caroline: from bloomberg's world headquarters in new york and london, i'm caroline hyde. romaine: let's get you caught up in where we stand in the u.s. financial markets. another down day. joe: the question is, "what'd you miss?" caroline: you could not have missed the sea of red across the screens when it comes to equities. tech getting hit hard as inflation worries back for some reason. bond market expectations for the

pace of consumer price inflation's over the next five years. highest since 2006. we have seen this story before the. -- before, though. can the fed and jay powell do the same as commodities have been on this staunch rise upwards? ironically today, commodities fell a little. but it feels as though the mood music changed and tech got clobbered. joe: it does not change the narrative. commodities mostly have been going up lately. what did go down is tech. not all tech is the same because we talk a lot about moonshot tech, but also the big cash tech, bank stocks, these companies make a ton of money in the here and now. they had their wares day since the middle of march. the index down 3.6%, a downgrade, but really it was just a lot of selling. romaine: this is where i make a

very insightful conversation about valuations. they still matter. i don't know. maybe. joe: joining us now, katie greifeld. katie: they are always high. what frustrates me is this is a market that is hard to attach a narrative to right now. if we think back to friday after the jobs miss, to thinking the fed is never leaving this market, we might as well buy stocks. but the magnitude of the tech drop today brought down the entire market. what really stands out is it is the entire tech sector. it's banks in addition to your arks, your teslas, it's taking down the hall market. the be -- the whole market. the best explanation i have heard is this is a market acutely worried about inflation and investors are taking it out on tech. but those worries have been with

us for a long time. caroline: exactly. what changed? since friday i thought we were not going to worry about inflation, now we are back to worrying about inflation again to such an extent we did not even manage to hang onto our value rotation trade. katie: we did get some headlines today. you saw five year breakevens had the highest level since 2006. what i thought was interesting was this divergence between breakevens and actual real rates, the growth expectations post-inflation. you saw five year breakevens, highest level in 15 years. you saw five year real rates hit a record low. so that juxtaposition, maybe that worried traders a little bit that we could see price pressures boil up from here, but it will not be accompanied by growth, at least if you look at how the market pricing in. romaine: we also saw a breakdown in crypto today. bitcoin, ethereum down.

have the fundamentals change for crypto? katie: your guess is as good as mine. but you are seeing interesting movements within the cup dose fear. if you look at bitcoin's total share of the crypto universe, it is down to 43%. it was 70% at the start of the year. in addition to does: and other silly coins -- in addition to dogecoina nd other silly coins, ether is really catching fire. it -- that is starting to take market share away from bitcoin. you are seeing the crypto space broadly not just move in one direction. joe: i want to go back to the rates discussion. we had the breakevens continuing to rise. are you surprised that even with so much intense inflation and chatter, commodities and the

bottlenecks and difficulty supposedly in hiring workers, although there is a lot of debate about that, that markets -- that nominal rates are not picking up at all and with no expectations the fed will respond to any of this? katie: it is striking you are seeing nominal yields pretty much stay in their lanes. that is in spite of the rising breakevens, the rising inflation expectations. they are still staying pretty muted. you are seeing this tug-of-war between real rates and rate -- and breakevens. right now it seems like real rates are the bigger driver, these concerns about growth, that is what the bond market is paying attention to. they are taking the fed at their word that this inflation will be transitory. whereas if you look at the stock market appears equity traders are more worried about what is going on with commodities than broader inflation. caroline: i don't know, five basis points higher today. they are wild. katie greifeld, we thank you so

much. coming up, we are going to deep into the cyberattack in north america's biggest petroleum pipeline, hoping to start again in the next few weeks. this is bloomberg. ♪

>> the industry understands that we are a target. >> criminal networks in russia and eastern europe, in the united states, around the world, have incredibly sophisticated cyber capacity to destroy things. >> this tells you how utterly vulnerable we are. we are seeing all these examples of ransomware attacks. >> we are preparing for multiple

possible contingencies because that is our job. >> the ongoing investments will be substantial. >> it a short. it will mitigate the impact on end consumers on the east coast. >> is a very transient, short-lived event. >> if it is prolonged, the impact could be much more extreme. >> we are prepared to take steps depending on how quickly the company can bring the pipeline back to full operational capacity. romaine: no shortage of commentary about the cyberattack that hit north america's biggest petroleum pipeline. that is from texas all the way up to new jersey, run by colonial pipeline, a huge pipeline for basically anyone buying gas up and down the east coast. joe, i am sure you had your eyes on pump prices with the escalade you have in your driveway. joe: i am just wondering which one i have to fill up first. but absolutely, we did see a

jump in the premiums paid for gasoline in new york. it's interesting because there is a regional thing. the new york gulf coast spread, now there will be a lot of gas theoretically from texas, so they might get the cheap gas we pay for with higher prices. we will find out. joining us now, roger read from wells fargo securities. in theory it looks like maybe this will be resolved, but in your view, how soon, or how long will it take for this to become a meaningful supply problem? roger: thank you for having me here today. yeah, i think we spelled it out fairly quickly in our notes today. but really you're looking at the system comes with three to five days of flexibility in it, and that is for a number of reasons. so you get this thing restarted around wednesday, we don't think there is a lasting problem. if it extends beyond that a significant amount, for example, if their description of

restarting most of the line or a partial restart by friday or saturday turns out to be very minimal, we get more concerned about availability of product and all that. but right now it looks like things will be more of a headline than an actual physical change to the market. caroline: is it just if we do go on a six, 10 day outage, is it jus the consumert -- is it just the consumer who is hurt? looks like we just got a technical issue with roger. he will be back in a minute. but i will ask the escalade owner.but i will ask the escalae

owner. it feels as though it is gasoline only right now that will be hit. joe: it seems like a gasoline

problem mostly, but i think our guest is back. so let's go back to our guest. roger -- oh, sorry. still waiting to reconnect. it really does feel like it. look, a lot of people waking up today and realizing the gas pipeline is on the internet, which is probably not something they thought about. romaine: a lot of stuff is on the internet. we should point out we did have bloomberg reporting there was disruption with jet fuel as well as heating oil here. this pipeline is not just serving what you and i put into our cars but it services a lot of airports up and down the east coast as well. but to the previous point our guest was making, this idea of it's how prolonged this is. there is flexibility within the system. as long as you have three or four days here where this goes on then maybe disruption is not get bad.

a week or more, refineries pullback and you see disruption at the consumer level as well. caroline: and truckers of course too. meanwhile, a little more deep dive on this issue of cyberattacks on colonial. stick with us. this is bloomberg. ♪ loomberg. ♪

caroline: today we are focused on the ongoing angst over inflation which weighed on equities and tech. one standout of course has been the drumbeat of how we express our inflation issues, lumber, and what that has meant for housing prices. you have been keeping a keen eye on that. joe: it is incredible and

everyone is aware of it and everyone knows someone who is trying to buy a home or is sitting on a home, if they are lucky enough to own one. but this is really just such a huge part of the economic story this year. for more on what is really going on with housing i want to bring in rick palacios, principal and director at john barnes real estate consulting. prices are so high. why don't we just build more of them and bring down the price of homes? rick: if builders could do it, they definitely would. i have been listening to you guys talk about cpi. inflation is everywhere except for cpi right now. i think housing is really the poster child for that. romaine: what got us here? was this really an issue of too little supply and too much demand, or were there regional factors that played into why we

are seeing this imbalance? rick: it is interesting, i think inflation may be a bit more transitory. it may stay layout -- longer in housing than other industries. catchup packets will relieve itself pretty soon here, i am thinking. but when you think about hassan -- about housing, you have these supply chain bottlenecks that have been just on steroids post-covid. land, labor, materials, municipalities. so that's the norm across the entire economy right now. but you layer on top of that, there's insane demand for housing right now. housing as a whole has had a captive audience unreal real of the entire consumer. i think some of that will start to wean into the latter half of this year and 2022. caroline: are there any other areas where there has not been demand? is it the whole spectrum that we have been seeing in housing, or

has it been the suburbs do particularly well, has it been the less affordable housing, like plus $1 million? what about those wanting to buy their first home? rick: we ranked this on a monthly basis, and demand is insatiable across every buyer segment right now. entry-level price points, move up second home, luxury. i mean, across-the-board. builders are having a hard time keeping up with demand. it is one of the reasons why if you look at just home prices, we have data from april on our survey, new home prices up 16% year-over-year. that is the highest we have seen in the history of our survey. joe: tell us more about demand destruction. where do you see, either because the houses just cannot get built or the prices are so nuts, what do you see happening when the

finally perspective homebuyer says i have had enough, i will stick to renting or my current situation and maybe look again in a couple years? rick: if you think about it in terms of our forecast, we do have growth moderate. 2021 is a very unique window into time for housing, where it is firing on all cylinders for a lot of the reasons we just talked about. but over time, and some of this is rates and inflation that is looking like it will start to accelerates and rates creeping up, we do have home prices moderating, we have the rate of new home sales moderating, new home construction moderating. we talked about a captive audience. there's almost no resale supply and a lot of these markets for homebuilders are active. so homebuilders can really kinda control the market where they are at and demand what they are demanding on the pricing front, because there is no other game in town right now. romaine: that is certainly true. when we start to get a couple

years out, maybe you see more normalization with regards to it. how far out on the risk spectrum are some of these builders? i know a lot of what they are building right now they have kind of already locked in on potential buyers for that, but how far out do they normally go? rick: it really depends. tying up land can take many, many years, mainly here on the west coast. one of the things that has been helping builders right now is they acquired and bought the land they are now monetizing through selling homes years ago. but when they are going to buy land right now, the homes they are going to deliver on that land, it will not be for sometimes a year or two years, or many years out. so that is where we are starting to see some builders, and joe, what you referenced in that thread i tweeted last week, where there is not a lot of comfort around volatility in construction costs and land costs, labor costs.

so what they are saying is let's pause here a little bit, dial things back a little so we do have some guardrails around what is happening on the cost side so we can price these homes more accurately to what we are seeing is a homebuilder in terms of the notices we are getting from vendors on a weekly basis sometimes that are ratcheting up our costs. caroline: talk to us about the labor part, rick, and how -- are more people being channeled towards wanted to work within construction? is supply at any point becoming un-bottlenecked there? rick: it is probably a combination of everything. not a lot of trained people, too. we highlighted this a decade ago coming out of the great financial crisis. a lot of the trade and the label pool in residential construction essentially left the industry during the great financial crisis, and we have not seen those individuals really come back en masse, even though there

is a ton of demand for their skills and their craft right now. joe: this is super interesting and it is a really big theme. it seems to me whether we are talking about lumbar, or in your description, the trade to know how to build a home, really atrophied in the post-crisis period where we had this long slump, and now we are paying the price for it. rick: a big part of that too is a lot of the traits pre-great financial crisis, they came from outside the u.s. we had immigration coming in, that essentially shifted and changed, and we had not seen it reversed. a lot of homebuilders i spoke to say, gosh, we would love to have an immigration policy we can get these people in working for us, path for citizenship. maybe we can see that happen. romaine: what is the next step? where do we go from here? rick: i think housing this year, 2021, this goes back to my

comments on this very unique window in time. we are going to look back on 2021 and say we had the strongest home price appreciation we have had since 2005, about 15% resale price appreciation. new home sale prices are going up higher than that. crazy construction volume. if builders could build more, they would, but the bottlenecks right now are really limiting what they can do. i think as we get into 2022, a lot of the land purchased over the last three quarters will hit in terms of community counts, and we will have more supply, finally get more retail supply coming online. and then you will get price appreciation moderating two more realistic levels -- to more realistic levels. caroline: that would be a fine thing. rick, your perspective on cities versus suburbs? rick: yeah, i mean, you are starting to see articles pop up about how cities are doing pretty well too in terms of transactions and finding the bottom.

we have got achieve who has -- he wrote a book on this years ago. our view is -- we were seeing the suburbs grow at an accelerated rate from what cities in urban were. you had covid hit and just like a lot of trends across a lot of industries, that trend was accelerated. it is something we are seeing right now is a lot of builders are more comfortable going further out because what we are seeing with work from home and people saying i can now be further out. i only have to go into my office a couple times a week, so i don't want to live in the city. caroline: long live the suburbs. rick, great to have you with us. really interesting that we are all kong the death of the city -- all calling the death of the city, but macy's about to invest millions into its new york city tower plan. so apparently still money to be

made in retail in new york. joe: new york is great. romaine: thank you. i agree. i love when you take these controversial opinions. joe: i am trying to be brave here. it is a good city. caroline: you have to walk that fine line. romaine: we have to talk about some of the broader issues with inflation. obviously seeing it in the housing market, but also in commodities and other places. we get the cpi report on wednesday. joe: yeah. i am excited about that cpi report. it feels like we could have some fireworks. something is happening. obviously, who knows, transitory, all that. but the short-term, feels like things are getting year -- getting interesting. romaine: base effect. 2.3%, month over month only about 0.25. which is a deceleration from the previous month. caroline: i really did not think we would -- friday i was told i was not carrying about -- not

caring about inflation anymore. joe: romaine doesn't think it exists. romaine: we need a narrative every day. caroline: have to cling to something. romaine: we have a lot of hours to fill. caroline: pick your headlines and stick with it. joe: bloomberg technology is next. romaine: have a great evening. this is bloomberg. ♪ loomberg. ♪

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