♪ >> before, we would have to see several years of labor market recovery to see that participation recover. i think there is a unique factor here that could make that happen more quickly. >> right now, the markets are being fed and cripple mix of positive news -- an incredible mix of positive news. >> you've got to get to pre-pandemic employment, and i think you will see auditory and fiscal policy will be fun a mental until we get there -- will be fundamental until we get there. >> we do think it is transitory, but we also have to admit that there is a very fair chance that

inflation will turn out to be sticky. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz, and tom keene. a simulcast, bloomberg radio, bloomberg television. we do it with the backdrop of a boom economy mr. cooperman has never seen. jonathan: a ton of demand. can we meet at? that is the challenge for some at a different companies in the united states of america. it is a good problem to have, a huge struggle to meet demand. earnings would have been better if it wasn't for material and commodity prices as well. that's been the big issue for earnings season so far. the actual story has been the margins have held up well. tom: we go out to that one million statistic widely presumed, and a look at the supply shocks across the

nation, and frankly globally, and it makes it evermore a mystery where we are q4 of this year. jonathan: i think friday is a mystery. we can gauge all of the different data points we look at in the economy right now, but hiring when million people -- hiring one million people, that is a real effort. what we need to gauge is whether these companies can actually hire people at the price they are offering and the wages they are offering right now. i think that's going to be an interesting part of the debate we have this upcoming friday. tom: it is the concept of a fully employed america. the fed has really picked this up as a social theme as well. what was your rest election -- your recollection of the quality pre-pandemic? lisa: the participation rate, if that is what you are referring to, has been coming down somewhat. this idea that the benefits that were paid out during the

pandemic may inadvertently or advert and lead lead to higher wages, because in order to attract workers, they will have to pay more, this is becoming a political debate, but it is also a fascinating economic one as we see whether there is the labor force to meet the demand to hire them. tom: let's frame this for leon cooperman. mr. cooperman i believe has a caution on the market out one year. state the case as you see it. lisa: the idea is where else are you going to go? are you going to go into bonds, and to anything else? you are not going to see a massive crash in stocks. at the same time, you're getting inflation, getting cost pressures we heard about from general motors. he himself in a recent interview said that he did get a new car, although he traded in a 2002 lexus for a hyundai. leon cooperman i am sure can talk about all about the supply and demand. tom: he's got a 12 car garage, so we know where that is going. jon ferro, i look at the debate we got in the equity markets

right now, and it is what everyone is looking at. i think we forget it is expecting out six months, nine months, your out. -- nine months, a year out. jonathan: how big is that deceleration? we are still working our way through so many distortions, and the way i view this economy is that it is like holding a beach ball beneath the surface. this was a mandated recession. now the policy has changed. the beach ball is surging to the surface again and moving even higher. we've got to look at the return to trend growth. you know how many people come on the show and talk about the return to normal? what is normal? tom: it's true. that is better said about february pre-pandemic. was that normal? we really don't know, in hindsight of this natural disaster. $70 a barrel, good morning. jonathan: crude doing ok. the beauty i, $60 handle -- sick

wti -- wti, $66 handle. we bounce back about 0.4% on the s&p, 0.6% on the nasdaq. tom: leon cooperman joins us, with decades of experience on wall street. leon cooperman with omega, and their family office, chairman and ceo. we want to talk about the markets front and center, but of got to ask you once and for all, as we have seen time after time after time, the hiding of leverage on wall street to get to some form of greed, it always gets ugly and shakes market confidence. with archegos and all that, that secret leverage that no one knew was there, is it -- has it

harmed permanently are market confidence? leon: everything is cyclical. the fact that after long-term capital, the industry would get into this kind of predicament again, i don't know that i would say quickly, but getting into the same predicament again, it is kind of surprising. i guess they want to make a margin on what they lent this fellow. i would say more things change, the more they remain the same. jonathan: good to see you again. what do you make of the increased man for transparency disclosure in the hedge fund community? leon: i don't get the idea of the family office. i feel like eli roth in "godfather ii," which i've only seen a million times. he's a retired money manager living on a pension.

the bad news is i no longer have the kind of income i use have when i ran a hedge fund. why do they have the right to regulate me -- why they have the right to regulate me is beyond my wildest dreams. a lot of crazy things are going on. i think the market structure has been destroyed by a number of moves made by government. in terms of the market, i describe myself as a reasonably fully invested bear. the fully invested part is all cyclical, given all of those decades of experience that tom attributed to me. bear markets don't come about because of immaculate conception. they come about because of certain fundament of factors. accelerating inflation, we don't have that. the fed is to accommodative -- is too accommodative. the fact is we are coming out of

recession. corporate profits are terrific. so the normal conditions that cause a bear market are not present. the other when i would mention is a geopolitical event that we can't forecast, but we have plenty to worry about. i think the biggest plus out there is the environment where there's just an absence of alternatives. you referenced this when you were chatting before, but essentially there's an absence of alternatives. what is happening is everyone is being pushed out risk curve. the investor that used to buy t-bills, i can't survive on zero, so i will take duration and inflation risk and buy t bonds. industrial credit buyer says i will buy high-yield. the high-yield buyer says i can't get by on 5% or 6%, i will buy structured credit, which tend to have a higher yield

because they are more opaque. . and then the bond guy basically says, i will tell you what, i will put 25% of my money inequities, and the equity person is going to put 2% in bitcoin. everyone has been moving down the risk curve. that will change. i have to say, while i am reasonably heavily invested in having a good year, i am more focused on the longer-term issues. i don't compete against the s&p 500. i'm an absolute return guy. but it seems to be if you sit back and thing about what is going on, it is very clear. we are borrowing from the future. we are borrowing from the future. if you had 100 economists on your show, and you ask them where is the potential real growth of the u.s. economy over time, the answer would be centered around 2% real. you get there because we are at 1% product if be to growth, zero point 5% productivity growth. you speak to a bear, they will say 1.5%. a bull might say 2.5%.

this year, the economy in real terms is going to grow three to four times potential, yet we are persisting in trying to hold interest rates at zero. it makes no sense to me. secondly, prior to the $1.9 trillion package, prior to the $2 trillion package, prior to the $4 trillion of infrastructure spending, we have already injected into the economy $1 trillion more of transferred payments income then we have lost. so what is really going on is very simple. prior to the virus hitting, we had about 5 million people unemployed. that ballooned to 23 million people. it is now down to around 9.5 million people. anna terry and fiscal policy has been conducted to get the unemployed back down to the 5.5 million pre-covid. they are less concerned about the long-term issues or damage they might be creating. that is one thing. i think we are borrowing from the future.

that is very clear. the debt that we are racking up will have to be paid, and unless you are into mmt, which i am not, this is going to create a long-term issue. the second point i would make is there's a shift taking place to the left of government. the people in charge now are going to go for higher taxes. we are going to have higher inflation, higher interest rates. i think this will be a straining influence on multiples. i think inflation should be worse than secretary powell is assuming. every company i talked to and every business, i came back to new jersey from florida, i'm a florida resident, i came back to new jersey and i had lunch the other day at a local place. i asked the owner, how is business? coming back, but i can't find labor. jonathan: we are seeing that again and again. you. in the calls. -- you hear it in the calls. let's take this conversation a

little bit further. why fully invest if you have gone all through the issues you have just gone through? leon: the near-term outlook, the conditions that will lead to a big decline, like i said, it is accelerating inflation. we don't have that. most importantly, we have a hostile said when you go into a bear market. have a fed that is extremely friendly. they tell you they are going to keep interest rates low not only this year, they are going to keep them low next year. i'm assuming they are going to be surprised by inflation, and the market will be surprised as the fed raises rates sometime in 2022. they will be forced by inflation. that is my view. so it is a cyclical versus secular outlook. let me explain. i got my mpi from columbia business school in 1967. i was broke. i had a student loan and a six-month-old child who is now approaching 55. i had no money in the bank. i couldn't afford a vacation. so i went to work the next day.

i started my career at goldman. the dow was roughly 1000. in 1982, 14 years later, it was roughly 1000. so i think we borrow from the future. i expect very little action from the s&p. everything i look at would suggest caution, intermediate to longer-term, would be the rule in a day. lisa: howdy remain cautious if it is not bonds, if cash is losing value because of inflation? if equities are borrowed from the future? are you going more into bitcoin? leon: the only bitcoin i own -- let me just say this. on nft's, bitcoin, stuff like that, you talk to somebody else because i tell people that i turned 78 a week ago, and basically, i am too old. i don't understand that stuff. it makes no sense. i own a little bit of gold, but compared to my net worth, i own very little. i am basically a meat and

potatoes guy. i'm a stock guy. stocks make more sense than anything else because of fed policy. but when the fed policy changes, i think the market is going to have a response to that. lisa: you say you have got your eye on the exit. what is your eye? how are you going to exit? does it mean more cash? leon: in a bear market, the winningest loser at least wins. i understand every asset has been inflated by policy, whether it is real estate, etc., stoxx, bonds for sure. i think the bubble is not so much the stock market. i think the bubble is the bond market. if it turns out to be wrong, i've been in bonds for quite some time. if that view turns out to be wrong and interest rates belong where they are, you don't make double-digit returns in the stock market. i believe in the capital market line, when you earn a bond that

is relative to what you sure in the stock market. so you probably earn 4% or 5% a year to the stock market. but what i am looking at for the exit are traditional things. i'm looking for change in fed speak, looking for change in the posture of the fed. i'm looking for inflation. i am looking at gold, looking at the overall economic activity. if i had to give you a list of positives and negatives, i am more impressed by the negatives. jonathan: here's a negative right now, just got a downside surprise on the a to b report -- on the adp report. it's a small downside surprise, 742,000. 850,000 was the estimate. going into payrolls friday, looking for a big number. 990 5000 is your median estimate going to friday's print -- 995,000 is your median estimate going into friday's print. tom: this report is not all that good. michael mckee joins us ahead of

all of our economics on this. i look at where we are on adp, and i say, can you link it to friday? you have told me time and time again you can't. michael: what if i told you you could? just kidding. you can link the direction and magnitude without linking the absolute numbers. that is why i think the markets may be a little bit rattled, shall we say, by a number that is about 100,000 less than we anticipated from adp. but it is one of those strange events that people trade on that doesn't necessarily give you a lot of accurate information about where we are going to be. the only thing you can say is the rebound has pulled adp up. we are now 742,000. it looks like most of the gains are spread out between small, medium, and large businesses almost equally. manufacturing, 55,000 jobs. service providing, 36,000, so

signs of a rebound. jonathan: i hate this game, so i do it through gritted teeth. equity gains taking a leg higher. i hate the bad news, good news story. but for the federal reserve, this goes back to a conversation we had this morning about a friday number. what would it take to spook the market? how big would the number need to be? may be a downside surprise is producing that goalie looks result. it is a tiny move. i don't want to draw too many conclusions off of a very small move and a very small downside surprise as well. tom: long ago at goldman sachs, leon cooperman sat there and said, you've got to be kidding me. we don't own enough apple? i want to talk to you about what one of the great thinkers on wall street at credit suisse has always said, that we are going to see this massive concentration of digital success stories. can i be overweighted apple or

amazon? or are they so much the fabric of this nation that you've got to own them? leon: well, i am them. they are not cheap stocks, but they are not expensive stocks. nothing is expensive if interest rates stay here. i look at 1972. in 1972, when jp morgan u.s. trust was ruling the roost, they had the philosophy of owning the right stock at any price. they don't care what valuation they pay as long as they were a world-class rose company. avon -- world-class growth company. avon, polaroid, sears roebuck. the 10 year is now 1.62%. tom: but the heart of the matter, leon cooperman, and you are what i would call intellectually extremely constructive in your caution, you know that the financial media is overwhelmed by the

gloom crew. every friday they come out come of the world is coming to an end. and they are trying to avoid a polaroid or an eastman kodak. how do you sidestep the polaroids that won't make it? leon: well, that is a function of your discipline and your approach. i look at the stock market and i see three stockmarkets. the first stock market i see is the faang market. the market is extreme nearly this splint -- extraordinarily disciplined. i have to say i am impressed by the market action. a big correction has come in the so-called faang'dd that have no earnings -- so-called faang's that have no earnings and are long on promise. and they are not extensive against interest rates. so they are nifty 50 today.

there will be a high failure rate like there was in 1972. but what ended the nifty 50 in 1972 was a tenfold increase in the price of oil that led to a global recession. we need a recession with a change in fed policy to change the attitude. until we have that, the market will play. jonathan: well, that's not going to happen for a number of years, maybe. leon: that's what the fed tells you, but i think mr. powell is doing a disservice, frankly, when he says the market is not a sick -- is not ask pensive of where interest rates are -- not expensive because of where interest rates are. the world has turned upside down. what i was saying before, the long-term issues to me our number one, we are clearly borrowing from the future. interest rates shouldn't be where they are, and we should not be injecting so much fiscal stimulus into the economy that is growing off the charts. secondly, we have a government

in charge -- i voted for mr. biden because i thought we needed change. i voted my values, not my pocketbook. but the truth is, if you look over the next 12 months, we have more inflation, higher interest rates, and higher taxes. not particularly bullish. the third point i would make as we have a massive growth of debt. this nation was founded 245 years ago. we had no national debt. it is going up at the rate of $3 trillion a year, and that debt has to be service. it is going to reduce the long-term growth potential of the economy. jonathan: i hear all of these concerns, and i think it resonates with a lot of our audience, but this falls into the should/shouldn't debate. what they should do, but they shouldn't do. it is what they've done, and we got to accept that now. and you've got to put money to work as you always do. so what are the signposts you are looking for ultimately to get you to de-risk? if you are fully invested now, and here's a long list of things you are worried about, what

are the things that lead you to take some money off the table? leon: i'm listening to the fed speak, to see when they change. i look at the stock market. the stock market is a high-quality leading indicator. this no indication -- i mean, the market has been very disciplined in its actions. i am looking at the price of gold which has been undermined by bitcoin. i'm looking at inflation, looking at economic growth. tom: you mentioned looking at apple is one of the stocks you own. bruce cass wants to talk about the post pendant x softness that we will see in apple, amazon, and the others. are you adjusting for apple that stumbles after the pandemic is over? leon: i have no credentials in apple. i sold apple much lower. i got out much too early. i do own microsoft, google, some facebook, some amazon. but i would say this.

another point on the cautious side for my -- from my days back as a strategist at goldman, stock market normally peaks in line with the peak rate of change in corporate profits. that is the second quarter, end of june. stocks will be up much less. so i am watching a host of indicators as to when to get out , and i am prepared to lose money because frankly, in bear markets, the winner loses least. i believe in a long-term outlook from what i own. i own cigna, 12.5 times earnings. google, 28 times earnings. you know, i am a big believer in the capitalist system. when companies are in excess returns, it attracts capacity and capital and kills returns. i came into this year overweight

and energy, and everybody hated it. it was 3% of the s&p. lisa: and you absolutely crushed it. you're talking about the fundamentals, and today we see a downside surprise was met with buying action. has a dove us fed become more important to stock valuations than fundamental growth in the economy? leon: i think the market structure has been destroyed. i say that for a few reasons. when i came to wall street 50 odd years ago, commissions are 25 to 50 since a share, and the volcker rule -- are there are dollars to five cents -- are $0.25 to $0.50 a share, and the volcker rule does not exist. 80% of the buying used to done on the new york stock exchange. 80% today is done offboard, so the system doesn't stabilize.

for some unexplained reason, i have written to the sec and they ignore me, kind of like my wife. [laughter] tom: really? leon: in 1938, they and acted the uptick rule. it worked effectively for 70 years. in 2007, they limited the uptick rule, and that gave rise to a lot of these trading systems which know nothing about value, so they by strength, they sell weakness -- they buy strength, they sell weakness. when this market has a reason to go down, it will go down so fast your head is going to spend. jonathan: and you are going to be on the following day so you can talk about it. i knew there was a reason you and tom keene. on so well. you have that in common -- you and tom keene got on so well. you have that in common. tom: it's amazing. jonathan: leon cooperman of omega. coming up, michael feroli, jp morgan chief economist.

alongside tom keene and lisa abramowicz, i'm jonathan ferro. live on bloomberg radio, on bloomberg tv, this is "bloomberg surveillance." bond yields higher by a couple of basis points to 1.61 percent. euro-dollar at $1.2002. this is bloomberg. ♪

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jonathan: from new york city for our audience worldwide, good morning to all alongside tom keene a lisa abramowicz, i'm jonathan ferro. up 16 points. advancing .4%. up around .7% on the nasdaq. headlines crossing the bloomberg terminal. one is on the debt ceiling. the other grouping of headlines is the treasury refunding announcement. let's bring in michael mckee for more. michael: good morning. the interesting numbers for the markets are 41 million in 10 year notes. 58 billion dollars in three-year notes. $27 billion in 30 year bonds. these are not significant changes from the previous auction levels although we did

see the treasury seeing their country bring the amount -- they are four bring -- they are quadrupling the amount tomorrow. the treasury is bringing back concern about the debt ceiling. it was suspended by congress does give years ago and comes back july 31. the big deal is always will be u.s. default? republicans have been suggesting they may hold it up again. today the treasury says they are evaluating scenarios on the debt cap, and the extraordinary steps they take like stopping investing in government pension plans. the red headline is they may run out of room more quickly than they have in the past. the extraordinary steps may not keep us going as long as they have in the past. a warning from the treasury department to the markets and members of congress on capitol hill they do not want to play around with this. lisa: 10 year yield take a leg

higher at 1.6227 on the heels of these headlines. how much is this something that can be remedied in the next couple of weeks or will this be a persistent overhang to markets until the very end as congress deliberates over how to extend this. michael: the betting has been this will get done because democrats control capitol hill. they have only the one-vote margin. if any member of the democratic senate wants to hold things up -- the democrats have done that when republican administrations have been in place. the feeling is they will stick something into the budget deal they are trying to do for infrastructure that will keep this going. treasuries as they expect congress to get this done but they are warning if they don't could be a problem. tom: other than you predicting the denver broncos super bowl that has never happened, this is

the single weirdest thing i have ever seen. we are out five plus standard deviations, fiscal to gdp, trade to gdp come the republicans are up on their calvinist moral high stool talking about the debt ceiling as we are drowning in debt and an active deficit as well. you and i know from our youth that the debt ceiling is nothing more than a political tennis ball. is it the same now? michael: it is the same. the one difference is in 2011 republicans pushed back against the obama administration, and they let the u.s. get very close to default. tom: you and i were over on the other sides sweating. remind us what happened. michael: the s&p downgraded the u.s. from aaa to aa. it had a major impact on the bond market. tom: i thought we needed a short

history lesson. jonathan: i want to jump in. i'm trying to understand how you can warn about these issues and reduce your cash balance to the treasury and reduce your options size. if you're worried about the debt ceiling, why would you be reducing your cash balance? michael: the problem for the treasury is the losses they have to. when they suspended the debt ceiling, they said the treasury had to have their cash balance down to $150 billion. the biden administration lawyers have looked at that and say it could be higher. we are at 1.2 trillion now. that is one of the reasons we have a lot of upset and the very short paper market because treasury is spending down this money and has reduced sales. it will get complicated project managers between now and july 31. tom: michael mckee, thank you so

much. this is a flashback to hear people talking about the debt ceiling. very busy in the next three days, michael mckee. now joining us for a four hour conversation is michael feroli, he has a brilliant essay out on friday on goods and services and on the odd job economy. michael feroli, i've to rip up the script. you and i adore and german friedman of harvard economics. -- adore benjamin friedman of harvard economics. i will go back to his classic book 20 years ago. explain the moral consequences of debt as we wring our hands over something as strange as the debt ceiling. michael: i agree with where you are going in your previous conversation. it is odd to be focusing on the debt ceiling at this time,

especially of the last few years we have not worried much about the deficit. the debt ceiling should be a residual of that effect. the concern is a bit unique to the u.s.. my understanding is this can be extended by a reconciliation. hopefully this should not be too much of a headache for the markets or economy. jonathan: as far as i understand, the option side at the longer end remaining unchanged. going into the payrolls report this friday, how big are you looking for that number in america? north of one million? what are the risks around some of these companies not being able to meet the demand by not being able to hire the people. michael: we are near consensus looking for one million. we think the risks are fairly balanced. this morning number suggest

there could be downside. as has been the case over the past 12 or 13 months the range of uncertainty is quite a bit larger than normal. there are technical factors in terms of how we adjust the numbers that could skew things one way or the other. it should be a pretty big number. if we have a missive a couple hundred thousand on other side of that, i would not change my thinking about the overall course of the recovery. expect noise but expect a pretty big number. jonathan: you think labor shortage translates into higher wages? beyond that, do you think it does? michael: i think you're right to say the next couple of months. when you think about the issues on labor supply, one of them is working parents liking to be at home in this unusual environment we have had. another may be that the unemployment insurance bonuses

may have raise people's reservation wages and made them more picky in what jobs they accept. both of those are temporary. school schedule should come back to normal in september. that payment ends in september. for the next couple of months it may be tight in the labor supply. perhaps we saw a little evidence of that last friday. a fair bit stronger-than-expected employment cost, which was kind of ignored. that could be one of the signs we are facing a labor supply shortage. i would think they are somewhat transitory in nature and we should loosen things up as we get to the fall and winter. lisa: what will make you think they are not transitory, that there is credence to the idea the benefits leave people more picky in terms of what they are to accept with wages in addition to rising input costs and supply chain issues that have caused

prices to go up? michael: we want to distinguish wages and prices. for wages, if those factors do subside after september, then we can take stock of how data development after september start to play out. we have to wait until then. on prices, it is trickier. some of these bottlenecks will be putting upward pressure on certain categories. one area that might be useful, in the past the fed has drawn attention to things like the dallas fed. what measures like that do a strip out extreme movement the upside and downside to get a measure of the central tendency of inflation. things like that may be worth looking at. lisa: to wrap up, the adp numbers came in disappointing and you have people showing they do not correlate with the monthly jobs report and they are noisy and messy and their methodology does not capture

people getting rehired by the same company. what would you say in terms of the adp's predictive ability? michael: even the best of time it has not been great. over the past year you had misses of over one million. pretty big swings over the last year. given the range of misses, what we saw this morning is not that far from what we are expecting for private payrolls on friday. i would say perhaps this takes out a little bit of risk of a huge upside or downside surprise. jonathan: michael, have to leave it there. it is nice to see a full opposite jp morgan. tom: i was just going to say. jonathan: michael feroli of jp morgan. thank you. that is a story in some ways. the interns, the individuals that have just joined the company, they want to get back to work. they want to learn.

the upper end, they want everyone back. middle-management is different. tom: inch by inch, step-by-step, the three stooges strategy. yesterday for the first time in ages i saw the acclaimed bloomberg tour and our wonderful world headquarters in new york. jonathan: new guys getting shown around the hq in new york. getting back to normal slowly. lisa: i have to say there is an interesting bifurcation between upper and middle management and the incoming classes. the idea of culture and has culture changed during the pandemic due to more tech, the younger generation more used to it. jonathan: have you seen that snow days are getting banned? for the kids of america. tom: happen you ban a snow day? jonathan: is all remote. the kids have to do it. tom: it is un-american. jonathan: i agree.

tom: to they say un-british in the united kingdom? jonathan: tom, you crack me up your equity futures up 16 points. tom: of my god, we will break the debt ceiling. jonathan: give a couple of weeks. it is all we will be talking about. this is bloomberg. ritika: with the first word news, i'm ritika gupta. general motors reported stronger-than-expected profit growth in the first quarter. gm gave the credit to booming sales and higher margins for utility vehicles and pickup trucks. the automaker says the global trip shortage will continue to affect output but it meant tainted's annual forecast. -- it maintains its annual forecast. the new york times posted profits that beat expectations even though digital subscription growth fell short.

the times at a 300,000 subscribers to its online edition. and now has 7.8 million subscribers in print and digital. it is the warning of the geopolitical risks that come along with the green energy transition. international energy says western governments should consider stockpiling metals like cobalt and lithium. production and processing is highly concentrated. the top three producers account for more than 75% of the world's life. london is emerging from lockdown . london accounts reported the u.k. output set almost 30% of the drop in payrolls nationwide. residents are moving to the suburbs and britain's exit from the european union is draining high-profile workers in finance. president biden wants at least 70% of u.s. adults to receive one dose of the covid vaccine by july 4. 60% of adults have received at

least one shot. the president says that makes it easier. the government has been encouraging vaccination sites to offer walk-in appointments. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪ >> we need to export, but right now we need a domestic focus. at least for the first 18 months a lot of my focus will be domestically. tom: gina raimondo, one of the most interesting people working in politics. the former governor of rhode island is fascinating. now the secretary of commerce. david rubenstein joins with peer-to-peer conversations right

now. what i love about gina raimondo is one of the great stories out there, her ability over the years to just keep moving. her father lost his job. i remember when bulova watch collapsed in rhode island. she made good on it in venture capital and in politics. david: she has an incredible story. she came from a blue-collar family. her father lost her job. she went to harvard, lost her -- near the top of her class, venture capitalist. she chose not to go to new york or washington or l.a. built a business before she got into politics. tom: she got into politics and got high marks in a challenging rhode island. it is a rhode island that all agree has a worn-out infrastructure. she is focused on that right now. david: that is correct. infrastructure is something rhode island really needed.

she helped reform that. elected governor twice. she chose to come to washington. she could have stayed as rhode island governor, maybe run for president down the road. she could still do that down the road. she wanted to come to washington to help president biden do the kind of things he is trying to do. she is the point person on the infrastructure plan. lisa: also a point person with respect to our policies with china, especially considering the record trade deficit we just printed due to all the imports from that nation. how does she talk about free markets but also having a national focus? can you square these ideas? david: the administration has not changed a lot of the trump trade policies yet. they have not taken down the tariffs with china or the tariffs with europe. i suspect some things may be negotiated with europe. she implied that. maybe the tariffs will come down to some extent.

we do not know for certain. right now the administration is focused on infrastructure and they do not focus on new trade agreements. i do not think they want the kind of trade agreements president trump negotiated. lisa: there is an idea that behind biden's proposals the government can offer good spending that can generate corporate growth. how did she talk about that in terms of the commerce of the united states versus federally funded programs that are one and done? david: the commerce department is often taking ceos overseas for trade missions. this administration wants to make sure companies here are building more jobs here. i do not think she will eat a lot of trade missions. she wants to get the infrastructure bill through and they recognize they will have to compromise on some parts. tom: you have a working number in your head what that

compromise is? does it ease back a little bit to get done or do you see a much lesser statistic? david: their two issues on the compromise. what is the size of the infrastructure bill going to be? there are two infrastructures. traditional infrastructure and the care infrastructure. it is unclear what the number will be. republicans seem to be less than half. the other issue is the taxes. corporate taxes and personal income taxes. the administration made it clear they are prepared to compromise on taxes. tom: i look at the compromise on infrastructure. it folds into capitalism in america. should we have a more pure bill or will gina raimondo say we could do a more complex bill? david: she is one of several

players that will try to make a difference. right now it is something that will likely go forward over the remainder of the year. it will not get done quickly. the structure part is easier. the harder part is the tax part. tax legislation usually takes a year or more to get through congress. senator manchin has said he could support a corporate tax rate of 25%. the president has proposed a higher rate. i suspect some corporate tax rate between where it is now and 28% will get done. in terms of individual tax rates, i would be surprised if there is no individual tax increase at all. lisa: as the cofounder and cochair of carlisle, how much are you relying on the infrastructure to get done. how much would it getting done or not getting done change your outlook and the way you invest? david: infrastructure is

something the company could benefit from and infrastructure the president is talking about would be good for the economy. there is no doubt it would help in many areas. telecommunications. our infrastructure on cell phone towers is not first world. it could be much better. there are many different things i think would help the economy it is hard as an investor to say if the bill passes the impact will be felt in two or three years. i will make the investment now. it is unclear. lisa: there's a question about the optimism. if there is not optimism about future growth, it is hard to invest in assets. you can line up for arguments for why market should go down but it is not lining up. are you a fully invested bear but looking up to some of these programs to say it could change the trajectory of the recovery? david: the economy has been

pretty good because of the stimulus. it is likely to do well for some time. the secretary of treasury walked back her comments on interest rates increase. i suspect the markets will do well. there was some concern yesterday about interest rate increases coming along. for the next two years come the economy is likely to do quite well. two or three or four years, it is harder to predict. the stimulus is still working its way through the economy. tom: really looking forward to gina raimondo. david rubenstein peer-to-peer conversations. the general motors company has been around 1908 through various iterations. it has been reinvigorated with mary barra, she is chairman and chief executive of general motors. here is david westin. david: it is a good day for you and good day for will durant. looking at the numbers, one of

the things i look at is the top line and the profitability. you did so much better than anybody expected. you almost put shame to analysts. my question is how did you do that? how did you get so much more money and profit out of a relatively flat revenue? mary: is a number of issues. strong demand for our full-size trucks and suvs. the chevrolet silverado, the gmc sierra, the escalate, the tahoe, there is exceptionally strong demand for those products. that is what is driving high average transaction prices because the demand is so high. we have able to be disciplined on incentives. gm financial has done an excellent job of taking advantage of higher used car prices and a strong market. we are also seeing recovery and return to strong sales in china. across the board, they contributed to the strong numbers. david: you surprised some people

by say not only would we stick with our guidance, but if anything we think it will be towards the upper end of that guidance. at the same time you have the problem with chips. something like 1.5 to $2 billion being left on the table. i think that number still holds good, yet you are doing much better than some people across the street at ford, for example. why? mary: there's not a lot of transparency between the different automakers on what is happening. we are focused on gm. what has been incredible is the work we are doing with our purchasing group, our manufacturing group, and sales and marketing. we have been working to build strong relationships with our suppliers for many years. there is a team looking to understand what chips will we have access to, how do we allocate those to our highest demand and products we have limited to no ability to recover , because there is such strong demand.

we run those manufacturing operations around-the-clock. they are being creative and doing what engineers do of problem-solving and in some cases reengineering to get the chips to the right products and to find every opportunity we can to build a car, truck, or cross over and get to the customer. david: is a question of where you direct your chips. are you getting more chips than you would have expected because of your purchasing department? mary: there is not a lot of transparency to say more than. we were clear last year at what we thought the demand was going to be this year and the chips we had ordered. we are continuing to work with the supply based on that. it is looking for every opportunity and managing it centrally and also working hand-in-hand with china. across the board that team is

being scrappy in finding ways we can build vehicles, not only full-size trucks and suvs, but also our electric vehicle program. even with the challenges the semiconductor shortage, there is no impact on our electric vehicles, on our autonomous vehicles, and the growth initiatives we have been talking about. david: that was one of the questions i had for the hummer coming out later this year and the lyric next year. will there be any delay because of the chip problem? mary: absolutely not. those vehicle programs are on track and i'm excited to have customers get in those vehicles and drive them. i think they will be amazed. david: we understand the 1.5 to $2 billion number put up before. can you give us a sense, if you had 100% of the chips you needed, what percentage are you getting now? mary: it is a very dynamic situation.

every chip we have access to we are making sure it gets into the vehicles where we have strong customer demand. it is something that changes every day. i will not put a number on it. david: this problem is going away in the sense that as you go forward you will make more cars that require more chips. what is long-term solution so you do not have the sort of problem you have this year? mary: i think we are going to see a recovery. q2 will be the weakest for the year. we will see recovery in q3 and q4. we are working out long-term strategies. there is a menu of things we are working on. processes we are changing. more to come later in the year on how we make sure we are never in this situation again. we have a dedicated team working on that. david: when it comes to batteries you have integrated with the joint venture where you are making grown batteries. is there something like that

that would make sense for gm? mary: we are not going to take anything off the table. we will make sure we have the right number of chips and it does not constrain our growth. we see huge opportunity not only with the product portfolio, but with a strong electric vehicle products we have coming. i talked to one of your michigan representative's yesterday who suggested perhaps there needs to be coinvestment from the government as well as the private sector in chip reduction. does that make sense from your point of view? mary: making sure we have a secure supply chain supports the growth we will see. it is something we will all have to work together on. you're having conversations with the administration and members of congress to find the right solution. david: in your presentation general motors lays out a robust program to go to electric vehicles and deal with greenhouse gases over the longer-term. you have specific targets you are sending out.

how do you hope to achieve those? mary: it is making sure there is an ecosystem when a customer looks at can i buy an electric vehicle, they say i will have a better experience when i buy an electric vehicle. it will be a beautiful vehicle. it will be a segment i want to purchase. if they want an suv or crossover they will not buy a sedan. it is also making sure there is a robust charging infrastructure. that will be not only what we are doing. we are putting charging in our workplaces, but also working with communities and all of the startups in this business and connecting those. we just made an announcement we will provide access to 60,000 chargers across the country to give confidence to customers as they buy an ev that they will have robust charging infrastructure. all of those things combined, beautiful vehicles, the right

range, and charging available, customers will move to ev's. david: for investors who watch your company, you expect to have the same profit margins on ev as you have on internal combustion vehicles. mary: as we move into the platform and continue to take costs out of the battery, that is our goal to get there and have that breakeven and then move beyond. you have to understand there's a different cost of ownership in electric vehicle versus an internal combustion engine vehicle from gas savings you do not have to fuel up. we have to look at the equation. we are on that journey and i'm very pleased with the work going on with our battery technology to continue to take costs out and increase energy density. michael: i'm sure you're looking -- david: i am sure you're looking at supply chains beyond just micros chips. as you look at ev's, where are there possible weak spots?

mary: as we look at some of the key materials that need to go into vehicles, especially those that are expensive, we are looking at how do we reduce the need in each vehicle. we are also teeming with partners in the supply chain to make sure we have a secure supply that will allow us to grow. that is the work -- a lot of it underway.nd a l david: as you look forward to 2021, you've said you are maintaining your guidance. you will be at the upper end. what are the vulnerabilities? what is the sensitivity that might have you fall short? mary: with the insights we have now we believe that guidance is correct with where we think we will be from a semiconductor perspective. one of the things that gives us a lot of confidence is the interest in our vehicles, the demand for our vehicles, whether it is a chevy trailblazer or a

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