>> you will see prices continue to move up and it will be on things we consume. >> the economy is overheating. >> it thing to pay attention to is the chairman. >> powell is optimistic we will get a robust labor market recovery, that inflation will be contained. >> he has been saying to wait, look, and we will respond if we need to. there ain't no it inflation problem. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz.

jonathan: this is "bloomberg surveillance." i am jonathan ferro. tom keene is back on monday. taylor riggs is stepping in. equity markets, all-time highs. the deal in d.c. is the head story this morning. 148.67 on the tense, unmoved. lisa: the feeling that not much could move it. not only do we get the infrastructure bill, but we are also about to get inflation data. no one is even mentioning it. at what point can nothing shake the resiliency. is it a market pumped up by stimulus dollars? jonathan: where are we in the cycle of this market? lisa: that is the key question. a lot of people are saying midcycle. that is the consensus being generated on wall street. some people are saying this has moved so quickly, such a consolidated cycle that we could

be entering into a later stage without realizing. jonathan: taylor riggs is desensitized by these big numbers in washington. taylor: [laughter] you did see some interesting movements within the equity markets. this much money is in bonds. you saw some movement, some upgrade from analysts on infrastructure-related stocks. for the record highs is the place to be. jonathan: your equity market looks like this, 4259 on the sp that on the s&p. 1 -- on the s&p. yields come in almost a basis point on the day. maybe we have been spoiled over the past week. still 135 monday morning. lisa: now we are up a basis point. i think we will still get volatility, it will just take a while for a shift in what the fed is going to do. jonathan: crude with a $73 handle. we are down on wti.

stop mover of the morning, i know -- stock mover of the morning, virgin galactic in the premarket up almost 15%. virgin galactic getting the faa approval to fly customers into space. taylor: this is unbelievable, this is the stock of the day. how does this speak to the ingenuity of science and of how animated people can be? perhaps the first -- of how innovative people can be? happy first spaceflight for customers. blue origin auctioning off a seat for $28 million. the space race continues. lisa: i love that taylor is so glass half-full and i am thinking what is the faa for going into space? do they have the same protocol for going into an airplane? do you have to have air masks for reaching a certain level? taylor: i hear the first class seats are better.

lisa: thanks. jonathan: [laughter] real value to this conversation, i hope we can add value to the banks in the premarket. off the back of the potential to see $140 billion returned to shareholders, bank of america of 9/10 of 1%. jp is up. citi is up. lisa: citigroup had the biggest expectations and perhaps that is why they are not up more. still, remarkable to me a little reaction of the $140 billion being released. jonathan: patrick joins us now, chief investment officer. we talked about it,peak everything in a market that seems desensitized to these numbers. what is your take on that? patrick: you have earnings growth, you have any economy

that is still growing. the pillars of higher risk assets are liquidity, low bond yields below inflation, and economic recovery that leads to earnings growth. i don't think that has changed. the dots moved a little bit last week. while those pillars are in place, i think the path of least resistance is everything. lisa: what are you watching? patrick: i am worried about multiple contractions that will happen on higher 10 year yields. you have been talking about that the 10 year yields are stubborn, not moving higher. i don't see how two years from now we don't have higher 10 year yields. the fed will stop purchasing bonds and people say when you don't do qe that represses yields. i think this time we have jobseekers who really have some pricing power. if you look at service, it is a 40 year high of companies finding it hard to fill

vacancies. the biggest problem is that they cannot find quality applicants for job openings. i don't think inflation is going to be transitory. there are a lot of transitory factors pushing inflation high. if we get wage growth, which i think is coming, i think inflation is going to be a problem. it is something other central banks are trying to engineer. the stimulus package, it looks like we may have some bipartisan agreement. that is going to come. whether this bill is what it ends up being, i doubted, but there is a genuine belief that government spending and infrastructure is something needed. i think that increases deficits, increases growth. taylor: with those inflationary pressures, are we at peak margin? patrick: that is probably a fair assumption. margins are record highs, just like everything else. we do have higher input prices,

higher wage costs. most likely companies will push that to the consumer in some affect, pushing up prices. jonathan: bank of america has looked at things like the employee to revenue ratio which has declined over the past few decades given the composition of the s&p 500 and how it has shifted to big tech. some of these companies have a small cohort of the labor force. when you're looking at things like that, when you break down the market would you break down the market that way? patrick: very much. the service sectors, the restaurants and hotels, those are big drivers of the stock market. the technology companies, the thesis is that it is moving away from man and towards computers and efficiency. you get a bit of both sides of those. extension from the big tech, hard to expected to go further

even though they want to be suffering from higher wages or higher input costs when you're looking at a 52% gross margin on any iphone. i don't think there is going to be an ability to expand those things. lisa: i think about your earlier point that you think inflation is probably more of a risk than the market is realizing. can you dovetail your expectation of man versus machine, machine taking dominance over men with that inflation given the fact that tech investments -- tech advancements have been disinflationary? patrick: you have a 30 year disinflationary backdrop with increasing global trade, getting the regulations from the 1980's and the tech improving productivity. we seem to be moving the other way on those kinds of things. i don't think the tech inflationary backdrop will change things. i don't think it is going to be

the powerful disinflationary backdrop we have had. it is coming down to wages. when people have more money and it costs more to produce things, it is going to come through with higher prices. the government needs inflation, as well, because when you have gdp to debt above 100%, it is harder to create economic growth. if you have banks pressing yields, that is probably the best way to manage the debt to gdp ratio. taylor: as we are talking about debt and deficits, along with the restrictor package that we are getting agreement on, you further assume dollar weakness under the weight of dollar and -- under debt and deficit. patrick: i don't think it is going to be markedly week but i think the u.s. has been most aggressive on what it is doing with deficit and debt. that is weak dollar. on the others, it has a central bank that will be hiking a

couple of years down the line. the ecb probably has five years where it want be able to move its interest rate. i expect marginal dollar weakness which will be a tailwind for risk assets but i don't think it will be sharp. jonathan: i want to finish with this question, do you think the ecb can actually hike rates this cycle? patrick: i think it is the next five years they are probably stuck where they are. maybe even getting to zero at some point in this cycle. i would probably view that as a victory. jonathan: i would be surprised. patrick: me too. they have a big challenge in front of them. unless you have a very weak euro which does not suit germany necessarily, it is hard to see how you generate inflation in the euro zone. jonathan: patrick armstrong, good to checkup -- good to catch up. if you think of the hikes in the

last cycle, they came early in the recovery. they were the only hikes of the last cycle in europe. lisa: do you the fed could raise rates this cycle given that when they hinted at tapering there with the flattening and the yield curve and the decline in inflation expectations. the u.s. needs greater inflation in order to repay debt and decrease the debt load. jonathan: i want take a position on it. i will say that mike mckee has asked the question in a news conference whether the new framework, because it basically ties your hands and forces you to respond too late -- whether too late could beat not being able to move at all and you have to move weaker or you don't move at all. lisa: people think we are in the same zone we were pre-pandemic. if anything, it has gotten more entrenched because of the download, then it will be hard for them to raise rates. jonathan: we have to talk about a bank -- about banks.

what he meant to talk about it with. we will -- what a man to talk about it with. we will do that shortly. for our audience worldwide, heard on radio and seen on tv, this is "bloomberg surveillance "-- "bloomberg surveillance." ritika: at least four people are confirmed dead in the collapse of the condo tower in the miami area. emergency crews are coming to the area with dozens of people still missing. they fear the death toll will rise as there is no word of what caused the building to crumble. at least one resident has complained that the homeowners association does not repair damages to cracked walls. vice president kamala harris head to the u.s.-mexico border. she will tour a facility in texas and meet with immigrants'

rights advocates. this comes after criticism from republicans and some democrats for not going to the border after president biden picture to figure out the root causes of immigration. matt hancock is apologizing for breaching pandemic rules after seeing and bracing a senior aide. he. said he would resign it comes after a newspaper posted photos of him with a woman. he says he knows he let people down and he is very sorry but we keep working to get the country out of the pandemic. derek chauvin will be sentenced today after a case that sparked international protest against racism and police brutality. he faces a maximum sentence of 40 years in prison after a jury found him guilty in the murder of george floyd. he kneeled on a george floyd's

neck for more than nine minutes even amid cries that he could not breathe. 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. this is bloomberg. ♪

jonathan: from new york city to our audience worldwide, good morning to you all.

alongside lisa abramowicz and heather griggs -- and taylor riggs. 40 to 59 on the s&p 500, advancing almost 1/10 of 1%. yet or unchanged -- yields are unchanged and the banks look like this in america. going into the opening bell, off the back of a green light from the stress test, jp morgan up. bank of america up. citigroup, up by 0.46%. mike mayor, he joins us now to discuss. after the close monday, we could get some big capital return plans. what are the numbers you're looking for? mike: it is to be the super bowl of banking, the stress test, now it is like a preseason game. it was boring but boring is beautiful for banks.

the fed through the kitchen sink at the banks with the stress test, the banks passed with flying colors. we expect a flurry of press releases that announce increases in dividends and buybacks and we ultimately expect capital return to double versus the prior year. that should be to all in yields. that is better than even junk buys. there is a lot of value with bank and we think that -- with banks and we think that will draw in new investors. ultimately what this means is redemption for the banks. remember during the pandemic, the banks were going to cut the dividends. now you have dividend increases and banks with buyback increases after monday. this is good news for banks.

banks and their investors should be able to reap the investment. lisa: where nothing more of a reaction in markets? -- why are we not seeing more of a reaction in markets? mike: people have been skeptical of banks this past year. we upgraded banks in the middle of the crisis. they did not trust the resiliency of the banks. it was a memory from the global financial crisis. if something goes wrong, the banks are going to get hurt. that was the farthest from the truth. more of the risk has been outside the banking industry. just like there has been too much skepticism over the past year and there is still skepticism, connect the dots. the banks passed the fed's stress test. you get the announcement, and then you get the increases. lisa: i don't think i hear a lot of people that they are worried about systemic risks in the

bank. i did that the yield curve is flattening and this is priced in. you saying it is not that and people are still worried about systemic risk? mike: no, i think that has passed. that was the last six to 12 months. now people are like, we know the dividends are coming but we don't care that much. i think they should care. the dividend yield adjusted for a buyback should be around 8% compared to the 10 year yield under 2%, that gap is one of the widest in history. where can we get an 8% yield globally? that is above the junk bond yield. i think people arsenic will and skeptical about the sustainability of the return, about the earnings. the yield curve is on people's minds but look what happened last week. the fed said it is likely to have two increases in the fed's

fund rate in 2023 and a bank's benefit -- and banks benefit twice as much from long-term rates. taylor: you're famous for saying that banks are not financial, they're just tech companies. despite the buybacks and dividends, are they investing enough to keep up with big tech? mike: the largest banks certainly are. some of the best fintech players are bank of america and j.p. morgan. yep tens of millions of customers -- you have tens of millions of customers. this is going from digital reactions to digital relationships. there catching customers and -- customers at multiple points. they continue to gain customers. bank of america and j.p. morgan grew deposits over the past year equal to the six largest banks. that was organic growth and a lot of that is aided through digital banking. jonathan: i apologize for lisa

abramowicz. joking, mike mayo. i think you are right to push. as mike points out, the numbers are there. yet, the prices are not responding. lisa: it seems like the skepticism around financial stability has been for not the window besides everyone but senator warren. the banks have been a stalwart through this. how much they can generate, especially without loan growth -- because we have not seen it. jonathan: a shrug of the shoulders for the banks, a shrug of the shoulders in the bond market. let's continue with republican commitment -- republican congressman fred shall. -- with a republican, smith. i want to -- with a republican congressman. i want to understand what you

think can be passed on capitol hill in d.c.? >> i think the moderate democrats and the republicans have been thrown under the transit bus by their compromise. immediately upon reaching a bipartisan agreement with the president, nancy pelosi and chuck schumer said we will not support this at all until we raise taxes on working people and business and pass our green new deal and other american family priorities through budget reconciliation. i think joe biden is a prisoner of the left wing in washington. jonathan: what was agreed to yesterday, dead on arrival already? rep. hill: republicans proposed a transportation bill with a pilot program to have a vehicle text on miles as opposed to the gas tax which i think is constructive. have to mcgrath are going to

move a bill that is basically the green a new deal priorities with $570 billion. it is not dead on arrival but i would not say it is being claimed on both sides of the aisle. it is not done yet. lisa: what would you be okay with when it comes to reconciliation intendant with his bipartisan deal? rep. hill: we need targeted spending and to get back to spending priorities as opposed to spending $6 trillion to increase the federal government. we need to not raise taxes on workers and on businesses as we try to come out of the pandemic and get people back to work. it is a subject of not only the amount of money, but the target and the priorities. that remains to be seen what the democrats will propose in the senate. . and the house lisa: if there are no -- senate and in the house. lisa: if there are no tax hikes, or ones that are more palatable,

you would be willing to support a multitrillion dollar package or please not push back on the bipartisan bill and allow reconciliation to go forward? rep. hill: i don't think that is the way it is going to go. i think you are going to have an infrastructure vote. nancy pelosi and chuck schumer will not bring that to a vote until they get to vote on their reconciliation package which is a multitrillion dollar package with tax increases. that is what the house and the senate are demanding of chuck schumer and nancy pelosi. i think it is premature to say with the final package looks like. lisa: is this 2 -- taylor: is this two wrapped approach the way to be going? -- this delco -- this two route approach the way to be going? rep. hill: i think no. -- paid for from previous funding and get that passed in a

clean way on a bipartisan basis. clearly, yesterday, nancy pelosi and chuck schumer threw a wrench into that plan. taylor: you're also a ranking member on the -- on a subcommittee. when we think about the grid is a national security issue, are we doing enough to meet requirements? making the grid reliable, transitioning perhaps to more green energy, but it has to be protected from a national security perspective. is there enough in this bill to do all of those? rep. hill: that has been an ongoing priority on a bipartisan basis in congress and about two of the power sharing companies located in my district. in both instances, they have a reliability transfer authority

for power across this country that includes a strong cyber protection and grid resiliency initiative. i have met with those companies and many utilities. the private sector works on this every single day. where the government can make strategic investments i think you find bipartisan support. as to the amount, that is not something i can comment on cassette not studied their up -- their proposal. taylor: we will make sure to ask you another question because we are coming off of the big conversation we had. the banks are coming out and passing all of the stress test. can you confirm that you don't see systemic risks that the banks passing those stress tests is a good thing? rep. hill: i think the banks' strength to the pandemic is a bright spot in the pandemic --

strength through the pandemic is a bright spot. it indicates our economies open and ready for business and i look forward to the results of that with more americans getting back to a full-time job. jonathan: the usefulness of stress tests, if we never allow the banks to never face stress again. the federal reserve is intent on not letting that happen. last year is an example of that. the banks did not get into the stress. what is the value of a stress test if the federal reserve is bent on these banks not facing stress again? rep. hill: i don't agree with zero interest rates the fed has proposed and i don't think they should continue at the rate of $120 billion a month. those benefited the economy during the pandemic, but it is time to move away from that. they have a primary obligation to regulate our banks and make sure they have the capital to operate a safe and sound environment and that is what is done. it has been a big change from

the 2008 crisis. that is why you also many street firms convert to a bank charter so they could build the capital and resiliency necessary if there was an economic downturn. jonathan:jonathan: always smartd always sharp. republican prongs been french help. economic data about to drop. your bond market basically unchanged, your yield going nowhere. the euro just a little bit stronger, euro-dollar 1.1950. income down 2% begins to median estimate of -2.5%. personal income did flat, 0.0%. eight median estimate of 0.4%. -- a median estimate of .4%. all raft of data drops after that. lisa: the interesting thing to

meet his it was a disappointment when it came to spending. the poor inflator was pretty much -- the core inflator was pretty much in line. i want to see if services spending too not offset the decline in good spending. what does that mean for high much -- for how much of dry powder people are spending? jonathan: let's hit the data with torsten slok. what is your take? torsten: the first thing to watch is inflation. core pce inflation was as the consensus expected. that means we do see inflation higher and that is confirming what we saw. we got the cpi numbers already so we know this was a very elevated level of inflation. the second thing is what lisa mentioned. the shift from goods to services , to what extent are we seeing people go back on airplanes,

stay at hotels? the service part of the economy needs to come back and that is what we are seeing in the data. more people are flying on airplanes, more people are going to restaurants, more people are staying in hotels. services being a key driver. these are the main components of the report. jonathan: just run a clinic for people who tune in every now and again to a show like this and here nerves -- and hear terms like cpi, ppi, court deflator, what are all of these things? torsten: the key is to monitor what the fed is watching. the fed has said they monitor core inflation, and specifically core pce inflation indicator. what are they monitor core inflation? normally we measure inflation including everything, also very volatile components like energy. the fed past the logic which

says we do not want to do monetary policy according to volatile indicators so this is their look at those part of inflation the relatively stable that shows us something about where the economy is going, and core inflation excluding most volatile components does represent a good picture of where is the economy at the moment. that indicator is significantly above the fled target -- above the fed target of two. now that we are so much higher than the inflation target of two , is that temporary or permanent? that is the discussion we happen markets. what are the reasons people could believe this is more permanent? lisa: a lot of people have dismissed these traditional measures because the content has changed so much in inflation. services completely fell out of bed. now we are seeing it come back online. how significant is it for you that in this most recent data we

saw disappointment in terms of services spending, that that is not coming back as quickly as people expected? torsten: inflation is measured as the basket of consumption we all have every month. if my consumption changes during the pandemic, i do not fly, go to hotels, i spent less money on those components. that is why during the pandemic people spent a lot more money on goods and much less on services. that is changing. that is why it becomes relevant monitor whether prices go up, which is exactly what we see in the inflation data and that has been lifting the level of inflation to this much higher level. that is why over the next several months we need to monitor very carefully whether the reopening parts of the economy continue to see high inflation.

he is saying this is all temporary, but there are reasons to worry this might be more permanent. on my screen i see commodity prices elevated. i also note the labor market being very tight and also the supply chain problems. the fed survey shows a lot of persistent problems with supply chain. there are some reasons to believe this will not just be a few months and inflation comes down. that is why the discussion of how long-term term is disinflation going to persist? lisa: we are speaking with torsten slok. you came to the firm from the sell-side firm of deutsche bank. now you have to put this into implementation and help them direct their strategy. i wonder with the details come is your view market is right that it is risk on, low rate in perpetuity? when it comes to the deployment

of some of the cash people have in savings account, there is not been a side the massive rush that can outweigh some of the higher prices that might keep people from spending too much for too long? torsten: from an investor perspective it is clear the level of loan rates is low, the level of late -- of short rates is the, credit spreads -- there is an inflation risk. there is a high likelihood with this clout we see on the horizon, if it does start raining -- otherwise i would think there's a chance the fed might turn more hawkish. more hawkish signals we do see more upside risk to inflation and the fed adjusting the message, that would have

negative implications for credit spreads and the dollar. turning this into investment advice and thinking about what the implications are, there are good reasons to be cautious in terms of the outlook come at least as long as the cloud is hanging in the fear of inflation is still so profound. in a few months we will know if it does start to rain, but for now there is no good reason to be worried about the inflation being a bigger problem than what the fed is appreciating at the moment. taylor: can you square, given there is a labor problem, not a skills problem, why we have a record 9.3 million job openings and no one wants to fill them? torsten: this is a very important discussion in terms of labor market. there are more job openings than there are unemployed people. we have a skills mismatch. job openings requiring skills the individuals who are unemployed at the labor market

do not necessarily have. that will not only be a mismatch in terms of education and background. it will be a mismatch in terms of the skills where the jobs are. it could also be the job openings have been in manufacturing, which is the good sector, whereas a lot of the layoffs were during the -- were in the service sector. we see mice -- nice hiring and job openings in the service sector. we are also seeing very significant job openings in manufacturing. it is very important we need to see a lot of job openings be filled, and that is why we are seeing wages go up. think about full-service restaurants. i've seen wages go up by a full dollar or $15.5 to $16.5 an hour. we will probably see wages state a more elevated level and from

our perspective see wages continue to go up. that is not a temporary issue. it is very specific risk to the inflation outlook. taylor: are we paying attention to the fact that once you raise wages it is hard to cut them, they are not necessarily transitory? torsten: once you have jacked wages up, you almost never seen any country wages go down, even during recessions. it is rare to see wages begin to move lower. that is why when you think about the year-over-year affect, now that the 12 month window moves forward in the level of wages is at this higher level, it is not going to go down. that is why the wage inflation issue is a very important issue. that does not mean that was below the selling price. it could be the companies begin to squeeze the margins. if that is the case that is not a risk for credit and equities because think about the p/e ratio. if the key in the p/e ratio

starts to go down that brings risk to the pe that is why valuations, as long as you have a problem, it does look fairly vulnerable. jonathan: good to hear from you as always. always sharp. torsten slok, apollo global management. let's check the price action. equity futures up .1%. let's call it 4263 on the s&p. yields in about a basis point. 1.48. lisa: this is the most important thing to note. no drama. the fact that personal spending disappointed, the real personal spending in particular dropped .4%. the idea we could be looking at services spending not offsetting the decline in goods spending giving people a pause. jonathan: we will continue this conversation around the opening bell. we will catch up with mohamed el-erian, bloomberg opinion columnist and queens college

president around 9:05 eastern time if you want to be precise. lisa: i think he also wants to go to space do you. we were having to discussion earlier. he said based on our salaries you probably could afford a ticket. jonathan: our salaries? lisa: he is in academia. we will do remote and invite you along. jonathan: that is his excuse. i guess i cannot argue with that. equity futures this morning up seven on the s&p, advancing .18% on the s&p 500. coming into friday at all-time highs. we advance a little bit. in the bond market, yields are lower by a single basis point to 1.4817. the euro stronger and the dollar weaker.

with that, wti 7346. alongside me, lisa abramowicz. a special thanks to taylor riggs for waking up early last couple of days. tom keene back on monday. this is bloomberg. ritika: with the first word news, i'm ritika gupta. at least four people are now confirmed dead and that collapse of a condo tower in the miami area. crews are coming through the debris and with more than 150 people still missing officials in florida for her the death will rise. no word yet -- in florida fear the death toll will rise stop record show at least one -- we are learning more about the biden administration plans to sell oil reserves to pay for the bipartisan infrastructure plan. energy secretary jennifer

granholm spoke with bloomberg television this morning. >> not selling off all of the strategic petroleum reserves. it will be a limited sale to be able to meet the goal, the president's goal was he did not want any of these pay for's to raise taxes on those earning under $400,000. this is one of several elements. it is limited sale. ritika: the bipartisan $579 billion infrastructure deal faces a complicated path in congress. president biden told reporters he expects democrats to push through an even larger bill, but many conservative republicans plan to fight the bipartisan and the democratic legislation, and some liberals say they will not support one without the other. 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 will get this done. it is a good moment for america, a good moment for the free

world. a good moment to push back against china. lisa: that was representative john garamendi of california's third district following the agreement on a $579 billion bipartisan infrastructure bill. how likely this will get done with the reconciliation tied to it, the idea it will only get past by democrats if there is an additional $6 trillion bill attached to it. terry haynes joining us. he has always been covering this and even assigning probabilities. this is one of my favorite aspects is he gives us hard numbers. you have parsed through the noise and you say this will be a white knuckle ride for markets over the next couple of months as the reconciliation bill gets tied to the $579 billion infrastructure bill. what you think the process will be like? terry: i think first of all

let's not talk about it being a two step process. it is a four step process. everything is pointing to four things converging this fall into september and early october. first is infrastructure. the second is the so-called families plan which has green new deal in taxes and other stuff in it. the third is fiscal 2022 spending, which has to happen by the end of september, and the fourth is a suspension of the debt ceiling so the government can continue to borrow. my probabilities on this are the two things that have to happen are spending deals and debt ceiling. 80% likely to happen is infrastructure because i think the vast majority of the members of both parties want it. the fourth thing is the families

climate, which i will give 30% to. we do not even know what it is yet. not even all democrats will support it. that is obvious from the kind of things joe manchin has been talking about, who started talking about there being too much debt from our conversation yesterday. i think that is probably not going to happen. it will take a wild to sift out. biden does not have the ability to unite the warring factions of his party, thus a lot of the washington confusion that has sewed a lot of market confusion. lisa: there is a question of whether the plan can get past without anything concrete alongside it. given the fact you assign an 80% probability to that bill, do you think it will be a standalone? terry: i think it ends up being a standalone. there will be a lot of back-and-forth. that is why i call it a white knuckle ride for markets.

a lot of back-and-forth on process. will things get linked up or not linked up? there will be times when it looks like it and times when it does not look like it. what ends up happening is the climate taxes families part collapses under its own weight because as we talk before, i do not look at washington is two political parties, i look at it as four factions. what i know is all four factions have to agree on spending, all factions have to agree on debt limit. all factions want infrastructure, so therefore it is very likely. who wants the other thing? only one wing of one party. that is very unlikely to happen. they will have to be convinced by events it is not going to get done and they're not able to convince the other three factions they should get it done. taylor: the equity markets seem to be surprised or happy there

were not tax increases in this proposal. are you caught off guard by the fact there are not tax increases , at least for the $579 billion? terry: i am not. the reason is simply the bipartisan group made part of their deal that there would not be tax increases. what you get in washington speak , you get a $1 trillion tax bill over five years. this is about a 100% plus up in that period of time over what the federal government would have spent anyway. at the same time it is not as if we are throwing six or $7 trillion at infrastructure problems. there is no guarantee they will get done quickly. the economic effect will be muted. they will put together for the 579 part that is the new spending, they put together a

plenty -- a predictable grab bag of things that i think are soft, but gets the job done in budgetary terms. beyond that, the tax increase threat will end up being in the families, climate part of this thing, the reconciliation part. today i will give you 30% that might happen. i do not see them getting 50 democrats on it. taylor: terry haines, pangea policy founder, always great to have you. lisa said it right. we love getting terry on because he gives us the betting odds. we have migrated from 75% odds to 80% odds and this has been in the zeitgeist of everything we were discussing at the close. if you think about the equity market reaction to tailwinds of economic growth, no headwind yet of taxes and we go to your world of bonds which is seen not as much of a tailwind from global

growth from this policy. lisa: what i have heard from congress members, from the policy wonks we have heard is there does not seem to be a lot of market faith in the 5 trillion or 6 trillion reconciliation bill being passed or put alongside the $579 billion plan. to me that is the key. that is the idea we heard from terry haines. there is an 80% chance of this infrastructure plan being passed, but will be standalone. it will not be attached to reconciliation and that is the x when nation of why we are not seeing a reaction in markets. we are expecting something bigger or around the size. taylor: what you do after this? do you go home and nap? lisa: i have other things. are you going home to nap? taylor: no, we are going to be on the closing bell. let's tease ahead. romaine bostick, caroline hyde,

and taylor riggs will be doing that. we will see if we can extend the record highs we will see. what is interesting is the defensiveness we continue to get with the nasdaq. that through 2020 has been the defensive sector that leads the way. at least for the day, the dow looks like it is making a comeback. we love doing the dow because it is price with it instead of market cap waited. lisa: jon ferro loves the dow. he tries to put that is much as possible. tom keene tries to hide the dow. we are looking at the nasdaq up about 20. the s&p up a little. no trauma. it has been up in the green all morning. the 10 year yield coming down a little bit more after the disappointing spending data. still core pce coming in at an annualized 3.4% rate. well above the 2% yield we are seeing -- the 2% rate the

federal reserve is looking for. coming up will be speaking with libby cantrill, pimco head of public policy. that is at noon. taylor: space. i want to go to space, lisa. lisa: this is bloomberg. ♪

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jonathan: from new york city for our audience worldwide, good morning. 30 minutes away from the opening with equity futures higher and stocks at all-time highs.

"the contents the open -- the countdown to the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: we begin with the big issue. d.c. reaching a deal. >> a lot of people talking about infrastructure spending. >> the market is not convinced. >> much smaller than some of the initial figures we hurt -- initial figures we heard. >> the bipartisan bill is supposed to move in tandem with reconciliation bill. >> the u.s. simply does not have the capacity to implement an infrastructure spend. >> where will we find the workers to complete this