>> the biden administration has

a real problem here. they have to get inflation down to a comfortable 3%. >> we will be in that 3% to 4% inflation level, and i think or three to five years. >> it will provide some relief. >> the fed is optimistic they will see lower levels of inflation, but they are not forecasting to percent inflation anytime soon. >> this is bloomberg surveillance. with tom keene, jonathan ferro, lisa abramowicz. tom: good morning. bloomberg surveillance. one year ago, brent crude up 66% in 12 months. jonathan: the s&p 500, a massive move. that is where bank of america is still pretty comfortable taking that exposure in the equity market. tom: everything we do we talk about the fed, the president,

ecb, all of it is backed by a commodity foundation which is a commodity boom. jonathan: which is why a lot of people think the fed has a job to do, take out demand. bill dudley said moments ago that the challenge for the fed is so difficult. how do you take out that demand from a hot labor market, rebalance supply and demand and do that without having on a plumbing climbing? in reality, that is so difficult. tom: 14% unemployment, down to 3%. maybe bill wants to model 24%. what is the risk that all of a sudden 4.1% becomes 5.1? that is onyx optimal to americans. jonathan: are they still hiking? cpi will be going in a different direction, or maybe it won't. that is the fear, you end up in a situation where inflation

persists and growth goes lower. tom: lisa abramovitz, it is real simple, bonds say all. what do bond sale on june 1, 2022? lisa: that maybe it is time to shift back. people said that the fed would go quickly and get out ahead of expectations, who could out hawk each other when it came to their projections for rate hikes. then you had the rates pause. now it is shifting back that the fed will have to be more aggressive. citigroup saying all indications show inflation is not slowing. without inflation slowing, you will not get the pause. tom: we pause for the sports report. rafael nadal, 36 years old, i'm sorry, it is a huge deal underreported in america. jonathan: seeing him smile

yesterday, i think john mcenroe said years ago, beating rafa in paris at a french open is one of the hardest thing to do in sports. tremendously difficult. he has only lost in that event three times across his career. unreal. tom: we will have to much that. and of course, the red sox will be dragging themselves back to .500 baseball. we will move on from there. dow futures up 170. in honor of the queen, we quote the dow often. jonathan: does the queen like the down? tom: she follows it every day. jonathan: it is a quiet morning. crude up .8%. tom: i am watching some of these items to see if copper turns around the china opening. brent shutte joins us now.

what are people doing with their money? you observe this across the northwestern mutual platform. what are they doing? brent: over the past years, people have been saving money. the consumer is in pretty good shape right now. gas prices are eating away at that, but over all the consumer is in good shape. that will help them get them through this time where inflation is high. i disagree with the citigroup message. i think inflation has peaked and is rolling over. that will give the fed the ability to not tighten the u.s. economy into recession, which is the market narrative that came out last week, that you'll see in the future. jonathan: have we learned anything about where leadership in the equity market comes from? bill: we have been pounding the table for value and things that are cheaper for the past year.

you have seen a market dislocation because you have an economy moving back to what it was pre-covid. monetary and liquidity issues going back to pre-covid. the most expensive names have been repriced because you have repriced the bond market, and many were stay-at-home stocks. if you were in stocks, you have not experienced nearly the same downturn as the expensive stocks. it will still get tougher, but the cheap names give you a margin of safety that we want to own. lisa: if you are wrong, if the fed does not pause, if inflation had a mechanical peak but does not come down that much, is your thesis wrong, or do you just have to tweak it around the edges? brent: i think more so tweaked around the edges. we have owned commodities for the past two years when it has been unpopular to own. we have owned them because we thought that you would see what you are seeing today, an inflationary environment that is different from the past.

i have not believed that inflation was that, just took longer to get there. we also own tips. we have moved out of that position right now because we believe inflation is coming down. the good news is, tweaks around the edges but there is a wide range of outcomes. the most complicating issues is the ukraine-russia war, which was not on the radar for the past two months. lisa: i want to go to what s&p global came out with, withdrew projections for the 2022 forecast, even though the company tracks other corporate balance sheets to get a sense of where things are going. what are you tracking for some sort of compass at a time of such uncertainty? brent: the big news is what happens with inflation. if you look at where inflation has been, it's been on the good side. that good side of the economy pulled forward demand. think about all of the earnings that we worried about last week,

target, walmart, amazon. they rebuilt their inventories because they thought demand was here to stay but it is shifting. now they are hefting to lower prices. put those together in a nice mosaic, i think you'll see inflation fall, which is the biggest question that people have about their. secondarily, what will the fed do about it? you mentioned in the opening that the fed talks tough. people are worried about these rate hikes, but they are already priced in. that is why there is room for the fed to go slower than what is imagined. tom: in the great moderation, we have pension funds with a true actuarial assumption coming down. are we at a point where you now need to increase your actuarial assumption or be able to increase what you take out of a portfolio? brent: i think i understand the question.

i think returns will be less than in the past. we have at a pretty good decade even on the back of that economic growth. in the future i think you'll have less returns because the majority of the market is more expensive. people need to look overseas and other places that have not worked so well. there is a positive story building where those equities are getting cheaper. i think there is probably a bit of a catalyst coming that will prepare those markets higher. jonathan: that screams china? brent: interesting commentary because you have to add geopolitical risk on top of that. international stocks are hitting levels where they were 10 years ago. contrast that with the u.s., still 16.6 times forward earnings, which is not cheap. i think you are looking at something more like 2000, where parts of the market do better than others that did well, that were overvalued.

i think you need to look elsewhere now. jonathan: are you saying the s&p may be mechanically challenged at that level for a while given big tech? brent: i think so, and that was the message post-1999. investors had bid them up to levels that were excessive, other parts of the market doing well, and it was not a lost decade for those parts. expectations are so low in those places, you have an impetus to go higher over the next few years. jonathan: always good to catch up with you. more constructive in some places. more on just how challenge the index may be because of the waiting on big tech. that is where the advantage has been for american equities. some suggesting that may be where the disadvantage for years to come. tom: i agree with the passive weighting debate, and we saw

that with energy 30 years ago. what i found interesting was once again major shops saying we have to at least study if not act on international investment. i am so old-fashioned, to me, the overwhelming factor there is you need a weak dollar to make it happen. jonathan: are you saying that is a symptom or driver of? tom: driver of. i do for --defer to others but i'm looking at 1.02 dxy. maybe the yen is giving me some love. but euro? if they pop 50 bps, you are going to get a weaker euro? jonathan: can you say with conviction that higher rates for the ecb means a positive euro story or a negative one? tom: that is the drama.

jonathan: that will keep things entertaining at the ecb next week. why you should stay tuned for full coverage of a non-snoozer presser. i cannot even promo it seriously. this is bloomberg surveillance. ♪ ritika: keeping you up to date with news from around the world, let's get to first word news. i'm ritika gupta. janet yellen says she got it wrong last year on inflation. she made the admission in an interview with cnn, saying elevated inflation would not pose a continuing problem. now she is saying she did not fully understand the circumstances. the federal reserve is about to deploy a second tool to curb interest rates. it will begin shrinking the balance sheet. they say it should cool price pressures by tightening

financial conditions. the u.s. is ramping up military support to ukraine. president biden says he will give the ukrainians advanced rocket systems that will allow them more precision in attacking russian targets. the weapons will let ukrainians hit targets as far as 50 miles away. the city of shanghai reported its was coronavirus cases in three. this came in a day where residents celebrated the end to mandatory lockdowns at home through the city. delta airlines is back to where it used to be. second quarter revenue will be fully restored to 2019. capacity expected to be 83%, just 1% off of the global news 20. 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.

>> just look at the cost structure of the industry, look at where new production is coming and where would be coming even if we did not have $123 brent.

i would say it is more in the $70 range than in the $120 range. jonathan: from new york city, good morning. equity features like that does on the s&p, positive one third percent. yields higher by three basis points. crude higher by nine. back in april, we lampooned a washington post opinion writer on their observation, that if it were not for -- [indiscernible] tom: that can only be the wonderful stephen short. his note is just a breath of fresh air within the petroleum business. ed morse of citigroup talks

about the macro economics of the moment. stephen short is hyper defined. let me go to the single sentence of your note. 99% of us are simply getting poor were this commodity surge. well that trend continue? >> absolutely. real disposable income as fallen in 10 of the past 13 months because a runaway inflation. inflation that all the smartest people in the world spent the better part of last year doing humans work making fools of themselves every week, saying inflation is transitory. if i don't have to eat, put the lights on, if i don't want any coal, inflation is not a problem. it always comes down to commodities. what we are looking at in the energy industry, we know the story. the esg ground, the people taking the war against natural

gas, that is a war against the american consumer. natural gas is a key feedstock in synthetic ammonia fertilizer. we are putting fewer seeds into the ground the spring which means we are taking fewer crops in the fall. inflation has not peaked, at least on the core level. with energy and food, inflation has not peaked. runaway inflation at the gas pump and at the grocery has been the lead indicator for recession of the last six recessions in the united states -- tom: i want to go to the hyper detail of your note, your true expertise on distillates. do you have any optimism that we will invest given these higher prices? stephen: as winston churchill said about america, we always

make the right decision after we have tried all the other decisions. on the east coast, what has happened? over the past three years, we have cut our refinery capacity by 40%. that gasoline production on the east coast has held study. but when you cut your capacity to make things out of crude oil, something has to give. while the main status quo on has been there on gasoline, diesel production has fallen by 40%. diesel stocks are below 9 million. we are looking at a dire situation in the diesel market, but we are not quite there. the smartest thing the biden administration could do with regard to the energy crisis here in the united states is sign the jones act. that requires all interstate commerce be tagged on american flag vessels. we don't have enough american flag vessels. you need to rescind the jones

act, allowed diesel to be manufactured in these states, to be put on foreign vessels, brought around florida and into the east coast. that is the smartest thing to do to invest in a short-term fix. in regard to the longer-term fix, there is not the political will at this point to invest in fossil fuel. the long-term structural imbalance will remain high prices, therefore, they have to remain. lisa: are you surprised by how little pushback there has been on consumers in respect to reducing spending? there has been a reduction generally but overall they continue to spend more, even as you see new records every day of gas prices. stephen: absolutely. we have substitutes in the market. it used to be consumer spending would drop off, gasoline prices national average it three

dollars 66. gasoline on the nymex is now treating over four dollars a gallon. the aaa average right now is $4.60, national average. given where futures are trading now, by the fourth of july, i am guessing prices will be another $.20 higher. i do believe, even though we have nothing to mark this against, we will see that. that has been one of the positives, consumer spending came out last week, came out stronger than expected. but we are waiting for the other shoe to drop. the personal savings rate plunged to 4.1%. we are below the 30-year non-recession means on savings. savings is now at the lowest point since 2013. the bottom line is we run out of the stimulus money, americans are dipping into their piggy

banks. it takes more to drive to your picnics, beach, so forth. i do expect to see consumer spending tail off, which is a problem, given consumer spending is two thirds of the economy. this is why i am still comfortable in saying, if the u.s. is not currently in recession, these food and energy costs, filing income, we will be in a recession within the next six months. jonathan: we usually say thank you, but that was a little bit depressing. thank you. . right on cue, goldman cutting rice targets on ford, gm, tesla. they say supply chain troubles in the near term, reduce demand in the medium-term. throw in pmi metrics, isn, they have weakened. they are cutting them to 14 from

18 on ford. still punchy price targets on tesla but the direction of the travel. tom: over at citigroup, he was more optimistic about that, but he made it clear they are eating media trends in autos which are challenging. jonathan: those challenges coming through the auto market. that seems to be where things are heading. lisa: i wonder if the macro economic headwinds that are so surprising i coming from china, and perhaps if the lockdowns were not known to such a degree. jonathan: are you questioning how surprised we should be about the surprise? lisa: mushy surprise.

jonathan: live from new york city, good morning. hello to the month of june. futures higher by 1.5% on the s&p. yields just a little bit higher. three basis points.

2.8731 on the 10-year. some believe we could get an output deal without russia involved. crude lower and ultimately positive again. 116.28. tom: we got a note. the markets turned around. vicks under 26 still gets me going. jonathan: quiet move? lisa: nice. any time a move in the equity market is called "nice," just shows you how long it will last. jonathan: give the bulls something. it has been a tough year. tom: can we move on? we are going to move on here. out of the crisis there was analysis like chair yellen

getting the analysis wrong in the last couple of days. the calling to inflationistas may be it wrong 10 years ago. mickey leavy, working with bank of america, now in barry berke markets. it is people who worry about inflation with all the heritage of alan meltzer and others, the shadow open market committee, and now you are amid high inflation. how do you interpret the ancient worry of inflation now that we are amid real, tangible inflation? >> you just feel it everywhere. the inflation was generated in a classical manner, excessive monetary and fiscal stimulus generating too much demand.

at the same time, supply constraints. you feel it. it is an inflation tax. you feel it imposing itself on real purchasing power. the question is, how embedded has he inflation become in wage and price setting behavior? once again, and the fed has a history of this, the fed has waited too long to exit from its easy policies and inflation has come back. now the question is will the fed be able to weave this fine needle of raising rates just enough to slow the economy to take the edge off inflation without tightening too much? it will be a challenge. tom: are you using your conventional economics, the taylor rule and other fancy mumbo-jumbo, or is this so

original how we got here, where we are right now that you have to be as data-dependent as jerome powell? mickey: yes, you have to be data-dependent. it is almost as if last year the fed was deaf to the data. now the difficulty of monetary policy works with a lag. the problem is you have this deeply negative real funds rate. the fed doesn't know how much it needs to raise rates to dampen things. some of the higher inflation is due to supply constraints. it's a guessing game for the fed as to how much they need to raise rates to dampen demand. it definitely has to raise rates probably more so than the fed funds futures are suggesting but we are in this difficult

situation. i hear somata people talking about recession now. if, in fact, we are on the verge of going into recession, that this expansion peak is very different from all other expansion peaks in its economic characteristics. we could be entering a gray area. i caution people about thinking in binary terms, either recession with a capital r, or continued economic expansion. it could be a difficult to divine gray area that we are in. lisa: who is further behind, the ecb or the federal reserve? mickey: the federal reserve, core inflation in europe is well below that of the u.s.. europe faces a host of other issues, not just high inflation. in the u.s., whatever measure of

inflation you use, core inflation is much higher. if you look at different measures of inflationary expectations, the fed has a difficult task ahead of it to raise rates enough to interrupt that wage-price feedback mechanism. lisa: do you buy the pause argument, that the fed will take a break from raising rates 50 basis points perhaps in september and look at how the effect is really trickling out to the economy? mickey: great question. the fed dithered last year. now it is all excited that it needs to hike rates aggressively the question is not if they will raise rates enough but, will they have the resolve to really lower inflation? that depends critically the

economy and particularly labor markets. if, as the fed hikes rates, labor markets remain ok, the auto limit rate increases a touch but not much, that the fed will continue to hike. but i would not be surprised if not this september but later in the year, next year when the unemployment rate starts moving up, the fed comes out with a statement that says we have to be balanced on our dual mandate, backs off of things. we are in a difficult situation. tom: chair yellen came out yesterday and said she was wrong on inflation. what that the people get right to pushed against transitory? let them take a victory lap now. dudley, leavy, summers, the rest, what did they get right? mickey: all you needed to do was

look at broad measures of aggregate demand, like final sales to domestic purchasers, nominal gdp. it was accelerating sharply last year which is completely inconsistent with what the transitory camp said, that it was supply constraint. basically, the root of that was we had this unprecedented amount of deficit spending. the bonds treasury issued were largely purchased by the fed. if you just put on simple standards, fiscal policy multipliers on what the fiscal authorities did with that spending, you would have predicted a surgeon aggregate demand. when the data started showing that, it is really striking how the fed and the biden

administration were in denial. jonathan: groupthink has been a problem at the fed for a while. have we fixed it? mickey: this is truly a wake-up call. the fed has gone through so many unforced errors that it really needs this wake-up call. we hope it learns from the current situation but there is still too much groupthink. the macro model that the fed has been using has not been working, but the fed still talks about it as if it is working. i think we can learn something from this but i still think that this relies so much on their own discretion, does not use a more rules-based approach to monetary policy. jonathan: awesome to catch up, mickey leavy.

i thought the taylor rule was coming up. tom: different opinions all the time. jp morgan from moments ago. jonathan: give me the number. tom: people that disagree with the jp morgan view. they reaffirm the dynamics between russia and saudi, and that saudi will keep the powder dry, you get a risk toward greater than $150 a barrel. jonathan: 139 is the high of the year in march. try to convince people we have not seen the high on crude? 150 plus? tom: i want to make clear, this is not some throw a dart at the dartboard. jonathan: a lot of work on capacity has been done here. tom: it is about unforeseen events. christian walks through, if russia blinks, what does saudi arabia do?

the usual ballet of opec. if we went to vienna, we would have better knowledge of this. jonathan: futures are up half of 1%. lisa: it is so nice. the fact that we are getting a lift, though, is notable, especially given that people are still seeing interest rates go higher. i cannot make much of these interest move because they will be different in a half-hour. it is all over the place these days. how much conviction can we really have? jonathan: when we look back at may, did it feel that we were flat on the s&p 500? anything but. jonathan: uncertainty is deeply unpleasant, everyone feels that. that is what we have right now. profound uncertainty that you see in the fluctuations, single name moves in the wake of earnings reports, how do you

parse that into an index level call? tom: we are uncertain about our uncertainty. the pendulum of fixed income only. jonathan: a conversation that you don't want to miss in a couple minutes time. lisa abramovitz sitting down with howard marks of oaktree capital. futures up .4%. it is a nice move. this is bloomberg. ♪ ritika: keeping you up to date with news from around the world, let's get to first word news. i'm ritika gupta. ukraine will get advanced rocket systems and other weapon systems from the u.s. global news 24 president biden made the announcement in the new york times. the rockets can hit targets up to 50 miles away. ukraine has promised not to attack targets inside russia. european ambassadors are set to approve sanctions against russia. the final compromise targets

russian oil transported by ship but spares crude oil delivered by pipeline to appease hungary's demands. the british retail consortium says fresh food prices are rising at their fastest pace in a decade. it rose 4.5% in the year that ended in may. china had been planning for years for covid to zero with testing sites at every corner. thousands are being set up across the country in the largest and most economically vital cities. the goal is for residents to always be 15 minutes away from a swabbing point. new york governor hattie koegel and others pledged to raise the age to purchase an assault rifle to 21 years old from 18. they say they will also pass a package to tighten gun law measures this week. 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 are in an environment that is different from the last couple of decades where commodities and labor were easily available and relatively cheap. now we are in an environment where structurally commodities are becoming more scarce, more heavily contested and computed for, more expensive, and labor, as well. tom: peter oppenheimer at goldman sachs. his views on the equity market.

the uncertainty out there right now, which means everyone reading howard marks leans forward and reads more carefully. he is a philanthropist, he is successful. aboard -- a member of the board of trustees on the met gala. lisa: we appreciate it, for those of us that have spent many hours at the metropolitan. one of the cofounders of the entire distressed market, understands how psychology can drive what is perhaps the best philosophy going forward. he writes these fabulous memos from time to time. thank you for being with us. i want to start with trying to understand investor psychology. as a student of history, where are we right now in terms of bullish and bearish?

howard: attitudes were quite bullish prior to a few months ago with the exception of a brief respite during the pandemic. but we have been in a bullish climate since the end of the global financial crisis in 2009. not wildly bullish, certainly not what i would call euphoria, but optimistic. that has been crimped now. a lot of the big-name stocks are down, the whole market is off probably 15% from the high. i would say that attitudes are more balanced today. when there is optimism, greed, risk tolerance and so forth, that is a very difficult climate

for the value investor to find bargains. we are happier today than we were six months ago. i don't know if we will be happy six months from now, if the bargains will be more pronounced, but as they say, at least the bloom is off the rose. lisa: how do you position seeing value now but also prepare for see more value in six months? howard: one of the six tenants of oaktree, which we started in 1985, and i believe in thoroughly, we are not market timers. that means mostly two things. we never sell to raise cash to prepare for a decline, and we never say it is cheap today but it will be cheaper in six months so we will wait. if it is cheap today, we buy it. if it is cheaper in six months, we buy more. i think that works much better

than an assertion that we know where the market will be in six months. lisa: so important when investors had been shooting for that 7.5%. the idea that that seems unachievable in an era of quantitative easing. suddenly a bonds have an average of more than 7%. is this the best period you have seen for pensions to hit their bogies in a decade? howard: i think that is right. of course, many have hit their bogies, it is just an advance of what they would. the stock market and other things have surprised on the upside for the last 10 years. one of our big activities is high-yield bonds. a year ago they were yielding in the 3%'s. one deal was even done in the 2's. today, yield is in the 7's.

a pension fund that needs that can make use of high-yield bonds. everybody gets concerned when prices decline. but if you flip that over, the flipside of price deterioration is increases and prospect of returning's. perspective returning's on many asset classes are higher than they were just a little while ago. again, much better climate for the bargain hunter. lisa: somewhat counter this by saying inflation takes a lot of value out of those returns. on a real basis you are still not getting much. how do you counter that as a long-term investor by saying at this point it is worth it to get higher returns, even if on a real basis, it is not much more? howard: you are right we are not talking about an increase in real returns, nominal returns.

most organizations recognize their need for nominal returns. that is a challenge. nobody knows what inflation is going to do. i think i heard out of one ear your previous guest say some of the inflation factors will probably subside in the next few months, which means, all things being equal, an increase in real returns. lisa: how much are you trying to game out where inflation will go over the next 12 months? i know that you don't time the market, look at day-to-day price swing issues, but this really does determine how important some of these interns will be going forward. howard: yes, it does, but i don't think there is anything know to be on that subject. i am sure we don't know it.

another tenet of our investment philosophy, investment decisions are not based on macro forecasts. macro forecasts are very important. the only problem is they are really right. more importantly, any one forecaster is really right more often than the others. we don't make our decisions based on that basis. we are called bottom-up investors, we invest on micro, not macro companies, individual securities. we feel through hard work and skill we can get an edge. lisa: where are the areas that you are actually seeing deep value? howard: they are much more spread around than they were before. some growth names are offering much better value than they did a year or two ago, down 70%.

we continue to find opportunities throughout the investment universe. you know, prosaic industries are also offering good value. lisa: when you talk about the global investment picture, i know the u.s. yielded less in real terms and nominal terms. you looked overseas, in particular to china, as an area perspective return. has that changed as yields have gone up in the u.s. and things have slowed down in china? howard: we have a preference for investing in the u.s. the u.s. in most regards as the best economy in the world and an excellent environment for rule of law, for being able to predict the outcome when various

stakeholder rights come into conflict. that is very important to us. you mentioned our business in distressed investment. that is very important to know how we will be treated by the law. on the other hand, from time to time, other parts of the world offer better bargains. we have the best in the u.s., but the best sometime does not come cheap. the thirdhand, we like to have some diversity in the portfolio. we have been investing in places like china and india the last couple of years. we will continue to do so. when i hear people say, i have made my living in the last 50 years investing in things that other cyber on investable, and when i hear people say that china is on investable, to me,

that says maybe there are some bargains there, if everybody else is boycotting the sector. lisa: how fully invested are you, always? howard: we strive to be fully invested. again we are not market timers. we strive to be fully invested. our clients hire us to invest in our asset class, not to time the market. again, it's better bargains arise, i'm always confident that we can raise money to take advantage. lisa: three years ago when we were talking about what perspective returns seemed realistic on a reliable basis, you said five percent, 5.5%. where are we now? howard: i think we can make 7.5%. i am saying an institutional portfolio. at the time i was talking about the metropolitan museum of art, where i chair the investment committee.

i think the committee as a whole came out at 6. today, an institution like the met, another pension fund, endowment, can make 7.5. you have to be willing to go into alternatives to do it but most are willing. lisa: what kind of alternative? howard: the big asset classes are private equity, private debt. distressed debt, real estate. specialized forms of investing. the important thing is not which sectors, the important thing is which manager. in the public asset classes, we call them beta markets because most of the returns are determined by the performance of the market and which manager you have means a little plus or minus. in the alternative markets there is not that gravitational pull

to pace it. what really matters is if your manager is highly skilled and disciplined or not. that is why we call them alpha markets, skill markets. lisa: do you think your peers are taking undue risk or not enough risk? howard: there is a disparity, there is a range. peers do different things. an area like private lending where we are very active has been a darling in the past decade. a lot of money, a lot of managers and funds have moved into the area. buffett put it best. when the tide goes out, we find out who was living without a bathing suit. when economic conditions, more difficult, we see who made good credit decisions and who made bad ones. lisa: what is the historical precedent for this moment?

howard: it is very hard to find one that fits exactly. we have never had this externality of the pandemic, there has not been a war going on in a long time, and important international conflict with the threats that this embodies. the u.s. have never had an economic threat like china, never had an economic rival since world war ii. of course, historically low interest rates. interest rates went down by 20 percentage points from 82 to 22. that was a big tailwind. so, these conditions are not reminiscent of any that i have lived through, but i think the important thing for your purposes, hopefully for your

audience, taken as a whole, i think conditions are fairly normal today in terms of how you should manage your money and the risks you should take. to me that is the key decision. lisa: thank you for taking the time, howard marks, cofounder of oaktree capital. fascinating to hear how much some of the pessimism that we hear today translates into more optimism because there is finally yield, finally opportunities, not a monolith of optimism out there. tom: it is old school but also with a superb excess of return over the years. what is interesting about your conversation, the idea of a lifting up of the actuarial assumption. i am not there yet. if you have a 5% assumption, when do you take it up to a 7%

return? howard is the first person i heard that from. lisa: when you are seeing that on the average yield on these instruments, if you believe these companies will not default, you can get into the idea of whether the federal reserve has killed the credit cycle, if we will not get the same kind of the falls in the same way, this is what more people on the edges are talking about. tom: deborah cunningham pushing against ray dalio, making clear that cash is not trash. basically for faith and credit. there is finally some value there. that is nothing that any of us have seen in 15 years. lisa: perhaps not the end of a bond rule market, but if it is, is that positive for bond investors? tom: this is a huge topic at davos. where do you step in? it is no different than the courage to step into equities. lisa: especially when you do the

credit analysis. we are getting a nice a nice lift to equities. interesting especially given the uncertainty and yields higher that there can be that sustained again. tom: vix, 29.4. stay with us through the day on television and radio. this is bloomberg. ♪ jonathan: bramo called it a nice lift, not me. good morning. the countdown to the open starts right >> everything you need to get start -- to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪