>> in this negative yielding world, all roads lead to equities. >> the way to beat inflationary pressures is with record high profitability. >> you are just not going to have that earnings to push the ark it's much higher next year -- the markets much higher next year. >> ripping away stimulus and hitting the brakes probably won't be good for anyone in the economy. >> it is telling us this economy might actually be react salary to. -- be re-accelerating. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on radio, on television, a

simulcast, and a critical time for the nation. we just heard from william dudley, former new york fed president. jeff lacker coming up in 30 minutes from richmond. they don't have a clue the trajectory of this economy. jonathan: let's be honest about it. it has been broader, stickier, higher than they expected, and they are not changing their mind on that. president kashkari i think encapsulates that conversation. but no, we are not changing our views. tom: let's set up the conversation here in minutes. we will have gene tannuzzo join us. he looks for a higher terminal value. i believe we heard that from bill dudley, codified a little bit by his public service. jan hatzius goes totally the other way. jonathan: morgan stanley are with them. they think the federal reserve waits.

there's a disconnect for me. it is not my particular view. it is just a disconnect between the people who say the fed is behind the curve, but subsequent to tell you the fed will deliver shallow, slow, gradual, orderly rate hikes from there on out. if you believe the fed is late and behind the curve, why do you also think they are going to move slowly in 25 basis point increments every single quarter from the second have him next year? that one doesn't -- second half of next year? that doesn't add up to me. tom: i'm sorry, they are sitting on the couches of the oval office saying, we don't care what goldman sachs says. we've got a problem 70% of america flat on their inflation back. lisa: the idea that you are seeing consumer confidence decline pretty dramatically as a result of the higher inflationary reads, this is why we get president biden coming out and banging the drum about the spr and releasing oil reserves to get down the price. we have been saying all morning, and this is a really important

point, watch what they do, not what they say. we get the retail sales number tomorrow. you go to the store and you can get things because everybody wants them. you can get goods to the store shelves fast enough. this is not necessarily a recession like scenario. we are looking at a very robust demand picture. tom: with small caps higher, that was written everywhere. you got to stay with us because we are going to go from the markets to where does the president sit right now to jeffrey lacher's conversation, and all of them are looking at what small caps signal in inflation. small caps win. jonathan: the outlook for growth, 2021, 5.1% gdp. that is the median estimate. 2022, a drop down to 3.9%. that is the median view in our survey right now. we have morgan stanley over the weekend looking for something close to a 5% handle on gdp. could we get real gdp of 5% in america next year? will be hard pressed to

convinced anyone to leave this equity market. the bond market is orderly. i say orderly because there was an issue from the 30 year last week that was anything but for a lot of people, and it got people a little bit jittery about supply coming out of this treasury. tom: on a monday, let us stagger to it. gene tannuzzo joins us, global head of fixed income at columbia threadneedle. why did the crew looking for a lower set terminal value out 4, 5 years, why did they have that wrong, and you in columbia say no, like dudley, it is going to be a higher set? gene: we think there's a very narrow and unlikely scenario priced into markets right now. basically, what the market is saying is that growth is strong, and inflation is a problem, ergo the fed has to get going and hike quickly after the taper is concluded next year, but then

they will be able to stop after a few hikes and everything will be ok" down. i think that is a very unlikely path. i think you heard bill dudley say something very interesting, which is that at some point, you really do need to tighten financial conditions which is something the fed has tried to avoid so far. if they actually want to tighten them, you need to have a higher rate. i do think that terminal rate has to be higher. jonathan: where is the opportunity for you in the disconnect? gene: i think for us, we want to focus on companies that are not benefiting just from this liquidity wave, but are fundamentally improving their balance sheet and taking that as an opportunity to move towards a credit upgrade. those are the opportunities where you can still see price appreciation in the bond market. without that, the liquidity is slowly going to be drawn away through the course of next year, and those price appreciation opportunities are going to be few and far between. lisa: how do you hedge? do you end up having a lot of cash? gene: i think you want to be

focused more on the shorter maturities in general. i think that leaves you to a common nation of shorter maturity assets and floating rate assets bank loans that should benefit from a rising rate environment. jonathan: is it a quality trade from investment yield over two high yield? gene: if you look at generated rising risk -- at generally rising risk premia and rising interest rates, investors didn't typically do so well, so i think if you are not playing price appreciation in a specific area where you think there is opportunity for credit upgrades or deleveraging, you just want to be short on the curve and play for the carry rather than a price change. tom: let's start the parlor game for 2022. we are in accommodation. somewhere out there, but he's the clear blue sky -- beneath

the clear blue sky, is a restrictive fed policy. what 10 year yield is that? gene: i think it is going to be in the 2%, 2.5 percent range. i thing we haven't been there in a while, and we can look back to previous periods when we have seen rates start to rise. it is when you start to see rate applications slow down, when you see pricing activity in the housing market slowdown. that is where you are seeing vulnerabilities in interest-rate sensitive sectors. i guess would be from here, it is probably closer to over 2%, maybe 2.5% on tends. -- on tens. lisa: i wonder how much you look at high-yield bond yields. how much room does the fed have to move before you get a widespread selloff that they are going to have to try to contain? this i think is one reason why people say the fed can't raise rates all that much. jonathan: when we say tightening financial editions, do we mean equities lower? do we need credit spreads wider?

gene: they have to be. you put up the chart of financial conditions and credit spreads, and they look like the same chart. the fed has been careful that when times are bad, they want to use financial conditions. they want to bring credit spreads in. if they really want to address the inflation problem, certainly at this time next year, we are still talking about inflation being transitory. by definition, it is not transitory. they need a wider spread. jonathan: if we are still talking about it, by definition, it isn't. gene tannuzzo of columbia threadneedle. for a lot of people, they will agree with that. if we are still talking about it now, by definition is not. tom: it is not. i use this word too much, but it is what we are in. i love the differences of opinion we see informed by the deadly interview, and i'm sorry, dudley, berkeley economics is a little different than wisconsin economics. it is a real juxtaposition of

two very bright people. jonathan: when it comes to inflation, i am not here to say it goes this way, it goes that way in the future. but where there seems to be a counterintuitive disconnect at the moment is this idea that you believe the federal reserve is behind the curve, but you also believe they are going to move this gradual, slow process in 25 basis point hikes. if you think they are that far behind the curve and need to do something about it, it is not 100 basis points over two years. lisa: and you have a couple of reasonings behind this. one is the deflationary pressures will abate. others say the fed is held hostage by the markets, that markets will selloff to such a significant degree if they start to tighten policy more materially that they won't be able to continue that. but faith is not a strategy, as bill dudley was saying. one thing that concerns me is that nobody is calling for recession, that nobody is worried about this scenario playing out an immaterial way. no one is prepared for the

scenario. to me, honestly, that is why danny blanchflower is so interesting, and the responses to him when he talks about recession. there is such anger about potential he having a negative view, it just highlights the lopsided nature of the optimism. jonathan: i think the data right now is so difficult to read that it is so hard to have any clarity on the outlook right now. tom: the three of us are guilty of living within three zip codes, even though i don't go below 59th street. but the separation, the differences of america right now, frankly they are starker than they were when we were in a worse pandemic six month ago. jonathan: we focus on the aggregate of others, and the disparity tells the story on wall street right now. people can talk about where the savings are. that is where the conversation should be. it is not how high the savings rate is, how much cash is on the

sidelines, so to speak. it is who hold the savings, and the marginal propensity to spend is much lower for the poorest in society. that is the problem at the moment. you will hear people say there's loads of savings. people can afford these higher prices. who can afford them, tom? that is the problem. tom: there was a great savings chart over the weekend, to your point. the savings are partitioned between the fatcats and everybody else with less. jonathan: tom keene, lisa abramowicz, and jonathan ferro. tom: propensity, very nice. jonathan: i did study economics, tom. i just let some of it out every now and then. [laughter] tom: coming up, jon ferro, elasticity. jonathan: that is introduction to economics. from new york, this is bloomberg. ♪ leigh-ann: with the first word news, i'm leigh-ann gerrans. president joe biden and china's

xi jinping have plenty to discuss during their third virtual summit. still, the expectations for a major breakthrough are low. the summit is set for tonight washington time. relations between the two countries are tense. there are disputes over taiwan's human rights and the origin of the coronavirus. in the u.k., police say an explosion in a taxi outside the hospital in liverpool is being treated as terrorism. the passenger in the taxi died and the driver was injured. police say the blast was called by an improvised the passenger was carrying her get four people are being held in the case. senate majority leader chuck schumer once president joe biden to tap the strategic petroleum reserve to tell lower gasoline prices. schumer says consumers need immediate relief. the president has hinted he may take action on fuel costs. polls indicate many americans blame the president for failing to contain inflation. american power has agreed to buy

datacenter course i for a value of about $10 billion, including debt. that represents a 2% premium to their close on friday. big changes to royal dutch shell. it is dropping royal dutch shell from its name and will make the u.k. its headquarters. the energy giant is giving up its current will share structure and walking away from the netherlands, its home country for a century. relations between shell and the netherlands have been getting worse. the dutch government says it was unpleasantly surprised by the announcement. 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. ♪

>> we need immediate relief at the gas pump, and the place to

look is the strategic petroleum reserve. that is why i am urging the administration to tap that reserve, get the prices down, and then we have to embarq on a full-time campaign -- to embark on a full-time campaign to get us away from fossil fuels altogether. jonathan: senator chuck schumer on the oil situation in america. your equity market up 17, a list of 0.4% on the s&p. yields in a basis point at 1.5494%. crude negative a little more than 1%. keep an eye on the twitter account of larry summers this morning, just out with a nice, long thread. "because spending is offset by revenue increases and because it includes measure says as childcare, build back better will have only a negligible impact on inflation." we have heard this report from larry summers before for this particular program. he also talks about the federal

reserve, the fed and the fed appointments the administration needs to make in the coming weeks. the choices need to remark that the major challenge for the central bank is containing inflation. larry summers with a series of tweets this morning just moments ago. tom: former president of harvard college and secretary of treasury as well. this is an exceptionally strong monday, and jon, lisa and i say thank you to our team. jeffrey lacher with us in moments. quietly sandwiched in is elaine kamarck, director at brookings, on why presidents fail and how they could succeed again. it was an acclaimed book inside the beltway a number of years ago. all agree this president is failing. how does he succeed again? elaine: thank you for having me. he succeeds again by learning

lessons early on in his presidency. i will tell you, he's had one piece of good luck, which is it took bill clinton until his midterm election, two full years , to see what was going wrong and do a reset of his presidency, and he won then in 1996. so clinton had his come to jesus moment, if you will, and 1994. biden has had his come to jesus moment in the first year of his presidency, which gives him three years for a reset, and the reset has to contain the following. the republican party without donald trump is actually a very strong, and in effect stronger, party. mcconnell was reliant on replaying the 2020 election, and it didn't work. without the face of donald trump and donald trump's wild ethics, the republican party turns out

to be pretty strong in the suburbs, where it has always been strong. tom: president clinton reset to a conservative america, a decidedly different democratic party than what he ran on, particularly around welfare. can this president reset and walk away from liberals? elaine: i think he can. i think every indication in these funny off your elections were that the progressive base or the left wing of the democratic party did not do well. the socialist mayor candidate in buffalo lost. the candidates who was promoting defund the police in minneapolis lost. there were lots of signs. in the ohio special election, the left of center candidate in the democratic primary lost. in other words, there is no indication other than through the sort of energies of the press that this is a very far

left party, and it was not certainly in 1994, when bill clinton had to do a reset. biden has to be very careful not to fall into the rep. roby: -- the rope-a-dope strategies of the republican party, where they take the most far left is issue and, whatever they may be, paint it for the whole party. that is a disaster. lisa: what do you think president biden's number one unforced error has been? elaine: i think is number one unforced error has been the promotion of a legislative package that had no coherence to it, and therefore was branded as a $3.5 trillion package. so in other words, it wasn't

branded as a helping american families package. it wasn't branded as a child care, americans children package, or anything like that. all most people knew about it was $3.5 trillion, and it sounded like an awful lot of money. it was an awful lot of money. the republicans skillfully tied inflation to presidential spending, and i think you have seen president biden's numbers go down. i think secondly, he ran as a centrist and a moderate, and came out as a big spending liberal. americans hate that, when their president isn't what they thought he wants. lisa: a lot hoped that he would be more technocratic, that he would get things done and do them well. we are still talking about open positions in a number of top executive offices, particularly the federal reserve, which we talk about every morning here. how much is that also in unforced error, just in the functioning of the government? elaine: i think that he needs to

get his government together, particularly if he wants to turn around the image of his presidency. you are right, he was elected on competence. he was elected not to be this chaotic mess that the trump presidency was, and every day that he goes without a full team in office is, frankly, a big problem. jonathan: fantastic to get your thoughts on this administration and politics in this country. thank you. elaine from brookings on the situation at the moment. the fact of the matter is that on many factors underpinning this higher inflation in america, a lot of it the president is not responsible for, but it is the belief in this country right now that he owns it, and it shows up in the polls pretty clearly. tom: this has got to be said, and our audience, we are thrilled with different audiences, this is a pretty fancy audience. there's a lot of people in america that put 42 things in the grocery basket at the store, and they maybe don't quantify

that everyone of those things is $0.37 higher than it was x months ago, but they go to the counter and it hits them over the head. jonathan: that is the difference for people who don't have as for people who have money and people who they don't. if you haven't thought about the price of things for a while and you don't add things up as you are walking around the store, you are rich. for many other people, that is exacted what they do, what you just described. they go around the grocery store and everything that goes in, they added up to make sure they've got enough money. tom: elaine owns the high ground on looking at presidencies and how they have shifted. does this guy have the capability to make seismic shifts given the culture wars and fragmentation of the nation? jonathan: i have seen a shift on one thing, empathy. that has changed in the last week or so in a material way. we heard the energy secretary a number of weeks ago criticized for not showing off empathy. i have seen a lot more of that in the last couple of weeks. tom: i will go with that.

jeff lacker coming up. jonathan: looking forward to that. up 18 on the s&p, advancing 0.4%. from new york city, this is bloomberg. ♪

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jonathan: live from new york city with tom keene and lisa abramowicz, i'm jonathan ferro. a lift in the last hour. up .4% on the s&p. the nasdaq doing ok, up .5%. the russell up .6%. euro-dollar 1.1445. your bond market, yields in one basis point on tens to 1.5528. we come up with mohamed el-erian and got his thoughts on the federal reserve and where inflation is going in on why he thinks this is one of the worst inflation calls in decades. mohamed: inflation is much higher than they expected, they look at inflation much broader than they expected, and they look at inflation that will last

longer than they expect even now. it will go down in history as one of the worst inflation calls by the federal reserve. jonathan: that is one heck of a call from mohamed. tom: hugely -- from the man so respected on game theory. we speak with jeffrey lacker, a wonderful sequence of conversation because of the history of the richmond fed. no one owns economic history like the richmond fed back to 1912. jeffrey lacker, we were talking in the comments, bill dudley of berkeley and the new york fit shifting to the edge of lacker. does it surprise you to see

moderates or even some doves approach a more cautious richmond view? jeffrey: it is certainly striking the number of people we historically think on the dovish wing have come around to this. in a way it is because of how far out of bounds of historical patterns the fed's reaction to this inflation surge has been. people forget the reason we got inflation under control is by reacting to inflation scares. blips in the bond market that signal the possibility of increased inflation expectations. instead the fed seems to be willing to let it run. tom: let's take it to the immediate debate at hand and i do this in honor of thomas humphrey. paula krugman has gone back to the history of 1947, the post-world war ii spike, down we came with massive disinflation.

eisenhower deflation, and then there is the late 1960's, which was different. you suggest mr. krugman may be off and mr. lacher may be on with the more persistent inflation of the late 1960's. jeffrey: the 1947 to 1948 is attractive for those who are sanguine about the search. for me it seems like the 1960's and early 1970's is the more apt comparison. inflation is about fiscal and monetary policy and at that time you had two shifts, a shift in fiscal policy with president johnson running a great society program but also running an escalation on the war in vietnam that busted budgets, and that on the monetary policy side you have the gradual and sudden abandonment of the brentwood system which tied the value of the dollar to gold and tied down

longer run inflation expectations. you have the subservience of fed chairman william martin and arthur burns to prevailing political winds, a subservience that tilted them in the direction of reducing unemployment and setting inflation pressures aside. now we have a very striking and large change in the fiscal outlook compared to last couple of years. on the monetary policy side the freight rewrote its philosophy last year. it tilted towards a greater concern about employment and less of a concern about inflation, more of a willingness to let it run. the parallels are striking. lisa: you agree the remedy will be a quick series of rate hikes, perhaps a jump, akin to what bill dudley was talking about, where we could get 3% to 4% p

policy rates in the cycle? jeffrey: 3% to 4% would not surprise me. i think they are on track to a major policy blunder and recovering from that, realizing they waited too long will cost them to of necessity raise rates sharply and try to engineer a cooling of the labor market. that rarely turns out well. bill dudley has pointed this out publicly that the fed is rarely able to get the unemployment rate to go back up a little bit. it is hard to calibrate how much to take out of the system. it seems to be plausible we get to 3.5% or 4% and in addition that we push the economy into a recession. lisa: that is where i was going to go. if we look at the average bond yield in the united states,

currently at 4.23%. you get the overnight rate of 3.5% to 4%. what does that do to the valuation of the securities? won't the fed be reluctant to move in that kind of manner because of the torpedoing effect of markets? jeffrey: to avoid an error, they need to recalibrate the rapidly, accelerate the taper, get rate increases started earlier next year, they will need good luck. a lot of markets seem to be priced for a lot of good luck. tom: i want to take the freshwater heritage of the wonderful marvin good friend and his mentor alan meltzer. alan meltzer lectured me like you lectured me, we have to look all in at the macro data in america as an entirety. or are we so polarized that the president's study of inflation

has to look at it as two cohorts, the haves and have-nots. jeffrey: good question. we do not have a lot of data on inflation rates by cohorts. more broadly the differential effect of inflation translated into political implications for the fed, different levels of political satisfaction for the fed. on the employment side, i think the fed has redefined maximum employment as broad and inclusive. that is all well and good, but it is hard to measure. by adding more goals you weaken your attachment to any of them and it raises serious questions. the fed has been a slave to a deeply flawed and outmoded conception of maximum employment and i think they missed an

opportunity to update that. tom: one last question because you will throw me off air. who is closer to the flawed concept? governor brainard or chairman powell? jeffrey: i do not see much daylight between them on this. they are both strongly aligned with the house you that others in the system promulgate that views maximum employment as a timeless parameter that we get to at the very end of a long expansion, if we are not hit by any shocks in the meantime. you have to ask yourself the question, what was maximum employment and the third quarter of 2021? whatever it was, we got there and beyond. that corresponds to the modern view that maximum employment is

something that fluctuates substantially over the business cycle, fluctuates with a lot of different economic conditions in the fed needs to take that on board. jonathan: this is why love speaking to former fed presidents because you never say this 10 years ago. people speak so openly. former richmond fed president, thank you so much. that is the story this morning. the former fed presidents taking a very different line on what should happen next. lisa: they are sounding the alarm -- the alarm. they are saying the fed has put itself between a rock and a hard place and are in the danger of committing a massive policy error that will torpedo markets. this is something not in anyone's projection right now. tom: david rosenberg is one of the brightest and clearest speaking economists i know.

legendary merrill lynch, holding out a shingle in toronto right now. i've never seen the ambivalence in a david rosenberg note like i see this morning. it covers everything we are doing in this november. jonathan: that is what is amazing about this topic, this moment in economic history is how divided intelligent people are on the same topic. here is data from the new york fed empire index. the employment component of this a record high. there is still decent data out there. prices up seems to be the story. in terms of the employment numbers, the employment numbers in this read look good. tom: i will call it a tertiary statistic although it has gained importance in this pandemic. it does not compare with what we see tomorrow on retail sales. we'll give you a full briefing tomorrow early in the morning. jonathan: later i will catch up

with esty dwek on why you want to stay with this u.s. equity market. we will have that conversation in 20 minutes. a big focus worldwide on oil. from abu dhabi, yousef kamal. yousef: much of the questions have been around the oil price volatility that have kept a lot of us up late. we have drilled down with some of the ministers and will continue do that over the coming hours. we are now joined by the deputy minister of energy of russia. thank you so much for making time on your busy schedule. what are you seeing in terms of the supply and demand balance? the saudi's are all quite relaxed. >> thanks for the question. it is important we have this dialogue that we are discussing the market.

if you look at it, is not just the opinion of the ministers you talked about. look at all of the international agencies. everybody is predicting a surplus of supply starting from first or second quarter. looking at this and looking at our numbers. we see the same picture. if you look at inventory levels over the past few weeks, and the united states which tracks them on reports from various research agencies on a monthly basis we will see inventories have stopped growing. that shows there is no deficit at the moment. there are perceptions and hype in the market, but at the same time looking forward we have the seasonal drop in demand in winter. we have more oil coming from the opec-plus group. i thousand barrels a month is being added. more lockdowns we are experiencing, we believe there

is no deficit at the moment. yousef: how much is russia able to pump? what capacity still exists? maybe it has evolved? min. sorokin: we definitely have the ability to come back to our pre-covid levels. that is something which come in accordance with the voluntary schedule should be achievable at the beginning of the second quarter of next year. there is a higher allowance a lot depends on what the market calls for. yousef: there's been a lot of discussion around a potential spr release in the united states. with that move the dial at all on oil prices? yousef: considering the fact the market sees there is no deficit and if you look at the statements from the united states sang the market is well supplied when talking about sanctions from various countries and there is no need for additional oil, i think everybody sees the market is balanced.

additional supply would not one way or the other affected but it depends how much oil comes out to the market. there are other factors affecting it like the fed policy and the rates. that has a much bigger impact, and defending on what the fed chooses company know that with inflation above 6%, at some point that question will arise. that has a much bigger impact on the market than any of the supply demand we are seeing now. yousef: a lot of fliptop here has been around the energy transition. russia has made a commitment for net zero by 2060. what are some of the immediate steps russia is going to take on that? min. sorokin: that is extremely important. the president has set a very ambitious target. we all live on the same planet and we all have to take action. at the same time it has been said, we want to stay warm in winter and cool in summer.

we want to be well thread throughout the year and live to see this transition, which means we have to be extremely reasonable on our path to net climate zero. that means we have to supply energy at an affordable price, sustainably and regularly. there should be no ups and downs. for that to happen, we need to work together for the energy transition phase two have sufficient financing for energy transition technologies. the first of those is carbon capture storage. that decarbonizing is traditional sectors and allows us to move more. those are the three pillars we plan to emphasize and hopefully fast results. yousef: we heard from the ceo of natural gas and he says russia is creating artificial shortages of natural gas, "currently they

blocking supplies to europe and they should increase applied to ease the energy crisis." how do you respond to that? min. sorokin: this is our relationship with european customers and our contracts with european customers. our president has stated that we are fully complying with -- if you look at the numbers, we are supplying significantly more than 2020. it is not right to pull out single factors in this discussion because the situation has not started in europe, it has started from faster than expected demand in asia-pacific, lower from south america, and nuclear outages also in asia-pacific. u.s. energy being diverted to asia and europe cutting its own production. we are a country which supplies everything. i do not think that is the

correct way to pull out some single factors and try to put them in the picture. yousef: thanks for responding to that. it has been an eventful day for both of us. thanks for making the time. that is the deputy minister of energy and russia. tom, you will it away from here. tom: greatly appreciate that from abu dhabi. right now it is annual visit but right now highly unusual. stephen stayed up is foundational in retail. his heritage at sex fix avenue and now senior advisor at mastercard. i've never seen an essay like you wrote for mastercard of the bang up year. you wrote back and do a compare and contrast, not with the pandemic, but with 2019 reaching out to the guesstimates of this holiday season, dicey retail up 12% after auto and gas taken out, and i see what lisa cares

about, bobbles and beads up 40%. explain the two year arc we see in retail. steve: it is a healthy consumer and it looks like a very strong thanks having, black friday, and holiday season. if you look at it versus 2019, we are seeing real recovery in the consumer. we are looking at growth in the double-digit range, 12% versus pre-pandemic levels. department stores, apparel, luxury, accessories, all doing extremely well. the consumer is back. what we are seeing is good margins with retailers, we are seeing the consumer have a lot of money in their pockets, this is across the high end as well as the low end. tom: you have lived inflation at saks fifth avenue that directly infected every floor of the great store.

what does this inflation bout mean for mastercard and the optimism you have about retail buyers? steve: it is saying that as we get through the rest of this year we are on a good path to a strong consumer. the holiday forecast was 7.4% growth. we are looking at black friday in the 20% range. looking at the thanksgiving week in the double-digit range. the consumer is healthy. we have pricing, we have inflation. we are seeing it in the margins after the brands and the retailers right now. it is an inflationary environment. hopefully it will start to ease into next year. the supply chain issues are real and that inflationary number is factored in to the overall growth rate. lisa: how much is this a supply chain disruption issue, the idea

of shortage of labor, how much is this companies taking advantage of concerns and jacking up prices more than they have been able to when they have been forced to keep them down due to global competition? steve: i do not know if it is taking advantage or not. we are an environment where companies are able to get pricing through with their customers, but they are seeing real price increases. if you look at the transportation costs come labor input costs, all of these are very dramatic. in any case if a brand has pricing power, some categories you have pricing power, others you do not. i'm seeing them take pricing at margins, and you are seeing it in the overall prices and in terms of their gross margins. lisa: when we were talking about president trump's policies we discussed the effect on some of the tariffs he implemented. how much of those still instated and still raising prices for

consumers in a way that president biden could alter? steve: the prices through the tariffs are still there and we need to see them down because the consumer is going to feel the effects of these higher prices. is there an opportunity to take off some of the tariffs? absolutely. right now the issue is the consumer is facing some of these price increases. however, they do have money in their pocket. if i look at october, we are looking at 6% growth on top of when you had amazon prime day and you had early promotions. consumer spending, as we go to next year it will start lapping tougher. you at government payments that started last january. the environment with the inflation will get tougher. as we go through the holiday season i feel very good that we

have momentum across these categories. tom: i want to bring up a board on the radio. it talks about explosive two year growth. what we see out of amazon and the digital space, hugely explosive growth of 50.2% across two years. steve? you are a saks fifth avenue guy. what does it mean to you to see that statistic of 50% e-commerce growth in 24 months? steve: it shows that this is here to stay. you are seeing 7% growth on top of the 12% of commerce to 18% of commerce. digital israel. the consumer wants an omni-channel experience. they want products anywhere they can get them and the winners are doing by online, pick up

in-store, that is in the luxury sector, even the dollar store type of environment. what you have is the environment where the consumer is king, they have all of the data and they want to shop conveniently. those of us in the luxury sector used to think digital was not going to play, they are not going to shop online. that is not true anymore. look at what saks with avenue did. they are building their website. tom: let's dovetail this in and make some money for mastercard for steve. you and i need to road trip to the saks with avenue shoe. you go to the elevator and you open out into the extravagance of shoes. how far are we from them amazon exact and taking a firm and there so anyone can buy a sensible three or four pair shoe activision deck -- acquisition.

lisa: this tells you more about tom keene. going to saks with avenue is a high-class issue. people go there if they want to spend more money than somebody who shops and some of the other retailers. i wonder, to tom's point, the bifurcated recovery, whether the spending is a bifurcated spending of the bigger ticket items and the have-nots still restricting some of their purchases. steve: i am not sure i agree with tom. i think the consumers is healthy across the high-end. clearly the luxury environment, you look at growth versus two years ago in the luxury sector. luxury, very strong. if i look at the dollar stores and the recovery and some of the tj axis of the world. even the strength you see in the targets, the consumer at the lower end has some of it because of the government support programs, the labor market being

strong, wages going up. consumer spending at all levels. tom: steve sayed of, only saks could come up with the central park theme for their shoe store. steve sadove with us, thank you so much. lisa, i am way more hesitant on this. steve is talking about a more complete boom, and i am like, really? lisa: the issue for me is not necessarily what has happened, it is what will happen, especially as we get a fiscal runoff of some of the support that has gone into savings. the marginal propensity to spend jonathan ferro was talking about earlier, what happens when the stimulus does dry up and when people are relying more on their salaries than on their stockpiles of cash? tom: it has been an eventful day. thank you to our team for a strong monday morning.

we'll continue this discussion. continuing to watch washington, jay powell and lael brainard. driving for the conversation, patrice paris. this is bloomberg. good morning. ♪

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jonathan: from new york city for our audience worldwide, good morning, good morning. your equity market advancing one third of 1%.

"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: from new york, we begin with the big issue. president biden's next move. >> the infrastructure bill, we still need to understand entirely what is in it. >> of paris what build back better is and get it passed. >> we will see some stimulus. it will be spread out over years. it will be nothing compared to what we have seen in the last 24 months. >> the medium term impact of build back better on inflation is negligible. >> we do not know who w