>> this entire problem with inflation and what may or may not be a looming recession is a self-inflicted wound. >> what the fed should be saying is we are not targeting 2% inflation because inflation is in a normal environment. what they laid out in their projections was the perfect stop lending surveyor -- soft landing scenario. >> if you think we have

recession in 69 months, the downside is substantial. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning on a tuesday. we are thrilled you are with us. jonathan ferro, a much needed true vacation. kailey leinz is in for jon ferro. lisa, what i learned on my sojourn of a four day weekend is it is simple. inflation is here and it is here in spate. lisa: and it the remainder of this year. when i look at the equity notes, it is not about if there will be recession but how deep it will be. tom: we will discover that across the ark of this week. less economic data may be in normal weeks.

we can play this game all day, it is a new game. the price of milk on a moving averages study is up 66% off of the pandemic lows. everybody has got their own story on inflation. what is the story for jerome powell? lisa: what is the story as he has to testify before the house tomorrow -- the senate and that the house after. this is increasingly the question, what damage to they have to do to the economy and the labor market in order to get the price of milk down to something more reasonable for a lot of people? tom: what is amazing here before we get to kailey and the world she is living in, i am doing math on manhattan luxury rent. it is not only the new inflation, it is the rate of change, the speed, the rapidity.

we moved 5.1 standard deviations on manhattan rent according to miller samuel. lisa: this is just one measure of a whole host of issues we have been looking at with housing. the broader issues not just manhattan or florida, but how quickly does it roll over in order to really see some of the softening and inflationary inputs into rent? that is an issue as mortgage rates go up. tom: we have to look at the data coming in. kaylee, did you survive the weekend? kailey: i was glued to the price action all weekend. the other thing i was doing was moving to brooklyn because i got priced out of manhattan. it is a real thing. place i was talking about what the ramifications are going to be. i thought there summers' remarks -- 5% unemployment for five

years is what is necessary. is that something the fed is going to tolerate? tom: let's talk about that. the summer's 5% story is 10 million people looking for work. is that a social policy we can do? lisa: i don't think so. and people pushed back if that would be necessary and there was controversy over his comments. it could be 6% for two years and going back down. it does not matter. these are not visible numbers and that is why you see joe biden coming out with possible proposals to spend. is there any appetite for fiscal or monetary policy at this venture? i don't think there is which is one reason we are seeing bear cases. tom: joe mathieu joining us from washington in a bit. let's look at the data, you felt

that the last few days with the dow up. the dollar is up. spx up 65 points, giving me a 1.8%. the vix at 30. a better stock market with the yield elevated on the tenure. oil that's been over near the brent level. 116 on oil and the dollar churni ng this morning. she canoed like 40 miles this weekend, kaylee -- lisa. lisa: lower volume of sales. when does that translate into lower prices for homes? that has not happened yet.

we saw from capital economics that that is the expectation. we will get a softening of prices. how long does it take before it leads into the rental picture? today we hear from, sparking and loretta mester. how much to the signal the market has gotten ahead of itself? how much do they have to ratify what the market is pricing in an terms of a hawkish monetary policy? at 7:50 p.m., going back to the yen, the bank of japan monetary policy minutes come out for the month of april. how much of the talk about the? weakening in the? yen the fact that we are still near those record lows given this policy divergence between japan and the rest of the world. tom: this is off the radar this morning. lisa, your chart, it is real simple. you have a chart and then in

march it breaks and it is nothing but a weaker yen. in international economic, this is the debate. lisa: it is what a lot of traders are trying to fight for. it feels completely unsustainable but they will move at their own pace. they are giving you tea leaves about when they might move or what the threshold might be. tom: twitter with the headline out moments ago. i am trying to get that out right. i saw that and then it disappeared. twitter files proxy statement for special meeting. that is all for mr. musk. finally, the portfolio manager for blackrock global allocation fund. what is the dynamic of allocation? are you really thinking hard about new reallocations? or is it just stasis?

russell: it is stasis right now. we brought the risks in the portfolio down at the end of 2021 and we have kept it down. we have been running a lead position on bonds, lightening up on the equity side. we have a lot of cash in the portfolio. outside of natural resource stocks, there are not a lot of things in the green. while i think the market is cheaper and we are in the process of making a bottom, this is a different kind of market. the fed is working against you, financial conditions are tightening. lisa: you said long dollars is the best equity hedge. at what point do you see this losing its luster in terms of a hedge? russ: it has worked very well you today to. the dollar measure is up around

8.5%. the reason this worked is because the source of risk for equities more often than not has been the fed. when you have these days when there is a rate spike, when volatility goes up, you see the dollar go up as equities move down. will that be effective going forward? maybe not. it is not just the fed, there is pressure on the ecb, the bank of england, on the bank of australia a lot of -- bank of australia. a lot of banks are playing catch-up. lisa: kailey: the chief economist of the bank of england to sink he will sacrifice growth to cut efficient. seems to be the trajectory the federal reserve is on. that is why mike at morgan stanley said this market is not yet accurately pricing in the economic contraction. he says 15% to 20% more downside versus the 3000 on the s&p 500.

what is your view on that? russ: we are not that bearish. you can have more economic downside. this is not going to be the 2010 market turnaround where you have one day and then you can declare the bottom. having said that, we have to take into account what already happened. the evaluations are down 30% to 40%. we are debating recession, it is also worth debating if you have a recession how severe it is because that will determine the path of earnings. even if you were to get a recession, it is likely to be a mild one. the earnings are not as severe as summer discounting which means the 3000 call is too aggressive. tom: thank you so much. really good to hear from him and the broader allocation strategy at blackrock. lisa, we have the surveillance

will the decks out and said has gray hair and remembers inflation. there are not many cards in the rolex -- in the rolodex. lisa: we get out in the to edgar if he is listening. tom: he is a giant. express inflation in the abramowitz house? i will express it in the bill i got from levi store and 501 genes. what was the story in the abramowitz house? lisa: buying groceries this weekend and seeing a bill that is $170. tom: kailey leinz moving to brooklyn, the moving trucks extended the entire length of the brooklyn bridge. it was amazing. how about the inflation in

moving? kailey: don't even get me started. not even the movers, the furniture, the clinic supplies. i have spent so much money on amazon the last week. tom: isn't that true? jesse hides it in a separate account. good one to amazon. -- morning to amazon. stay with us, edgar denning is coming up. this bloomberg. ♪ ritika: keeping you up-to-date with news from around the world. elon musk sees a recession in the u.s. in the near future. the ceo spoke to bloomberg news. >> a is inevitable at some point. as to whether there is a recession in the near term, that is more likely than not.

it appears more likely than not. ritika: the interview was part of the economic -- the qatar economic forum. biotin will decide if he will band the -- soaring prices would likely require congressional signoff and cannot be taken by executive action. u.s. gas prices average $4.98 a gallon. russia warms that two americans captured while fighting in ukraine could face the death penalty. they are not likely to be protected by the geneva connection -- the geneva connection -- the geneva convention. the biggest rail strike in ukiah -- in the uk's underway.

some 40,000 workers are walking up to date, thursday, and saturday. that is bringing commuter services to a halt and threatening to form chaos. a company will pay $2.9 billion for the u.s. organic energy -- 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 am ritika gupta. this is bloomberg. ♪

>> there is nothing inevitable

about recession. tom: president of the united states. a lot of vetting out there, do you think it is tangible that larry summers could find a warm spot in the biden administration? lisa: that would be controversial. someone saying that -- is highly necessary? try selling that to people. tom: public announcements -- a public announcement, it is the kailey leinz lines of contribution, we will be taking contributions as kailey leinz moved to brooklyn. right now, joe mathieu's does not know -- joe mathieu does not know where brooklyn is. he joins us now. lawrence summers has done a lot of public service, they love him

and hit him. is that the name bandied about to reinvigorate the president's administration? joe: that would be something. i don't know if larry summers is looking for a job like that. we have to look closely at what the president said. if we kept playing the tape, he went on to say after the not inevitable remark that i think we will get a change in medicare and a reduction in the cost of insulin. it is not that joe biden thinks he knows more than wall street or better than larry summers or elon musk, but he thinks there is in answer to this, a legislative answer that could come in the form of reconciliations. something democrats can pass on their own, a stripped-down version of build back better. it looks like they will take another swing at that this summer. i don't know if that prevents a recession. tom: for those of you across the nation, we are making jokes

about this but there is brooklyn and brookline and brookland in washington, d.c. those spent a lot of different economies. i want to talk about who is not being talked about, the broader middle-class. how bad is the agony for the broader middle-class? what can politicians do about that? joe: brooklyn, connecticut where i once lived is a working-class area, agriculture, manufacturing. this is not the new york side of connecticut. many people are going to the store and buying chicken and hamburgers and leaving the state or splitting the stake. this is so real that you have a president after talking about this on a daily basis with a war raging, a pandemic that has still not been controlled, it is the number one issue. if he does well there is summers is talking about, 5% unemployment, you can cut that

to a couple of different things. maybe it is three years of 7.5%. that is a wipeout for democrats. that is not a story for reelection. lisa: what do prescription drugs have to do with substituting the price for chicken? joe: headline versus core, what prices can they affect? we heard a jay powell talking to mike mckee saying there not a lot we can do about oil and food prices but we are going to go after what we can. that has been destroyed to the white house -- from the white house -- that has been the story from the white house. it does require legislation, there's is not much the president can do with executive order. cash rebate cards they're talking about or the gas tax, that has to go through congress. lisa: how much appetite is there to do a fiscal standing -- fiscal spending package? people are pointing to the

fiscal spending last year is something that turbocharged the inflation. joe: it looks like a dealbreaker. between now and november, i don't see the appetite. the house can do a lot of things with its slim majority. the senate is another matter. unlocking more money to stability economy will not get a yes vote from joe manchin or christensen. -- were kyrsten sinema. kailey: while we are talking about concepts, we heard from elon musk at the qatar economic forum in conversation with john micklethwait talking about 2024 and if he would be supported president trump. he said he is undecided. do we have to get to the midterms before we have a clear picture of the presidential race? or will we get clarity on that sooner? joe: we need to wait -- we need

to wait a minute. we have not resulted january 6 rings. it is unclear if joe biden will run. it is unclear if donald trump is going to run, though he is acting like it. we have to get through the midterms and see where the economy will be next year and what hope this president will have for second term. it is not looking great. a lot of folks think he is not planning on that because of his age. tom: thank you for the update. we will speak to you in the next hour. there is a south tone to evernote. there is an mike mayo tone to a banking note. oliver chan writing up the recession this morning. it is a classic oliver chan note with a -- about altar -- about

ulta which is beauty products. he says it is recession resistant because of the sale of lipstick. lisa: i love it. a lot of tones in the notes is what has been priced in already and how much i we priced in a recession in deeper stocks and how much have stocks been bid up so much, so high that that is a no go? i am looking at people pricing in scenarios that are gloomy and doomy. at what point do we realize we are going to a nadir in terms of sentiment? you just have to wonder, how much gloom can people take before people step back and say what has been thrown out with the bathwater? tom: really well said.

this is the heart of the matter into june and july. mike wilson over at morgan stanley, the recession draw down is already 60% of the gloom. kailey: he said that his father to go. 3000 is the level he is looking at on the s&p 500. you also happy to oppenheimer saying the market -- you also have peter drop in hammer say it is vulnerable to further deterioration. mark jp morgan says too much recession risk has been priced in. there is a wide divergence on the outlook. i wonder how much is going to come down whether earnings are able to hold up and we get a look at that in a couple weeks. tom: futures up 66. dow futures up almost 500 points. the vix comes in with eight points. stay with us. this is bloomberg.

♪ edgar:

tom: "bloomberg surveillance", good morning to you. nasdaq up 9%. the feelings for her around the recession globe was out there. we didn't see that crypto. kailey: numbers we haven't seen in years, -- now we are taking a

look at that on bloomberg crypto. tom: a massive amount, lisa and i live this every day of court out there. really turns have an intelligent conversation away from the -- of bitcoin. i saw over the weekend in korea, i went into the travel of crypto operators. lisa: we talk about crypto as a side project. considering the energy, considering -- the cabdrivers who said they should invest. when does it go of some more? tom: part of that is the work of

carl weinberg. gauging recession likelihood. pulling up discarded in the united states is the chief u.s. economist at -- economic. how do you listen to them and how do you gauge the guessing of a recession and the quality of that recession? >> there is really no signal about a recession. it is going to have really serious ramifications.

interest rates are going to have to move higher. lisa: what do you make of larry summers idea of 10% unemployment? unimaginable numbers. rubeela: for the u.s. outlook, it should expect. they are also encouraging it in their forecast.

it is really unclear right now. in terms of a 5% unemployment rate, that is not really outrageous in terms of a longer run. deficit in unemployment rate. that is where the issue lies. how far up it goes is still unclear. 4% rising above that goes. tom: lisa, while you are at the grocery store -- a 6.1%. lisa: at what point does that translate into something? that means a lower cpi.

we look at rates the keep climbing even as home prices come down because people are getting price out of that market with 6% mortgage. how much are you looking at rates continuing to climb and cpi remaining far higher? rubeela: we talked about housing. interest rates are coming down. when you talk about housing -- people are being priced out of the market. the push from rent is probably going to last longer for some time. that is going to keep the inflation implication higher for some time.

what we expect to see is some easing of those pressures. kailey: as i am an average middle-class american, -- we haven't seen data deteriorating. how long is that gap holding or are we going to see more material deterioration?

rubeela: for now, we still have pinned up demand for travel accommodations, going to movie theaters, going to concerts. those things are going to continue. people have done these on a wider scale for some time. we are not really certain that is going to happen. but you have people in households that are facing not only higher food costs, credit card rates, mortgage rates, but all of these things are going to feed into the outlook. as they rely more, those things are going to feed into slower spending over time. kailey: how does that come down to the osborne recession?

over the fed, they say 48% over the next two years. rubeela: the federal moves very aggressively. we went from 50 to 75 and we are expecting another 75 in july. that is going to slow the economy down in a substantial way. recession risk is definitely going up. it is a pretty reasonable estimate. if the fed remains as aggressive, -- will rise. tom: rubeela farooqi, thank you so much. good morning to those of you across the united kingdom with really serious issues.

participation is less about a higher paid driver that it is about station staff and where -- and railway cleaners. some of these people are just giving up given the speed of disinflation. lisa: so many issues depending on the field. with respect to the wall street journal story, there has been a nearly 3% drop in the workforce of teachers and support staff in public schools around the country. about 300,000 people decided not to come back to work. it is really close to home with teachers leaving workforce. it has been a really exhausting bunch of years. they are not paid as much, people are exhausted. the scars of the covid crisis with kids that people still do

not talk about, but a lot of people are living with it. tom: this falls into what we are talking about with economic investors. one of the proposals from the variable economic policy institute of new york city. minimum wage going up like amazon, very different from virginia and other parts of the country. a stunning 21.25. you wonder how jerome powell has to adjust that. kailey: there is a difference between the minimum wage and a living wage. there is a difference between a living wage in this kind of inflationary environment where you are seeing wages going up -- where you are not seeing wages going up enough to keep up with prices at the pump. these prices are high. for people who make hourly wages, what are they doing? lisa: on the flipside, we sees

certain small businesses cartel hiring plans because they cannot afford the wages. is that the path to higher unemployment? how painful is that? tom: we have never faced this before. this inflation is different. the railway strike in london is different from what jonathan ferro. we will give you some perspective on this. coming up in the 7:00 hour, conversation with elon musk. ♪ ritika: president biden reiterated a recession is not

inevitable. after his conversation with former secretary -- a significant chance the united states will be battling inflation. the european union 27 members are set to meet with ukraine members later this week. in china the coronavirus outbreak is shifting to its south coast. a flareup has triggered mashed -- has triggered masked testing. the battle over who will end up earning spirit airlines. -- raised its offer to buy the airline. that vote is set for june --.

-- will cut his salary over 10%. wonderland is to buy cliff bars. family and ploy he owned. 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 am ritika gupta. this is bloomberg. ♪

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>> last year our unconditional oil production grew 25%. we expect to grow 25% this year.

conversations about investments across the portfolio of solutions sets needed to provide affordable energy while reducing emissions, is a path forward. tom: darren woods, chief executive of exxon mobil. giving you perspective about exxon considering 3.6 billion dollars coming down 18%. i will lick kaylee talk about what that means per day. five dollar a gallon gas. gas is a little bit lower, may be in the last couple of days? kailey: -- lisa: my favorite story of the gas rebate story is they haven't been able to produce as many cards in order to get the rebate. it shows how multifaceted his

problem that we are in really is. tom: matthew miller noting it is tuesday, tom, you giddy it. thank you for that. it shows the crib though program is today, not tomorrow. kaylee tells us about the agony. kailey: if three bet -- if the rebate is sustainable -- marked out the equity cap last week. there has been major destruction and crypto. a lot of retail is in this market. there could be ripple effects stemming from crypto to broader financial conditions. something badly global advisors were talking about this weekend. tom: bloomberg has a hydrocarbons team second to none. julia -- julian lee says he is a

bloomberg emissions specialist. julian lee joins us this morning. i love your terse xa -- your terse essay about exxon and the big guys that run the gas industry. the guys outside the petro in london, why are they not to blame for these prices? >> there is an awful lot of pressure. i did an analysis on petro in u.k.. about 47% of what we pay at the pump goes straight to the government in two different taxes and the second tax on the first tax. another round about a third is the cost of the raw materials. the crude oil, -- they go into

making the oil. something like 16% to cover the transportation costs. the refining costs, distribution wages. the people that work in the refineries. that is really not where the problem is. the problem is we are suffering shortages of gasoline and diesel. the supplies, the market is growing more quickly on the recovery from covid everyone looking at staycation's rather than flying. lisa: how much of that demand and structure are we seeing from the policy in germany. please stop using so much gas? julian: we are not seeing enough of the demand that we need to

balance the supply and demand of these fuels. whether it is the biden administration in the u.s., our own government here, there is a lot of pressure here to cut taxes on crows. the problem is if you cut the tax, all that does is stimulate demand. the last thing you want to be doing is stimulating even more demand. governments are in a real bind on this. lisa: we did hear about this from the united states and the united kingdom as well about removing some gas tax. how big is the swing factor in terms of demand? how low our inventories to make just a small decline in demand to make a real difference in

bringing down prices? julian: at the lowest, the best time of year for about seven years. it started the summer driving season at a relatively low level anyway. you are talking about the federal tax on gasoline by 18.5 cents a gallon. that is not a big drop in price. in terms of the overall five dollars a gallon price. the problem is, the immediate effect of that is going to be create a little more demand we

saw this in march where they was -- we saw this in march where there was a tax cut there. the prices kept rising because of the underlying pressures of the market. perhaps governments need to look at a more targeted set of help. tom: an eventful week for oil. crude oil of one dollars 74. -- brent crude oil up one dollars 75. i went back to the bwi industrial and the 10 year yield on fossils used to look at. it is very spiky. there was a little bit of thanks. lisa: this is technical analysis. we did see a little bit --.

this comes as bank of america came out last year and said buy junk because it is going to be ready for a violent rally. eight point 5% yield average. take a look at the five year yield. tom: give me your inner marty for threaten right now. lisa: what is recession going to look like? how long is it, how deep is it? if it is a short-lived recession, a lot of these companies have already baked in all the financing they need over the next three years. they could write it out. if not, you have a real problem. companies have financed themselves and for percent coupons. they are looking at several -- they're looking at seven to 8% coupons. tom: lisa abramowicz and kailey leinz with us. where did jonathan ferro go?

lisa: he goes to capri. we all should be so look you. tom: stay with us. up 68 points. good morning. this is bloomberg. ♪

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