>> i think people are overestimating the strength of the consumer. >> if the fed wants to slow demand they need to get financial conditions tighter. >> inflation will roll back. it will probably be later this year, early next year type of phenomenon. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. it is a thursday claims in 30 minutes. what we claim is optimism, way too much optimism this morning

away from the really difficult news in europe. we will get to it in a moment. people pushing against the gloom. jonathan: dan ives at wedbush saying now is the time to buy big tech. at the moment in the market, we are getting a bit more defensive. we have talked about that throughout the whole morning. the weakness is where the story is. not picking up on the banks, the financials, even with the move we have seen in rates. tom: and the confidence there that is really being tested, looking at what is out there right now, everybody into cash. the gloom plays off the central bank mystery of this april. jonathan: it is no mystery for a lot of people. bank of america calling 50, then another one, then another one. tom: let's compare that to citigroup, which is going 50,

50, 50, and then they keep going, right? jonathan: they believe that the end rate is going to be higher than we anticipated three months ago, and most people, almost everyone getting on board with that view. tom: what is so important here is the measurements that we are living every day. there's other people looking for a flatness, a lethargy. lori heinel of street goes the other way with an optimistic 2022. lisa: a lot of people have been saying that because companies have been doing very well. they are able to pass on the inflation they are seeing in the consumer. i want to dovetail this with the idea of the calls we are getting from bank of america and citigroup. if you're going to get 3% on cash, 3.5% even how much the fed is expected to hike rates if you are at citigroup, why don't you put some there because you are actually getting some yield

after years and years of not? how much does that start to suck money away from riskier security ? tom: even with the 2% fee, you are out at 7%. let's do the data. red and green on the screen. the vix at 22. jonathan: the nasdaq has been hammered, down by more than 4% over the previous two days. on the s&p, up a little more than 0.1%. crude up by or than 2.4% on the day. the energy trade, be of a calling at the pain trade of 22. they are looking for more still to come on the equity side, on the s&p 500. tom: you can do that when you've got francisco blanch holding court. right now we hold court with his colleagues. savita subramanian of b of a, buried in your note is follow the money.

follow the cash. it is a cashiness moment. how much cash? savita: i think what we are seeing in the overall investment landscape is a reallocation towards the short end of the curve. we have seen it with wall street strategists who have amped up the recommended cash allocations and equity allocations. i think that is net bullish for equities because what we found is when wall street gets bearish , that is generally a sign to get bullish. but when you think about the overall market, i think the reason you want to buy stocks right now is the cashiness of the market. the good news about the government and the fed is that they pass on a whole bunch of liquidity to consumers and corporate. something like $19 trillion of cash went from the public sector to consumers and corporate's,

and that cash is going from worthless to 3% by the end of the year. that is a huge move, especially against the backdrop that we don't think equities are going to return anything close to that on a longer-term basis. all of this creates an environment where some equities are going to do well, and we can talk about sectors at the moment . jonathan: that takes us straight to energy. why stick to it? savita: i know, it sounds crazy because the sector has paid double or triple. if you look at the world around

us, what we found in our work is that energy is still a massive underweight. same underweight we started last year with, it and present underweight. last year it did not necessarily hurt to be out of the best performing sector. this year it is probably going to hurt a lot more. it still offers very high free cash flow relative to other sectors. the earnings have kept up with rice moves, and it is really a sector that has gotten capital discipline, it is playing nice with esg investors. i think energy is finally investable again, but folks have not necessarily moved into the sector is aggressively as we would have expected. lisa: frankly, there is an under

allocation to commodities. what about big tech? dan ives saying this is the most attractive time to go all in, and jp morgan actually cutting their earnings forecast based on consumer appetite. where you sit on this? savita: i'm not a stock analyst, but there are parts of big tech, maybe old boring tech areas that have sold off enough to become expensive. . i think after big moves in the market, what we recommend is a simple screen and look for the cheapest tech stocks. the good ones rise to the top, and those are the ones that i think are likely to outperform. so look for free cash flow at a reasonable price. we are moving from 0% to 3% on cash. that is all you need to know in this type of environment. jonathan: just a final question,

the index call. where are we now on the s&p? what are you telling your clients about the index call? savita: we are neutral on equities. i think the market is going to bounce around a lot. i think it is going to hit our target a few times this year. it is going to be a year where i think there are going to be opportunities to add exposure to tech, to energy, to areas of the market ticket punished by the vagaries of that expectations. 4600 to me still seems like a reasonable target. corporate and consumer confidence, if those measures start to ale and we see expeditions start to drop, that is when we would get a little more bearish encyclicals. but so far, so good jonathan: -- but so far, so good. jonathan: wonderful to catch up with you. salida subramanian there. let's go to the jp morgan of.

they trimmed their earning estimates on apple, but they are still overweight, but they still have a $210 price target on the name. tom: matt winkler, one of the first things he said to me was i just don't get the sell side. over at jp morgan, they are talking about earnings softness, littlewood of angst which will be picked up huge by the media. his price target is higher than ives, still with. jonathan:jonathan: an overweight because -- still with an overweight. jonathan: because the price target has not changed. tom: you've got to be more nuanced to get perspective. jonathan: as we go through the piece, you talk about consumer spending. something we talked about with dan ives is just the resilience of the high-end smartphones, the resilience of tablets, the resilience of laptops and a

broader slowdown in consumer spending. lisa: on one hand, companies increasingly allowing workers to be flexible. then there's the tale of higher income individuals being able to withstand some of the inflation better than lower income individuals and the higher income individuals being able to spend on all of these devices. jonathan: where does discretionary spend get hit, based on the pressure we are seeing? consumer confidence is already getting hit. we see it on decade lows. when does it start to translate into weaker spending. lisa: dollar general, those types of companies have seen it play out. in retail, you have seen it underperform over the past few weeks.

i'm curious about how much is going to be lower and rather than upper end. tom: ben laidler 101, no one has got it more right since christmas 2018. jonathan: the question lisa is asking is an important one. guess who's coming up? olivier blanchard. tom: really looking forward to it. the gentleman was adam posen who was way out front on a higher inpatient regime for central banks. that will be worldwide. must watch, must listen. jonathan: coming up in a little more than 30 minutes. from new york city, this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. russia is rejecting the latest ukrainian proposal on ending the war. foreign minister sergei lavrov

says ukraine's proposals on crimea and donbass are under some double. he also says ukraine is trying to undermine the negotiations and that the u.s. and its allies want the war to continue. in ukraine's port city of mariupol, the mayor says russian attacks have killed more than 5000 civilians. he also says 90% of the city and for structure has been destroyed. if russia captures mariupol, it would open up a land corridor to the crimean peninsular. russia seized that from ukraine into any 14. janet yellen will lay out the principal for digital assets in her prepared remarks. she says regular should should be designed to support responsible innovation whilst managing risk, and should also protect against fraud. we may be on the verge of a bidding war.

brookfield asset management say they have made a nonbinding bid to the italian company. meanwhile, bloomberg has learned the blackstone group may team up to take them private. elon musk having a little fun joking about twitter's next board meeting. the tweet reads, "twitter's next meeting is going to be lit." musk was named to twitter's board this week after disclosing he had taken a 9.2% stake. 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. ♪ ♪

>> we do not control the market, nor of refined product gasoline and diesel fuel, and we have no tolerance for price gouging. jonathan: mike wirth, the chevron ceo, after the oil majors were hauled in front of congress. from new york city this morning, good morning. on the s&p, just turning lower in the last couple of minutes. on the nasdaq, still elevated just about, up by almost 0.1%.

we get to 2.6258. we are kicking higher again. tom: almost taking a pause here, but yet, there we are stuck at these levels. it is all most unimaginable to think of the two-year at 2.80%. jonathan: we are not far off, are we? tom: the curve inversion shows a little bit of constructive pause here. there's confusion in california from chevron, confusion seen in washington from texas oil types, new york oil types. there is confusion in moscow. will kennedy is the executive editor for energy confusion at bloomberg, and we are thrilled he could join us this morning. give us some clarity from your world-class team about how we discover the price of

distillates. will: it is not quite clear. the futures market isn't working terribly well right now. volumes are very low, so volatility is enormous and people are not trading what they use to. just to let that is telling a slightly different story to the crude price. it is telling you a story that actually, a lot of energy markets around the world are extremely tight. we have seen some extremely high jet fuel prices in america over the last few days. it may be a better place to look for a true picture of what is going on than the crude futures market. tom: javier blas has a cat at

home named margin call. what is the financial exposure of the commodity houses to this confusion that is out there right now? are you people steeled for financial angst within energy traders? will: we have seen a lot of that. traders need more capital and they are exposed to bigger margin calls, and their balance sheets have been stretched at times during this crisis. it is making it more expensive to trade commodities, but these houses are making plenty of money trading shipping oil, taking advantage of the margins that are out there, but they are having to use a lot of capital to do that and take up a lot of credit to do that, so there are risks involved with those trades as well. lisa: how much supply has the russia embargoes and curbs really taken off the market at a

time that bloomberg economics expects they are going to earn more than 1/3 more this year from oil and gas exports than they did last year? will: it is one of the most import questions right now. it is definitely taking some supply out of the market. many of the cargoes in recent weeks were traded for the war started. we are now reaching the critical period or receive the crude and oil that have been traded since the war started. we see tanks getting filled, refineries struggling to keep going. most people are estimating out of the 7 million barrels a day of products exports roughly, between one and 3 million over the coming weeks. the market really needs to get an idea of where that final number lands. it is a big number, which would

leave a giant hole in the market. perhaps crude futures -- a critical few weeks to discover where that number eventually lands. lisa: how is china the most import and swing player in this in terms of the end purchaser of those energy exports from russia? will: china is buying more crude. india is buying more crude from russia. we have seen russian group selling out, but asia will buy more russian crude, but it probably doesn't have the capacity for several reasons to absorb all of it. there are logistical issues, and they won't want to back out of existing supply, so while there is cheap russian crude for agent

suppliers, i don't think the market expects they can absorb all of the oil going to europe, so there probably will be a certain amount of oil left unsold. but yes, they will fill the gap come update -- the gap, but they probably won't fill the whole gap. jonathan: these companies getting roasted right now, the oil majors, can they make some success behind major write-downs this quarter? will: clearly those who walked away from russia businesslike shell flagged a $5 billion write down this morning. that will obviously hit the bottom line. the american majors, especially chevron which you mentioned earlier, does not have that. they are going to make lots of money. jonathan: i have no doubt that in the earnings report, they are going to tell us what they made this quarter and remind us of what they lost back in the first quarter of 2020. will kennedy, thank you, as always.

it is going to be a very interesting earnings season, that is for sure. tom: could be a political earnings season as well, particularly true if gasoline prices stay sustained. i am going to go right down to the granular. my uber today was $12 more than it normally is, and that is fuel. jonathan: that is a fuel surcharge, something we have seen. tom: we have seen it, but are we going to see it a lot more, including those airline fares we talked about yesterday? jonathan: it is getting so expensive to travel. 'bramo, you are living it. you're living the canceled flights, too. lisa: to your point when you said will the oil majors hide behind write-downs, shell with a write-down of $4 billion to $5 billion of the russian operation, raises a really good point. how much is this the way that they try to say -- for the europeans.

but the u.s., where do they hide? tom: are you giving the kids a beverage of their choice? jonathan: i think she is having several beverages of her choice at this point. lisa: is this a therapy session or what? jonathan: from new york, this is bloomberg. ♪ ♪

jonathan: we are seconds away from some economic data in the united states. good morning. we turned negative on the s&p 500. futures down 0.05%. the nasdaq now essentially unchanged. yields higher. 2.6183. the dollar stronger. euro stronger, rather. looking at jobless claims in america. look at this number. 166,000. mike mckee, take us through it. michael: we know companies are trying to hire and they are not letting people go. 166,000 is the number after 202,000 last time. the previous week was revised

down to 171,000. everybody hold onto your hats. the labor department has also changed, revised the seasonal adjustment factors the last years back to 2017 and that may be part of the reason we are seeing these numbers. it is too complicated for me to say off the top of my head because the changes take up a page in the release. i have to go through that and you all can go through that. it does suggest we are seeing a tight labor market. one thing i want to mention, die brought along a chart. for those of you on radio this is easy to look at. the total number of people getting jobless claims and initial jobless claims through the recession. one thing we could look at his jobless claims that telus things are getting a little too tight when the fed starts raising rates.

the problem is these are coincident indicators. they start going up as the recession starts and hit their peak during the recession. that will not tell you a lot. it is something to keep an ion in terms of try to figure out whether the fed has gone too far now that we have started the tightening cycle. jonathan: not much happening in the market on the back of this. the nasdaq 100 is up not even .1%. looking at that number, and looking at the chart as well back to the late 1960's, jobless claims the lowest since the late 1960's. this chart is broken. how can we fix it? because of the pandemic, this chart is useless in many ways. michael: you have what they call a series break and there is not a lot you can do about it. you could drop that period out but it will be difficult to have a graph that encompasses 40 or

50 years now because the change was so great in march and april of 2020. tom: michael mckee, thank you so much. a lot to talk about and eight debate on the american economy. there is no one more qualified than vincent reinhart with his heading of the economic research at the fed, project the greenspan fed. -- particularly the greenspan fed. a personal note after i finished reading every word of the minutes today, who writes the minutes for the fed? when you were at the fed were you the guy who wrote the minutes? vincent: i signed them for about six or seven years and was involved in drafting for a decade and a half before that. the reality is that a group does it and ultimately it is the responsibility of the secretary. every draft is seen by every

person who was in the fomc room for those two days. it is a group effort. tom: we have seen a massive division this morning on bloomberg surveillance over glass half-full, half-empty. when you see claims where they are, what does that signal to you about a fully employed america? vincent: the glass is more than half full and the federal reserve will have to take a little bit out. that is a difficult event they are trying to -- that is a difficult pivot they are trying to undertake. listening to your conversation in the last five minutes, it is hard to read the data. it was distorted by the pandemic. the experts have no idea what these seasonals are. you have to really appreciate

the information we are getting in real time is somewhat suspect. lisa: do agree with bill dudley that we are not seeing more of a selloff in equities and we see -- and if we see inflation run as hot as it has been the fed will have to have more aggressive action against directly trying to torpedo where equities are at this point? vincent: i would not put it that bluntly but the reality is monetary policy works through financial markets and a financial conditions tightening, they will be removing -- and unless financial conditions tightening they will be putting restraint on the economy. the reality is the overnight federal funds rate policy of the fomc does not matter a lot for anything. it matters how it gets priced into the yield curve and into other financer -- other financial asset prices. unless those prices move in a

way to tighten financial conditions the fomc will not have accomplished slowing of the growth of aggregate demand to something more sustainable given the level where we are. lisa: if the market is pricing in several series of 50 basis point rate hikes in a row from the federal reserve as well as $1.1 trillion federal reserve balance sheet reduction over the course of the year, how much further with the fed have to go in terms of signaling or even rate hikes to actually tightening conditions enough? vincent: one thing to point out is even though successions of half-point hikes implies the real federal funds rate, the nominal federal funds rate less inflation will still be negative. that is the measure of policy impetus. a lot of what the fed has to do initially is just catch-up. until they are passed to the cash upstage, -- the catch-up

stage, it is time to ask -- at a pace of .5 over the next meeting the fed will stop to be tightening well into next year. tom: you've maybe lived the fed more than anyone's we speak to. from lyle brainard, from bulbar to where we are -- from lael brainard, from volker to where we are now, is the great moderation over? vincent: i think that is right. one way to put it is we have had two generational shocks. a pandemic and a european war in the space of two and a half years. that is within a decade of what we thought was a great financial contraction. we have added a lot more to volatility. the great moderation was the great anchoring of inflation

expectations. we achieved what paul volcker and greenspan talked about, a situation in which households were more concerned about a changeable price level making their decisions. we are out of that range and we're probably out of the great moderation as well. tom: the question is if the moderation is over, greenspan invented with you along the x axis this word measured. are we done being measured? vincent: greenspan also produced the policy tightening of 1994 and 1995 that putting intermediate actions, then 50, then 75. he was willing to do what was appropriate. i think being measured at this point has drawbacks.

a better word than measured is predictable. the fed can do a lot but they can let everybody know about what they are going to do. a feature of 1994 and 1995 that we forget his markets were really volatile. there were number of blowups, and a prominent hedge fund. -- including a prominent hedge fund. if you have a more assertive and changeable fed to address macro economic concerns, you might get more financial market volatility. jonathan: vincent reinhart, great to catch up with you. for a lot of people who have just entered the markets in the last 15 years, is almost unthinkable to think back then there is not a statement and a news conference. he just had to figure things out. tom: what you just mentioned is going to be in jamie dimon's letter a year from now.

the percentage of the public that has not experienced this, whether the visceral feeling at the gas pump or and i'll seven of the grocery store or tuition bills, whatever it is, so many people have not lived what vincent reinhart's span is across the fed. he was at the fed in the middle 1980's and was there for years. jonathan: i member sitting down with ubs and talking about the average age of the trading floor and the fact so many of them had not seen a rate hiking cycle before. for many people they have not seen a rate hiking cycle like the one we are about to see. tom: i think really are the only ones in media loving -- talking about a bond bear market. how may people have seen a -8% drop in bond prices? jonathan: you mentioned paul

volcker and i think the quote of the week on paul volcker came from lael brainard who said "40 years ago paul volcker noted the dual mandate is not an either or proposition and runaway inflation would be the greatest threat to the continuing growth of the economy and ultimately to employment." that is the situation the doves find themselves in. it is not an either or. lisa: one of the unspoken questions a lot of people have is if consumers show resilience, then why not allow inflation to run hotter? if it is not crimping growth than why not go past the 2% threshold the fed has clung to for so long. jonathan: they've been beyond 2% for a long time. coming up on the portfolio, geraldine sundstrom. looking forward to that. this is bloomberg. ritika: keeping up-to-date with

news from around the world with the first word. ukraine's foreign minister says his agenda is simple. he wants nato to give his country weapons. he met with the nato secretary-general in brussels before a meeting with the alliance. ukraine has been pushing for more air defense systems and antitank weapons. the next economic jolt to russia will probably be in the labor market. according to a bloomberg survey, unemployment is set to more than double from exceeding highs of more than a decade. sanctions up with the economy in force for one of the deepest recessions in russia's modern history. the shanghai lockdown is threatened to become the biggest crisis of president xi jinping's tenure. the struggle of the cities people to obtain necessities like food and medical care has triggered rare pushback from residents.

many saying the commonest parties covid policy is worth in the disease -- the communist party covid policy is worth in the disease. warren buffett -- that sent shares surging in the premarket trade. furniture has moved into the type -- berkshire hathaway has moved into technology in the recent years. 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. ♪

>> it cannot be business as usual in any of the financial

institutions. the call from the outset has been to impose maximum pain on russia -- the goal from the outset has been to impose maximum pain on russia while to the best of our abilities shielding the united states and our partners from undue economic harm. tom: for meat she will always end forever be chair yellen. we welcome all of you on radio and television. lisa abramowicz and tom need with the gentleman from -- and tom keene with the gentleman from the national institute of technology, olivier blanchard are joins us this morning. thank you so much for joining us. you are just in washington university with all of the heritage and all of the optimism of washington university on growth. can you be optimistic about the

american economic experiment at this time? olivier: the current one, the one we are all thinking about is are we going to have increasing inflation and get back to a low level? that i not as optimistic as most people. i still think is going to be very tough. i think inflation has a lot of momentum. i think there is a very tight labor market. the fit is going through a hard time. -- the fed is going through a hard time. they do not want a recession. this will have to, with some increase in unemployment -- this will have to come with some increase in unemployment. michael: -- tom: with all of your work and the firepower at m.i.t., you lived the 1970's debate over entrenched inflation.

you have a chart at peterson institute of the seven or eight year battle to extract ourselves from 1975. is that our future, out to 2030? olivier: it is not the future but it is a warning. what happens is the fed delayed doing what it had to do and paul volcker came very late in the game and just went at it. he had to increase rates by 1300 basis points to make sure it was where he wanted. inflation expectations are not as bad. the hope we can do all of this while having rates go to 2.5% or 3% is a hope. not in my boko forecasts. lisa: the hope is underscored by the mystery of some of the tools the fed is using. i am thinking and particularly of the balance sheet, possibly

reducing it $1.1 trillion over a year. how much do we understand how this reduces inflation? olivier: it is likely to make the long rates higher than they would otherwise be. to the extent -- that will slow down the machine. that is the way you reduce inflation is by making the labor market less tight. exactly how it works, when it comes to the policy rate i think you have some understanding of how to fx the economy. when it comes to qe or qt i think we know -- committed to it if it turns out to be the strong -- lisa: do you think we are headed to a time where inflation is structurally higher than it has been over the previous few decades because of deglobalization and some of the shifts we have seen that were

accelerated during the pandemic? olivier: i do not think so. i do not think there is any close link between productivity growth and structural elements. the rate of inflation can be anything, we just have to have it flat, we have the economy at full employment. a lot hotter than that or colder than that, but you have any rate of inflation you want. tom: you have lived the religions of the moment. you and i remember when the world stopped on a thursday afternoon at 3:00 and we all found m1, m2, m3. there been other religions of economics. what is the religion right now we need to be aware of? olivier: i was never in the m1, m2, m3 religion. i think -- the way we think

about how monetary policy works is you look at the yield curve. some economic activity depends on the short end of the curve, some depends on the long end. basically the higher the yield curve the more tightening there is. if i had to choose one object as opposed to more, i would say look at the yield curves. the yield curve is telling us rates are going to go up for a while and then maybe they will go down a bit adjusted for inflation. i think that is the tool the fed has. in the old days you only played in the short end. now it plays all the way through the yield curve. that is the option. lisa: what is the tool of real yield? i talk about this as the inflation-adjusted yield on 10 year treasuries moves the

highest back to march 2020? olivier: you have to realize we are still in an era of very low real rates. the short end of the yield curve, real rates are very large , negative. at the long end are less negative than they used to. getting closer to zero. i think that is what is needed to get the economy going in the long run. we do not know what the long run is, but it is probably long at this point. if we were going along with no more inflation than target, then i would say zero is probably the right number. before we get there we have to get inflation down. jonathan: we have to leave -- tom: we have to leave it there. looking forward to your work with the peterson institute.

always and forever with m.i.t.. lisa, on m1, m2, i believe blanchard just trashed chicago. he just torn to shreds the chicago of the 1970's. lisa: i did not hear incredible animosity and drama. tom: i heard it. lisa:'s points are really well taken. in a perfect world of equilibrium, it would be zero. there should be a baseline of understanding that yields represent long-term inflation expectations. he thinks they will have to go above zero, which a lot of people think we'll have a real effect on risk assets. tom: out of the great financial crisis olivier blanchard with some other people lead on the debate of where the new inflation level is. we better get used to 3% and not

2%. part of the raging debate we will take to the ecb meeting on april 14 and onto may forthwith the fed. it all wraps around with the fed. this is bloomberg. good morning. ♪

jonathan: live from new york city for our audience this morning, good morning. equities lower. your 10 year yield higher.

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: live from new york city, we begin with the big issue. setting the stage for may. >> the fed governors are speaking more hawkish late. >> the fed minutes. >> 50 basis point rate hikes are on the table. >> they are likely to go 50 basis points in may. >> the market is welcoming these 50 basis point hikes. >> the may 4 meeting. >> the need to raise rates and start cutting down the sides of the balance sheet. >> they are