all while controlling stress and emotional eating. at last, a diet pill that actually works. go to golo.com to get yours. caroline: from bloomberg's world headquarters in new york and from right here in london, i'm caroline hyde. joe: and i'm joe wiesenthal. romaine bostick is out this week. caroline: the s&p 500 dragged lower by tech. the cdc pushes back on any cruise reopening, and oil rises higher as we get that vessel blocking the suez canal. romaine: the question -- joe:

the question is, what'd you miss?? caroline: inflation and the pressures that come with it are unspoken. powell spent another day downplaying inflation issues, but measures of prices paid and charged by u.s. businesses is down in march. record highs. the data is slightly short, but shortages and material disruptions in supply chains, remember, there are bottlenecks coming at the same time that intel just unveiled a new plan. before we dig into the details on ships, check shares -- check shares -- tech shares are ugly. joe: it's ugly across the board, and the further our you get on the tech risk spectrum, the worse it gets. if romain were here, he would be laughing at me for bringing up

those again -- those are down further. small caps, a not good day if you are interested in taking a lot of speculative risk. caroline: interesting that we find correlation there, but the last few days, the russell goes a different direction than the nasdaq and bond yields fall into it and none of it seems to make sense. the nice narrative is tied up. joe: i hate when there is not a clean narrative, but we will figure out what's going on. i want to bring in kriti gupta. thank you for joining us. can you sum up what happens today in one suite explanations? kriti: we're going back to the old correlations. the nasdaq 100 and the russell 2000 used trade together very closely, there is the momentum trade and you are seeing it happen again with the downside as opposed to tech reacting to those yields, the correlation we were really looking at. we are reverting back to what we have seen. caroline: bonds, a complete

snooze fest. are we pleased that the five-year auction is basically not rendering us in any way bother? kriti: it appears the bond market has been put on ice right now, the idea of holding your horses a little bit. that something this trader told me, this idea that we are ending up, the end of fund flows is what we are seeing right now, a lot of reallocation and easter into next week as well, so there could be a bit of a quiet trading period from here on out. not in like the bond market as well, because ours we see that correlation breakdown, it will be interesting to see how people reposition now that we are farther into our vaccination campaign. which side of the trade really holds? is it the tech heavy trader those cyclical trades that have already gone up so much? joe: it feels like everything is tired right now. we talked with the last few

months about the reopening trade and the back to normal trade. that's losing some juice. tech is losing jews, people buying treasuries again -- it feels like there is not a clear narrative or anything. kriti: this is a reversion once again back to this idea that people are figuring out what they want. i will make a controversial statement here -- dare i say that we might be returning to the fundamentals just a little bit -- i know, gas, shock, scandal. but when you start to see the sentiment driven moves so much, you have to say, how much is based of this on the fundamental s? how much is based on earnings numbers? the previous earnings season, fourth quarter back in december, or the third quarter results coming into the fall, you started to really see the people who said you know what, that doesn't matter. we are focused on the fed, the

election, that's what we're paying attention to. i think you have to pick a narrative. perhaps that fundamentals are going to come back, we are just slowly making our way there. caroline: case in point, right age down 18% on its numbers. they have to lower their overall forecast. who guessed it that we warned about covid, we don't have many calls. the backlash. gamestop as well actually moving on fundamentals. where are we with retail companies that have done so well ? are they now going to fall out of favor? kriti: who knew that gamestop would not see this massive gain? a lot of people are seeing how gamestop would act today, this idea that we are testing the theory that the stimulus checks are going to be spent writing game -- right in gamestop shares. i will give you a fun fact from my colleague mike regan, who

said nine of the 10 last quarters that gamestop reported, their shares fell. this falls within the trend and it was an earnings miss after all, which was interesting, because i was looking at some of the reddit feeds and online youtube commentary on it. a lot of these day traders were actually hailing this idea that oh, they are focusing e-commerce and bringing in an amazon veteran, making up for the fact that the earnings call did not feature ryan quote when -- ryan cohen are questions from analyst. -- ryan cohen or questions from analysts. caroline: proved right perhaps once when it comes to fundamentals. kriti gupta, check out the blog. meanwhile, price pressure has stowed flesh inflation -- fresh inflation concerns. we take a look when we come back. this is bloomberg. ♪

caroline: so inflation certainly has been in focus for investors as the economy makes its recovery. it's also what jay powell has been talking about for the last two days. the read we actually got today in terms of some of the data is proving against his point that there is nothing to worry about. joe: yeah, so we got the pmi's today, and we are seeing it big time on the producer of price levels. if you want to have something shift and it will go through the suez canal, it will cost you a lot of money, but beyond that, we are seeing all kinds of bottlenecks and things emerge. how much does it translate into consumer prices, how durable is it? those are separate questions, but it beat its record highs on the price level. joining us to discuss all things

inflation, bloomberg opinion columnist noah smith. people love to talk about inflation nonstop for whatever reason, but let's start with the empirical question. are there things we see on the producer level? should we worry they are going to feed through to the consumer price level and it will be some sort of dramatic and -- dramatic consumer price inflation in the u.s.? noah: yes, companies try to pass on increased costs to their consumers. will they do something dramatic? i don't know yet. that would be a multi-month, multi-quarter, multi point rise in inflation and at that end, we started to freak out and say ok, what the heck is going on here, but we are not there yet. caroline: not there yet. you have a great piece out today talking about lucas islands. who is measuring inflation?

how are they measuring it and are they measuring it in the same way? noah: right. lucas islands model was how everyone tried to infer inflation from how much they saw their local prices go up, and i think a lot of people still do this. i have some friends living in the bay area who say, houses are expensive, rent is expensive, rent -- restaurants are this expensive, we must have a lot of hidden inflation. but that's because a bunch of rich people moved to the bay area and if you go to cleveland or wherever, that's not happening. you have to look at the natural level. joe: another thing a lot of people in the bay area, they have been getting opinions on inflation. another things they say we should talk a lot about his asset inflation, that somehow stocks and the cost of an nfc is going up a lot, and that has something to do with inflation. why is it logically not something we should think about

as inflation the way the fed is thinking about it? noah: basically, inflation is meant to be kind of a change in the value of the currency. so the currency, the actual u.s. dollar is worth less relative to all the useful things you might want to buy, such as bread and back massagers or whatever you want to buy -- i guess not in the pandemic. the thing is, a stock isn't actually something useful you want to buy because no one needs a share of apple. apple shares are just sort of a claim on the useful stuff that is out there. because apple shares don't have intrinsic value, we don't want to include them in inflation. that doesn't mean that asset price changes are important, it's just not what we think about when we think of inflation. caroline: and jay powell up they're not worrying today about inflation. obviously desperate to see it go above that 2% level for him.

what are economists seeing inflation at and what are they using to measure as the right thing from your perspective? noah: all the measures of inflation, the cpi, the gdp deflator, the producer price indices, pce and even the billion price project by m.i.t., these are all very highly correlated. over the long term there can be some divergence, so we should argue about which ones we use in our measuring, how much things have changed since 1980, but if we talk about how much things have changed this month, they are measuring the same stuff and of course, you know, the fed is going to be looking at the mall, but they are all saying the same thing. joe: something else you wrote about on your newsletter, the return of macro wars. a lot of ideological camps having spirited debates, larry summers warning of overheating, mmt types list concerned -- less concerned about it.

do we have good models were reliably anticipating inflation? it feels like the fed is like, we don't know when we are getting inflation so we will just wait until we see it. how have the traditional approaches held up, and do we have to junk the old ideas of where we think there is inflation? noah: i would say macro models and the kind that academics use and the kind they get the fed to use are completely useless in creating inflation. just completely useless. at this point, everyone is relying on heuristics and rules and changing ideas. at the level of public discussion, it is even less. it is people shouting. in terms of people at the fed, they are using these simple heuristics and rules because academic theories are no help. caroline: you are going to have

to be in pce data, but is it going to come back to wage inflation? at what point does that happen from a part of the bay area? noah: when you have modern inflation, workers are able to bargain for raises like cost-of-living raises. when inflation gets really high-end variable or gets up to 8% or 10% and also bounces around, workers have a much harder time anticipating how much inflation will be and bargaining to keep up with that. therefore, wages often, at least in the 1970's, wages fell behind during inflation, which doesn't happen in your textbooks, but kind of happens in real life. they are not counting the cpi's, maybe there are some arguments that they should be, but the fact is, it's not wages that are going to show up. it's consumer prices, producer prices and stuff like that. caroline: so to tie it up in a

bow, do you think we have inflation or not? noah: it is too early to tell. these things bounce around a lot. it could be gone next month. caroline: love it. noah smith, we thank you. great writing and great perspective as always. one thing that could be feeding inflation, some of the blockages we have seen in the chip space. let's look at the chip manufacturing. we can see it with intel taking the lead once again. we have discussed the move and how the business will do better. this is bloomberg. ♪

caroline: one of the major corporate stories of the day centers on intel. the chipmaker and bailing a plan to spend billions on reviving manufacturing, but the ceo is saying intel is back.

joe: that's exactly right. multiple stories combining here, because we have the well-known ship shortage that is an acute thing, and -- chip shortage that is an acute thing, and intel announcing it will spend $20 billion on two new u.s. plants to do more manufacturing chips in house. we saw some weakness among the competitors. caroline: weakness among competitors? i am sure we will get the charts any moment now. joe: hey. caroline: there we have it, until down 2.3%, but it is the spillover effect. much lower than 5% at one point after hours, down 1% at one point, and the chipmakers today in the u.s., applied materials, they are the ones that will benefit from this. joe: more competitors bidding on their goods. joining us with more insight is

professor willie /////////xi. -- professor willie xi. they might outsource some of their manufacturing -- but they are not doing that. they are going to invest big on their own production. how hard is this going to be for them to pull off. prof. xi: 20 billion, that is a start, ok? it took years for them to fall behind, ok? this is a tough problem, tough technology. it's a start, but clearly, pat gelsinger has put down a marker and said we are going to go back after leadership again. i think that's encouraging. caroline: what about where they are doing it? is it right that we saw those in asia fall? is it right to be

focusing so much on what's happening in arizona, for example, then europe as well? prof. shih: the shortages we are seeing in automotive, but increasingly in other sectors as well, has called attention to the fragility of the supply chain and the excessive dependence on a couple suppliers, foundries in taiwan, ok? so you see a lot of tension in washington about how we need to have more of that supply chain domestically. it's going to take a while to rebuild that. intel is proposing to go into the foundry business. they are making a big bet on that. it will take a while for them to develop that model. the good thing is, they are starting with two new fads that will be dedicated foundry business and what pat gelsinger has said, they are going to use industry-standard tools and ip blocks, those chunks that he

used to develop those chips. it will be more aligned with the model that other customers who go to the taiwanese foundries, like tsmc, are used to doing. it's not a model that intel is used to doing, though. joe: $20 billion is a lot, but even back in january, tsmc announced it would spend another $29 billion capex. when i asked you if this is going to work, what's it going to take beyond this initial commitment of an investment for them to reverse what you said was a multi-year process of falling behind? prof. shih: what they have to do, they have to push the frontiers. what pat gelsinger has said, they are going to commit to deep uv. they have been a little behind on that. that's one of the reasons for the $20 billion price tag, because when you look at one of

these asml, bp ub machines, each machine is pushing $150 million and the size that intel is going to propose the bill, they might need 20 of them, ok? that's like having a fleet of these 100 million plus machines in there, ok? they need to get the process is up and the volume through there, because it is through volume -- that's how you protect your processes and how you do your learning and drive your costs down, ok? tsmc is very good at that. they've spent 35 years developing that skill. intel knows how to do that with their microprocessors, but they had some troubles with advanced processes. they will have to work at it, and it will be multiple years. it's not something that we will be able to look two quarters,

three quarters, or two years out and say, this is going to solve the problem. it's going to be steady progress and they are going to have to take risks, make investments, get customers to buy that output so they can keep driving volume and learning. caroline: that thing, that it is not going to be solved in a couple of quarters, can we say it's exactly the shortage and chips we are seeing at the moment. listen to what pat gelsinger had to say about that. >> there is a build out in the supply chain of the industry, and their induced a radical increase in demand. you have demand scaling up radically and there is a position where there is a deeper shortage. it will be a couple years before it is fully resolved. caroline: what's your perspective on the global shortage we are seeing at the

moment and how that gets resolved? prof. shih: there are a lot of interesting facets to this shortage. we are feeling it in automotive, but i will remind everyone that at the beginning of 2020, the outlook for the global automobile market, china in particular, was slightly down from 2019, and that was before covid hit. then covid hit and sales fall off a cliff so if you are an automaker, you are thinking, how my going to survive? with the pandemic business, it has created huge demand for things like notebook computers, flat-panel displays, new gaming consoles -- we had a new generation of gaming consoles come out, ok? to the extent that the capacity is fungible, they soaked up a lot of the capacity. the auto guys -- this started becoming visible late last fall, november, the leadtimes for

getting your orders into the foundries started extending out. the u.s. made it worse by sanctioning huawei and smic. it was a combination of factors. now, to get through this shortfall now, it's going to take a good six months to a year before we really start seeing a lot of relief on that. caroline: willy shih, great to get your perspective across all things intel and all things chips, harvard business school. it was a story of intel not managing to outperform on a day where we had quite a significant news flow, because big tech under pressure. are you watching headlines tonight or what? joe: same as yesterday, i am going to watch the price of digital trading cards.

they fell again and the weakness of the stock market -- everyone has to watch that market. caroline: disinflation in your and fts -- nfts for the time being. joe: "bloomberg technology is next." ♪

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