>> it just makes sense for first republic to be part of a large money center bank like jp morgan. >> there is still a fair amount of stress in the banking system. >> there is something systemic here. the question is whether or not it is only in banks or there is a general problem. >> it is hard to divorce the fed actions from what is happening. >> there going to regulate these banks when it was prices themselves the problem.

>> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: this is bloomberg surveillance alongside tom keene, i'm jonathan ferro. lisa will be here tomorrow. wake up call from janet yellen, the best estimate is we will be unable to continue to satisfy the government's early -- obligations by early june and potentially as early as june 1. president biden making a move, setting a high-stakes debt limit meeting between professional -- congressional leaders on may 9 and we just heard mccarthy agreed to eight may ninth meeting with the president. tom: i am wrong on this. i'm hardwired to ignore it and i'm wrong. the pros tell me this time is different. in the market tells me this time is different. there are oddities in the short term market, the trust market

that indicate tension to may 9. jonathan: let's compare and contrast two things. the urgency of markets that came yesterday, june 1, compare that with a lack of urgency around meeting with congressional leaders. why do we have to wait a week from this -- and week from now for this. tom: they will have a may 9 meeting to decide who kicks to -- kicks the can down the road. many saying the short path is to kick it out to september or further. the american tradition is to move it down the road. is the president or the speaker going to kick the can? senator schumer is qualified. jonathan: how much road is left? tom: that is the question. it is infuriating republicans. you need to grow your way out of this and how, with one percent gdp? jonathan: does this bleed beyond

the average securities in the market? tom: the resiliency of the equity market, spx near 4200, a dow print right now, the vix was a 15 handle and at one point the market was doubting urgency. it is great theater. they will do and oval office shot. everyone will be cozy. jonathan: i'm sensing you are not taking this that seriously. tom: i'm not. you can have sinbad or roy woods junior show up it will be a more constructive meeting. jonathan: equity futures softer, -0.2% on the s&p 500. the nasdaq totally unchanged. even with the deal between jp morgan and first republic, no relief rally for the banking sector. no relief rally in the equity market broadly.

unchanged going into the fed. tom: i am sorry i missed yesterday's festivities. stay with us for jp morgan first republic through the morning. i go back old fogey to three month libor. it is a grind into the fed meeting. jonathan: the meeting begins today and washington, d.c. and concludes tomorrow. will coverage on bloomberg tv and radio. friday, the payroll before, and in between an ecb decision and apple earnings. joining us is the equity strategist at berenberg. you know where i'm going to go with this. the tk is thinking this is the same story. they complain, they kick the can that there is not a big issue with the debt ceiling. is that a complacent way of looking at things? are you concerned and should we be concerned about what is happening in washington? >> i am not sure whether it is

the debt ceiling itself which should be the focal point of concern. there are many aspects of this. when have we had debt ceiling concerns at the same time we have had an inverted yield curve in the u.s., a banking crisis with some of the biggest bank failures in history. and also having that u.s. equity market trading north of 18 times earnings, those are peak multiples excluding liquidity bubbles of the last 50 years. it is not just the debt ceiling but everything else that goes with it. and the final point is what is happening in the world. deglobalization, frictions between the biggest economies, the u.s. and china. the debt ceiling is one thing but it is happening at the same time as everything. it is everything everywhere all at once. tom: one thing i started doing in the last 90 days is i read

the publication cranes in different cities around the country. one of their headlines today, manhattan has almost 94 million square feet of available office space. it is one of the bank variables your expertise -- is commercial real estate challenged in europe? jonathan: i was looking at this from a u.s. perspective again for a big piece we put out last week. it said is the castle back to work data you publish or have on your platform. you look at that across all u.s. cities and it is running between 40 and 50% compared to pre-covid levels. we have this phenomena in europe and the u.s., around the world, we have not gone back to normal in terms of using office space. there is a lot of vacant property and more capacity being built. commercial real estate is a key risk focal point wherever we

are. i think in particular into the u.s. banks, more so than the european and u.k. banks. the lack of breath in terms of liquidity coverage across the banking system in the u.s. appears to present more fragility. high liquidity coverage ratios in europe suggest greater protection. but i think your broadpoint is spot on and i would reference the castle back to work because it sits alongside the empty space, the additional supply coming. people have knock on back to work. you put ai and ibm into it, saying we are coming back and we will replace our position with ai, a lot of challenges. marshall real estate looks under pressure. tom: do you assume american

banking will become more canadian and european deco jp morgan mpeg of america combined is the fifth bank of the united states. that is where we are heading. but do you see consolidation inevitable to occur? jonathan: there are great financial specialist groups out there. many of your viewers look at the quebec see -- the picture over the spanish banking system and how it has consolidated the last 10 or 15 years. we know consolidation in banks has been running consistently over the last 30 or 40 years but it has accelerated in europe on a needs must basis since gse. we seem to be running into that in the u.s.. consolidation is happening because banks are fragile in this world and the too big to fail are reaping the benefits of

getting attractive businesses at a good price with liquidity backing from authorities. so far the downside risk, moral hazard is a different matter and it does not solve some of the underlying risks coming through from higher rates and what that means. it is not solve some of the gap between money market rates and deposit rates and people waking up to the fact they can get higher rates from deposit markets. there are still risks but authorities are plugging the holes. jonathan: a brilliant piece from him today, fantastic. a quote from a professor from cornell, and it reads as follows. we have two choices, we preserve our reduction focused, regional and specific banking by removing fdic limits or we allow financial iced wall street banks to take all, which would necessitate nationalization of

the whole sector. tom: back to the second bank of the united states, the battle of henry clay and andrew jackson. it will be a focal point through the week. jonathan: do you see reasons to buy the regional banks in america? have struggled to get off the map over the last couple of weeks. jonathan: short answer, no. longer answer, we have a banks handbrake factor in our sector model across all regions. the weight is higher in the u.s. for obvious reasons, what is happening real time. that takes banks to a neutral rank within the sector. in contrast with u.k. in europe. but we so have the risk factor on banks. the banks are our top one or two sector models in the u.s. and the u.k..

-- europe and the u.k.. our models continue to point to this preference for u.k. and european banks. in the u.s., defensive sectors in the u.s. equity market have never been this cheap going into a u.s. recession. you can get quite good protection in u.s. equities and defensive's into a recession. that is a good trade at this point into the summer months. jonathan: we have been talking about this u.s. recession for 12 months. we are still wondering whether we are in it now. big move yesterday in the ism manufacturing number. the prices paid component seemed to spook the bond market. throw in the meta-bond issuance and we had a real repricing in the yield curve even when the equity market did not do much. tom: more importantly is day by day. you look at the correlations of equity bonds, currency and

commodity is and you go to the spread market. down near record inversion on that, isn't it the debt thing? yeah. i will go with that. but it is much more the bet on what inflation is going to do and if the job market will allow powell to relax. in the last couple of days it has become more restrictive. jonathan: equities negative 0.2%. another big week for equity. anna of wells fargo coming up. the future looking softer, from new york city, this is bloomberg.. lisa: can you up-to-date with news from around the world with the first word, i but lisa mateo. president biden has a high-stakes meeting next week on that debt limit.

the treasury department warned a potential default can come sooner than expected. republican kevin mccarthy has said he will not extend the debt limit unless there are trillions of dollars in cuts to the federal budget. underlying inflation in the euro area slowed for the first time in months. after stripping out food and fuel, consumer prices rose from a year ago. a case for the european central bank to slow its most aggressive interest rate hiking campaign later this week. white house considering promoting federal reserve governor philip jefferson to a vice chair. a latino candidate could then be named to an open board slot. it was confirmed by the senate last year with broad bipartisan support. he would face little opposition to becoming the fed's number two. the white house national security council says russia has suffered more than 100,000 casualties since december in the fight over buckled -- a city in

eastern ukraine. ukrainian ground forces say they have pushed back russian troops from some positions there. writers of some of the most popular shows on american tv are walking off the job. writers guild numbers are striking for higher pay when there are rapid changes in the way people watch tv programs and films. demand is for higher payments for shows on streaming services. global news powered by more than 2700 journalists and analysts in over 120 countries, i am lisa mateo and this is bloomberg. ♪

>> we are all pleased to get the major source of uncertainty that was remaining from the bank turmoil addressed. that is good. the u.s. financial system is sound. this is a case of a small handful of banks that were poorly managed. and getting this addressed is important. jonathan: jane fraser, ceo of citigroup yesterday. she probably would not realize

we have seen the second-biggest banking failure in the history of the u.s.. tom: thank you. i totally disagree. i understand she has a corporate officer at a public person, she has got to say the right thing at the right time. i am glad she was able to calm the troops. but everybody i've talked to it is about commercial real estate. that is one angle. and it is still about distorted interest rates. it is underplayed that the events that got first republic and other banks into this mess still exists. the idea that there is no other bank out there, i have trouble with that. jonathan: they were speaking to the ft over the weekend, suggesting they are full of bad commercial real estate loans. heard from katie yesterday, the tcw group president. she was from goldman sachs for many years. she says regional banks are in

area we are concerned about because of deposit flight and the highest exposure to commercial real estate. tom: i'm going to listen to the pros. they have seen all of this. gerard cassidy was on the steps of the doorsteps of continental illinois a few years ago. jonathan: we joke about analysts, can i say great call to jerry cassidy and great call on the analyst call with jp morgan. fantastic line of questioning they addressed with leadership. tom: i think of canon leon at cfra. gerard cassidy up early in london ahead of u.s. bank equity strategy at the royal bank of canada. i'm going to the powerpoint. it was nicely done by jp morgan. at the bottom was an internal rate of return guesstimate of 20%.

you and i are not going to go to an inner rate of discussion of the equation but i fell off of my chair. is this irr are 20%, is it that lucrative for fortress diamond? >> it is and thank you for having me from london. one of the reasons the internal rate of return is so strong is that in an agreement with the fbi see, which is common, the fbi see when they sell these banks out of receivership will take a loss sharing agreement with the buyer. when you have one of those loss sharing agreements, the amount of capital the bank is required to hold against assets goes down. that is one reason the irr is as strong as it is. tom: what do you calculate jp morgan will get if interest rates come in and we just invert, we get back to normal interest rate structure?

it is a huge number if they get the markets to cooperate. gerard: you put your thumb on it. of if you go back to 94, 95, i'm not suggesting we are going to have the goldilocks economy in 95. but read span took rates of three to 6% and we did not have a recession. he started cutting rates in 95. bank stocks were up 55% that year. if we don't have a big recession as many people think we are going to have, credit problems for the banks will not be that severe and rates will start going down probably next year. tom: we studied at the altar of henry kaufman. he was kind when i first joined bloomberg. matt levine and john authers, read them if you are part of mobile wall street. mr. authors talks about kaufman as a cause i public utility.

is that what we have got with a combination of jp morgan and bank of america? are they a public utility? gerard: i would not refrain from saying that other than to say their financial utilities. and that is a positive. if we could have banks that consistently pay dividends through the cycle and also deliver mid to lower teens return on changeable common equity, those are attractive. could call the financial utilities in my opinion. jonathan: great for shareholders, i wonder about customers. the deposits they are resuming -- assuming from first republic, you asked on the call yesterday. how do they reprice? gerard: what happens normally in bank failures, often they are able to negotiate the rates of interest on deposit.

not the term cd is, they are contractual. but that was the reason. it makes the deal more attractive to jp morgan. i am not saying this happened with first republic, would often what happens when these banks head into receivership, have to pay for deposits to bring money in. that is why buyers get to reprice them downwards, which makes them more profitable. jonathan: i love the way the cfo of jp morgan addressed this. i think the reprice experience will blend over the time into the rest of our deposit franchise. that means there deposit and rate of return will come down to zero. at jp morgan, they are not paying much for deposits and they don't need you. i was wondering whether you thought they were downplaying for pr reasons how profitable the deal might be for jp morgan. gerard: you said it well. i think it is extreme the profitable for jp morgan.

their size and strength gave them the advantage. we wrote in our research note on this transaction that the prior transactions, the loans were marked to market about $.77 on the dollar. in the case of jp morgan yesterday, they marked them to $.83 on the dollar so they did not have to be as aggressive as some of the bidders. that was an advantage. tom: nasa from gerard cassidy, we go to the pros. a loan at par down $.77 and jp morgan paid were others would not. jonathan: they have experienced of dealing with stressed institutions. why is this so different and why in five years will be not be sitting here rethinking everything we have said in the last 24 hours? gerard: the major difference, and jamie dimon address this

yesterday, this was a deposit run problem. it was a classic duration issue of long assets on duration, short on funding. this was not a credit problem. first republic had pristine credit. i would suggest this is a different situation. it is not as risky for jp morgan and others because this is a mismatch of assets versus liabilities. they are now going to benefit from the market of those assets and the yields it creates. jonathan: wonderful coverage. good to see you in london. gerard cassidy of rbc capital markets. it is about 11:00 a.m. there now. tom: i can see him -- jonathan: i love the way the cfo responded to his questions yesterday. they said this about how clean

the bank was. you get a very clean bank in the most clean way you can get it. it does not mean there is no risk, it just means they do not have those problems. referring to the problems of aaron and washington mutual in the day. tom: i like the sense somebody had, think of the silicon valley franchise overnight. years to build that out and instantly they get it. they go to the right club and they have the right lunch. i don't mean to be cynical. jonathan: you don't sound cynical. tom: get me some san francisco giants tickets now. jonathan: don't you want lakers tickets? basketball. we are not going to l.a.?

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jonathan: live from new york city, welcome. the equity market softer on the s&p 500. equity futures -0.2%. as news yesterday. dipped into negative territory and stayed there by the end of the session. we close a little lower but no drama. nasdaq unchanged going into earnings from apple thursday. the fed reserve decision tomorrow. snoozing in the equity market. the bond market it was anything but snoozing. yesterday was strange.

the price is paid component of the manufacturing read came in and rebounded. and then he started to see treasury selloff and yields push higher. meta-came to market, big tech debt offerings. yields higher by more than 10 basis points across the curve, repricing lower, down two basis points on the two year. the 10 year still in and around 350 going to the federal reserve. expected to produce and other hike and go on a conditional hold. we used to say that about the rpa in australia. the aussie dollar stronger today, positive by eight or .9% of 1% of the u.s. dollar. a shift with the australian central bank. tom: the australian bank surprised and you think you will see more surprises.

i wonder if we will see a surprise tomorrow in that no one is looking for it. will there be a surprise in the leg which? -- language? is a parlor game. everybody is too complacent about a meeting tomorrow given what is going on. what i see on the bloomberg screen, the short-term paperwork is some foreign-exchange niceties. there is tension that is -- we are distracted. jonathan: a ton of things to navigate. the new 1 -- it has been pulled forward. the debt ceiling debate. after janet yellen's comments yesterday, it has come in about a month. she will say early june and there will be time around that. maybe a couple of weeks or so. we have to be conservative. but it brought the conversation forward. tom: in early june is like tomorrow in washington talk.

let's talk to an expert on the dynamics in the deepest part of the financial -- financial system foreign-exchange. head of foreign-exchange strategy for the global basis at rbc, elsa joins us from london. we've got some technical issues. tell me where we are now. she just went away and that happens. you don't happen -- gerard cassidy is in london and he was like wait, i get airtime with surveillance, not elsa. he yen to the court. jonathan: this is what bank of america has to say. enough juice for one more hike. he's as they head off to q2 looks soft. we expect the fed to hide by 25 basis points and signal a pause in june with a week by us for rates coming forward. the space for that in the statement -- at the moment it

implies more time could comfort down the road. tom: they reworded it to colby smith at the ft. not mike mckee. jonathan: he is usually at the end of the news conference. tom: it is brutal. the statement will be read off a piece of paper. he's going to be looking at the paper as he loses -- moves forward. also with rbc capital, i have to go to what is moving. i got euro-yen, week yen now. what does euro yen signal to the global system? also: signals perhaps our prematurity and looking for strength. the bank of japan will normalize

policy but not happening anytime soon. what is interesting on the euro side into the ecb meeting this week, it felt like a decision between 25 and 50 and we just had the senior learn officer -- loan officer survey this morning looking for demand for loans coming sharper and cementing the case for a 25 hike. tom: is europe and recession? elsa: not yet. the struggle is how long does it take? you can ask the same thing in the u.s. and across the world. we soon material tightening in interest rates. it will have an impact for investment and so on. the more interesting question is relative. why invest in europe at the moment with structurally higher energy prices and without the same tax benefits in the u.s.? one not take advantage of the inflation reduction act, subsidies, lower gas prices and

relocate investment toward the united states? jonathan: how does that shake on that euro-dollar? elsa: i struggle to get on board the bullish bandwagon. it is more that i think the case that euro bulls have been making for a dollar and euro outperformance is in the price. the struggle to see where we get the upside news. jonathan: super frustrating, the debt ceiling and the debates in washington. it is unavoidable. do you have any call on how you expect the dollar to respond in a risk off environment around the debt ceiling debate? is it different? to people flock to it or move away? elsa: when you speak to investors, we have a view it is going to get resolved but it will get noisy in the interim. the question -- how much

discretionary fiscal tightening will come on the back of the resolution? if we see a lot it could be an argument for getting more bearish on the u.s. dollar. typically nobody wants to make difficult decisions on spending cuts or tax increases. it gets pushed back and the scenario, i don't see that playing out in a short dollar story. tom: there was a game 10 or 15 years ago where we would calculate the impulse of flows into the united states and what we do to the 10 year yield, how many hundredths of a percentage point will it take off? are we going to discuss that when so much is coming into the u.s. and it drives down yields? elsa: i think the conversation, i look at it from a structural valuation perspective. if the u.s. is more attractive to invest, you can see why all else equal, the dollar would be firmer. i'm not a massive dollar bull

but i struggle with this strong bearish dollar narrative. you hear people talking about the end of the dollar's state duster status as a reserve currency. but you can't invest on the horizon. a lot of arguments were immature and the capital flows do matter for yields and slight dollar strength. tom: i look at the simple call, dollar weakness or strength, the assumption is weakness. what it means for our listeners and viewers. is it a big figure move that will have an impact on portfolios, or the speculative noise of the foreign-exchange market? elsa: it pains me to say it is just speculative noise on the fx market. as an fx analyst i think there is good effort to be had there. but maybe that u.s. dollar is not the best place to find it this year. maybe investors outside of the

market can probably afford to pay less attention. tom: how polite. jonathan: i'm sure in the future she might walk off. thank you, elsa lignos. looking ahead to central bank decisions, the ecb on thursday, tomorrow the federal reserve. the ecb looking for a 25 basis point hike. we will see whether they should go 50 basis points. you are a subscriber to auto sport. went to this happened? tom: i was as confident as i could be being one second off the pace, not competent. --confident. it is a magazine. it was dated. this -- aston shocks at baron

--jonathan: like a month behind. tom: i do not get any sleep. it was up until 4:00 a.m. at the white house dinner, i came in and turned the telly on in there and was. i love it espn has only british announcers. if it was american announcements -- announcers it would be he is the son of a billionaire. jonathan: they tell you about the life. tom: up close and personal, there was this american up close and personal. it is touchy-feely. the british are focused on the race. jonathan: sky sports coverage of formula one, they are putting on espn over here. which i find odd. tom: we will talk about this.

this is not like baseball where fenway park is different from yankee stadium. azerbaijan was on the streets. jonathan: we could talk about this. tom: it is different. jonathan: it is like a car park. miami feels like it is in a car park. a parking lot. tom: would you go to the race? why would you go to the race? jonathan: the sound and the smell. all of it. sensory overload. very cool. you have to experience that upfront. tom: maybe we can get from red bull or ferrari, aston martin -- jonathan: we have aston martin. tom: do you think they could get

the three of us and looking pits? jonathan: mike crack coming. we have to wear those headphones. tom: do i get to where the thing with all the labels on it? jonathan: the overall's? tom: right now baseball has one label. in 10 years they will have the labels. jonathan: i think they are reluctant in baseball. tom: there is purity. the red sox and phillies uniform. jonathan: we are excited for this interview. no doubt. we will catch up with the aston martin f1 to principal. from new york city, this is bloomberg.. lisa: keeping you up-to-date with news from around the world with the first word, i am at lisa mateo. president biden has invited top congressional leaders for a meeting on the debt limit next week.

it comes after the treasury department warned that nation risks default as early as june 1. the white house has said it would not negotiate with republicans overextending the debt ceiling. speaker mccarthy who passed of the debt plan said he would not increase the spending limit without cuts to the budget. a top u.s. regulator once a sweeping overall of -- overhaul of deposit insurance. the fdic's says switching to a targeted coverage approach where business accounts get more coverage than the current cap be the best option. that will require congress to act. in the u.k., & households may be passed the worst of an inflation shock. heavy discounting on clothes and furniture pulled down a stock price growth for the first time this year. this inflation slowed, down .1% from the march high. but grocery bills climbing,

hitting a high. more job cuts at morgan stanley in the midst of a dealmaking slump. senior managers are discussing plans to eliminate about 3000 jobs by the end of this quarter. morgan stanley has about 82,000 employees. many cuts expected to take place in the banking and trading group. hsbc will buy back as much as $2 billion of stock. the london-based bank will also resume paying quarterly dividends for the first time since 2019. they first reported quarter results that beat estimates. global news powered by 127 journalists and analysts in 127 countries. this is bloomberg. ♪

>> i think the resiliency in terms of consumer spending speaks to the fact that so much

of a mess was cleaned up during covid from stimulus programs and time people were forced to spend at home. the strength is coming in and it is an asset and buffer for the economy and it is showing up in consumer results. jonathan: great to catch up with lori. on the equity market, more learnings. thursday is apple. the rba overnight, hiked interest points. a surprise against the consensus view. looking for the ecb to do the same thing on thursday. an update on the debt ceiling debate. today we heard from janet yellen in a letter to speaker mccarthy. and other leaders from both parties. treasuries said our best estimate will be we are unable to satisfy all of the government obligations by early june and potentially as early as june 1. after that we learned quickly the president set a high state debt limit meeting between

congressional leaders, inviting them to meet may 9. there is distance between being urgent about june 1 and saying may 9 we will have a meeting. mccarthy agreeing to that meeting according to a gop aide. next week, the beginning of a long road toward the day. tom: they get the fed meeting and jobs data on friday. a busy week. i don't think they care about it. my take on the white house correspondents dinner is they are focused on the election. it is all politics and nothing to do with economics or analysis. it is a political by larry -- ballet. jonathan: ultimately it is for the election. isn't this about setting the stage? tom: setting the stage and

placating constituencies. i'm not sure what joe biden constituency is. is he playing to the middle, to liberals? i don't know. jonathan: we will say. tom: it is busy this week. with it all is uber earnings, more important as their small competitor had some jobs cuts. we'll talk to mandeep singh, senior tech analyst for uber intelligence. i have one question, important around your expertise in silicon valley. i will rip up the script. what are people in silicon valley going to do today, are they comfortable switching from first republic to a giant monstrosity like jp morgan? can people like you make that switch? mandeep: you can throw apple in

the fray as well. they are offering those yields. they are trying to attract consumer deposits. right now, everyone realizes you have to get some yield on your cash. there is safety toward larger banks but i think apple's entry in this space is interesting. clearly they have a long-term vision. tom: i agree, they do it without being financial or a bank. over to her. -- uber. how is there year going? -- the year going? mandeep: thumbs up. the only way you can make money in this business is a scale. half at scale comes to the supply side and on the brighter side they have organic momentum. i would caviar up uber's mobility business looks better.

it is a drag on profitability. three or four years out i don't know if this company can be high-growth. it is more a margin improvement story and as long as they keep the growth and keep delivery on the margins, i think you can say it is not valued as a tech stock as it should be. i think these companies should be valued as a logistics business but uber has the scale. jonathan: how does that compare with lyft? mandeep: things are not looking good even with the ceo change and the job cut announcements. they are struggling with driver supply. if you can't manage your eta, there are no switching costs. consumers using lyft can switch to uber or doordash.

now they have to announce job cuts to improve profitability, a double whammy. i don't see them coming out of this soon. jonathan: is there any lever lyft can pull? mandeep: if you start looking at the companies as a logistics business, they are competing with amazon and shopify, businesses that layer e-commerce and logistics together. they can partner with walmart or target, you need scale. the b2b side of things has bigger scale. that is what grubhub did partnering with amazon. paul: i'm looking -- tom: i'm looking at the financial analysis. the cash flow switch from uber minus a four gazillion out to a positive two gazillion is

extraordinary. how do they flip to a constructive statistic? mandeep: it is loaded. there spending about $9 billion in cost of revenue and -- no one has understood why these companies are so bloated. there aren't hte expense of $800 million a quarter. consumers are coming to your app. there is a lot to be fixed on the cost structure side and uber had the scale of $30 billion in annual revenue rate. there tearing down the cost. tom: it is like meta. meta buys uber. jonathan: the debt deal, $8.5

billion. tom: uber is not meta. i'm looking at the w a sisi -- wcc. uber is at 6%. is it a tech company? what is a logistics company, are they competing with fedex? mandeep: yes. and they are probably valued at 68 times. -- six to eight times. the market is looking for how much the profitability -- this is adjusted, not a gap number. it will get the benefit of doubt as long as they keep -- on the delivery side, that is a $500 billion business. that will be key to operating

business. they want to be a super app but we have not seen that synergy between mobility and delivery. it may take a couple of quarters. jonathan: wonderful to get your perspective. mandeep singh of bloomberg intelligence. numbers should be coming in the next couple of minutes. tons of bond offerings yesterday. this knocked around the treasury market. contributed to the move higher in yields on treasuries. >> why would there be bond offerings? cfos are like lemmings off a cliff. it is not so much they are saying lock it up and get in there. but they want a constant stream as it yields go up. -- jonathan: lower than two months

ago. the maturity has gone from north of five to south of four. north of four at the moment. tom: apple, a crushing burden. it will not announce this on the day of their earnings, tomorrow or the next day. a week afterwards, they do a debt offering to do a debt offering. we have 94.4% equity. it is not what you do. jonathan: first quarter revenue, a small upside supplies -- surprise. 850 million. the estimate 757 .7 million. slight upside surprise. up by 3.8% in the market on the uber. tom getting excited.

the modern f1 principal. it is in the next hour. about 50 minutes away. ♪

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>> it just makes sense for first republic to be a part of a large bank like jp morgan. >> there is still a fair amount of stress in the banking system. >> there clearly is something systemic here but whether it's within banks that have been mismanaged or a general problem. >> is hard to divorce the fed action with what's happening in the banking sector.

>> the fed will now regulate the smaller and medium-sized banks when it was fed policy that cause this crisis. >> this is bloomberg surveillance. jonathan: live from new york city for our audience worldwide, good morning, good morning, this is bloomberg surveillance on tv and radio. the equity market is 0.1% on the s&p 500 area down in washington, the feds today meeting begins in chairman powell concludes tomorrow in the market is looking for a 25 basis point hike and then who knows? maybe a plus from there and then onto the ecb thursday emma payrolls friday, apple earnings are just around the corner. that's a big couple of days ahead of us. tom: and some of the surprises along the way like the meta-bond transaction yesterday. it's about a summation of some

restrictive points where we've seen the fed say, on and -- say, on - come on. jonathan: medic came out with tom: a monopoly? jonathan: first quarter revenue, 5.6 billion. first quarter eps, two dollars $.80. they have raised guidance for the full year in the stock is higher by 1.6%. tom: uber is sort of the travel business. they are about moving people around. i think the recession talk is up a little bit. it's like a 1% talk but i don't see a lot of negative gdp chitchat. jonathan: you go to the airport and there is a recession, it's crazy to travel in america and as europe as well.

tom: you've got the follow-up on the bank news. we really need to get smarter on the bank stuff and start john -- start with john malavine. jonathan: let me go back to the quote from the professor. we now have two choices before us, either we preserve our production industrial banking system by removing fdic insurance limits immediately or financial as wall street banks to take hold, an outcome that would necessitate nationalization of the sector. that sounds pretty drastic. did we take a step toward that yesterday? tom: i was talking to a fan from australia last night and i said i'm sorry, this stuff is calm plex and mohamed el-erian was

channeling a gentleman from leap zig. they wrote a definitive paper and the second best choice. this is important, we are also looking at the best choice out there and if you can't make the best choice, what happens when you go i guess we will sell it to jp morgan and those are different dynamics and there is theoretical foundations to the actions that we saw yesterday. jonathan: the second best choice is what the central banks have to face tomorrow, the federal reserve tomorrow. the s&p 500 is negative by not a whole lot. if you check out the bond market, yields look like this -- just to finish on the euro, inflation came a little bit hot in the euro zone early this

morning, that currency is negative 0.1%. tom: when do we start talking about it six handle on the short-term rates? it's inflammatory but that's a big number. jonathan: i'm with you but this depends on how far the central banks were -- will push it. it could be a hawkish surprise but i'm not sure were looking for that right now. tom: should we get to our guest? jonathan: she is around the table with us. good to see you in person. tom just moved his auto sport magazine. tom: do you watch formula one? >> i do. jonathan: we will talk about fernando who is rumored to be

dating taylor swift. tom: i'm so far behind on the gossip. jonathan: that's the story for another time. now we will talk about stocks. looking for a 10% correction, what do you see that will lead to that correction? >> we are seeing margin compression and the margins are slowing and earnings projections through q1 reporting, they continue to believe a flat growth year-over-year for the s&p 500. we are bringing our eps number down about 10% contraction. we think that's very reasonable in an environment you expect gdp growth, slowing consumer and still inflationary pressures. you are talking about a pretty reasonable multiple and that brings a slower. jonathan: why is tech absolutely crushing it in the last week? >> it's something we are

watching but we think it's getting ahead of itself right now. you're also seeing it running ahead of itself in the yield markets. they are expecting fed cuts and the market is expecting cuts after this meeting. it's too soon for us and that realization and people having to move forward are out with their expectation for monetary easing that will make things tougher in the summer. tom: what about the tail risks out there? if we look at to next year, can you see them or is it opaque? >> there are things top of mind and that's what's got things so interesting. we know what to look at but not sure have to wait each one. we're looking at the commercial real estate space which is been a hot topic. what happens at the loans can't

get renewed? also student loans and how does that impact consumer spending? we're are looking at these factors. what if the fed doesn't start cutting, what if they pause and hold? tom: that's the worry that all of our listeners and viewers have. you are basically saying take the summer off and the rest of the year off? when you take the summer off under wells fargo economics, do you go to cash? how do you take the summer off based on your 4200 call? >> rather than go full cash, we are not that bearish yet and we think you can whether through this but look at the secular growers. we still think there is opportunity and you look at the cap goods space and you are seeing that volume holding up. especially even in something like staples like food, you see

volumes shrink. there still are opportunities to keep that growth to plow through what could be that rough summer. jonathan: it's difficult to identify specific names with you so i will be delicate -- are the cloud names secular growers? >> as someone who believes in that technology and uses it, i still think there is growth opportunities. like we said especially with software, tech itself and set -- has had such a hot run, i'm not ready to pour in the investments now. jonathan: what is the secular growth story want to get behind the moment? >> we like median entertainment. that has had a great start to the year. we still think it's attractive and we think there is opportunities. a lot of it is thinking about where consumers will continue to spend even if you have to tighten your belt and part of that is in the experiences in the services they can enjoy. jonathan: is this spending more

money on streaming apps? >> it could be tom watching more f1. there is that push but it's more what will relatively outperform when people start pulling back on their spending and their revenge travel spending you talked about. jonathan: you think the airline story is done? can i go >> that far? i don't want to say it's done but it's not somewhere where if i had cash to put to work that i would rotated to now. jonathan: that sounds like it's done. tom: that's the wells fargo economic call. your economics team and look where gdp is, is there enough nominal gdp to keep this game going. how do you fold in wells fargo economics into your equity analysis? >> our expectation for gdp growth is just above 1% for this year but pretty much a flat 2024

and that's concerning with the sharpest pain points where we see the most gdp contraction is for q of this year and the beginning of next year --4q of this year and the beginning of next year. that doesn't align when we see the toughest earnings contractions. jonathan: when is that earnings contraction, what is the window you are looking for? >> we think it's this year and we think it's already occurring. using those margins come under pressure and you seen that 4q last year earnings came in a little lower than expected and we think that continues in these are the quarters where will be tough us and realization will push back the multiples and equity levels lower. jonathan: great to do this in person, good to see you. looking for a 10% correction in the next 3-6 months off the back of earnings. tom: you will go 4200 down to 3700? jonathan: that's basically the

range of this year so far. tom: i think everybody's got an opinion here and it centers around this recession call. i think the recession call has drifted away a little bit. jonathan: there has been pushed back but at what point do people capitulate? tom: that's an important question. i haven't seen mentally fear of missing out really jump in except in tech and that's a different story. we will see with apple thursday. jonathan: our next guest will join us in about an hour. later this hour, we will catch up with the team principal of aston martin f1. tom: i have my mercedes magazine here. jonathan: how much is a subscription? tom: you've got it but it's got the british fine print. it's like $600 per year. jonathan: you are spending that

much money? tom: i get the full digital package. jonathan: you and two other guys in manhattan have that subscription. from new york city, zero .1% on the s&p 500, this is bloomberg. . lisa: keeping you up-to-date with news from around the world with the first word -- president biden has set a high-stakes meeting for next week on the debt limit and the treasury department warned that a potential default could come sooner than expected. he will meet with congressional leaders and republican kevin mccarthy, the house speaker, has said he will not extend the debt limit unless there are trillions in cuts to the federal budget. underlying inflation in the euro area slowed for the first time in 10 months after stripping of volatile items like food and fuel. consumer prices rose 5.6% from a year ago. that backs the case for the european central bank to slow

its most aggressive interest rate hike campaign later this week. the white house national security council says russia has suffered more than 100,000 casualties since december and the fight in eastern ukraine. that includes 20,000 dead. the commander of ukraine's ground forces a they have pushed back russian troops from some positions. uber reported first-quarter earnings that beat estimates and consumers continue to spend more on rides and food take out despite rising prices and uncertain economic outlook. who were fewer than expected monthly users and bookings beat estimates that's an indication customers are taking trips more frequently. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪

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>> we've got a lot to do in the most immediate think we can do is ensure the continuing reliance of our economy and the financial system. most important, i think we have to do make sure the threat of the speaker of the house and the default of the national debt is off the table. jonathan: the president of the united states speaking on the debt ceiling in the united states. the treasury secretary with a wake-up call to start the week,

a bit of a wake-up call not just for congressional leadership of also for the administration as well who offered a meeting to speaker mccarthy and others as soon as may 9. we understand speaker mccarthy will attend that meeting. tom: it's real politics and it's important with the modern -- with the modern polarities we have. they have to get this done and that's the task the president has his decades of experience of getting it done. i would go back to the watergate europe where you had howard baker, sam ervin and others understanding that you have to get it done. that's missing today. jonathan: if it is june 1 and it

could be a number of weeks after that date and treasury has acknowledged that, it is a solid month or so earlier than people thought it might fall. this comes off the back of the text payment a number of weeks ago which indicated that might be the direction of travel. june 1 sounds urgent and important, let's get things done and waiting a week to have a meeting doesn't sound that urgent. tom: i agree. i totally agree with that. it's waiting a week to get more data and to see what tax receipts do as well. anne-marie hordern joins us now we go to the may 9 meeting. let's frame the look with politics about the look. is it in the oval office, on the couches with everybody smiling? annmarie: i presume so but i have not been briefed on the optics and the look and feel in the style of this meeting but

normally these meetings happen in the oval office. to john's earlier point, the reason why likely this is not set for this week given the fact that the treasury secretary is saying the time that treasury can exhaust their special accounting measures they taken since january could be as early as june 1 is the house is not in session now. when president biden picked up the phone and called speaker mccarthy, he is in israel. he spoke to the knesset yesterday. this is probably why they have to push it out to next week area this also just shows how short of a timeline these individuals have to get a deal done because the house is in recess this week and then there will be another recess for both these chambers. we are working in about three weeks and in that time come the president will be abroad in japan and australia. tom: i'm sure you will be with him but the answer to me is

there is a process, not so much who blinks first but who sits down in the oval office on may 9 and says we ought to do this. is it biden or the house? annmarie: biden has decided to invite the leadership of congress which is hakeem jeffries alongside speaker mccarthy, mcconnell and schumer. mcconnell has made it clear -- mitch mcconnell is the senate minority leader and biden got a deal done when we had this problem last time. he has really said that he is going to defer for this to speaker mccarthy. i don't think we are there where he is going to step on the speakers toes. he will let him lead those negotiations but to provide some cover, the white house invited all four so congressional leadership is all invited to the white house for this meeting. we know speaker mccarthy will be the one that he has accepted and all eyes will be on him because he's been asking the present for

another meeting since they first sat down february 1. in that timeframe, speaker mccarthy was able to get a win. president biden said show me your plan and he showed them his plan and he got through the house. now the ball has been the white house court and the issue at the moment is the white house continues to say they will not pass a bill regarding the debt ceiling that is not clean and that is something speaker mccarthy says he will not do. jonathan: how do you think this will play out next week? what does may 9 look like? >> may 9 is a conversation in the oval office. if thex date is approaching june 1, you can see this kick the can down the road. i'm not sure how far they are willing to do that. maybe they can get to september when they have to come up with a budget. there could be a path potentially where every side has a little bit of a win.

if they go to september and they pass a clean debt ceiling bill but also a budget that has spending cuts. potentially, they are separate bills so mccarthy could say we will raise the debt ceiling but we did so by extracting spending cuts and biden can say i was always up for negotiating spending but the issue was a wanted a clean debt ceiling bill. that's one potential but there is a number of ways this could go. some say it gets cut in the senate and for democrats in the house, they are the ones that have to sign onto this and speaker mccarthy, that will lose some of his members of the far right caucus. this can go any number of ways but they don't really have a lot of time. jonathan: we haven't talked about senator manchin recently but he talked player and he was a key player in past negotiations so what did he say yesterday? >> senator manchin has been a

headache for the administration throughout biden's entire term but most recently, there are some parts of the inflation reduction act he does not like how it's being executed. he was also the one that came out and after speaker mccarthy was able to pass his debt ceiling lift plus spending cuts package for the house, joe manchin said it's time for president biden to sit down with mccarthy. he does not agree with everything in the bill but he said the bill right now is the only game in town and the only debt ceiling bill that raises the debt ceiling at the moment. he said biden needs to get in a room with him and that's what we are seeing happen. jonathan: we've seen this movie before a mean -- and we think we know the ending. we were talking this over this morning. is there a sense in washington that it might be different this time based on how things are going? annmarie: i think everyone tries

to say we've been here before and we will always get there. the concern is with how fractious you have the republican party in the house. many people point to the 15 rounds it took for the speaker mccarthy to become the speaker of the house. there is many in his party who want such deep spending cuts that no democrat and some centrist republicans will never sign up for. the bill they pass, that's their beginning negotiating salvo. you will always get less, not more but there is concern that this is different and many are talking about 2011 when the u.s. was downgraded even though there was negotiations happening at the time. the u.s. still was downgraded at that moment. that's what everyone is pointing to and that's with the concerns are and i think we will have more clarity may 9. jonathan: there is always something to worry about,

appreciate the coverage. we will catch up with you later this morning. hopefully we will get an update from someone in washington. from citigroup, they are looking forward to the federal reserve tomorrow in the communication of chair powell. the team at citigroup says the fed policy path becomes a function of incoming data and tomorrow statement they say will likely keep options open for further rate hikes beyond the 25 they expect tomorrow. tom: people are looking for low rates and they could say the same thing. jonathan: terry wiseman of mcquarrie in the studio joining us next, looking forward to that. from new york, this is bloomberg. ♪

jonathan: in a couple of hours, the federal reserve wakes up in washington. it is still early days in d.c., 7:30 eastern time. they take their time. tom: 8:30 is the -- is early. jonathan: it is like a new york 6:00 a.m. in washington, d.c. time for the two day meeting at the federal reserve that concludes tomorrow. here is the price action going into the equity market, negative zero point 15% on the s&p, unchanged on the nasdaq.

no relief rally in the equity market yesterday even with the banking solution by first republic. no rally in the regionals. kp w unchanged. outside of that, into the bond market, this did reprice yesterday. tons of corporate debt supply came to the market, yields pushed hires -- higher. just a read on these things pushing up prices, the yields were higher up more than 10 basis points across the curve on the front end. we are down about a basis point on the two-year this morning. foreign exchange, have a look at australia briefly. the rba coming out with a surprise rate hike. they delivered 25 and signaled may be more. the aussie stronger by one full

percentage point against the u.s. dollar this morning. for a broader conversation about hawkish surprises, tom: the reports out of china on their may holiday is it is absolutely packed with the consumption oomph and china, and australia is hardwired with that. jonathan: i understand from bloomberg economics that maybe they are willing to tolerate softer growth in oak -- in favor of -- a shift around the balance on those things since the last meeting. tom: it is a cultural difference nation to nation as new zealand is acclaimed for being rules based. this is a joy as we continue our coverage of this banking coverage -- banking crisis. it pays to have someone with real-world world experience, with australia's my quarry, thierry wizman.

-- macquarie futures. i want to go back to john shorts, david malpass, and it blew up in march 2000 eight at bear stearns. from your distance but tangible experience of collapse, how is jp morgan different in 2008 than 2023? thierry: speaking about jp morgan, let me talk about the banks in general. 2008 was qualitatively different than the situation now for the banks in the united states. you had a situation where the primary problem at the banks was the asset side of the balance sheet. it was generally a situation where there were too many mortgages that went bad too quickly. that is an asset side and collateral problem. what we are seeing now is different and primarily is a liability side problem. it is lack of confidence in the banks.

it may be because people are worried about their ability to continue to ponder their obligations, but this is a crisis that started from the liabilities side. that makes it qualitatively different and easier for entities like the fed to solve. the federal reserve has backstops. it can replace the liability side the banks are losing. one dollar of deposits leaves, the bank can go to the fed and borrow on the primary credit facility and get that dollar back, rebuild its base and continue to do what it is doing. this is qualitatively different. tom: can interest rates assist government institutions and can interest rates assist jp morgan here by getting the wind behind them over the next one to five years? thierry: there's nothing better in promoting confidence than economic growth. nominal income growth. if you can't get nominal growth,

you might as well get real growth. it comes down to do lower interest rates help growth? they do. if the fed were to lower interest rates, you would get inflation but that would be coincident with nominal growth. every obligate her around the country would honor their debts and that would reduce financial stress. jonathan: let's talk about something not promoting confidence, people are already exhausted about the debt ceiling in washington, d.c. can you walk us through piece by piece? go through why you think this can get addressed? thierry: we've had examples of a debt ceiling crisis in the past and they have found resolution. i won't say this is the same but the differences today are political, not economic. kevin mccarthy wanted the acclamation of his party to become speaker, he had to make certain promises.

one promise he made given that this was january and we were coming against the debt ceiling, one of the promises was that he would not back down with respect to getting out of the administration what he wants in terms of spending cuts if he's going to go with a debt ceiling increase. unfortunately, he got the speakership and now he painted himself in a corner because he made that promise to his caucus and cannot back out that easily. now you have a hard stone coming up against a hard wall. you have two intransigent sides. we may come down to the wire and the may we solve -- we resolve this may not be through the traditional means of debate and compromise. we may approach a crisis but the cleaner solution here if we don't get to a political resolution, is simply for the u.s. treasury to do what it is doing, i.e. issue debt and get

challenges in the courts by the opposition. they have passed the spending so there is a legal basis for the issue that they have to -- what happens at that point? we go immediately to the supreme court. the supreme court could issue an injunction and has a legal basis for that the debt of the united states will not be questioned and that is a legal basis for telling the administration, you can do what you want and if that happens, it will put the debt ceiling situation on ice. now you have a clean, clear judicial ruling. that is a clean way to do it. jonathan: does it sound too clean? thierry: coming and having the supreme court which is co-equal to the other branches and effectively say, this is our purview -- jonathan: it would be clean, sure, but the process -- thierry: it could happen over 48 hours. you don't need a lengthy hearing by the supreme court. they can me -- they can read

what amendment 14 section four says. it is undeniable that this is not constitutional to let, intentionally let the payments go unpaid. there's another way to do this. the treasury has hundreds of billions of gold in storage at fort knox. one way to do this is to issue gold certificates to the fed and have them fund the government's operations. that's a solution. there are a few workarounds people have proposed. you can read them and they happen to be clearer than the messy situation we might get ourselves into. tom: this is a dissertation on the history of debt coming out of world war ii. how much of this is almost religious? we have a culture in america, i will generalize it is calvinist that is unfair to the gentleman from switzerland. debt is bad.

bernstein wrote a cross -- a classic monograph, debt is bad, get rid of debt, and we don't do it. there's a culture overlay that is unspoken. thierry: debt in support of investment, in support of assets being created in the economy, in support of mo productivity by way of that is good. debt in support of that -- in support of more spending without savings on the other site is bad, especially when that rises to the point where income is generated that is no longer sufficient to honor that debt, to support the obligations of that debt. i think debt is perfectly fine. it's an aspect of the capitalist economy but with limits. it depends where it is going, what activities it supports. jonathan: let's get to the market question -- is there any risk?

what's the risk outside of the so-called at risk securities? what does that look like? thierry: a lot of people say if there is a missed payment on a principal payment or a missed coupon payment, that moody's will put the u.s. in default or the s&p will put the u.s. in default, and that will trigger cds payments on the swaps. i think that is not realistic. i say that with reference to the fact that unlike a corporate bond or obligation, u.s. treasuries do not have cross default provisions. if the treasury does not make a payment on a bond, it does not accelerate the payments on every other obligation they have. you can say that bond has defaulted but the corpus of debt has not defaulted. there are no cross default provisions. that's tricky because you think of a default as something different and moody's would have to think about it as something

different if a similar thing happened for corporate issuer. that calls for a judgment call and it's not clear that even if a payment is skipped that moody's will go that far. they can avoid calling default, we can avoid triggering cds. jonathan: what would that mean for treasuries used as collateral? thierry: the value of the collateral is only as good as the price. to the extent that we are talking about a few pips change, you will demand more of them to support whatever repo or lending activity you are trying to sponsor. in the final analysis, as long as the treasury bill has value in dollars it will serve as good collateral. tom: 30 seconds, martins place, sydney, australia, macquarie futures, do you believe in the pacific expansion? thierry: i don't necessarily believe in the china expansion. they are undergoing a nice recovery hindered somewhat i the

slowdown in demand coming out of europe and the u.s., but domestic demand is good and enough to keep china moving forward for a year. beyond that, structurally, you have a demographic problem, the demise of globalization. these things will slow the asia-pacific story. jonathan: week pmi better this week. smart stuff. we will get you back to talk about the debt ceiling because that was actually an interesting conversation. tom: you got nothing to lose. jonathan: do you need some love? tom: i am going to get it next from aston market -- aston martin. jonathan: i promise you this time, he's coming up next. ♪ >> keeping you up-to-date with news from around the world, i am lisa mateo. president biden and top

congressional leaders for a meeting on the debt limit next week after the treasury department warned the nation risk default. the u.s. will not negotiate with republicans. kevin mccarthy who passed the debt plan said he would not increase debt ceiling without cuts. a u.s. regulator wants a sweeping overhaul of deposit insurance. -- have drained a pool of money used to protect clients. the fdic says switching to a targeted approach would be the best option. that will require congress to act. more job cuts on the way at morgan stanley in the midst of a dealmaking slump. senior managers are discussing plans to eliminate about 3000 jobs by the end of this quarter. morgan stanley has about 82,000 employees. many of the cuts are expected to take place in the banking and

training group. bp is slowing the pace of share buybacks, posting first quarter profit that beat estimates but the surplus cash flow it uses to boost returns shrank by about 40%. bp says it will repurchase $1.75 billion of shares before announcing second-quarter results. that is down by one billion from the previous period. global news powered by more than 2700 journalists and analysts in 120 countries, i am lisa mateo. this is bloomberg. ♪ ♪ (upbeat music) ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ )

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>> fernando is a fantastic driver, one of the best of all

time. he is finally got himself in a competitive car. 41 years of age, he is giving the fortysomething something to root for. he will be a competitive driver and team this year for us. we will very much keep an eye on them. jonathan: fantastic to catch up with christian horner, the red bull racing team speaking to us about aston martin and formula one. to see them second and the constructors world championship has been phenomenon, what a turnaround. tom: for those that are learning just like i am after watching netflix and america climbs on board, what they find so important is how small the group is, 20 drivers, 10 teams. david ricardo at the met dollar last night because he is not there official driver -- not the official driver for the red bull team.

he was there is the back up driver. jonathan: daniel. tom: daniel ricardo, what do i know? aston martin is on the up and up. jonathan: nice to see fernando doing what he is doing. tom: alonzo is picking up on this, selling luggage while he is waiting for a phone call from taylor swift. alonzo selling out the fancy globetrotter luggage right now. this is the up and up, the branding around you got to meet red bull. jonathan: joining us is the team principal further aston martin bloomberg team -- aston martin team. this isn't what i was expecting last year when i heard the news that fernando was stepping in. to see you second in a constructors championship is something. what has led that turnaround? mike: to be honest, i did not

expect that either, to make such a big step. we try -- tried to give as much as we could last year and made substantial progress but it was never enough to pick the big points and move forward in the championship. by the end of the year, we were much more competitive and we took another step in the winter because everything is related. it could be that other competitors have not made the step they wanted and brought us to the place we are in now. we are happy to be there. jonathan: we will get to the business of this in a moment. can you tell me how important it has been to bring the technical director to your martin f1? mike: that is one of many recruits across last year and they have been very complementary to a great workforce we already had. all in all, they came together

as a great group, get all the strength out of everybody, and you see the result. tom: i look at the extraordinary original that each race is different. in american baseball, we compare fenway to other baseball parks. the distance from baku to miami in terms of the actual track is just extraordinary to me. how much is the adjustment for you in 10 days to go from azerbaijan to florida? mike: first of all, it is a huge logistics effort to bring the whole circus over to the u.s. but in that short time, then you have to adjust basically everything, not only the clocks but you have to adapt the cars to the layout of the miami circuit because it is substantially different. we need to get used to the temperatures, the heat and all

the things that are different. it is a substantial exercise for everybody. tom: i look at red bull as a leading team and the two's -- the two drivers going at it. the relationship of your two drivers is extraordinary. the veteran alonzo, i get the idea that dad is helping out, but strohl seems like he has earned his stripes. explain -- explain the relationship of your two drivers as they go into miami. mike: they are great drivers and also great human beings, very mature and great teammates. they help us big time to work as a team much more than other teams. very often, and you see with other teams a fierce rivalry between teammates which sometimes is even ending in accidents at the circuit between these cars. we are fortunate to have two such great drivers that

understand this is a team sport and the rivals are there with different cars than ours. we need to get every possible opportunity to do better than the others. jonathan: i have to be honest, and this is my perspective. the miami racetrack looks absolutely terrible. maybe you have got to be more diplomatic. i think there is a worry for long-term fans of the sport that the emphasis is on breaking the united states of america and they are willing to sacrifice the quality of the racing. do you share those concerns? mike: no, i do not share these concerns because i think the racetrack in miami has everything that a modern formula range -- formula one racetrack has to have. it has high-speed corners, low-speed corners, completely resurfaced. i think the heat we have over

the weekend will add a lot of difficulty to cool the cars but mainly keep the tire management under control. all in all, i think we are for a great weekend and great racing. jonathan: the attention has gone off the back of the netflix series, to get my partner tom keene on board, it has been a pleasure. i want to talk further down the road. there's always been a relationship between the f1 team and the road car. ferreri is a great example, more recently aston martin. i want to understand the tension 10 years out. when aston martin is fully electrified, where does that leave the modern f1 and the relationship between the f1 team and what goes into the road car? mike: good question, and the same applies to all the other brands that you just mentioned.

f1 is working heavily into carbon net zero and to grow more sustainable by 2030, which is must less than 10 years. -- much less than 10 years. by 2026, we will run only on sustainable fuel and will increase the amount of electric power we give to the car. it will be around 50/50. the formula cars are already hybrids but electric cars will be increased and complement the road car fleet by these developments. jonathan: how will that take ways if you retain the internal combustion engine and the road car won't? mike: lately, the developments in artificial or how you call them, sustainable fuels is adding or massively increasing life of the combustion engine.

from that point of view, i think formula one can be a great participant or great catalyst to the road car business to make these nice cars that we have today sustainable and be able to run them longer. jonathan: i sense from what you say that you don't think f1 ever becomes fully electrified and to some degree you can preserve the internal combustion engine, is that right? mike: i think the combustion engine will have its time for the next 10 years for sure, but ultimately it will fade out and formula one will not be with the combustion engine 20 years from now. tom: our reporters in london are like, enough talk about taylor swift. what's the relationship with honda going to be out to 2026? will we see drama as honda tries to climb into formula f1?

mike: we are quite happy with the powertrain manufacturer we have at the moment. we have a lot on our plate at the moment for 2023, 2024 to make further progress. we are not really too much into 2026 at this stage. jonathan: just for the pit passes for miami, 731 lexington avenue. the zip code? tom: 10022. tell alonzo i will buy the globetrotter luggage if you can get us in. jonathan: i appreciate this. tom: we could be there with taylor. jonathan: we are not going to ask about taylor. mike, thank you, looking forward to the races. tom: this is fun. i got a lot of emails worldwide and people are geared up. jonathan: back to the markets and ann miletti from all spring

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>> i don't think the economy is not bad it is specific portions

that have problems. >> i think the fed is likely to hike. >> the fed should have paused and will be cutting. >> the risk is greater they move too far too fast as they have. >> the hope is if there is a downturn it will be short and shallow but no guarantees. >> this is "bloomberg surveillance" with tom keene jonathan ferro, and lisa abramowicz. tom: welcome on radio and television, and most interesting set of days ahead. apple earnings and a fed meeting tomorrow, today a bank reorg. there is not another bank is there? jonathan: morgan stanley. we can see that. tom: to me, and frankly this will go to the rightsizing of first republic i jp morgan is you right size and the solution is in financial difficulties to

cut costs. jonathan: let's talk about the difficulty for people trying to make a call on the fed. so many headlines like that 1, 3000 morgan stanley, pick a tech firm and put a number. you haven't seen the sharp decline in a major way. the payrolls on friday, here's the median estimate, 180,000. with unemployment in and around 3.5%, looks like a decent jobs market. tom: the three months moving average, it is way above. economist that calculate the optimal nonfarm payrolls, it is shockingly low. some people are even under 100,000. they look at the data and say this is a boom -- boone labor economy. jonathan: overwhelmingly but consensus is the fed will not commit to anything and it will be a pause.

as the bar higher for a cut or another hike? tom: you can dive into this all you want. i'm going to go with the economic data and frankly, there's a lot of data including today. i don't think we can make light of is it the front data? no. durable goods, jolt survey, they matter to this debate. i assume you believe in may 3 on services. jonathan: prices paid rebounding, yields higher so the same off the meta-bond issuance. a lot of issuance of the corporate side yesterday. tom: i've also said you will see a great zombie role of 4.10%. jonathan: the fed tomorrow, ecb friday, payrolls friday, apple after the close thursday. negative -- equities negative on

the s&p 500. yields down three basis points. the 10 year around 3.50. the euro still sub 1.10. four days of weakness on the euro side against the dollar. backing away from the year today intraday highs last week. tom: the distant, the yen backs away. we talk about that and i'm always bringing yen dynamics into a global and american analysis, and you are beginning to see standard deviation jumps. weaker yen and i would suggest don't do that. jonathan: you know what is not weak? the aussie, strong off a surprise 25 basis point hike, some indication they might go again. indicate they are willing to tolerate growth weakness. tom: sydney, australia making

clear, china has some oomph. this is an honor to drive a conversation forward. if you are institutional, retail wall street looking at your value portfolio underperforming, this is the conversation of the day. ann miletti is an iconic and strong milwaukee and part of allspring global investments head of equity. state the value case over the growthiness of big tech. ann: i think values hot a little bit of a run last year and you saw the reemergence of growth this year. not surprising, because you saw interest rate contraction a little bit and that multiple contraction you saw in growth stocks reemerged this year and gave some of that back, plus fundamentals of those big tech names look better than people expected.

you saw those big tech names do better. however, valuation of those big tech names now are a little frothy. i think the risk reward is not as favorable as it look in the beginning of the year. tom: your acclaim, good or bad, is to find the value trap and ignore it. where is the value trap? ann: the value trap in the market right now is low-quality. it is not paying attention to fundamentals and just throwing darts, owning everything. that's a value trap today. you cannot own an index in an environment where rates are going up, inflation is still high, and the economy is clearly weakening. now is the time where you really

have to be selective. jonathan: crisis, mohamed el-erian several weeks ago at the imf meetings said this was not a banking crisis. you say it is. why is this a regional banking crisis? ann: we haven't seen the end yet. i don't believe we have. i heard other people on your show this morning say it is. things typically don't and as -- end as quietly as they have. you don't see a big fraud like ftx. you don't see regional banking crises, three banks collapse, and then just everything settle out. there's too much noise. there's going to be something else. will it be another regional bank or something else? that i don't know for sure, but we do know commercial real estate specifically, office real

estate is held by a lot of regional banks and that is problematic. i think there has been so much noise or so much talk in that space but that's been pretty well telegraphed, or the worst kept secret. i fear more about what others aren't talking about, maybe even what i don't know i should be worried about today. there is likely to be another surprise out there. jonathan: i will take my money and put it in a mart -- a money market and make 4%. i take it that's not what you are advocating. ann: that old average of sell in may, go away, i'm not a big believer. i don't have a crystal ball and i don't think anyone coming into the studio has one. jonathan: some are good at pretending. ann: some are. but the reality is, if you sell today, you have to be good at two things.

you have to be good at timing on the way out and good at timing on the way in. that's not what i've been good at my whole career. that's not what i'm paid to do. that's not what good investors do. what good investors do is select the right companies and stay invested in those companies throughout the cycle. i think history has shown you get rewarded for doing that. tom: on an active basis, would you let -- the last few years -- on an active basis do you have to hold fewer holdings? do you tilt toward sequoia, fidelity, joe mercer know at for the lady for -- fidelity, do you have to hold fewer items? ann: i think you own fewer names. i don't think you want to be so concentrated that you bring a

lot of risk to the table. what is the right number of names? is it 50, 100? tom: top 10 holdings on large-cap is 44%. ann: large-cap i think you have to be careful because if you look at the indexes, they carry so much weight in the top 10. the indexes are the enemy. you have to be competing with the enemy for large-cap. if you look at the mid-cap, small-cap space, 75 to 120 names, maybe that is the better average to think about. large-cap, you can be a little or narrow than that. -- a little more narrow than that, but you need to be diversified in the number of names as a portfolio. you want to be diversified across what you own and we should talk about some of the things i like in the equity space. jonathan: what do you like?

ann: it is hard. tom: typical milletti. ann: it is hard, i know i've been pretty pessimistic. there are some spaces. health care has underperformed and has not recovered well post-covid. it has held back but there's a lot of room in the tech space and healthcare services space and the multiples haven't recovered. if you want to talk value, there is value and good long-term growth intentional. i've -- potential. emerging markets look interesting and there are some where rates rocketed at much higher than they did in the u.s. and they are on the other side. they are starting to come down. they are ahead of where we are in the cycle and the dollar is starting to show some weakness. we all know if you look at the

dollar versus emerging markets, when the dollar weakens, it is good for emerging markets so that could be interesting. jonathan: some of the countries that are the true front loaders. do you want to talk f1? ann: you guys are the experts clearly. jonathan: fast and loose now. ann: thank you so much. jonathan: ann miletti of allspring global. tom: i can see her. jonathan: miami or vegas. tom: she's like you, she thinks miami is not quite. what is a ticket in vegas? it has got to be 10 grand. jonathan: i've said this last time we caught up with christian horner, sometimes you are better off flying to europe and buying a race ticket than trying to go to miami. tom: you and me in monaco. jonathan: i am thinking we will fly into london and go up north except it is not that far north.

henrietta treyz joining us shortly on the debt limit in washington. from new york, this is bloomberg. ♪ lisa: keeping you up-to-date, i am lisa mateo. president biden has set a high stakes meeting next week on the debt limit. the treasury department warned a potential default could come sooner than expected. the president will meet with congressional leaders. the house speaker said he will not extend the debt limit unless there are trillions in cuts to the budget. underlying inflation in the euro area declined for the first time in 10 months. consumer prices rose 5.6% from a year ago in april. that backs the case for the ecb to slow its most aggressive interest rate hike campaign this week.

the white house says russia has suffered or than 100,000 casualties since december -- more than 100,000 casualties since december, including 20,000 dead. the commander of the ukraine ground forces says they have pushed back forces. pfizer beat first quarter estimates thanks to the demand for its pandemic products. the covid vaccine and antiviral face pressure as infections are waning. that was half of the more than 100 per's -- $100 million of revenue last year. global news powered by more than 2700 journalists and analysts in 120 countries, i am lisa mateo and this is bloomberg. ♪ i heard about the payroll tax refund that allowed us to keep the people that have been here taking care of us. learn more at getrefunds.com.

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>> we've had examples of the debt ceiling crisis before and they have found resolution. i think we might come down to the wire. we may approach a crisis but i think the cleaner solution here if we don't get to a political resolution, is simply for the treasury to continue to do what it is doing, i.e. issue debt. jonathan: a different perspective from thierry wizman at my quarry earlier. i wake up call from janet yellen yesterday, writing in a letter

-- our best estimate is that we will be unable to continue to satisfy all of the government obligations by early june, potentially as early as june 1. we know there will be a scheduled meeting may 9 between congressional leaders and the president. the president orchestrating that meeting yesterday, a week from today. a federal reserve decision tomorrow. the meeting begins today. payrolls on friday. it looks something like this. just below 200 k seems to be the estimate at the moment. tom: where are the revisions? i believe three months moving average is one million jobs were formed over 90 days, 333,000. yes, we are coming down but do we believe in a collapse in the job market in america? i don't hear that many saying that. jonathan: 180 thousand does not

screen collapse, jobless claims 240,000 does not screen collapse. tom: i am more interested in the real estate market, commercial real estate. a number of smart people have said this is something that bears immediate scrutiny into the summer. jonathan: take a look at regional banking etf, yesterday. down more than 2%. tom: jp morgan. some terrific work today with bloomberg opinion, matt levine and john authers brilliant on gpm. look for that -- jm. -- jpm. henrietta treyz with us now. within the marble halls of capitol hill, when there is a debt crisis or shut down or job

boning, how does the process change on capitol hill? henrietta: if anything, it speeds up dramatically. there was a lot of hay made about secretary yellen moving the debt ceiling up from as early as june 1. the reality is nobody does anything until the last minute anyway. we've got about four weeks. if those are in may, june, july, september, it is not like they will work in advance. speaker mccarthy demonstrated goodwill putting that bill on the floor last week well ahead of schedule. it spurs them into action. we've got four weeks, that's plenty of time. we've seen it done in far less and i would wager that it doesn't start until the week of the 22nd. tom: so five guys sitting on a couch with chair yellen in the

oval asset -- oval office on may 9 doesn't have urgency? henrietta: i am happy for the big four to get in the room. it is one of the steps but we have other formalities that need to be accomplished. senator schumer has scheduled two votes or queued them up, one on a clean debt ceiling height and one on the house bill which republicans might vote for. we are still at least a week away from concrete negotiations. i want to see the budget committee chairs get called up. i imagine there will be more than just this group of the big four. we want to see staff in the room. you know this about me and so do our clients, i care about what staff has to say so i want to see those guys get together. i imagine we will see that start soon. jonathan: i don't have a read on this. i have no idea.

i am taught by some people same movie, same ending. i am taught by other people it is different. what informs your read? you mentioned staff. henrietta: not only have we seen this movie so many times, but it is almost an exact repeat of 2011. you can find similar things from 2014 and 2019. the president is a democrat, the senate is democrat and the republican house. just getting the majority party in one chamber signed on, that's the big deal last week and we will start moving to the plays where the staff goes through the fine details. staff advise they are willing to hike the debt ceiling to $33 trillion which would get it out

to the election presidential cycle. those are the my new show the staff is focused on. cuts from rolling back debt really -- covid relief, fraud waste and abuse spending, all things that were incorporated as part of the republican past bill but not nearly the tree -- 3 trillion plus number mccarthy promised. that is a nonstarter. jonathan: there will be a lot of ink wasted on analysis between now and then. go through this scenario. this is something thierry wizman mentioned in the last hour -- if we approach a crisis, i think the cleanest solution here if we don't get to a political solution is simply for the u.s. treasury to continue doing what it is doing, i.e. issue debt. he made the point they could go on, ignore the political situation and carry on issuing

debt and pay their bills. is that a workable solution to this? henrietta: no. no offense but congress is going to insist on acting. i know it looks like they don't want to take the vote but they react poorly when any federal agency or otherwise takes their authority away. that jurisdictional control is something you see committees comment, the ways and means for their tax policy bills and insisting they start in the house. they react poorly when any federal regulator oversteps their bounds so i believe congress will act. default is not an option. i think investors should skip over the headlines and see that kevin mccarthy put that bill on the floor well before he needed to. i see no real problem. jonathan: four weeks is enough? henrietta: more than enough. jonathan: henrietta treyz. tom: it is sort of like dr. wh s

zman's expertise, talking to people who have been through this before. jonathan: we will talk to some people who have been through this before. we have been having so much fun. time is almost up. tom: we can do more formula one talk. jonathan: what would you like to say? tom: twitter, they went into the turn one at baku and the furry guy with --ferrari guy was flying and they disqualified him. i was stunned. jonathan: aston markin, that drs -- aston martin, that drs thing is a cheat mode. rear wing opens up, go faster. tom: it is a turbo thing.

jonathan: it makes the cars go faster, put it that way. and on a red bull, it means the car is going much faster. tom: you can see the difference in speed. jonathan: it is like they are watching the cargo that much quicker. it is meant to make the racing that much more exciting but ultimately i don't see much driver skill. tom: i don't, but what would you do? jonathan: i don't know what the solution is but i think it has become a problem. i think they tried in baku. tom: honda. jonathan: talking a lot about stuff we don't know about. from new york, this is bloomberg. ♪

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tom: "bloomberg surveillance," on radio and television, thank you. lisa abramowicz is off today, recovering from the white house correspondents dinner and jonathan ferro is preparing for an exciting hour. we will be briefed by claudia sahm who has some beliefs on what the fed will not do in this year following into 2024. michael mckee with us and he doesn't have to look on his computer screen and digest 12

pages of material in 32 seconds. let's start with 10:00 a.m. this morning, you lectured me, pay attention to the jolt survey. what does that tell jerome powell? michael: i was just delivering that message from jerome powell to you. but jolt survey is what they hung the idea of tight labor market on. the number of job openings was so great by a magnitude of factor that it had to indicate that there was a shortage of workers and that was leading for employers to bid up pay to get them to come back to work. so a drop in jolts which we did see the last prior month that was reported on, has -- is considered good news. we are looking for a drop today in terms of numbers. i have to cautioned that the jolts report is not seen as

widely accurate. tom: interesting. michael: it is a very low response rates from companies but it is one of those things that you have so people look at it. tom: the fed meeting tomorrow, you will be there asking questions. we were making a joke earlier, colby smith will probably get the first question and then the chairman will read whatever the question is off of a prepared statement. who makes that statement for him? is he writing it with a kid at his desk? michael: he is working with the staff to anticipate the questions we might ask. tom: which question matters? michael: the biggest question will be how they sell the idea of staying at 5.25% for a lengthy period of time. will there be any kind of circumstances under which they would think about cutting rates?

that's what the market thinks they are going to do and if the market thinks that, does that mean the fed has a problem with credibility and financial conditions? tom: have we other been here? -- ever been here? have other chairman have -- had to define pause tactics? michael: it always comes up at the end of a tightening cycle and generally they do not say it is the end. they say, we think we are close and we might have to do some more but that will depend on incoming data. i suspect you look at the same thing again unless -- if you see inflation data pop up. tom: where is the inflation rate in jerome powell's head? what is the statistic in the level of inflation? michael: they are still looking at over 4% on pc which is the index -- tce which is the index

-- pce which is the index they do their targeting. they think they will get down to 3% or 3.5% when rents decline. when they collect all of this, it has been a slow process but you should be able to take a big portion out. tom: there is some boston bruins swag on sale if you are looking for that. michael: i got a note from my brother that said it was perhaps the worst defeat in hockey history. tom: it was a big shock to say the least. michael: the red sox are not in last place so good news. tom: michael mckee, thank you so much. anticipating our fed coverage tomorrow including michael mckee with the chairman. this is important, a conversation with claudia sahm who was on fire yesterday on twitter, a former fed economist

of sahm consulting. she occasionally writes for bloomberg. you are pivotless. this is not a fed that will pivot. why will they just say no? claudia: there's a lot of reasons why later in the year they will not cut. they will not cut if there is a recession or banking or financial market turmoil. we've seen this, they will hike tomorrow and that will be twice. the lesson from the past is that if you go back to arthur burns who is widely viewed as the worst central banker in the history of the fed, he kept cutting when unemployment went up and that led to vo;lcker having to stay the course. this fed will not talk about it,

but the history looms large and makes sense. tom: within that, they have time and there's a sequence of meetings every six weeks or so. i would suggest they have massive asymmetric advantage to waiting and seeing more data. is that how you read it? claudia: we may have an advantage. the federal reserve has become data dependent in a backward looking way. they know that inflation takes time to come down. there's a lot in the pipeline. if they don't look forward with their decisions, it will be too much. that might not show up this year. they are playing with fire in terms of pushing when we already have a lot in the pipeline. tom: your mission in economics, one of the ideas is the partitions of american society. what percentage of america right

now is in recession? claudia: this is a really interesting point. we are going to get the data on friday from the labor market and the jolts today. this is national data that mask a lot of what is going on underneath the hood. in terms of individuals and groups of individuals, there is over 40% of the states that haven't made a full recovery unemployment. they don't talk about that. in terms of where a recession would hit artist. tom: i would suggest, i don't want to get into a stag elation -- stagflation discussion. the idea of celebrating 1% gdp, that just doesn't get it done. my right? claudia: you are right. gdp is an abstract content --

comment. the 1% gdp, a lot of that is inventories. we see consumers still spending and that's what we want to see. tom: let's go to the job economy and what is so important is the decile make of it, the bottom decile and quintile have been doing well. what about the broad middle class in the covid recovery? claudia: we are doing well. this has been a -- covering owing to a strong labor market. the income and wealth is not as dependent on jobs as basically everybody else so we have seen a lot of progress. unfortunately, inflation has eaten away at that and there's progress in jobs and it is true,

we've done a lot to close the gaps at the bottom. that's truly something to celebrate and try to protect. tom: neil of renaissance sent me a blistering note underscoring his optimism on the consumer and good incomes, if not great incomes as well. is there a great misjudgment beginning with the imf about the resiliency of the american economy here? claudia: i have full faith in the american consumer and workers. they will be able to spend -- people need -- a lot of the spending are items and services they need so if they have the income they will need it. i have the last full faith in what is happening in congress and the federal reserve, anything that looks like a debt ceiling debacle or federal debt default, that would be disastrous. we don't need that right now. tom: i get that and we've been

going back and forth. i am old school, it will get solved. are they not capable of moving they can down the road? claudia: i'm not sure they take it seriously enough. what was put through the house by republicans is not a serious start and we have a month. your prior guest gave me quite a bit of hope. this is how they work inside the halls of congress, yet this is not the time to play with fire. the economy, while i agree with neil, there's a lot that's included and probably too much pessimism, we are in a fragile place. tom: i'm not -- i'm looking at short-term rates and maybe it's outside your purview but i've got to get one more question. old-school three-month libor climbs and climbs and climbs including more recent three-month or inside three-month measurements. how do you as an economist

interpret the stunning rise in short-term yield? claudia: again, i think that fits with this degree of pessimism. i have a hard time -- what markets are predicting which is reflected in the prices, i have a hard time squaring. i disagree that the federal reserve will start cutting later in the year. i think we could have a recession. i agree with that read i think there's way more pessimism. a lot of that is in the views about the debt ceiling. there's a lot going on so i think it's harder than usual to parse what markets are doing. tom: thank you so much, claudia sahm was sahm consulting writing for bloomberg opinion. she has her own ratio and index statistic with the fed of st. louis, keeping score on the sahm

index of labor dynamics. i will call it odd because after jp morgan and first republic bank we've got to get back to the correlate of forces. -- correlative forces. it is not with a breakout yet, 60 basis points, curve and version. the real-year-old, one point 31% on the 10 year yield. the vix still remarkably solid, not 15 but 16.60 on the vix is of note. bitcoin 28,000. stay with us. this is "bloomberg surveillance." ♪ lisa: keeping you up-to-date, i am lisa mateo. president biden has invited top congressional leaders for a meeting on the debt limit next week after the treasury

department warned the nation risked default as early as june 1. the white house said it would not negotiate over extending the debt ceiling. speaker mccarthy who passed a plan last week said he would not extend the limit without cuts a u.s. regulator wants a sweeping overall of deposit insurance. the banks have drained a pool of money usually reserved. the fdic is switching to a targeted coverage reproach -- approach. that would require congress to act. more job cuts at morgan stanley in the midst of a dealmaking slam -- slump. senior managers are discussing plans to eliminate 3000 jobs by the end of the quarter. morgan stanley has about 82,000 employees. cuts are expected to take place in the banking and trading group. shares of chatgpt are plunging.

they make much of its money and subscriptions and that's a revenue source that is in jeopardy. the one-time highflying vice media is preparing to file for bankruptcy. the online media company has been looking for a buyer. it is preparing for a possible bankruptcy filing in coming weeks. it was once valued at $5.7 billion with investors disney and fox. global news powered by more than 2700 journalists and analysts in 120 countries, i am lisa mateo and this is bloomberg. ♪ ♪ (upbeat music) ♪ ( ♪♪ ) woah. ( ♪♪ ) ( ♪♪ )

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>> this fed raised rate much more than the forward guidance suggested.

they put those rates way above where the market suggested last summer there was supposed to be. and the banking system, the lending system doesn't work when you have a higher short rate versus a long rate. yield curve is a predictor of recession and causes recessions. tom: chief economist, he has been dead on about the excesses of the fed. he is clearly one of the crew looking for excesses and going to tomorrow's coverage, words will be carefully chosen by the chairman of the fed. we will have complete coverage tomorrow. futures negative eight, now -81. i really want to point out that within this, the banking stocks in recalibration. i will sell this to you as clearly as i can. matthew levine and john authers of bloomberg have written two

brilliant essays, very different, but brilliant essays of the historic moment. i don't think enough has been made of the second largest collapse of banking in recent history. levine and authers kill it for bloomberg reporting. a must read. always a study for global wall street is christopher varona at strategas securities. where we are on common ground is a beloved belief in the trend. as you said when we were talking before, at this moment you are in search of trending. trending is out there and the cacophony is so great there is in a trending to trend on. christopher: when we look at the external trend of the market, we could say generously it is up but under the surface it is a mass. -- mess.

sector by sector, group by group, there are names you would expect behaving in a similar way are responding disparate. tom: why is that? chris: our estimates for growth, nominal and real, i don't think there's enough real growth for everything to work. a good bull market yielding 80%, 90% of issues involved. we are dealing with half the market and there's no better evidence than discretionary, which is the biggest split i've seen in 10, 15 years. auto sales are very weak but homebuilding is very strong. very split. tom: we are looking at percent change when you look at the big tech stocks that have outperformed. they have technical veracity or you cannot make the call? chris: they have veracity, but tech is being confused as strong, under the surface it has

the same problems. tom: seven stocks moving. chris: under the surface it is worse than the broader market. yesterday's new low list, regionals, banks, consumer finance, retail, metals of mining, steel, that's the handbook of what you don't want to own in a slowdown. tom: the heart of you folks, i think of the chart, those were normal times when you looked at 100 stocks. no one -- nobody is looking at on hundred or 200 stocks. it has blown up. chris: the concentration at the market at the top whether it is etf's or passive investments that contribute. doesn't look like economic growth will re-accelerate or slow down? i would choose the latter with the weakness in banks, autos, and steel.

tom: jean frazier made it clear, and she's a public voice and has to say the right things. jason trader is so large he has to say the right things. frc is over. bologna, says a large body of people. what do charts say about the recoverability of this different shades? chris: the five or six weeks past the acute phase of this crisis, 48 hours pass the news of jp m and first republic, and look what led on the downside? all of these or making new lows so we asked the simple question, if the crisis is over, why can't the banks stop rallying? it is not the small communities and regionals. bank of america hasn't rallied, keycorp hasn't rallied. tom: adult pro tech talk, we can

do that with christopher varona. i am looking at the bank index and under a wells wilder trend of parabolic -- exponential measures and 81 dxy which is a measurement of trend, i can't own this. what do you need to see to say i could buy the banks? chris: at a minimum you have to reclaim the levels you saw. tom: base building. chris: are we there? tom: is that three months or year? chris: i think six months plus. it is not just the banks. the consumer finance names are week hang. look at cap -- weak. look at capital one. lazard, all on the lows. black rock should reflect s&p,

90% holder, it should look like the index and it is below 200. there is something sick within financials. what that is will reveal itself but to say the financials are giving an endorsement message here i think is a stretch. tom: we have a ways to go and for dennis gartman watching, i've got to go there. he's going to go lower left in the upper rate on gold. nobody is really talking about it. what is the technical construction of a bar of gold? chris: it is fantastic. gold has been a leader for the better part of the last six or seven months, the only time in recent history where the s&p is more than six months off its low but gold is up about 20. the s&p is up 15. this consolidation in gold prices has been so benign, no

technical damage even as rates have pushed higher. the pause in gold looks orderly and the next move is higher. tom: how do you express gold, and etf, powder, gold dost? chris: i am buying gld. i would be skeptical of the gold stocks given the weakness in the middle broadly. the physical is the best way. tom: i've got some distribution in 2000 and i'm going to say what's your vertical count off of gold hovering at 2000? is your framework 2200 or higher? chris: targets are a very precise objective. my target is higher. i can get you 2350. i think that will prove conservative. i like the asymmetric qualities gold presents. on one hand, it may protect us against a hard landing and deep

recession but on the other hand, it works in an environment where the fed goes back to old habits and prints money. i like the asymmetric quality gold presents. tom: we started with elsa out of rbc capital markets. do you detect a dollar trend off dxy? chris: dxy is mainly euros so 60%. dollar trend is down. tom: is it trainable? chris: gun to my head, immediately lowered dollar over the next 12 to 24 months. you look at dollar-yen or dollar-aussie over 24 hours, you can make case for a mean inverted move. tom: jason emails from a cigar store in manhattan and says what is your single best buy? chris: when you look through

health care, there's some decent charts. we focused on whole logic. tom: you are the second person today. united hairs can -- united health care, is that there. chris: we are not there with managed care. tom: what is great is you have chris verrone talking at work and that is as a fundamentalist, bill's mead, that's one of his top holdings. a clinic with christopher varona. strategas securities. a baird company. if you want to learn more, on technical analysis, read the books. at 12:15, a conversation, bloomberg technology with uber's chief executive officer. they will lift up the

conversation on what appeared to be bang up earnings. the futures negative seven. this is bloomberg. ♪

jonathan: live from new york city this morning, negative about 0.2% on the s&p 500. the countdown to the open starts now. >> everything you need to get started for the u.s. trading, this is bloomberg the open with jonathan ferro. ♪ jonathan: live from new york, the debt limit deadline may come as soon as june and the