL FUND
RATE IS A GOOD PROJECTION IN THE LONG RUN.
THEY END UP COMING DOWN TO ABOUT 3.6%. JONATHAN:
JAY POWELL SENT TO SPEAK WEDNESDAY AT OF THE JOBS REPORT
FRIDAY. HE SAID THE FED IS IN NO HURRY
TO CUT RATES AFTER HOTTER THAN EXPECTED PRINTS TO START THE
YEAR. RANDY,
GREAT TO CATCH UP WITH
YOU. FANTASTIC TO GET YOUR THOUGHTS
ON A MAJOR ISSUE. THE CONVERSATION WE HAVE BEEN
HAVING IS WHETHER THE FEDERAL RESERVE IS BEGINNING TO DRIFT
TOWARDS ACCEPTING A HIGHER INFLATION RATE.
IS THAT YOUR SENSE OF THINGS OR DO YOU PUSH THAT? RANDY:
I DO NOT THINK THAT IS EVEN LIKELY OR CONSISTENT WITH THE
FED COMMUNICATION. JUST BEFORE DISINFLATIONARY
SURGE STARTED, THE FED WENT THROUGH A COMPREHENSIVE REVIEW
OF ITS MONETARY POLICY FRAMEWORK.
MEETINGS ALL OVER THE COUNTRY. IT
TOOK A YEAR.
AS PART OF THE PROCESS, THE FED REAFFIRMED THE 2% INFLATION
TARGET AS PART OF THE FRAMEWORK. IT WOULD BE [INDISCERNIBLE]
JONATHAN: I BELIEVE WE MIGHT HAVE LOST
OUR CONNECTION TO RANDY QUARLES. PETER, YOUR THOUGHTS?
THIS IS A BIG DEBATE. IT SEEMS TO BE SPLIT.
THE EARLY INDICATION FROM RANDY IS HE DID NOT AGREE.
WHY ARE YOU CLOSER TO 3% WHEN THEY ARE STICKING TO 2%? PETER:
THEY SEEMED TO CHANGE THEIR ATTITUDE.
RIGHT BEFORE COVID, WE HAD INFLATION UNDER 2% AND FINALLY,
WE WERE GETTING
ABOVE 2%. AT THE TIME, THEY WERE SAYING
WE ARE LOOKING AT MULTIYEAR AVERAGES.
I THINK THEY CHANGE THE CASE SOMETIMES TO ALLOW THEM TO BE
EASING. AT THAT POINT, WE WERE GOING
ABOVE. THEY SAID NO. EVERYTHING WAS TRANSITORY.
THEN WE REACTED. THEY SEEM TO CREATE MESSAGING
THAT ALLOWS THEM TO POSITION FOR THE EASY SIDE.
WE ARE AT 2.5% BUT WE THINK WE MIGHT GET TO 2% SO WE CAN START
CUTTING. EVEN IF WE DO NOT, WE WILL
STILL CUT FOR A LITTLE BIT. JONATHAN:
THIS IS PURELY OBSERVATIONAL FROM MY STANDPOIN
T.
I THINK PEOPLE WHO BELIEVE IT IS CLOSER TO 3% NOW OBSERVED
WHAT CHAIRMAN POWELL SAID IN AUGUST OF 22 WHICH IS YOU WILL
HAVE PAIN, WE WILL GET INFLATION BACK DOWN TO 2%. NOW, THEY SENSE UNWILLINGNESS
AND THE WILLINGNESS TO STRETCH THE TIMELINE TO GET TO 2%.
THAT IS DIFFERENT FROM PUTTING THE EMPHASIS ON PAIN TO GET TO
2%. IS THAT A SHIFT? PETER: IT IS A SHIFT.
IN THEIR DEFENSE, PEOPLE WERE SAYING THEY WERE BEHIND THE
CURVE AND SHOULD STOP HIKING EARLIER.
YOU HAVE SOME LAG EFFECT. THEIR FAVORIT
E METRIC IS REALLY
ABOVE 2%. THEY PICKED A PRETTY EASY
METRIC THAT IS KIND OF IN THEIR FAVOR. JONATHAN:
I'M PLEASED TO SAY WE HAVE REESTABLISHED THE CONNECTION
WITH RANDY QUARLES PRINT YOU WERE MID-THOUGHT AND GOT CUT
OFF. YOU BELIEVE THEY ARE STILL COMMITTED TO 2%? RANDY:
SORRY ABOUT THAT. JUST BEFORE THIS INFLATIONARY
SURGE BEGAN, THERE WAS A COMPREHENSIVE REVIEW OF THE
MONETARY POLICY FRAMEWORK AND THE FED REAFFIRMED THE 2%
TARGET. IT WOULD BE VERY SURPRISING AND NOT BE GOOD FOR THE FED FUTUR
E
CREDIBILITY FOR THEM TO SAY 3% IS CLOSE ENOUGH FOR GOVERNMENT
WORK AND SO WE ARE DONE. THAT WOULD MEAN THE NEXT TIME
THERE WAS AN INFLATIONARY SURGE WITH A NEW 3% TARGET AND
INFLATION GOES UP TO 9% IN THE FED SAYS WE ARE HEADED BACK
DOWN TO 3%, FOLKS WOULD SAY, WHY SHOULD WE BELIEVE YOU NOW?
IT IS IMPORTANT FOR THE FED. THE FED HAS BEEN CONSISTENT
COMMUNICATING 2% IS THE INFLATION TARGET.
I DO NOT THINK IT HAS TO COME ALL THE WAY DOWN TO 2% BEFORE
THE FED STARTS USING BUT IT HAS TO BE THEIR PR
EFERRED MEASURE
WHICH IS CORE PCE HAS TO HAVE COME DOWN CLOSER TO 2% AND HAVE
STAYED THERE FOR A WHILE. OTHER FACTORS IN THE ECONOMY
THAT COULD BE INFLATIONARY, PARTICULARLY TIGHTNESS IN THE
LABOR MARKET, HAVE TO ADJUSTED ENOUGH FOR THE FED TO FEEL
COMFORTABLE CUTTING. RANDY: ONE QUESTION I HAVE IS, IN THE
MARKET, YOU TOOK THE TIME TO MENTION THE MARKET HAD DONE A
LOT OF WORK FOR THEM. PETER: TREASURY YIELDS WERE AT 5%
PRINT CREDIT SPREADS WOBBLY. NOW ALL OF A SUDDEN, YOU HAVE
YIELD BACK TO 4.25
% ROUGHLY. CREDIT SPREADS ARE TIGHT AND HE
CHOOSES NOT TO MENTION FINANCIAL CONDITIONS.
IS THAT A SIGNAL OR HOW HE IS THINKING ABOUT IT?
THAT IS CONFUSING ME AND SEEMS TO BE POINTING TO A PERSON WHO
WANTS TO BE DOVISH. >> WE ARE AT AN INFLECTION
POINT IN THE FED POLICY PAST AND COMMUNICATIONS. OUTSIDE OF THIS PROCESS, THERE
WERE TWO HYPOTHESES, THAT INTEREST RATES WOULD NOT HAVE
TO GO AS HIGH AS IN THE PAST TO CONTAIN INFLATION AND THAT
INTEREST RATES WOULD NOT HAVE TO STAY AS HIGH FOR AS LONG T
O
CONTINUE THIS INFLATION. THE FIRST OF THE HYPOTHESES HAS
BEEN BORNE OUT. THE TAYLOR RULE, A GUIDELINE
CENTRAL BANKS HAVE USED TO GUIDE INTEREST-RATE POLICY,
WOULD HAVE SUGGESTED AT THE OUTSET YOU NEEDED SHORT-TERM
INTEREST RATES TO GO UNDER 10%. WE DID NOT GET THERE. THE INFLATION RATE HAS
SIGNIFICANTLY SUBSIDED PAY THE SECOND HYPOTHESIS WAS WRONG.
IT WILL TAKE A LONGER TIME THAN MANY OVENS LEAVED AT THE OUTSET
-- MANY OF US BELIEVED AT THE OUTSET FOR POLICY TO WORK.
IT WAS CLEAR INTEREST RATE
S HAD TO GO HIGHER.
IT WAS NOT CLEAR HOW LONG. EVERYBODY AGREED WE HAD TO DO
SOMETHING PAID WE ARE NOW AT THE INFLECTION POINT WHERE
THERE WOULD BE DIFFERENCES AMONG THE COMMITTEE AND
DIFFERENT MEDICATIONS FROM MEMBERS OF THE COMMITTEE.
THE JOB OF THE CHAIR IS TO TRY TO MAINTAIN CONSENSUS AND
DIRECT THE COMMITTEE TO AN OUTCOME WHICH COMPLICATES HIS
COMMUNICATION TASK AS WELL. IT IS GOING TO BE CONFUSING.
I THINK PEOPLE WILL TAKE WRONG SIGNALS BY HEARING WHAT THEY WANT TO HEAR AS THE TONE
FROM TH
E FED COMMUNICATORS DIFFERS. JONATHAN:
WE HAVE TO GO. MY APOLOGIES FOR THE TECHNICAL
COLLECTIONS -- CONNECTIONS. RANDY QUARLES, APPRECIATE IT. TOMORROW, OUR GUESTS. FROM NEW YORK CITY THIS
MORNING, GOOD MORNING, THIS WAS "BLOOMBERG SURVEILLANCE."
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