♪ >> we know this economic data is great. this is all reopening, fiscal stimulus. how much does behavior change? we are all becoming behavioral scientists. > you will see a shift back towards services, and that will take some pressure off of the goods sectors. >> are we heading into a period of peak data? peak data historically has been met with corrections. >> all eyes are really on what constitutes substantial progress right now. >> the good news is long-term, the fed has a track record of controlling inflation, but it could come across. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: the quietest fed decision of the last 12 months. for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. equity futures up about 0.1%. a ton of earnings through the

next 24 hours. apple after the close. a presidential address in front of congress. a federal reserve decision i've hardly heard anybody discussed so far this morning. tom: i agree, it is off the radar. maybe that is a mistake. the press conference could be interesting, to say the least. on the way to june 15 -- to june 16, maybe that is an important fed day. our guest coming up says that is the day in 20 21, the reason to stay with us. jonathan: i thought they were deemphasizing forecast based monetary policy. where they really waiting for june, or do they go to jackson hole? tom: all you need to know is the are raising it up. this boom economy, they are raising it up. how far out do you extend that? the forecasts are a mystery. jonathan: we will catch up with torsten slok a little later this morning. companies not offering guidance for this year. last year it was because the

economy is so bad. this year, the economy is so good? lisa: the real question is on inflation. this remains one of the key distinguishing features. jeff gundlach saying yesterday he think a lot of these inflationary pressures do not look transitory. i am curious whether fed chair jay powell gives any guidance has to has they will calibrate transitory versus a more substantial wave of inflation because they might not look at forecasts, but the rest of wall street does, and they are going to do it for them. and they are starting to get ahead of them. jonathan: it's come up in these earnings calls repeatedly. here's the price action. on the s&p 500, equity futures slightly positive fight 3, 4 points, almost 0.1%. we had a lift in treasury yields over the last couple of days. yields up again by two basis points to 1.64%. tom, i do love you for the sound effects. tom: come on, two-year yield,

1.7%. jonathan: you want to go there? i will talk about it right now. the two-year yield has lost its heartbeat over the last year. if you look at a five-year chart, and i will bring that up a little bit later if you don't cut me off again -- tom: i already did the chart with francine earlier. jonathan: whether the friend and that yield curve -- whether the front end of that yield curve becomes unanchored, unanchored on better data, may be on higher inflation. that hasn't happened yet. tom: but what is the catalyst for the markets to take over and tell the fed what to do? don't fight the fed. jonathan: either the communication changes or the data changes. that is what it is going to come down to. right now, the fed and the market seem to be on similar pages. tom: you're giving me two transitories. give me a third. jonathan: i'm going to move on to lisa. lisa: i think there is substantial progress between you two.

you guys are working together. substantial progress is what i am looking at. . we get the fomc rate decision at 2:00. then fed chair jay powell will give that press conference. i am curious to hear about what he says about substantial progress being made in the labor market. what will it take for them to talk about tapering? people expecting that later this year, the discussion, not the actual tapering. a lot of questions, and they are telling a really fine line here, being a cheerleader for the economy while also communicating they are going to keep monetary policy ultra easy. after the bell, we are going to see apple and facebook earnings. you were mentioning the rally and this 5% very quiet rally. even within big tech companies, the share prices have been wildly i for gated. you've seen apple shares up more than 9% so far. facebook shares up 1.6%. people looking at the regulatory pressures and add spending

pressures. the gross, where is it going to come from -- the growth, where's is it going to come from? joe biden will be presenting his american families plan to a joint session of congress for the first time. expect him to speak about this 1.8 trillion dollar plan as a way to redistribute wealth and inject more fairness into the tax code. we are being overwhelmed with plans. what will stick? what has staying power? jonathan: a race to get things done in washington, d.c. if you miss the first 60 minutes of this program, you would think this morning was a quiet morning. it is not. this is not going to be a quiet day either. julian emanuel of btig says, "it is no exaggeration to say that wednesday could be the most important day for markets in 2021." journalists usually try to sell stories like that. why? julian: we are just looking at the facts of the nose flow -- of

the news flow. fed chair powell and president biden, particularly in this environment where we are having such intense debate about inflation and whether economic growth is really in the low sixes, as consensus states, or really more like 8%, and whether the fed will have to react to that. of course, we are going to hear that we will have more spending and higher taxes tonight from president biden. tom: you have participated like no one in this market. states the bull case right now on this most important day of 2021 why i should acquire shares this morning. julian: the bull case is obviously, we know that economic and earnings growth continues to power the market ahead. negative real yield puts people in stocks, away from bonds. we don't know how long negative real yields will persist. we do think yields are going to rise, but we don't think it is

going to get to a point where it is going to be restrictive for stocks for quite some time. but again, the other thing is the amount of liquidity that is out there. for trillion dollars plus in money markets. saving rates -- $4 trillion plus in money markets. saving rates augur well. lisa: we could see inflation pressures for a lot of companies. they could pass along the costs, but not all of them. where you factoring that into your investment -- where are you factoring that into your investment thesis? julian: there's no question that is something that is building. for us, what causes is a drill down not just at a sector level. it is really at a stock price -- a stock by stock level. we've heard from companies that they will be able to pass their costs along, or they are planning to, and we take them at their word.

those are the types of companies we want to own. pricing power is paramount in this market. jonathan: where do the industrials and manufacturers fit into that? because they might have a tougher time. julian: that is definitely a mixed bag. very idiosyncratic. in fact, part of that is just trying to figure out, with copper at $10,000 on the lme, are you going to be able to see the economic activity, to see the infrastructure bill? which is why the wrangling in washington is so important for the industrial sector. tom: we always go to mr. ferro for the follow-up question. jonathan: i appreciate that, tom . on the london metal exchange, it is the 1970's. do you really think there's a 1970's parallel here? julian: there could be, and it is one of those things where we would like policymakers to

realize the potential for it. i think part of the healthy aspect is the debate going on in washington right now is that there are democrats and republicans that think the spending proposals maybe a tad too aggressive. but if we start raising taxes, that itself is also a self fulfilling prophecy in an environment where core prices are through the roof. lisa: avocados have been a big concern for tom keene the entire household. there's a question about what type of price hikes have been already priced into equities. do you see it at all? julian: we feel there is an element of the corporate tax rate rising probably to the mid-20's. we don't think that capital

gains taxes are fully priced, and frankly, when we look at it, we are getting defensive on large-cap tech as a tactical trade simply because those are where the majority of capital gains lie looking out the last four years. i think it is the reason why you are seeing these selected reactions post earnings. jonathan: interesting. alphabet has been one of those selected outcomes. julian, always good to see you. julian emanuel, btig cheese equity and derivatives strategy. on the lme, copper is just off all-time highs, on the london metal exchange, where we topped out at the end of that commodity super cycle going into the end of 2010, early 2011, 2012. tom: i've done a lot of technical work here on the

bloomberg commodity index which is actually pretty good math, and i guess you can sort of call bear market breakout on commodities, but i don't hear that from all that many of our commodity guests. jonathan: what i hear a lot of, and we have heard it much less so recently, is the super cycle story. as you know well, being familiar with how the super cycle played out last time, i remember covering the best. i spent a lot of time talking to the miners who invested too much money in digging too many holes. that is not the story this time around. willie higher demand be met with higher supply -- will the higher demand be met with higher supply? it is not a simple for a mining company. i don't think they will commit to this is much as they did in the previous cycle. lisa:lisa: which is why jeff currie and his compatriots at goldman sachs ubs say there's a lot more room to run for this commodity cycle. there's more discipline on some of the miner sides, as well as the shale and oil producers. jonathan: copper just a little

bit softer over on the london metal exchange. coming up in the next hour, dan skelly, morgan stanley market research and strategy. julian emanuel calling today what could be the most important day for markets of the year. this is bloomberg. ♪ ritika: with the first word news, i'm ritika gupta. tonight, president biden will unveil a 1.8 trillion dollar plan to expand educational opportunities and childcare for families, paid for in part by the largest tax hikes on wealthy americans and dictates -- americans in decades. community college would be free, and the child tax credit would be extended. the top tax rate for individuals would go back to 39.6%. fed chair jerome powell is

expected to maintain aggressive support for the economy. fed policymakers wrap up a two day meeting today. they are all but certain to hold interest rates near zero. they are also expected to repeat a pledge to keep buying bonds at the current rate of $120 billion a month. four years of political brinkmanship has come to an end. european union lawmakers gave their approval to the post-brexit trade agreement with the u.k. that ensures that commerce will continue without the chaotic disruption to business a no deal brexit once threatened. still, it doesn't mean an end to hostilities between the two sides. deutsche bank has posted its strongest quarter in seven years and has raised its outlook. fixed income traders outperformed most of their peers on wall street. income from buying and selling debt securities rose 34%, and deutsche bank avoided losses from the collapse of archegos capital management. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries.

i'm ritika gupta. this is bloomberg. ♪

♪ >> we are talking about a tax change that would affect the 3/

10 of 1%, the top sliver of households. jonathan: that was brian deese, national economic council director. you will hear a lot more on this when the president addresses congress this evening. from new york city this morning, good morning. alongside tom keene and lisa abramowicz, i'm jonathan ferro. here is your price action as we count you down to the opening bell two hours and about 12 minutes away. equities advance a little more than 0.1% on the s&p. the nasdaq just a little softer, down eight on the nasdaq 100. yields higher by a couple of basis points on tens going into chairman powell's news conference. special coverage, tom keene leading that later this afternoon. do you like that, tom? euro-dollar down 0.2%. weaker euro, stronger dollar on the currency pair. tom: we will get to emily any moment on the taxes. we are really beginning to see jobs day in may, may 7 -- may

7. you wonder if we will see all of those ramp-up. jonathan: and then we will do it again and again, and on repeat through the summer. that is what we need to see. we want to see that unemployment rates come down to maybe a 4% handled by year-end. could we threaten a break below that? that's where the conversation will be in the months to come. tom: the sort of conversation is a boom american economy. we really haven't seen that since the late 1940's. emily wilkins on the energy of the night tonight. what do you expect to see in the room? are the republicans going to sit on their hands? yes. how many democrats will sit on their hands? emily: i'm sure democrats will be up and applauding. the sentiment throughout the democratic caucus is that even if you are not on board with exactly everything the president is proposing, you certainly want to show your support and show unity. but let's remember, it is going to look very different this time. there are only going to be about

200 people in the actual chamber. there's going to be a lot of spacing, so definitely a very different energy this year. tom: i take your point. i believe we just have the chief justice attending for the same kind of idea. which tax do moderate democrats care about? emily: at this point, the biggest push we have actually seen is about that state and local cap that's only moderates in the house are pushing to have removed. they don't like it there. they are from new york, from new jersey. it has really hurt their constituents, and they are saying they won't pass a final package unless that is removed. you have not seen president biden touch that a lot. it does bring in revenue to the federal government. it does tax the wealthy. those are both things the administration is looking for right now. but the proposal that president biden comes up with is going to go to the house, and we have already heard from lawmakers who

say they will be changing aspects of that proposal. top appropriate or, very past -- top appropriator, very powerful, resident delauro -- powerful, presented of delauro. they say they want to do with health care, the high cost of prescription drugs. we are going to see president biden's proposal come out tonight, but we are also aware that on both sides of the democratic spectrum, they aren't 100% on board with this plan, and they want to make sure that changes occur as it goes through the legislative process. jonathan: lisa has a lot of questions on that, so i will keep this brief. in the words of brian deese, the gain here is to minimize capital gains. can you move closer to that goal? emily: there are a number of democrats looking at that 39.6% number and saying that is a little bit high, but they are going to see how it plays out.

you have already seen senator joe manchin of west virginia, one of the more moderate democrats, and some of us jokingly referred to him as the actual majority leader in the senate, he wants to see these taxes kept low. he's not really jiving with the high numbers that we are seeing from president biden here. lisa: he's also questioned whether the high numbers really matter when it looks at the effective tax rate that companies actually pay. looking back to when the tax rate was 35%, data shows that companies only paid 26% to 28%. they paid materially less throughout history based on different loopholes. what kind of discussion is there are what joe manchin is suggesting, which is close the loopholes? try to make the tax a little more concrete in terms of taxes paid by corporations? emily: that's definitely a message that senator joe manchin has right now, and it is one that a number of democrats are listening to. if they raise these tax rates, it doesn't look good for a number of taxpayers. if they are not getting that revenue in, what was the point

in the first place? that is certainly something congress is going to continue to take a look at. it really does get into the nuts and bolts. you heard manchin say, why hasn't the federal government gotten as much as they should from these corporations? he's called for investigations into that. there are other member's of the house and senate that are interested. i think that is one of the things we will see worked out through legislation. i think they are getting into the nuts and bolts of what the president is proposing tonight. lisa: what is the main opposition to closing these loopholes? why haven't we seen more on this? emily: i think there's always that difficulty when it comes to lobbying groups. there's a lot of lobbying groups out there presenting a lot of corporations, and they want to keep some of these loopholes in place. for lawmakers, it is important to remember what these corporations want to a certain extent, either because they have jobs in their district, or because they have these big donations to lawmakers.

capitol hill a lot of people pushing for a lot of different -- capitol hill has a lot of people pushing for a lot of different things, and it is very easy to say, whatever, we will keep it in there. i don't think the folks back home who voted for me are going to vote one way or another -- are going to care one way or another. jonathan: let me bring you the latest in london, if you indulge me for a minute. we talked about a headline in the previous hour, the prime minister facing a formal probe over the refurbishment of his apartment at downing street. the prime minister responding to those allegations. "i paid for the downing street refit personally. i have confirmed in full with the ministerial code. people will think it is bizarre to focus on the flat. people will think the refit is a relevant," the prime minister goes on to say. he also says no laws have been broken, and he looks forward to

the verdict from the electoral commission. tom: absolutely. george osborne emails in and suggests the collection of decorative prints and velvet embroideries offers a modern take on the quintessential english country house. nothing says 10 downing street like osborne and little. jonathan: prime minister's questions over and westminster, london at the moment, i'm getting reports that he appears a little bit rattled over all of this. lisa: i'm sure this is not the narrative he really wants right now. he's got to drag this economy out of a really bad recession. he wants to celebrate the vaccination efforts, and instead he is talking about the curtains. jonathan: the curtains and the flat, and unfortunately, so already come on a day where the president addresses congress a little later. [laughter] the federal reserve chairman delivers a news conference and we get earnings from one of the most important listed companies on the planet, apple. lisa: but the flat. jonathan: we will talk more on that a little bit later. tom: remember the color code? jonathan: you started this,

didn't you? lisa: walmart blue, really? tom: i will bet you he bought ferro and ball paint. jonathan: i bet you're right. this is bloomberg. ♪

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♪ jonathan: from new york city for our audience worldwide, live on tv and radio, i promise you we will not talk about a flat in downing street for the next 10 minutes or so. equity futures up four on the s&p. doing ok on the nasdaq, slightly negative. kailey leinz will run you through the stock movers in just a moment. talk about a name leveraged to the reopening trade, big tech, that is where the boom is. let's get to the bond market. yields have been pushing higher over the last day. up through 1.60% yesterday, up this morning to about 1.6 4% on tens. it is the front-end of the yield curve i think we need to discuss. tom, i did this for you.

a five-year chart of the two-year yield looks like this. for our audience on radio, it goes up, then it rolls over, then it loses its heartbeat for the next 12 months or so. somewhere down there is some price action in the bottom right corner of the chart. your two-year yield right now is 0.597%. what is going to be interesting for me in the next few quarters, at some point when the data is surprising to the upside, people start to recalibrate what the federal reserve is going to do, and that yield starts to get a heartbeat again. things start to get a lift. that is going to be the one to watch. tom: the recalibration of that will be a process or an event. we will have to see in terms of market stability. jonathan: you like that, tom? i teed you up, you sent something back, you didn't cut me off. truly original. i appreciate that. almost 18 basis points on a

two-year yield. kailey leinz can't wait for that. kailey: romain isn't here for you and tom today, but he mentioned that alphabet is flying in premarket trading. that is absolutely true. it blew past expectations when it comes to revenue in the first quarter. you can thank google's ad business. businesses are trying to attract those consumers. also, $50 billion share buyback is not hurting the stock this morning either. i would note facebook hasn't reported yet. that is due after the bell today. but better add trends for google are lifting that stock as well. you do have microsoft moving to the downside. forget record quarterly revenue. forget the ninth and a robe beat on earnings. that is just not good enough in this earnings season, given how high expectations were. that stock is lower by 2%. getting absolutely pummeled in premarket trading is interest -- is pinterest.

it is the outlook, that pulling forward of demand we saw for netflix affecting pinterest, too. tom: if pinterest split, it would be a downward bonus. jonathan: we saw it was netflix, we saw it with pinterest, but with other tech companies we are not seeing it. kailey: this will be interesting for facebook, come those earnings after the bell. will their user growth be flat like we are hearing from pinterest in the current quarter? that is something i am watching. those shares are down 11.5% in premarket trading. we have a number of other earnings number to keep track of is well. one is amd, the chipmaker. it raised its 2020 guidance. that stock is up 5%. another chip stock, texas instruments, just had an in-line forecast for the second quarter. again, not good enough this

earnings season. those shares down 3%. starbucks also a little lower. global comp sales, analysts were look for 17%. i wonder if people were out at starbucks using their visa debit cards to buy their coffee because visa sought debit card volumes up 31%, tom. 31% as those stimulus checks to americans went out. tom: i get a small black coffee. kailey: i'm a tea drinker myself. tom: are you in there getting the mocha much ito? lisa: yes, i'm in there getting the mocha mochito. jonathan: i'm caffeine free, as you know. decaffeinated. what does that explain, tk? indulge me. tom: kailey, help me here.

lisa: you can leave. kailey: can i go now? [laughter] jonathan: microsoft with the lead quote in that press release yesterday. "over a year into the pandemic, digital adoption curves aren't slowing down. they are accelerating. and it is just the beginning. can you get any more bullish than that? tom: i think that is the structural change, and part of that is the structural market. dean curnutt nailed the structural change in volatility. he said, wait, we will get back to some form of norm in 2017 or 2018, and we are there. there with dean curnutt -- we are with dean curnutt of macro risk advisors. how do we get back to 12 or 13 on the vix? dean: if you go all the way back to the pre-global financial

crisis period, we had a vix printed below 10 in late 2006, early 2007. we got to 80 by november 2008, and by december of 2017, we were back at nine, only to hit 80 in march of 2020. so these cycles are long. it is any eventuality, but as you noted, we have basically had the call that the pandemic destroyed the risk bearing capital that was effectively allowed to sell options. so you had a supply shock. you also had a demand shock, the retail demand for short dated options was just insatiable. both of those are starting to reverse, and they are allowing the vix to settle in. so i don't see 13 or 14, but i do think 16 or 17, i think we will hang out here for a bit, absent some shock. tom: we mere mortals look at the vix as a spot price, the present price. what do the future estimates of

the vix tell us? dean: i would say it is a reasonably normal curve at this point. typically you have the vix settling in at a lower level versus one month, two months, three-month vix futures. it is a little bit of a funk in of supply and demand, but also a function of very low realized volatility right now. i think something that is fascinating, you're seeing it in declining volumes, the market is in a little bit of a holding pattern right now. one month realized volatility on the s&p is threatening to go below 10, and jointly, one month realized volatility on the tlt at the same time is almost below 10. that interaction, that combination of volatility in the stock market and the bond market , and then you overlay the correlation of these two, it is actually pretty market friendly right now, so we've got this period where the market is not forcing you to do anything. what i see in clients who often

talk about hedging is they are just not feeling the urgency right now to hedge because the market is not forcing that urgency. you would rather save your premium for a bit of a rainy day . so i think the challenge for us right now is analysts is really to look at what that set of circumstances is that would catalyze volatility. i don't see it happening right now. i see some problems towards the end of the year, and a lot of it comes back to conversations of is it transitory, is it not, is the fed's catch up and wait strategy an accident in the making. i'm worried about the end of the year when it comes to fed and inflation. lisa: by the way, i do see tom keene taking a drink after you say transitory, so very much on cue. another way to consolidate what you're saying is it doesn't pay to be bearish or in any way to hedge just being pure risk on, and there's a question of whether all of the liquidity and markets has killed off measures

of risk and markets. what are you looking for? are these going to be the first indicators, higher vix readings, that there is some danger percolating underneath? dean: it is a great point. i do think the fed, one of the side effects here of all this policy is the pricing mechanisms that we rely on our certainly distorted, and don't give us the same clean signals. i think can look at something as basic as realized volatility, and that is simply the day-to-day changes in the s&p. what is the magnitude of them? we are going below 10 in realized volatility. that is basically saying the s&p is moving 0.5%, maybe 60 or 70 basis points a day. that is just not enough. so i think that's one. it tends to be the case that market vol events don't just happen out of nowhere. they tend to build. so we will have to see more frequency of 1%, 1.5% moves. that will move the vix up past

20. i think we are going to as well watch the 10 year. we had a holding pattern and settled in at 1.60%-ish. as jon was referring to before, the action has really been not so much in tens. it is really in the five-year part of the curve. tom: what is he doing, pushing into the real yield? dean: i would love to be on. [laughter] but looking at, for example, something like the twos-fives spread, there's a tremendous mount of information there. the fed's promises are still good roughly out to 2023. past that, we start to get worried. if you start to see the two-year selloff, that is the market effectively pressing the fed. jonathan: before you go, received a note from you about a month ago, and we are all urging you to get better. i know you were in a pretty serious jet ski accident a couple months back with the family, your two sons. can you update us on that?

in your own words, "my own personal vix hit an all-time high." how are you doing? dean: i'm doing better. we did have an accident on vacation. we'll tell you one thing, the concept of the pvix, one of the thing you realized when you are on your back is the among to help people are able to give, and the health-care industry just generally is tremendous. so thanks to my incredible nurse , my wife frances, i am back on my feet almost and back in new york, and really looking forward to the progress from here. and thank goodness my kids are ok as well. jonathan: looking forward to getting you back. you do a lot of charity work, and i'm looking forward to working alongside you as well. dean: i think it is kind of pick up a shovel and get in motion. obviously the government is trying to do a lot, but i think

it starts from the ground up, and it is just really trying to make an impact locally. i do think that unfortunately, the education shortfall has always been more of a systemic, self reinforcing idea. but the pandemic has made it so much more difficult. i think as parents, we have all seen our kids struggle through zoom and class every other day. if you start with less, it is just that much more difficult. i am just trying to push back on that. jonathan: dean, recovering and getting back. you are a good man. dean curnutt, macro risk advisors ceo. from new york city, this is bloomberg. ♪ tom: with the first -- ritika: with the first word news, i'm ritika gupta. president biden goes before a joint session of congress tonight to try to sell his historic spending plan. president once money for child care and tuition free community

college. he plans to pay for it with tax hikes aimed at high income earners. some are calling on the president to do more. president biden's plan would do away with private equity's most lucrative tax breaks. fund managers rely especially on a share of the appreciation in the assets they oversee, known as carried interest. those profits have been taxed as capital gains. that tax break would go away under the president's plan. he also wants to raise the top rate on capital gains. saudi arabia is in talks to sell a 1% stake in saudi aramco to what is described as a leading global energy company. the sale could be worth about $19 billion, according to crown prince mohammed bin salman on. the kingdom is looking at a deal as a way to lock in customer demand for the country's oil. investors weren't set of five -- weren't satisfied with mike or soft's quarterly -- with

microsoft's quarterly reports. shares are lower premarket. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

♪ >> apple has been a master of the supply chain over the years and has continued to look for

ways to diversify the supply chain. the best we can tell, demand remains robust across product lines and geographies. we are again expecting hundred percent plus growth. jonathan: from new york city this morning, good morning. alongside tom keene and lisa abramowicz, i'm jonathan ferro. here's your price action this morning. on the s&p 500, s&p futures going absolutely nowhere. yields higher by a single basis point on the 10 year to 1.6342%. euro-dollar negative by a little more than 0.1%. crude positive $63.66. we advance a single percentage point almost going into the fed a little bit later this afternoon. tom: what we try to do at "bloomberg surveillance" is to do earnings and corporate analysis differently. we spent a lot of time on the financials and less on the product.

evercore isi is truly one of the uber bulls on the street. his price target is up 30%. thank you for joining us. how do you get to such a bullish stance? is it about their ability to persist in creating free cash flow? guest: thanks for having me. fundamentally, yes. our take on apple has always been this is much closer to a consumer stable company like coke or pepsi or procter & gamble, or a luxury goods company. those are trading at 20 to 30 times free cash flow multiples area to our price targets are driven by the fact that we think the valuation gap will close as people appreciate the fact that apple is more of a consumer

stable. jonathan: what does it look like on the buy side right now? amit: at this point, investors are caught between two dynamics. the near-term is numbers are very good in the near-term. the flipside of that has become as you get into the back half of the year, september into december, compare stocks get difficult. how can the stock keep working when the comps start to get difficult? amit: if you get the -- jonathan: if you get the product mixed shifting, does the demand hold up? amit: it should. gross margins tend to run very consistently in the high 60's range. the extended belief narrative is

about the stall base, so gross margins -- so gross margins should move steadily higher. lisa: there was a time when people were looking to services as a potential ongoing cash stream for apple, especially if they do not come out with new revolutionary products. has that narrative shifted? amit: i think services continues to surprise folks. i do think the incremental part that has come out of the last few years is the appreciation in the wearables business. it is going to keep doing well, so i think you have a little but of diversity of the monetization and services, plus it's wearables as we move forward. there's incremental excitement on new products, especially around apple car and ar/vr

headsets we could see in the next few years from now. lisa: in the meantime, they are struggling with supply chain disruptions, as a lot of companies have been. do you expect them to give more details around that 430 billion dollars spending plan in the united states to try to secure their supply chain? amit: to your point, everyone that has reported so far has talked about some of the problems with the supply chain. apple is not going to be a whole lot different. the only thing i would point out is say apple is typically the biggest customer that any company has. they procure between 8% to 14% of semiconductor components in a given year. so they will get more than their fair share of allocation. these players of apple -- these

suppliers of apple, i think they will be fine on that front. i do think they will talk about all that, but i think they scale will provide and shield them from the issues of other companies. tom: tell me about the price target. you are way out in front of the street. how far behind is the street from where you are on that? amit: oh boy. i think the street tends to focus on iphone cycles and less appreciate the monetization that apple has which means people get exceptionally bullish when the iphone cycle looks good. that's the worry a lot of people have to go through. in our stats, this is about monetization overtime. jonathan: always great to catch

up with you, sir. evercore isi's senior managing director, and together with dan ives, the most bullish on the street. the median price target over the next 12 months, $151. tom: this is important. i take these price targets very seriously because it is really what these guys are compensated on. i would note three moments ago, $310 on microsoft, so citigroup has a 20% plus lift in microsoft to their price target, as we saw amit with a 30% lift at apple. jonathan: over a year into the pandemic, digital adoption curves are accelerating. that is a bullish line in that press release. lisa: and it is borne out by the reality. even if people are going back to the office, how about kids that

have been working remotely? do you think they are going to give up their new phone love -- their newfound love of screens and the commerce of this from their parents? tom: why are you looking at me like that, lisa? jonathan: tom feels seen. [laughter] lisa: it is literally every parent out there, the kids reshaping their feeling for screens. that goes to a bigger bill, and apple reaps the benefit. jonathan: what do you make of these return to work plans from the various banks, slowly starting to drip out ahead of the summer? lisa: the bifurcation between the u.s. and european banks i find fascinating. european banks saying work from home is the new reality, and cutting office space. jonathan: what i love about that is the last bit. we are going to do this for you, we are going to cut the office space. in other words, the european banks are going to cut costs, but we are doing this for you. of course. tom: where are we going to be in a year? jonathan: i think we are going to be more surprised about how quickly things move back to

normal. tom: i am in that camp. lisa: i would agree as welllisa: . jonathan: dan skelly, morgan stanley, as we take a moment to agree on something. [laughter] this is bloomberg. ♪

♪ >> if things normalize, we are going to see a shift back towards services, and that means taking some of the pressure off the goods sector. >> the mentor liquid at the out there, for trillion dollars plus in money markets, saving rates near all-time highs, all of these bode well for the architect. >> this is all reopening, fiscal stimulus. how much does behavior change? >> there will be i think temporary inflation over the next 12 to 18 months. >> long-term big picture, the fed has a long track record