♪ >> is still have room for positive surprises, but what i am worried about right now is sentiment. >> some of the strength in the consumer that we are seeing in the credit card spending data, that is going to start to shift to the business sector. >> we cannot afford higher rates, and it is very unlikely that we will reach the height of the last cycle. >> this is going to be a very long expansion. >> it is pretty clear that whether it be the september meeting, jackson hole, the fed is going to have to address the tapering need. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa

abramowicz. tom: good morning, everyone. a very important thursday, as always. on radio, on television, "bloomberg surveillance." we got 14 things to talk about. let's squeeze it in before michael mckee and james bullard of the st. louis fed. they are looking at a bond market much unusual. jonathan: that is in the face of hotter cpi than expected. we understand the objectives. we understand the mission. we need a better understanding of how another $27 billion of asset purchases each month helps them achieve that. in the words of congressman trey hollingsworth, are we just -- tom: we lead strong this morning on bloomberg radio and bloomberg television. i will michael mckee with james bullard, then later in conversation at the rocky mountains summit with charles

evans of chicago and i believe chairman powell will stop by as well for an appearance midday. jonathan: buck wiki has got it right, hasn't he? maybe that's what we should be doing. chairman powell will come by in the next couple of hours. we will get testimony from him, then have questions from the senate banking committee. i imagine it will be more of the same from the federal reserve chairman, looking for a second term. that is very much on the agenda. tom: the nuances, the distinctions of transitory and temporary. which is it? kailey: one of the most important aspects of the testimony yesterday and what he might say today is fed chair jay powell comments on housing. when you talk about elevated asset prices and the potential for market distortions, to have a real-world impact that is very much the forefront of his focus. i am curious what jim bullard says about tapering mortgage-backed security purchases. tom: all of it wrapped around you morning of data and claims

coming up. in the vix, 17.93 isn't gloom, but it is not the day after day bull market we have seen. jonathan: let's keep it brief. bid into the bond market, down two basis points to 1.3257%. for our audience worldwide on tv and radio, morgan stanley down about 1.36%. just a little lighter on fixed income trading again. forget james gorman back on wall street. tom: it is a regime change. actually, nothing has changed. michael mckee is at some place romantic, while lisa and i are in the chill of a cold summer in new york. michael mckee is at the summit with an interesting german from st. louis. michael: good morning to you. we are here in victor, idaho, where the sun will be up a little bit.

we would like to welcome jim bullard to bloomberg tv and radio nationwide. i would like to start with a two-point question. chairman powell yesterday said that inflation is largely a factor in the inflation of the reopening economy and supplying jane issues -- and supply chain issues that will fade, but also said we are some ways off from's essential -- from substantial further progress. so question one, do you agree with chairman powell on inflation, that it is going to be very temporary? and where do you think we are on that substantial further progress continuum? james: you said very temporary. i think that is the key debate here. i think it is clear that some of the inflation will be temporary. how much, and how much feeds into a more persistent process, as really the question that the committee has to wrestle with

going forward here. so i think we are already above our target on core pce inflation. the committee, according to the summary of comic projections, is projecting 3%, excluding food and energy prices. i think some of that will hang on and persist through 2022. we had hotter reports than we anticipated recently, so there's some possibility that we would ratchet up our expectations for inflation in 2021 and 2022, so this is a different situation than we faced in the past. on the labor market, i think we have made substantial progress. we've come a long way from where we were last december.

all indications are by anecdotal report that the labor market that a lot of people are looking toward september and october, when schools are back in session . it is not fully healed. it is not fully done. but have we come along long way since december? i think the answer is yes. michael: in terms of that progress, do you think tapering may have to come sooner than most people anticipate, perhaps pulling it forward into the fourth quarter of this year? james: the committee is going to debate that in earnest now. i would emphasize there are lots of parameters around a taper decision. the starting date is only one

part of it. the pace of tapering is another part, mbs versus treasuries. but i think the most important thing i have been stressing here is the idea that you probably don't want to be on automatic pilot in this situation. this is a really fast growing economy, lots of things happening both in the u.s. and globally. i don't think we have the luxury of being able to just go on to automatic pilot and say we are never going to change the pace of purchases. i think have to be more contingent on that because we're not quite sure where this inflation process is going to go. we need some optionality on the upside with respect to possible inflation shocks. michael: the chairman did say yesterday that if inflation did seem to be persistent, the fed

wouldn't hesitate to act and you would have the tools to deal with inflation. what you say to critics who say you raise interest rates and have historically plunged the economy into recession? james: that is exactly the kind of logic i think that you want to avoid, that you get too far out of alignment with what is actually happening in the economy, and then you really have to react more strongly than you'd like, possibly causing disruption in the economy. i think the risk management here is that if inflation does come back down in 2022, we are in a great position for that. but if it doesn't, we are not in such a great position. i think for that reason, we want to have some flexibility on this taper. michael: there are a lot of

people who look at what the fed is doing and say the economy is opening up very fast, so why do we need $120 billion a month, $40 billion a month of that in mortgage bonds? what do we get with that that we wouldn't get for less? james: i think it is a good question. we took this policy decision in march and april of 2020. that was a very different situation. the pandemic was just getting going, and it looks like there could be a financial crisis. people were talking great depression. so that was the context in which this decision was made. but now you are in a very different situation 15 months later, where the pandemic is coming under very sharp control here. you've got growth in real gdp, projected to be 7% in the u.s.

this year, faster than china has typically grown in recent years. you've got bottlenecks and shortages everywhere, so this is a very different situation. treasury market functioning and other financial markets seem to be functioning very well. so i think we are in a situation where we can taper, and i think setting those parameters the right way, we don't want to jar markets or anything, but i think it is time to end these emergency measures. michael: there's certainly a lot of concern on wall street that the fed has eliminated price discovery, and the uncertainty over when you are going to taper is setting the stage for possible market accidents. are you worried about assets? james: i love price discovery

just as much is the next person. i'm a little skeptical that there isn't any on wall street. it is true that monetary policy is part of the equilibrium, so traders have to factor that in. i know it is a tough job. but i think we have come a long way with our transparency and our ideas about constantly communicating and trying to do our best to inform markets about where the monetary policy debate is and where it is likely to go, at least short-term, but we don't know how the data is going to come in better than anyone else, and for that reason you're going to get slight adjustments all the time. michael: i am out here in idaho at the rocky mountains economic summit, with a lot of ceos and economist, and the ceos are all asking the economists, why does the fed think there's no inflation when gas prices are

way up, went home prices are way up? i know that raising interest rates isn't going to bring down gasoline prices, but how do you keep inflation expectations anchored when the real economy inflation is something that people are starting to talk about? james: like i said in my opening comments, this is a different situation than we have seen in the u.s. this is quite a bit of inflation, more than we are used to. you kind of have a generation that hasn't seen very much inflation, so i do think it will be a challenge to keep inflation expectations in check. i do take some solace that markets seem to be giving us a vote of confidence based on the tips market that we are going to bring this under control and continue to have good inflation outcomes for the u.s., but it does require management and it does require us to move appropriately on issues like

tapering asset purchases and talking about when we would lift off of zero at some point down the road. michael: i am wondering how you think about and factor covid into your economic projections now, especially since it seems to be the poster boy state for having cases rise. james: we track it every day. i like to look at the main indicator, desk or day per million in the u.s., compared to other countries around the world reedit has come down dramatically, and is projected to continue to fall. it's true, not everyone is vaccinated. i think it would be unrealistic to think that every single person is going to get vaccinated. that is not how this works. but i am hopeful that we can get

to a level that will bring the virus under clear control. i think that is happening. i also would encourage people to think about the vaccination. i think this is a preventable disease at this point. there's no reason now that we have to have very many deaths from covid-19. michael: one last question. i want to go back to something jon ferro set at the beginning of the show, quoting a congressman. in the summary of economic projections, you have seen long-term economic growth at 1.8%. if we are spending all this money, why are we only getting 1.8% of? what is the benefit to the real economy from everything you are doing in the long run? james: that is a great question to ask. i think what we are looking at here is really fantastic growth

in the u.s. during 2021, 7% is the current projection of various prognosticators and our own staff here. and i think above trend growth in 2022, 2023, steve got a period here where gdp is passing the previous pre-pandemic peak in total output produced in the economy. that is happening now as i am speaking, and it is projected to go above the previous trendline, so you're really looking at quite a strong u.s. economy over the next couple of years, and i would hope that some of that would feed through to the underlying growth rate. i am hopeful that we will see productivity growth switch now to a higher growth regime

because we have experiment it with new ways of doing business, new technologies, and some of that will get into basic processes in the u.s. and lead to faster productivity growth. a lot of that seems to be happening. the data is very volatile right now, but i would be hopeful that the medium-term growth rates for the u.s. economy would be somewhat higher. michael: we will hope you are correct. jim bullard is president of the federal reserve bank of fed lewis. thank you for joining us on bloomberg tv and radio. i will send back to you guys, and i will enjoy being out here. jonathan: you do that, mike. don't rub it in at all. mike mckee there was st. louis fed president jim bullard. i think that was a classic mike mckee clinic on some of the issues. a key issue he has cited repeatedly, i think it is important that he keeps asking this, what do we get from one hundred 20 billions a month -- from $120 billion a month that

we would not get? tom: i think james bullard has been way out front about his interesting theory on regime change. and i think the fed president inserted well. it gives you an idea of the debate that is going to take place in the coming months. from new york city this morning, good morning. for our audience worldwide, this is bloomberg. ♪ ritika: fed reserve chair jerome powell said it is too early to scale back the aggressive support for the economy. he told the house of financial services committee that the debate over bond buying will continue at the central bank's upcoming meeting. meanwhile, powell said inflation has risen faster than expected. he's back on capitol hill today. senate democrats have found a way to help pay for their $3.5 trillion tax and spending legislation. bloomberg has learned they want to impose tariffs on carbon intensive import.

the plan also includes expanding tax credits for renewable energy and electric vehicles. in china, economic growth studied in the second quarter. gdp contracted for .9% from the first quarter. retail spending and desperate output both beat estimates -- and industrial output beat estimates last month. in south africa, the number of police forces to deal with rioters will go from 5000 to 25,000. . global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

chair powell: inflation has increased notably and will likely increase in coming months. inflation is being temporarily boosted by base effect as a sharp -- as the sharp drop from last spring is being priced out. jonathan: he will face the senate banking committee later this morning. good morning. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market looks like this on the s&p 500. read on the screen, 4350 come off by 0.4%.

yields are in by a basis point or two, 1.33%, as the st. louis fed president makes his bid to start winding down qe. tom: interesting market, to say the least. right now, as we look at bank earnings, we shift to the view of technology. this will be later in the month. it is a decidedly different view. -- joins us of bloomberg intelligence. he is fabulous on technology. adnan, all you have to do is look at the base revenue growth. up 15.3 percent, 20%, 41%, 18% as well. is a tech juggernaut about revenue or about profit? >> i think it is a little bit of both. one of the things the pandemic has shown is the key ability to

dramatically accelerate sales, but one of the things the pandemic has also shown is-- thr

three years of moving to the cloud, seismic technology changes, distributed workforce, central depository for storage and compute. all of those things we could've expected over a three year period have happened in a 12 to 18 month period. so companies are genetically reevaluating where they want to spend money and how they want to spend money. so to answer your question, i think pricing power is here to stay, but it is a new dimension in some areas, but the accelerated move is something the companies are going to have

to deal with. lisa: perhaps no one has pricing power like taiwan semiconductor. this might be one of the most important stories that went under the radar in the past 24 hours, highlighting the fact that the chip shortage we keep talking about, this affected so many industries, is set to persist at least until the end of this year, if not into next year. how does this affect industries ranging from automakers to the big tech names we have seen persistently struggling against a shortage? >> that is a great question. the short answer is everybody is going to have to pay higher prices, and that is going to have to be noticeable in the downstream components and products that we buy. industrial and autos are going to see longer delays because they are not as big pieces of the pie for the sea food chain in general, and areas such as computing, both pcs and mobile,

are going to be prioritized, but there will be haves and have-nots. if you are dell, hp, you are in a better position relative to a smaller handset vendor or a smaller pc maker. the auto industry is roughly about 10% of semiconductor consumption. it is not an overly profitable market, but it requires extensive testing come along lead times. it is a more difficult market to satisfy from a quality perspective relative to all the other markets. so i think the delays there are to some degree self-inflicted, but also part and parcel of just the nature of the auto industry. i think industrials is probably the most impacted from a chip shortage perspective, but smartphones, pcs, servers, i

think you will get product. you might not get exactly what you need. you might not get product, and pending on the size of the company and the importance of your company to the overall industry, you will be able to shape most of your demand. jonathan: anand, thank you. it will take time to work out. lisa: in the meantime, prices are going up. that is what i heard from him on everything across the board. perhaps the iphone, the extra one that tom is buying, is going to be a little more expensive. jonathan: are you going to line up for that? tom: i don't know, i am fascinated by the tech juggernauts. lisa: a snow iphone -- a chanel iphone. tom: there are going to be new iphones. i don't know yet if there's going to be a regime change. jonathan: jobless claims in

america, 350,000 is the estimate , down from 373. -- down from 373,000. heard on radio, seen on tv, this is "bloomberg surveillance." ♪

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jonathan: live from new york city for our audience worldwide, on tv and radio alongside tom keene and lisa abramowicz, i'm jonathan ferro. waiting for data in america. equity futures down one third of 1% on the s&p. your jobless claims data is out. here is michael mckee. michael: i will give you the jobless claims numbers very quickly. 360,000. a little bit more than anticipated but still shows progress along the way. the number i will highlight is something i've never done before. that is the empire manufacturing index, shoots up 26 points to a new record of 43. new orders and shipments surge and the prices received index goes up to 43 as well.

another new record. a very rapid expansion in the new york area. in the philadelphia area we see a bit of a decline in the philly fed index, 21.9, down from 30.7. it may be a state-by-state thing. as the economy is reopened we are seeing a lot more of this. continuing claims, 3,241,000. the input price index up 1%, the forecast was 1.1%. there is inflation in a couple of these indicators as jim bullard said, and very rapid growth in new york. tom: thanks so much. looking forward your conversation with charles evans later today. right now, michael feroli with us of jp morgan, chief u.s. economist. usually we can talk about his call on potential gdp or the

other economics of his acclaimed weekly prospect, but today we go to the gossip of the moment. michael feroli, how does a pro like you look at the gossip of a blended inflation worry versus looking at the cleveland median, which is right? a blended view of inflation or a more median view, a more acute view of price change? michael: if we are thinking about longer run, the median is probably a better indication of how much transitory influences there are. looking at the top line is perfectly adequate for understanding the pressures on household incomes and disposable incomes. they are real. they are depressing the amount of real consumer spending occurring. if we want to understand inflation to elements three months to six months from now.

things like the median are useful in understanding how much of that increase is being driven by a few categories. recently we have been driven by a few categories. we like the market. the market believes that as we look at one to two years, a lot of the spasm of inflation we have seen over the past few months will be out of the picture. jonathan: -- tom: how does chairman powell fight off the inflation needs does -- the inflationistas? michael: he is persisting in his message that this is transitory. if inflation expectations were to rise in the market-based measures, then a little tough talk can beat back down those measures of inflation expectations. so far that has not happened so right now it is a rhetorical tangle with members of congress that probably will not have a lot of influence on how they set policy. lisa: is a flattening yield

curve signaling a fed policy error or is it signaling this is bad inflation that will slow future growth? michael: there is a little of both. certainly far forward inflation expectations component of the longer-term yield curve is not signaling much of never shoot of inflation relative to the fed to percent target. the other interesting thing is if you look at interest rates, the real interest rate component further out in the yield curve remains very low, in some cases in negative territory. that senseless signal the market does not have a lot of faith this booming growth we are seeing this year and next year is translating into a higher path of trend growth. i think it is sending a message that secular stagnation, while temporarily out of the picture,

will come back in three or four or five years. lisa: the inflationistas have pointed to the trend line, the three month rolling average of inflation has surged to levels we have not seen for four decades. how do you push against that and say we are still seeing basic facts, this is still transitory move? michael: you can control for the base effects by looking at the three to six month measures and those are very strong. you can also strip out categories that have been outsized in their influence. used cars being the obvious ones. some of the travel and tourism things are normalizations. when you strip those out, it is firm on a sequential basis. which is probably a good thing. again, if you look at things like the median, it sends a much

more reassuring message that this is narrowly based. that does not mean -- to powell's point -- not that people do not spend money on used cars and gas and airfares, it is when we try to look about -- look at inflation developments as we get into the winter and into next year, should we expect this to persist and if not, reacting to it now does not make much sense from the fed point of view. it is a real hit to consumers purchasing power. no if's, and, or but's about that. jonathan: let's set the seed. we are in a hotel bar. we are -- mr. tom keene is pontificating about inflation. i see the newspapers in the hotel. the front page of the new york post says the incredible shrinking dollar.

i wonder from a consumer perspective, when they are confronted with that every time they have an inflation print, they are not reading your research, they are not listening to me. the majority of the country is seeing headlines like that. what does that mean for expectations? michael: it ways on expectations and there's a lot of solid research that shows higher inflation expectations make consumers spend less, which is contrary to economic theory. i would say the more comforting thing is so far surveys of consumer inflation expectations beyond the one-year horizon have basically returned to levels they were prior to the pandemic. longer run, even the man on the street apparently has not change their longer run view of how inflation developments are likely to play out. that should matter for thinking

about price setting and wage setting and wage demand. so far consumers are understanding that just as the market and professional forecasters are understanding that what happens this year is not a strong signal of what we should expect next year or the year beyond. jonathan: that point is so important. the discussion we have every day on these dynamics, which are not the discussions the rest of the country as having. that expectations component is something we have to be laser focused on. tom: the expectations component is out of control. i love what michael mckee said about the empire index out of buffalo, new york. it is not an elite zip code series, it is something that talks about original pulse. to wrap things up, for the federal reserve, michael asked this question and he repeatedly asked it. what we get for $120 billion every month and for the same

thing can we get less? what would your answer be? michael: if we go less sooner than what the market expects, what we get is a tightening of financial conditions. you see that with the way the market is completely attuned to every word powell says. the $120 billion is the right number? no, they arrived at it by accident last summer by experiment. that might not be the right number, but if they were to dial that back to $119 billion tomorrow, you can be sure the market would react in a very negative way for financial conditions that affect households and businesses throughout the country. jonathan: michael feroli of jp morgan, always good to see you. to go back to what jim bullard of the st. louis fed actually said, he talked about the crisis , talked about the context of that original decision and how

long that crisis would last. the crisis as far as he is concerned is over. tom: no question. we have to do a correction. the new york post article was really something. the dollar bill, the shrinking dollar bill. you can buy your new york post at your love mcdonald's. jonathan: is that where you are suggesting we were? tom: -- jonathan: i will go that story. chariman powell in about an hour. same story? lisa: how much did they press him on that story you just raised. what is the harm if you disrupt financial conditions from your all-time highs. the highest rate of highs from 1997 earlier this month. i wonder how much they will respond to that. why it is important to keep valuations where they are. jonathan: what i thought was interesting yesterday in terms

of the second term was to have republican congressman say we endorse your second term, that is pretty interesting. this is a different chairman powell to the one we had a blast four years. lisa: but he was appointed by president trump. it is a continuation of the old regime. jonathan: but is now a fed chair with something of a social worrier stance, self-proclaimed, too. lisa: nobody wants higher rates which goes to the point this country cannot afford much higher. tom: i would suggest jamie dimon wants higher rates. also brian moynihan and others. jonathan: are you suggesting that might be why the bankers always want higher interest rates and with that relate to a comment you made earlier in the show? tom keene, lisa abramowicz jonathan ferro up later, krishna memani. from new york city, this is bloomberg.

ritika: with the first word news, i'm ritika gupta. little more than a week before the summer olympics begin in tokyo the host city recorded a six month high in coronavirus cases. people in their 20's and 30's accounted for most of the new infections ahead of the international olympics. the head of the international olympics says measures are in place and are working. -- european governments are growing increasingly frustrating. they cite an outdated strategy for fighting the coronavirus. the travel ban is likely to come up today when the president meets with angela merkel. south korea seeks to move up its spot in the global space race. the countries science minister says this means launching satellites on homegrown rockets and eventually a mission to the moon. >> the reason for a moon

expectation is because we expected to be utilized in the future for not only national defense in the public sector, but the economic sector as well. we believe we have to take part in the program for such cooperation to take place smoothly. ritika: south korea solomons removed on its rocket of element earlier this year when the u.s. lifted restrictions in a bilateral agreement. the microsoft ceo says the company is on the right side of history and antitrust battles, plus lawmakers have looked into whether big tech companies abuse user privacy and squash competition. microsoft says it make sure user privacy and safety are among its highest priorities. 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. ♪

>> the risk management is that if inflation does come down in 2022, we are in a great position for that. we are exactly position for that. if it does not, we are not in such great position. for that reason we want to have flexibility on this taper. tom: james bullard of the st. louis fed, spirited conversation with michael mckee. michael mckee talking to charles evans of chicago later today. he is at the rocky mountain summit, about 30 miles southwest of jackson hole. a preview to jackson hole. this is a joy. there are so many negative stories about asset management, woe is me. it is nice to talk about a huge success. own a piece of the rock. you know it from prudential, their iconic effort since 1875. out of that it has become pgim.

erik schatzker with the spirited conversation with the ceo taking a victory lap at pgim. erik: absolutely. that ceo is david hunt. always a delight to have you with us on bloomberg television and bloomberg radio. david: good morning. right to be back with you. erik: we heard it from jay powell and no doubt he will say the same today. too early to pull back on monetary stimulus. let's translate what that means for investors for monetary markets as someone who speaks for $1.5 trillion. is now still a good time to be taking a risk or is now time to get cautious? david: first a few comments on the chairman's remarks yesterday. i think he will say exactly the same thing today. without any doubt, the place to look is the labor market.

there is all this noise about the monthly cpi that comes out. i would encourage your viewers not to spend a lot of time on that. all of the action is around the labor market. that is what you need to do to understand the direction of the fed and understand inflation. the fed has been very consistent. until we have a lot more job creation in this country and we see unemployment going back down, they are not going to move on rates. watching that growth of jobs is the most important place to focus. secondly is how the actual employment marketplace works. it is too early to tell, but it will be very interesting to see whether or not we get a rise in wages because it is hard to lure workers back, or will we see employers have made significant advancements. they do not need as many workers in the rise of automation will

keep wages down. both of those are plausible. we are watching. carefully to see which one. what we know is if we are going to go back to higher long-term inflation, those wages will need to rise. we have never seen this happen without that. our view is the inflation levels are transitory. we agree with the fed and we think their stance is very appropriate given the stage of the economic recovery. erik: the debate over the timing of a taper is intensifying inside the central bank. jim bullard told michael mckee this morning this morning it, it is time to end these emergency measures. how soon do you think the fed should slow its bond purchases from $120 billion a month? david: that goes back to what i am watching closely. that will depend on the employment picture and how

quickly that picks up. if we have very strong job numbers and we begin to see wages beginning to rise, i think we could easily enter into talks about talks starting in jackson hole, and then the fourth quarter beginning to be some kind of tapering. if those employment numbers are much weaker than i've projected, that i think we are looking at 2022 before that begins to happen. i think that labor picture is the piece to focus on to understand where they will come out. erik: when you look at the s&p 500 up almost 17% as a proxy for risk assets and the shiller p/e ratio pushing higher and higher, now at 38 times, what signal are those indicators sending to the asset allocators who are your clients? david: the dominant fact of the

investment landscape today is that it has never been more punitive to hold cash. for the last 24 months that has been true, certainly in the united states but even more true around the world. what that is doing is driving unprecedented amounts of money out of government bonds and into higher risk assets. certainly including equities, but also including a wide range of alternative assets. where we see the search for yield intensified. what you have to believe about the valuations today is those are supported by a view that rates are going to stay low for longer. that is a view we certainly have. others have been pushing back against that. time will tell. erik: let me go back to my first question. you speak for $1.5 trillion, is

it time to be taking risks or be cautious? david: we believe risk assets are attractive today and we certainly are constructive on risk. we are mindful of some places where pricing has run ahead. broadly, there is plenty of risks in the economy. our base case is for the next 18 months to have very strong economic recovery and economic performance right across the developed world. erik: you and i have talked many times about the need for consolidation in asset management. earlier this week pgim announced a small purchase, this was a private equity secondary firm called montana capital. is that the extent of the dealmaking we will see from you? david: let me put this in perspective in terms of our broader alternative strategy. we manage about $250 billion in

alternatives across public and private. we are the third largest alternatives firm in the world. for us that has been a leading real estate business and a credit business. we have been seeing a lot of money into alternatives over last four or five years and we have been working closely with our clients on their alternative strategies. one thing has become clear from their perspective is they feel they need more liquidity for their private equity portfolios and increasingly for real estate. what secondaries do is allow them to swap out there lp. this is breaking liquidity to the private equity industry. that we see as very early stages, but rapid demand. we are delighted to welcome montana capital partners to the pgim family. a very high-class firm that has

been around for a decade. it has terrific investment capability. we believe they will be critical to meeting the needs our clients have for finding more ways to provide liquidity into their private equity portfolio. erik: why just secondaries? the money is pouring into buyout. why isn't pgim participating in primary private equity? david: we certainly have spent time looking at that. in truth we do not see what we bring that is special to that particular area. the world does not need another kkr. what we think we bring is a unique investment capability and an institutionalized capability in secondaries with montana, where we can build a fundamentally differentiated franchise. i applaud the leaders in private

equity. i think they have done a wonderful job. as you and i have talked about before, i think that will grow. for us we wanted to have a distinctive capability where we could build an institutionalized investment process that will directly speak to what our clients need today. erik: one last quick question. i cannot help but notice the enormous esg business you are building inside of pgim. it comes with risk. how big of a problem is green washing in sustainable investing? david: i think it is a major problem. there is so much marketing spin around esg that sometimes it is hard to separate the wheat from the shaft -- the wheat from the chaffe. the big question i would encourage your viewers to ask asset managers is to what extent is esg fundamentally grounded in your investment process?

it cannot be a separate overlay. it needs to be part of how you manage money on a day-to-day basis. every bond we own has an esg rating. every stock we own in our portfolio has esg rating. we use that to make sure we are fulfilling our fiduciary duty to clients in considering those risks and to offer products that allow our clients to express how they want to invest in esg. if we do not start without foundation of a true integration into your investment process, then you are on a marketing campaign. that is the thing to look for. erik: i want to thank you for spending time with me and the rest of us at bloomberg television and radio. david hunt is the ceo of pgim. tom: erik schatzker there with an important interview. a successful story in asset management. we will drive forward. nasdaq green again.

schatzker lifted the market. lisa: single-handed. the action in the bond market telling after that empire manufacturing data coming out. the hottest on record. fascinating. tom: john is off the set so you and i can talk about bitcoin. a little fragile. bitcoin under birdy 2000 -- bitcoin under 32,000. lisa: did you see yesterday that the founder of doge coin slammed all crypto assets, saying it was wealthy individuals enriching themselves. tom: we will listen to chariman powell to see if he is going along on the doge. it is an important interview. the symbolism of angela merkel visiting the white house, i believe the 4:00 hour this afternoon. they will have a joint appearance. we will do better on balance of power. thrilled to bring in the former ambassador of germany to the united states.

looking forward to that. stay with us through the day. chairman powell coming up. on bloomberg radio and bloomberg television, good morning. ♪

jonathan: from new york city for our audience worldwide, good morning, good morning. 30 minutes until the opening bell.

chair powell date two. the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: from new york we begin with the big issue. jay powell still shrugging off inflation concerns. >> this is a very consistent message. >> if you look at what the fed will focus on. >> inflation moving materially and persistently above the fed target. >> he does not know how inflation will go. >> this is a fed determined to be patient. >> if they make a policy mistake it is letting inflation run too hot. >> it will obviously be a combination of inflation and unemployment.