>> the major areas of the global economy are slowing at the same time. >> what the market has told us over the last three months is they think the fed has got this. >> you want to be in this market, but you want to be managing your risks. that is the key. >> we are talking about a stock bear market. >> this is not a time where you try to chase or call a bottom, call a peak, call an inflection point, because inflection points are happening daily. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning everyone. on radio, on television, we welcome all of you back to our studios in new york. the singular story this morning is oil. american oil, $119 a barrel. we saw a $122 print on brent. jonathan: the driving season begins with gas prices approaching five dollars on average across this country. some places higher, some please

lower, but the direction is pretty clear. we mentioned some of the research from jp morgan it could hit six dollars later this year. there's a problem the economy for a lot of the people experiencing that in a bigger way and a problem at the white house on how to address it. tom: the economic data gets us to the midyear outlook. you wonder what the midyear outlook is for the president of the united states as he sits down with a secretary of treasury and the chairman of the federal reserve. jonathan: and approaching a midyear outlook for the federal reserve as well. president bostic tina fey pause maybe later this summer. this afternoon was governor water saying no thank you, we got a lot of work to do. tom: i'm going to go back to the idea of the many uncertainties that are out there, and downplayed over the weekend was a china reopening. the headline that flew by 20 minutes ago of beijing schools opening in june. jonathan: pushing through the commodity market, the trend is clear. wti back through one dollars -- ask for $120 -- back through

$120. gauging where this economy is and where it is going instrument a sleigh difficult to do because it is moving so quickly. tom: the 8% inflation statistics in europe today, italy, japan, germany and the rest, comes down to the inflation meeting this afternoon with the president. what are they going to talk about? lisa: and what does it matter? we were talking about it with brian deese, asking what is the point of this meeting if you are trying to reaffirm the independence of the fed? what are they going for here other than a photo op? how do you address it when you keep getting buffeted by new events? i think about the china reopening you talk about. how much does this have legs? if they continue to soften the zero covid stance, how much do we see that upward trajectory go well beyond what people are expecting with oil and gas? tom: the only way to address it is to raise rates. we assume that in june, right?

lisa: how is that going to solve the oil and gas problems? it is not going to solve the oil and gas problems. maybe it will reduce demand, but you are not really seeing that. there has still been an increase even with real wages deeply negative. at what point do you start to see the slowdown in demand and some of the pushback from consumers to the higher prices? tom: i hereby dub june, and i'm going to go back to fdr in the heart of the depression as i paraphrase, fdr said do something. it is do something june. jonathan: june 15, the fed will do something, most likely hikes rates 50 basis points. they will go again in late july. then there's a big gap between then into september. that is why this space, a little bit of vacuum that people are filling with this idea that that is when you get a pause from this fed into september and beyond. tom: brent crude, $123.69. lisa: equities down a little

bit. -- jonathan: equities down a little bit. i would suspect us to be down a whole lot more. we are not. down on the nasdaq about 0.2%. you're seeing that moving yields by eight basis points on the 10 year to 2.82 percent. not all of that is governor water at the fed and the u.s.. it is about europe too. upside surprise on inflation reason europe. negative zero point 7% on that currency pair. tom: the real yield coming down, still positive 0.2%. something to watch during the week. someone always watching that is peter tchir, head of macro a strategy -- head of microstrategy at academy of macro strategy -- head of macro strategy at academy securities. you have been in the hotels. i know you stay lucidly at fancy places like the saint regis come of the four seasons, and the rest. what you hearing out there? peter: none of that is in our

budget, but anyways, i think there is this frustration with where policy is headed. as lisa said earlier, readdressing the right thing? i think we are supposed to be figuring out how to supply ourselves. how do we turn on refineries in this country? how do we figure out a solution to this problem that is both holistic and longer-lasting? everything has been very reactionary. we have to get to the table and almost make a war plan. how do we want to address energy problems, how do we want to address food problems? i think we have to go back to rewarding companies for developing supply chains. that has got to be the message we should be getting, and i'm fortunately it is not the message we have been getting. jonathan: you were talking about that years ago. is that a theme you can invest in still? peter: i think so. in fact, we have been talking about bringing it back south america, even mexico, and as we go through these conversations, i think companies are taking a much closer look at proximity

when they think about their supply chains. not only are they looking at cheapness, but risk of disruption, cost potentials. i think everything points you to having their supply chains closer to home, so i think you will see some redundancies built in. i think that is going to be a three to five year project. i think it is going to be inflationary, steadily inflationary, and raising rates does not help that because it just causes companies to have to spend more to build those plans. lisa: a lot of these things are deeply inflationary, whether it is that, dealing with environmental issues, dealing with the higher costs of employment and being more safe and aware of what is going on. how much is that baked into the inflation assumptions going forward? where do we end up for the next three to five years despite the 2% target of the fed? peter: i think we are going to be in that 3% to 4% consistent inflation over 45 years because of all of this reassuring come

of this changing of supply chains, this extra focus on security, but you want redundancies. you are going to have larger inventories so that you are not subject to supply chains being shut off. all of that is going to be steadily inflationary. i had the key is so long as we are generating good jobs, those people are getting the good jobs to keep up with inflation. i think that is what we need to be focusing on, making sure these jobs pay well enough, which they should, and then may be figuring out how to support at -- support the people unfortunately being left behind. the way i see it playing out, it is going to create good, safe jobs that let people in this country do well. lisa: so 3% to 4% inflation for three to five years. what does that mean for a 10 year yield still flirting with negative real yield territory at a time when we've got the fed starting wednesday to engage with quantitative tightening? peter: i think we will have trouble getting much above 3%.

i think everyone is going to be aware that the fed is going to go through these series of maybe they are behind the curve come of they have already done too much, and ultimately, as inflation is a problem, job growth is going to be a bigger problem. he started hearing some of those earnings calls last week and the week before where people were talking about maybe they have too many employees. i think the fed has to be very careful because no matter how bad inflation sounds, job losses are even worse. so i think the fed is not going to be as aggressive as people think, and that is going to keep the tenure in this 2.50% to 3% range for the next three months. jonathan: you started your note by yesterday saying, "i want to honor those who made the ultimate sacrifice in this country." academy makes up a big proportion of the veterans -- a big proportion of academy are veterans, rather. talk about the insight that gives you on issues like russia, and china as well. peter: we have our geopolitical intelligence group, which is 14

retired generals and admirals and one retired astronaut, so i think they have a really different perspective on how these things play out, and when people talk about no-fly zones, we can understand what it means to enforce a no-fly zone, what we did not do that. that has been really important. one thing we have been doing a lot of meetings is although people want to still talk about ukraine and russia, we can't take the i off of china because china is color thing commodities. they are almost sanction proving themselves. we have seen a situation with china that is going to be long-term what drives our economic future, what china does, not so much what goes on in russia and ukraine. jonathan: sanction proving themselves. what you see in them do and what are you looking to do off the back of? peter: i think this ties into wanting to work with people that are close to us because that is what china is doing. they are lining up the autocratic nations of the world who tend to be commodity rich to sell china those commodities. they claim they will be a good customer because they are going to be burning oil, coal, natural gas for decades to come, so that is where they are aligning.

who do we want to partner with? who do we want to work with? to me, we are going to have very much a western hemisphere alignment that we compete with. jonathan: awesome to catch up, as always. on the elephant in the room and -- the room in many places right now, that is china. lisa: people talk about ukraine, but the issue of china, the issue of the lockdowns, what that does to the economy, and the issue of taiwan and a potential altercation, the issue of what do you do if you have business in a nation that is so not transparent with was picked to their health policies as well as the cut -- as well as what kind of scrutiny they will have over you is what people are dealing with. jonathan: just going through the calendar through the summer, june 10 cpi. july 13, cpi. august 10, cpi. all ahead of a big september meeting for the federal reserve. tom: i'm going to get out to september. i think the two recent meetings are where they are, but to me it

is september 2021 and i believe on to december 4. these are key meetings, and they are massively data-dependent. in fact, the president will hear that today. jonathan: ahead of that meeting they will get another read on september 13 on cpi. a lot of inflation prints for them to have a look on and start to decide whether it is still required, a 50 basis point increase, something slower, or maybe a pause. features -0.7% on the s&p. from a steamy 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. president biden will hold a rare oval office meeting today with federal reserve chair jerome powell and treasury sector janet yellen to discuss what the administration calls the president's top, priority, inflation. rising prices are hurting the president with voters just months before midterm elections. european union leaders have paved the way for a package of

sections to punish russia and president vladimir putin. they agreed to pursue a partial ban on russian oil that would forbid the import of products delivered by c, of it there would be a to bury exams and for pipeline crude. for the first time since early march, the number of daily coronavirus cases and china has dropped below 100. still, omicron's contagiousness means it may only be temporary. both beijing and shanghai have started to loosen restrictions. more legal headaches for deutsche bank. front for to rated germany's largest lender and its asset management unit, dws. the search is related to accusations of so-called greenwashing by the asset manager. it claims that dws was marketing product is being greener than they actually were. shares of unilever jumped today. activist investor has been imported as a director and has taken a 1.5% stake in the

company. the equipment -- failed to take over the consumer division of gloucester smithkline and as had to grapple with steep inflation. 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. "bloomberg surveillance ♪ -- ♪

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>> there is still spare capacity, but it is running dry. oil prices should be higher.

jonathan: and they are higher this morning. that was christyan malek, the global energy strategist at j.p. morgan securities. crude is rallying, right now higher by 3%, $118.62 on wti. tom: right now in the shock of where oil is, $123 on brent crude, truly out to new sustain highs. a good time to speak to ellen wald. her book "saudi inc is absolutely" -- her book "saudi inc." is absolutely extraordinary. everyone is screaming about investment in oil. it can be at any part of the oil process. do the saudis want to lead opec bus to a greater -- opec+ to a greater investment in oil? ellen: i would say absolutely.

this is something the ceo of aramco has been talking about for years now, although much more loudly and particularly since the aramco ipo. investment in oil and in all parts of the oil chain has been so low for so long that even without this russian crisis, you could say, oil prices would be higher simply because of this lack of investment, and we are not necessarily seeing a big enough response in terms of investment except from the countries that have continued to invest in oil like the uae and saudi arabia. tom: how do we jumpstart the investment in hydrocarbons? sam: -- ellen: i think it starts with an acknowledgment that we still need oil. we may not want to need oil. we may wish we didn't need oil. but if we want to continue with our modern lifestyle, with driving cars and using airplanes

and shipping things across the world, we need hydrocarbons. yes, there are cleaner ways to produce hydrocarbons and not so clean ways to produce them, but we still need them. that needs to be acknowledged at every level, especially by governments because when government support isn't there, investment bodies take their cues and they don't want to invest in something that they think the government is going to put extra taxes on or make impossible to use in just a few years. lisa: there's also a reluctant's -- a reluctance to put money into companies viewed as bad or viewed as into beating to global warming. have we seen capitulation on that front as we see strategist after strategist say that commodities are their favorite place to be? ellen: we are definitely seeing some people, some investors say

so what, it doesn't matter, i don't care about\, i don't care about public opinion, i'm going to put my money in this area that is going to make money. but it -- because at the end of the day, that is what they're looking for is a return on investment. but you are still going to have some people at some investment places that are more concerned, or they believe that public opinion is so strong that government will continue to make these investments too difficult. we need consistency and regulation. we need to know what is going to happen 5, 15, 20 years down the line, not just everything could be changed with a new administration in four years. lisa: i'm going to ask you the same thing we talked about was christyan malek last week.

why aren't oil prices even higher given some of the shortfalls in production? ellen: exactly. we are seeing higher oil prices. i think some of the market is still pretty volatile, and we are concerned about about demand instruction at this point. we are seeing some pullback in consumption in the united states . they are definitely concerned about china. we are hearing news that some of the lockdowns are being eased, and that is definitely going to impact man and cause demand to go up, but as inflation goes higher and higher, it is really going to cut into people's use of hydrocarbons as fuel, especially because these are things that are so high-priced now. tom: within this conversation, sort of the out of body experience for me, is whether it is exxon or aramco or an independent drilling in oklahoma , texas, they are not waiting for the government to help them

with investment. why aren't they investing at $130 a barrel? ellen: that is a really great question and there are actually a bunch of reasons. some of them are well capitulated by the dallas survey of oil producers in the u.s. a lot of it has to do with cost, the cost of drilling now have gone up in a huge way. they are not able to get a lot of the materials that they need, so there are delays in terms of supply chain issues, and also they are pressured so much to give this return on investment to their investors that there really hasn't been to take those and put them back into drilling, especially when costs are so high. they also can't get labor. there are labor shortages. even if they pay more money they still can't get people to come and work. so there are a lot of issues here.

i think some of these will work themselves out, but it is going to take months. jonathan: thank you, as always. ramping up production is not that supple. the good news is production in america is climbing and has been doing so for the last couple of months. i think we are about to about 11 million barrels a day. those numbers are still off from before the pandemic read it is difficult to ramp up capacity. we know we've got a capacity issue with refining. the energy players doing ok. last week on the s&p, those names were up by more than 8%, and your today so far, a 58.26% you to date. that's the energy players on the s&p 500. tom: i will say that when you look at the literature from royal dutch shell or the jp morgan work we have cited, cole is sort of -- coal is sort of flat on its back, and you need

investment across a lot of different makers of energy, whether it is solar or biomass or certainly hydrocarbons and gas. jonathan: you have cited the work of jp morgan, capacity, capacity is a word that comes up again and again when you speak to christyan malek. lisa: it has to do with investments, it has to do with how much you have to pay everybody, how much the actual materials have increased to expand, but also shareholders don't want those investment's. shale producers in the u.s. have been penalized for overbuilding during good times only to get busted during the bad. jonathan: and these are some better times for some of those names, for sure. futures are down about 28, 29. down by 0.7% on the s&p. from new york, heard on radio, seen on tv, this is bloomberg. ♪

jonathan: we are coming off the back of a big week again on the s&p 500 good morning to you. life on tv and radio, and it is

.7% on the s&p. you'll to breaking out just a little bit more in the last 15 minutes, i 13 basis points now on the tenure, 2.8658. tom: seven basis points, now out 12 or 13 basis points. it is so much of a yield lower move last week while you were in capri that we are really back to center tendency. jonathan: president bostic last week suggested we could pause rate hikes. governor rauner yesterday saying anything. he's looking for more moves to get inflation back down to 2% maybe the data started to validate that idea. perhaps you had that idea going into the minutes and the minutes confirmed what you already thought it listening to the fed governor, there is no consensus on that pause anytime soon. tom: 3.1% move in texas intermediate. right now, leland miller is cofounder of the chief executive officer -- the cofounder and

chief of china beige book he is someone with his pulse on the chinese data. the debt, taken from the micro data of china. he joins us this morning. i want to talk about the shanghai calculus, about the rate of change, the second derivative rate of change of the rate of change that the government in beijing needs from shanghai. how desperate is beijing for shanghai to get going? leland: they are desperate first of all because shanghai is a growth engine, but second because it is a confidence engine for the economy. what is so curious about the pmi data came out last night, a few days after and extort nearly panicky meeting, something we have's not seen in decades, all data come out last night and they are proving for my that april was bad, but may getting better, it is the opposite of what we saw in china beige book at a. we saw much more problems and may as a secondary consequent as of the lockdown spread away from

shanghai. so they want to tell a pretty story right now. it is important for markets. but we did not see an improvement from april to may. we saw the opposite. lisa: give us a sense of what the china beige book is charting out to the end of the year, the real gdp of china, not necessarily the 4.5%, 5% the communist party would like to say? leland: if you assume the second quarter is in construction, the question is what are they going to do the second half of the year. without rolling back covid lockdowns or covid zero lockdowns if they need them, to get the gdp somewhere in a range that they can claim, i think the new calculus is we are going to get to the fourth quarter, we are going to hope there's no covid, and announce 5% gdp for the fourth quarter and try to get somewhere between 3% and 4% for the year. then i think markets will say that's not too bad. we are not on track for anywhere

near that. you have to have a lot more support for the economy and a lot less covid lockdowns for the economy in order for us to get anywhere near that ballpark amount. but i think that is the story they want to tell. lisa: what are we on track for based on the data? leland: with the second quarter as we get is it is, if you try to do any type of linear projection you are under 2%. you have to see a lot more support for the economy, which i do think we will do. as we get close to the party congress, we expect there to be more credit support. we expected to be a little more infrastructure. that is not surprising. but you will have to see a lot more of that, and it can't be interrupted by lockdowns across the economy. tom: years ago, to get rich is glorious. how far are we removed from that in this chinese crisis? leland: i don't think we are that far away from it. if anything, some of what we have been taught over the past

six months is that the chinese model is not actually any more superior than any other model. they just had covid at a different time and now they are getting hit pretty hard with it. everything has to get through the party congress. xi has to have his political moment. then they can start recalibrating the economy and the regulatory system. tom: do we underestimate the unchanged china? do we overestimate right now the xi totalitarian shift? leland: i think we did into a few weeks ago, but what seeing all of this headlining conflict between xi jinping, i think people are understanding how much opposition there is with china in the leadership amongst people who are being locked down to this covid zero lockdown policy and the slowing economy. we are seeing the dirty side of china's governance right now,

and i think people are more aware of it. lisa: a lot of people have been looking out and wondering what we are going to see with respect to u.s. businesses, multinational businesses and supply chains. why we have not seen more of some sort of removal from certain facilities in china elsewhere. are we now starting to see that after years of speculation. leland: the lockdowns are something else. i think you are going to have a very hard time not just getting western businesses run across china, but getting ex-pats or anyone to work at these businesses. nobody wants to be in china right now. no one wants to be locked down, they can't see their families who can't be elsewhere, for a year, for six months, for longer than that. so i think this has shifted the calculus for people who want to live in china. they are going to have a much harder time running businesses in china because of it. lisa: u.s. executives are not going to come out and say they

are getting out of china until they already have. they don't want to hamper employees who work there. they also don't want to get blowback from the chinese government. how much have you seen this withdrawal? this is the big question for a lot of companies that have been pretty quiet on this. leland: it is telltale that just about everybody i know is either on their way out or has already left. there's very few people with plans to go into china anytime soon. it is very difficult to travel and very difficult to operate and live, so people don't want to accept that. tom: wink that change to the party congress later this autumn. leland: i think what the party congress does, xi has his moment, and after that they can recalibrate. you can change covid zero. tom: i don't mean to interrupt, but can they spare the time to get to december or january of next year? leland: i don't see how they do

it. they have to be extraordinarily lucky and introduce vaccines, and even by chinese reckoning they say they are not going to be introducing them till october. so they are having some very difficult conversations now. this is the worst conditions we have seen in years, and there's no way out of covid returns. so you have to be crossing your fingers if you are thinking china is really going to improve in the second half, both that policy support will be there and that covid won't knock them off their feet again. jonathan: i wanted to finish on something really important. i we have both observed, it was obvious to a lot of people the trajectory of some of the policy out of russia and where this might end up. some people have turned around in the last few months and have acted surprised that this has actually happened. many others aren't surprised at all. do you foresee the same thing happening further down the road with china? there are allegations of human rights abuses, genocide. those have come from u.k. of

countries. there was delayed sponge of fire last week obtained by a series of media groups speaking to some of the detail around those human rights abuses, and yet it is largely absent from the conversation of corporations engaging with the chinese communist party on the economy there. it sets us up to a similar story to russia. they ignore they ignore it, and then we get further down the line and we can't ignore it anymore. where do you see this going? leland: they are probably about it in private. -- they are talking about it in private. most of these companies are trying to understand whether they are going to have to completely separate their china business from their business for the rest of the world. i think the more that there is a political imperative to have one set of views on the western side and find certain things on acceptable and another view that reflects the chinese communist party's views in the mainland, a

lot of these complete may separate their china business from the rest of the world business, and we are talking about separating supply chains, corporate entities. this is a big change. folks don't want to be talking about it, but they are absolutely planning it. jonathan: where would that leave a company like apple? leland: apple would have to produce what it produces for chinese consumers inside the country, and it is going to have to find extra production capacity for all of these iphones and imacs and other things for the rest of the world. they will not be able to rely on chinese production capacity for most of their production going forward. they are trying to work out can ended see plans -- work out contingency plans. they got a norma's headwinds in the next couple of years. jonathan: really interesting to be your thoughts. leland miller of the china beige book international. an important topic being

discussed a whole lot more behind closed doors lisa: and actions actually being taken. ceos do not want to say anything with respect to withdrawal from china because they wil get blowback, but what they are doing on the ground had incredible implications not only for gdp, but frankly for inflation at a time when it is inflationary to rebuild elsewhere. jonathan: futures down about three points in percent -- down about 0.3%. yields higher by 13 basis points on the tenure to 2.86 18%. just a few words from governor waller was all it took yesterday to suggest that he sees a lot more rate hikes in the future to get inflation down towards 2%. tom: some legit dollar strength as well. the euro was at one dollar seven -- was at 107. you really wonder some of the

tensions beneath the headlines. jonathan: looking forward to catching up with savita subramanian of bank of america a little later this morning. we will catch up with her in about 20 minutes. the situation in this equity market. president bostic or with governor moliga the bank of america -- governor waller? the bank of america view. this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. european leaders have agreed to back a partial ban on russian oil, aimed at punishing russia for invading ukraine. the sanctions would ban the purchase of oil and per turning product -- and petroleum products delivered by ships, but would exempt russian oil delivered by pipelines. the u.s. is on track for a recession. dunce fitzpatrick was interviewed for bloomberg wealth

with david rubenstein. >> there's a lot of discussion about a booming recession, and the bottom live in -- the bottom line is it as a matter of when. when you look at what the markets are pricing here, they are praising it going into a 2023 context. i think markets might be wrong, and the reason is the consumer here is an expert nearly good shape. ritika: what's the ceo with don fitzpatrick tonight on bloomberg wealth with david rubenstein. the town of uvalde, texas has begun saying goodbye to the 19 children and two teachers killed in last week's elementary school massacre. visitations at the town funeral homes were held yesterday for two 10-year-old girls. this week, 12 funerals are

planned. lawmakers will consider what can be done to stem gun violence. 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. ♪

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>> we have unique economic strengths right now. john market and the labor market -- the job market and the labor market chief among them, but they are not the only one. we are seeing small business creation up at record levels. we have unique economic strengths which position us well to focus on the challenge, bringing prices down. tom: a spirited conversation with the knot can no economic council director brian deese, who up -- with the economic

council director brian deese. lisa abramowicz and tom keene. jon ferro in treatment for his next property. joining us right now with the clearest note of the morning is tom tzitzouris, head of fi research at strategas. i love the clarity of your note biden, powell, and yellen has a easy lifting down to a 5% inflation rate, but then. is that really going to be the topic today on the couches in the oval office? thomas: i think so. the biden administration has a real problem here. they've got to get inflation down to a more comfortable 3%, but the problem with that is giving it down to 5% is pretty easy. it is seasonality, base effects. tightening will get us down about 4%, but getting down to 3% is probably going to into the

recession -- probably going to engineer a recession. tom: are the phd's at the eccles building looking at reaction functions of differential calculus of the how to go from 5% to 3% inflation? thomas: i think they are come up with the question is do they over tighten along the way. if you look at the past history, eventually something broke for they actually got to their model driven endgame. there's a very high chance this happens again as well. they over tighten and recession ensues. lisa: what type of recession would-be? thomas: probably a fairly shallow recession because brian deese mentioned earlier in the show, you are looking at a very good cushion right now for the consumer base. home prices, cash out refi's, very strong wage inflation. lisa: do you buy this feeling that we heard last week that raphael bostic's train of

thought, that there would be some sort of rise in september where the fed reassessed and decided to pull back from some of the tightening? or do you think the market is underestimating right now the resolve that the federal reserve ? thomas: i think a pause is inevitable. a pause could very well mean a slowdown of 25 basis points per meeting rate hike past and no change to the expected terminal fed funds rate, and balance sheets reduction continues to proceed. i don't think we are going to see a pause in the sense that the fed basically stops tightening. tom: to folding your work at strategas, does the market do the heavy lifting for the fed? does the market get out front on this and create a tightening atmosphere? thomas: the market does, but we estimate the market has done the equivalent about 160 basis points of type in. if a neutral fed funds rate is

3% and inflation is running at a sticky 4%, there's more to come from the markets. the market has more tightening to. lisa: what does that mean for a 10 year? thomas: if we are looking at 4% sticky inflation, the 10 year has to be at or above 3%, but perhaps not by much. somewhere between 3.25% to 4% is where you would expect it as a terminal rate. it may come below that very quickly again. lisa: has the fed already been priced in? that was the scene, that the first have of this year was praising in the rate moves, and the second half will be pricing in the recession. is that how you see it? thomas: i think so. the fed tightening path has been priced in, that is a market pricing somewhere around 3% to 3.25% fed funds rate area but is probably not priced in is a full recession risk, but with 10 year yields even at about a

2.86% this morning, you're talking about yields what the market expects the terminal fed funds rate to be, so the market is not pricing and balance sheets reduction risk. the same is true from spreads. you do not see the levels that would indicate stress. tom: let's go back to your we house, which is fannie mae and mortgage. you are not immortal on this. you are a god of studying fannie mae and housing data. how sq is our housing -- how askew is our housing boom? thomas: i think it is normal and that you have a backlog of housing demand that was probably pushed forward by bad policy out of 20 and 10, and you have had underinvestment in housing. add to that the fact that nominal growth has been pretty high, as well as low mortgage rates. it is below nominal growth. housing demand is strong, consistent with where you would

expect it to be. tom: so the second home that lisa bought up by temper lake is 800 l -- bought up by temper lake is 800 acres. tom: if i were buying -- thomas: if i were buying at these prices, i would be looking at demand softening over the next 12 to 24 months and seasonably weak spots where housing turns lower over the next two years. tom: what you think, lisa? lisa: i think you have some real memories. thank you so much. [laughter] tom:tom: it is that time of year. lisa: it is. are we going to keep going with black flies? i'm very much looking bored to our annual vacation in the adirondacks. it will be fantastic. tom: not one single chemical has

ever worked on this skin. [laughter] i market up -- i bring it up because it is his wheelhouse. it is what he is acclaimed for. i am not hearing off about the housing upcoming america. lisa: i think it is a good point, that perhaps we are not going to see a blowout of the entire model like we did in 2009, but we might see a lost decade of profits, particularly in certain areas. i don't of the answer to this. it is going to be really curious, especially at 9:00 a.m. when we get some data. brent crude $124 moments ago. that is a wow statistic. lisa: and a lot of people say there's more to go. jonathan: did we miss ferro? -- miss ferro? i have we got through it. lisa: we did come but we do miss

him. tom: good morning. ♪

>> good morning, down three quarters of 1% on the s&p. the countdown to the open starts right now. >> everything you need to know to get started for the set of u.s. trading. this is the u.s. open with jonathan ferro. ♪