>> the fed should be saying, we are not charging 2% inflation. >> the absolutely perfect soft landing scenario. >> the downside from here is substantial. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. tom: everybody is talking over the weekend. clearly recession, gazing recession. we are going to do that with

gary in just a moment. lisa: commentators talking about , the u.s. -- the university of michigan survey -- to go big or go home. how much are we looking at a shallow recession or a deep one. that is really the question we are morphing into. tom: i am not a commodity expert report -- i am not a commodity expert but to call it live cattle, it up 60% of the pandemic. we had milk up 60%. this is the inflation into this recession debate. lisa: i can always tell when you have gone to the grocery store because there is this renewed shock at different aisles on how much things have gone up. you come in with your anecdotes about milk and beef. tom: what in the grocery store mattered to you this weekend? lisa: what i was looking at were

cans of soda. i saw them at 7.5 ounces. that is the shrink inflation. small areas, get less for spending more. tom: thank you for the comments. we really appreciate the gas we had. lisa, what was so important to me was the atlanta gdp number which is not recession but at the mark. lisa: the reason we keep talking about what larry summers said is not because we think he is to be right because of 10% unemployment for one year, but how much pain do we have to take to bring these prices down. we don't have a feeling this is going to be a transitory shift in inflation even with janet yellen about that. deliberately inflicting pain on an economy when there is still a lot of wounds that have to be worked out for the pandemic.

tom: let's go to bitcoin quickly. 21,000. 18 to 21,000 in the last 18 hours. kailey: the bottom was hit over the weekend. we will see whether this is sustainable. did you see the headline out of kellogg? three independent companies spitting off its u.s., canadian and -- cereal. the stop -- the stock up. tom: are you partaking in toasted cornflakes every morning? kailey: by precedent -- my preference is special k with red berries. tom: this goes back to 1906 with cornflakes and they are like others under pressure to do something. lisa: i wonder how much are we

going to see other attempts to also deal with the strong dollar and how much that darts -- that starts to weigh other companies. tom: the vix 30 level. 10 year yield 3.27% worth watching this morning. the 10 year real yield 0.7. round it up to 136. that gets my attention. 135.75. we need to do a morning brief so far -- we need to do a morning brief first. lisa: some of the dilemma of the moment, 10 year yield existing home sales, this is expected to soften. as we see mortgage rates climb beyond 6%. a lot of people are waiting for

that transmission mechanism which is not necessarily at their cut given the strength of the economy and the lack of supply. i want to hear what they have to say. what will be a trigger for them to move away from some of their policies in terms of tightly. the bank of japan issues their monetary policy minutes from their april meeting. how much they look? a major concern for them given that everyone says is unsustainable. they have a positive of negative yields. when the rest of the world is simply seeing the extinction --. tom: decades of experience in the ebbs and flows of the american economic experience. ed, we just saw carlos gutierrez

with care lugs -- carlos gutierrez with kellogg say enough. in recession, in the gloom of recession, is it the rule, always corporations adjust? edward: everyone adjusts in recession. we are going to have eminent recession. this is the most anticipated recession of all times which in my mind makes it even less likely. if it does occur, it is going to be a fairly short and shallow recession. which is probably what i am leaning towards. i don't think recession is yet inevitable. four point 5% subjective probability of recession happening over the next 18 months. i have been raising that assessment as everybody else has been. lisa: starting with gas, let's

say five dollars around gas stays around. -- really gripped consumer spending. edward: when you look at spending, it is about four or 5% of budgets. when you look at it on a per household basis, we were spending about 28 hundred dollars a month per household a year ago and now we are up to 500 -- $5,000 per month per income. the price of five dollars, if it stays here, we will be spending $5,000 per average per household. some have some pretty substantial raise -- pretty substantial rate increases.

the gasoline situation is definitely an issue. as you mentioned before, it is one of the main reasons the consumer spending index has taken a dive to an all-time record low. especially the expectations component. gasoline prices and grocery prices specifically. kailey: i am wondering how that is going to translate into corporate owners -- corporate earnings. spending less on discretionary items. how much broader will that extend as we approach the second quarter of the earnings season? edward: the bad news is that some of these retailers are getting stuck with lots of inventory of consumer discretionary categories. the good news is they are going to have to clear those inventories by cutting prices and as you know, one of the most

significant components of inflation over the past year has been consumer movable goods. that is going to come down. essentially all the housing related items. it is contributing to a slower economy. on the other hand, it is probably going to read inflation news is going to be somewhat better over the next year. tom: is your study of history in all central-bank from a dependent or did they throw in the towel and blink at some point. edward: let me start out with the extreme. back in the late 70's, early 80's, paul rocher said i got to bring inflation down. i don't know if that is going to happen if we let interest rates go up. whatever level it takes to bring inflation now. history does show, especially u.s. history, the most effective way to bring inflation down is to have a recession. really hard recession will do it

for sure. spent the last couple of years trying to get their labor market protected from the pandemic. they will -- they don't want to turn that around. they are tightening. the financial markets have tightened even more. we are going to see a peak in commodity prices. tom: edward yardeni, yardeni research president. kailey leinz, we are not doing by wholesale. kaylee's bloomberg crypto. i am looking at two studies of bitcoin down 50% and another one down 20% or so. within that study, what is amazing to be is to get back to

resistance is 27,000. that is how far it has fallen. kailey: it is a long way away. it is not contained to just crypto anymore. in terms of the ripple effect, global advisors pointed to the research. the volatility of bitcoin 14 to 16% of the price volatility of the s&p 500. this market has ramifications across other classes. tom: doubt is -- 30.34. please stay with us. this is bloomberg. ♪ ritika: keeping you up-to-date with the first word. i am ritika gupta.

elon musk told news editor it is not a necessity but recession is more like --. part of the academic -- part of the economic forum indo han. the move will require congressional signoff. u.s. gas prices have now reached $4.19 a gallon. just short of a record set last week. russia warns two americans captured while fighting for ukraine to face the death penalty. vladimir putin tells abc they were not likely to be protected by the geneva convention as prisoners of war. in the ukraine -- in the u.k., the biggest rail strike underway. 40,000 workers are working out

-- some 40,000 workers are walking out today. kellogg split into three independent companies. north american serial at plant bait -- plant-based foods facility. more than $11 billion in sales. 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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>> recession risks are going up partly because monetary policy could -- a little earlier than it did. tom: loretta musgrove from the cleveland fed. a mathematician. very good at recession worry across america. kellogg -- all that heritage of the american table. did they do pop tarts? the tang of the pop tart. kellogg up 9%'s or so. they're going to split up.

lisa: please don't talk about breakfast at moldy in the same sentence. it is still 7:18 eastern a.m.. having tax advantage units, i wonder how much aside for that is also looking at immunizing some of the risks from slowdowns in specific regions. there is a huge bifurcation right now in terms of recovery across the world. tom: in 1964, tang and poplars. joe matthews joins us right now. david matthews is one of my favorite people. she ran research at bank of america. a blistering note about your president blaming biden, blaming

everybody else for inflation. how does the president and how does washington deal with pulling us away from the fiscal impulse of the pandemic? >> that is a heckuva question as we considered were spending to get our way out of this. we were talking about inflation long before there was anything in -- anything referred to as the pool price. it looks like they are coming around with a lot of familiar sounding ideas. the bill back better program that never passed couldn't reimagine -- could it reemerged with another name. it might have joe manchin onboard. he was open to some $1 trillion. lowering the cost of prescription drugs.

maybe a child tax credit and investment in mobile energy is what we're talking right here. other ideas of gas rebate cards to deal with ablation. the potential for a gas tax holiday. it is interesting the language you here. the president standing on a beach saying i am going to make a decision on that by the end of this week. it is not really his decision. it has already been legislation to do that very thing are capitol hill and he needs lawmakers to approve it for that to happen. while the white house is having its own conversation, americans are having a different one. tom: lisa, help me out here on this inflation front. what do you do? it is the same in west virginia than it is in massachusetts. inflation is inflation. lisa: when we talk about the likelihood of things getting past, we talked about there is not a lot of appetite to spend more. will there be an appetite to remove the gas tax considering

some of the pushback saying, you remove the potential demand dampener and just accelerate the price increases that we see everyday at the pump? joe: that is something a lot of people don't understand or in washington, they don't talk about it. take the gas tax, everyone takes a road trip and we have potentially higher demand. it is the reason why nancy pelosi is not so much on board. this is just a few weeks ago. there was impact in cases where states have lifted the gas tax and also saw a rise in demand. we have got infrastructure plan that is just now being implemented to fix our roads and highways. that gas tax helps to pay for. how long are we going to go with keeping our roads and bridges intact? trying to make the case for the infrastructure lot that was the

best thing they had ever happened. that was supposed to help democrats in the polls this coming november and most people forgot it ever happened because a lot of these projects will take years before it begins. kailey: part of what the president also wanted to spend on was building out great infrastructure. where is the climate agenda and all of this as he looks to meet with big oil executives? or at least his team does later this week. joe: the charging glaciers are in the infrastructure law. that is something that is getting money right now. we have a network around the world of compatible charging stations. how do you balance this call for more oil production and at the same time trying to tradition -- trying to transition to bringing the energy. that is part of what we are looking at in this reconciliation bill. it would have aspects of both. it is not going to happen as quickly as democrats and progressives might want. we are going to need a little more oil in the meantime to keep

this from being such a problem. tom: thank you -- joe, thank you so much. lisa, as you mentioned earlier, is demand just within a touch of a 136 level? dow has weakened down. it has been -- we come up here just in the last number of days. we, just touching 135.90 right now. lisa: to use your phrase, this is in a parlor game. at what point does japan have to cave? they are not going to cave. they can work on their own schedule and control this market for a long time. they even recognize this as a risk. they recognized their policy is unsustainable. if -- even as they double down

last week's meeting. how long can this game of chicken go on? that seems to be where the end is going. tom: it seems distant. it is over there, why do we care in that? it is about the dynamics along the pacific rim. kailey: if it is going to be a problem domestically for japan, doesn't have ripple effects? also talking about the weakness of the yen. talking about isolation. the strength of the russian ruble is not the conversation we thought we will be having two or three months ago. that has caught the attention of russian officials for a reason of too much strength. even with restrictions among russian assets right now. tom: a frontier a country as the e.m. guys call it. versus one of the trade to the guards of modern civilization.

the vix 30 points. stay with us. this is bloomberg. ♪

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tom: good morning, everyone. jon ferro, well-deserved in capri. kailey leinz in for him.

it has been a quiet day. yen out to a 136 level. 24-year breakout. lisa: highest for the dollar versus the yen. this is a repudiation of what a lot of triggers were looking for which is a bank of japan humbled by a market, humbled by their inability to keep the peg. you are seeing record weakness in the modern era. tom: at the qatar economic forum , a lot of event all things. mr. roubini is keeping his eye on 140. on individual stocks, he has had his cornflakes, he follows with two pop tarts.

>> i see you are unable today. stocks coming off of an awful week. basically the biggest movers you are seeing in the premarket. apple up 2%. schlumberger j slipped 20% last year. the conversation with these upside moves is how much staying power is there and some of these moves. interesting note on the lennar, the stock got hammered last week. everyone said that big jump in interest rates will have a material impact on these homebuilders. so far no effect. in terms of actual deliveries, that was up 4%, better-than-expected. purchase price of those sales were up about 20%. the company says it will stick by its full-year forecast to deliver around 68 homes.

nevertheless, shares up 4% on the day. you mentioned john micklethwait over at the qatar economic forum interviewing elon musk, interesting comments about twitter. as always, he has a lot of caveats about what he needs to see to see that deal to completion. well below that offer price. also talked about his own business at tesla, confirming the layoffs, scale down in the total amount of salary workers, hourly workers. interesting commentary on the bloomberg terminal. also coming out, exxon mobil taking a 6% stake in an lng operation in qatar. a lot of these oil companies are trying to find alternatives to that russian pipeline that they were also invested in. now looking at some of the middle eastern nations.

the end of an era for kellogg. it started as a serial maker but now gets most of its revenue from snack chips, which i'm sure you are familiar with, tom. they will have a single division, snack ship division, and music to your ears, a plant-based division. tom: you have the tang with the frosted pop tart. lisa: but it is vegan, so it is all good. tom: we should make clear, folks, tang is not a property of kellogg. romaine bostick with the clothes this afternoon, a report on how, will move forward. i have been screaming about this to lisa. she says, shut up.

we love equities, bonds, stocks, but when price goes down in bonds, there is a thundering silence. winnie cisar has lived this at creditsights. i am done 16%, 21% annualized. is that a bond bear market? winnie: certainly feels like it to a lot of investors but we are also seeing a pretty attractive reset in yields which is getting attention back into the market where we have investment-grade yield now above where they were during the peak covid volatility in march of 2020. that income generation policy is feeling better now despite those terrible numbers this year. lisa: which is why i'm not surprised you are seeing some anymore inquiries from investors. what are the questions in terms of the parameters of risk, stress case in these risks?

winnie: what does that recession look like? is it severe, drawnout, more shallow, more of a reset based on growth expectations that are not quite as optimistic as we have been during easy monetary policy? everyone is trying to handicap what does the actual outlook or things like downgrades and defaults because that is where you'll will see some capital loss in the investment-grade and high-yield department, or will he be able to muddle through because fundamentals cutting into the slow down are actually in good shape overall? lisa: given your fundamental analysis, what have we priced an already for yields at 8%, investment grade at 5%? winnie: we are pricing in a more normalized outlook for things like downgrades and defaults.

almost 5% for investment-grade is an attractive income generation and compensate you for credit risk in terms of downgrade. we also have a longer duration in the investment grade market which is playing a little bit of complication into valuations. much slower coupons means bonds prices have to fall more to get that higher yield. in the high-yield market, we have a distress ratio. issuers that are stressed, facing some economic challenges, that has risen but not necessarily to a level that coincides with a massive uptick in default overall. we are pricing in a more normalized default environment, 2% to 3% area over the next 24 months. lisa: are you saying we will not see enough stress on the credit markets if the fed tickets went off of the soak -- accelerator?

winnie: the fed is focused on whether the capital is flowing into the credit market where issuers need to raise the capital. so far we have seen issuers come to market and price deals. now at much higher borrowing costs than last year, but deals are still being priced fairly efficiently. instead what we are seeing is most issuers have done a good job of pushing out maturities, locking in low coupon debt last year and the second half of 2020, which means there is left to do on the issuer side of things. that gives the fed more air cover to tighten policy. kailey: what are your issues considering we saw so much during the low pandemic areas. how many more companies will want to come to the debt market? winnie: for the next six month we expect issuance will slow down compared to the first half of the year especially in

investment-grade payment that is a typical seasonal pattern. we tend to gets slower back cap than front have. this year we saw a lot of financial driven issuance in the first half of the year, most years, most of the issuers christ the big bulk of their new issue into the first half of the year. in the high-yield market, the borrowing and the new issue will be a lot of bit more dependent on what happens with spreads then yields. for right now, the bulk of higher-rated issuers have little to do. it is more on a need to know basis that we will see the ccc's come to market. tom: we have to run with breaking news. i was thinking about pop tarts. winnie cisar, thank you. we are through 136 weak yen.

lisa: how much is this a reassessment of how far the bank of japan is going to go after surprising on friday, not getting any nod to the pushback they are getting in the fx markets? you saw the short positions rise to the highest since 2013. everyone is betting they cannot handle this. they come back and slapped the markets and people say i don't want to hold it. tom: we need to explain why international economists linked together euro, dollar, yen. we go, yen, why does that matter other than toyota? but it is way bigger than that. lisa: it has been traditionally a haven currency for the global market. for this to fall out of bed because there are two different realities, the reality of europe, and u.s. monetary

policy, and then you have in japan, it doesn't really matter for us. this is not the inflation we want. and we can hold it at zero or below and it doesn't matter. tom: i really dropped the ball. fortunately, my team researched this for me this morning. kaylee, i was not even aware with kellogg's up 8% that they have appeased the vegan crew with on frosted blueberry pop tarts. kailey: for the record, i am not a vegan. i do love some pizza, now found in brooklyn. kellogg splitting into these three businesses. they are talking about the fact that they are no longer just a breakfast cereal company, they have expanded into things like snack food. why didn't they name three

businesses snap, crackle, and pop? tom: that is so cute. her research. what you don't understand is kailey leinz has comedy writers. i don't know how she comes up with this stuff this early in the morning. tom: futures up 63. we are watching yen, 135.97. this is bloomberg. ♪ ritika: keeping you up to date with news from around the world, i'm ritika gupta. president biden has reiterated that a u.s. recession is not inevitable. he spoke to reporters after a conversation with larry summers. summers says there is a significant chance that u.s. will find itself battling stagflation. in china, the corona virus outbreak has shifted to the south coast. meanwhile, macau is raising to

stop its first outbreak in eight months. the european union's 27 members are set to grant canada membership. eu leaders will discuss ukraine's membership this week. elon musk says there are still a few unresolved matters regarding his proposal of twitter. he spoke to john micklethwait and said that there is the question of whether the debt portion of the deal comes together, and then whether shareholders vote in favor. musk is still waiting for a resolution on the matter of how many bots are on the platform. it is the latest move in the battle of who will end up owning spirit airlines. jetblue has raised its offer. that follows spirit's decision to delay a shareholder vote on its pending deal with frontier airlines. that vote is set for june 30. 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.

>> recession is inevitable at some point. as to whether there is a session in the near term, i think that is more likely than not. it is not a certainty but it appears more likely than not. tom: often in the news recently, mr. musk, spacex, twitter. in conversation today at an

incredibly important forum. it is the second year of bloomberg supporting the qatar economic forum. qatar is different, you hear about saudi arabia, the united arab emirates, the persian gulf, but qatar is front and center particularly with lng, which is why we are having conversations with the leadership of exxon mobil, shell. coming off of his conversation with elon musk, john micklethwait, we know will be back in cutter for the world cup. what is the likelihood that jamie vardy can get out of lester and help england not embarrass themselves? john: the single biggest question this morning. my hope is that he will reemerge. considering he is older, he does face issues. tom: john micklethwait attending

the world cup meetings. john: we should all go. tom: a conversation with elon musk. he was very careful. why was elon musk so careful in his answers to your questions? john: i don't know. what was interesting is that he did it at 3:00 a.m. your time, but for most of us it is quite late in the evening. i think he was careful because topics of his life are private at the moment. he has the twitter issue, where he is stuck about the fact, he talked about being someone who just about had bought it, all the things that he wanted to do with it, but i cannot believe the price is not a significant problem for him. i think he has issues at tesla,

layoffs, and he had to be careful because there are lawsuits coming in. and that he has all the politics, come out in mild support ron desantis, but i don't think he has thought through that much what he will do. weirdly, for someone who enjoys to be a provocateur, he isn't one of those phases where he is stabilizing a little. lisa: he had to talk about layoffs and job cuts at tesla, 3.5% reduction across the workforce, 10% cut in salary workers. how much does this indicate a slowdown in the company revenues , manufacturing demand? john: there must be something there. he tried to explain it by saying that tesla has grown quickly, but there is a risk. you played at the beginning, i asked, president biden yesterday

said he did not see a recession was inevitable. musk effectively said that he saw it as likely. that is in the back of his mind, like it is in the back of the mind of everybody who runs a large business. on top of that, he has problems with china. tom's description is a good one. i think he is careful. if you own twitter, what does that do with your relationship with china? in the interview, he said correctly that twitter will not be allowed inside china, but chinese on the whole don't tend to be lovers of free speech, and twitter is nothing if not free speech. that is another set of issues. if he backs desantis or even trump for the presidency, that would cause real problems for the chinese. there are a set of issues that are looking a little more difficult for elon at this moment.

you might point out, if you start any of those position from the position of being the world's richest man, perhaps you are not starting in a bent position. kailey: the subject of twitter has been a topic of conversation for months now. do you get the sense that he has as much conviction or desire to ultimately own the company as he once did? just tone wise, is this a man who still wants to buy twitter for $54.20 share? john: that is the interesting thing. if you look at the deal premium, it would indicate that investors don't think that he will buy it. they think it will come apart because the gap is a large one. on the other hand, i think he, mentally, is in a state where he talks about it, things he wants to do. i think it is more the price that were recent.

i think she is suspicious about twitter's numbers. he was careful pointing it out, that he had legal problems, but he wanted twitter to come up with more information. where exactly they are on that side of things, people know more than i do, but i understand that they have not given him the groundrules of everything of what twitter is. tom: ahead of the cutter economic forum, within the politics of the middle east, there is a triangle between saudi arabia, united arab emirates, and doha. explain the position of doha right now in greater middle east. john: doha is an interesting position. that is a pretty good description, almost a quadrangle, because you also have iran out there. the qatari's seem to have

recently made friends again with the iranians, but they also have a history of upsetting them. you have the iranians to one side. i was speaking to a local just now and she says there are [indiscernible] inside and that is something different. they are the proverbial small kid on the block who are trying to play several things at the same time. but they have one advantage that dubai does not have, energy. that is the reason why every energy big energy provider is here, because this is still an anonymous source, especially of natural gas. when you look about what is happening in the world with all the worries of ukraine, this idea that we are in a transition to a greener future, anyone who talks about transition is drawn

to natural gas, and that brings you to critzer -- qatar. tom: john micklethwait, thank you so much. look for his conversation with elon musk in small portions, but also a larger view, as well. a massive thing with elon musk is a small german shop called volkswagen. there is competition. lisa: he is facing competition from everyone. i've been passing tesla dealerships on occasion and you can see cars on the lot, which is surprising considering the backlog. tom: we continued, and dollar-yen, 136.22. this is bloomberg.

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