>> if you would look at tech, it continues to reinvent itself over and over. >> the big picture in terms of the economy is it continues to expand. >> there is no way the fed is easing financial conditions anytime soon. >> next year, start to cut. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. ♪ jonathan: bramo is a way so this show is going to be unhinged for three hours.

this is bloomberg surveillance on tv and radio. your equity market slightly softer negative on the s&p 500 down a touch after ai went nuts yesterday in the stock market. tom: historic day. the scale of the move is extraordinary. let's pause on that. some terrific guests coming up. standard deviation jumps, it was a 4.4 steve -- standard deviation move jump in nvidia. you go to the in vm be panel on bloomberg and look at the nasdaq 100, i framed it for 27% of the big dies. gone. that is ancient history. line them up. microsoft, apple, nvidia, google, 51 percent of the nasdaq 100. never have i framed that.

jonathan: intraday nasdaq 100 up -- up 27%. nvidia year to date up 160%. meta year to date up 110%. michael hardin at bank of america this morning, bonds and bubbles. he said 4% real yields pop the internet bubble. the market is saying 150 basis points, too low to pop ai. tom: pop ai, i am not sure where to go with that. alec webb in london was brilliant yesterday on this nvidia, ai stuff. once we get beyond the debt ceiling, this weekend, we go back to interest rate analysis in the june 14 fed meeting. jonathan: publicly, lawmakers are insulting each other still. , democrats blaming republicans republicans blaming democrats. the contours of a deal going

together into the weekend. tom: i think greg valieva takes the high ground today. people talking about 10 democrats and that. valley ace says it is 100 on one side and one hundred 25 of the other side that need to be convinced. it is a bigger group of people that need to be sold, whatever the toxic brew they are doing. jonathan: u.k. officials are counting -- of the treasury today. break of 50 billion, a break below that level, so down for more than 76 billion the previous day. that number has come down. i get it can jump and fall. you can see the trend two weeks ago from 140 in the middle of may towards below 50 billion. tom: i am going to go idiosyncratic on you. john and i have different screens we use in the bloomberg for equities, commodities. out of left field, but it is a

moment that sticks out like a sore thumb. you mentioned south africa yesterday unwinding, it is down 10,000. turkish lira, 20. that is a weaker lire of an electoral drama you are seeing in turkey. jonathan: equity market on the s&p 500 -0.14%. s&p yields come in by three basis points. 10 year, 3.78. euro, trying to stage recovery. fact of the matter is, we have gotten down to lowe's we have not seen since march. close to breaking 1.07 in yesterday session. tom: we did not break 1.06, maybe three times today. jonathan: economic data coming out later. we will get personal income, personal spending at about 8:30 eastern time. you miss sentiment survey coming up -- you mitch sentiment survey

coming up. daniel ricardo coming up later. danny rick, 40 minutes away. tom: to the american audience who may not be familiar with this truly international name, this guy is a star. it is his character, not just driving around. he was near perth, australia. he is australian-italian. does he speak italian? jonathan: i often thought he might end up as ceo for ferrari. tom: there is a lot of speculation of what is next. this is a guy that has taken the brand further. he is a little bit like michael jordan in basketball, more than just driving the car. jonathan: he is a real personality. he will be the second best guest this hour. the first best points us now. good to see you. let's start with that rip

roaring rally in big tech and ai. is this willing --is this something you are willing to find right now? >> not really. in strains, you do trim and trying to buy into weakness. nvidia numbers were off the charts the day for technology. my problem is everything else. the average stock year to date is down. the dow is down year to date. eight of 11 sectors down your to date. this is narrow and getting narrower market, that is generally not healthy. tom: in your history, you have an analog? is there another time that looks like this? bob: we are not there yet in terms of valuation or narrowness, but into the 2000 tech peak, there are similarities begin to build. i hope it does not in the way that when did. we have got to watch it carefully. tom: i look at the choice that would have to be made.

you are making them over the three-day weekend. you're going to reallocate into june, a midyear review june 30. how do you reallocate equities? bob: the first question is, interest rates continue to trend tech. my biggest add in the last quarter has been financials. stocks have been decimated. i am not trying to figure out which community bank is going to make it. the big banks that do not have asset liability mismatches that have good credit were taken down big time. having added to those, thinking there is more use to come there. jonathan: you're talking about banks like j.p. morgan, a large presence in retail as well. is it more specific? what names are you thinking? bob: j.p. morgan top of the list. citicorp, bank of america, those are the names i am adding. tom: when you look at the

community banks, one thing to do is an etf. do you suggest instead of cherry picking community banks, looking at a broad per folio? bob: you could do that. i do not think we are out of the woods yet. when the fed raises rates from zero percent. to fivepercent there are consequences we see a few, i suspect, financial banks are not out of the woods yet. tom: talk to me about preferreds. fossils like you and me remember when preferreds were talked about all the time. i think it is much less so now. that extra dividend in prefers, doesn't have value? bob: i think it will as we get into we more defensive environment. we have had a period when both preferreds and yield stocks year to date have not done all that well. that is because we are in an environment where interest rates have moved up. if we can go sideways for a

while and the market and equity market gets a little sloppy, probably ferns and dividend yield stock to better. jonathan: what would you say to people who have missed out on this rally year to date in are starting to feel anxious about getting and deploying capital? bob: have they really missed the rally? they might have missed the stuff that is out, but the average stock to repeat is down. i would not go chasing a whole lot here. i still think economic weakness, mild recession is in front of us. i know that is a minority of people now. earnings have not behave themselves all that well after better-than-expected first quarter, you would expect a lot of analysts to move their estimates up. it has been spotty. i look at my screen and stock market is only at 20 one times earnings. it is not like you are getting a bargain to take on some of this, gee, i do not know risk. jonathan: are you starting to

take cash addition and if not how big? bob: most of my portfolios i am fully invested. where you can get 5% on cash and you are uncertain about earnings and your pe is over 20, having a little cash in your portfolio whether that is fixed income for -- fixed income portfolio or equity part is not the worst thing in the world. jonathan: great to catch up, enjoy the weekend. talking about yield at the moment, 449 on a two-year yesterday through thursday we had 10 consecutive days of yields rising at the front end of the yield curve. this morning we come back down by four basis points. 4.50 on a two-year. tom: 50 year bankrate is up 7.15%. we have just -- no.

yes, we have just exceeded the peak of march. jonathan: this happened in real time. tom: 30 year mortgage we have just exceeded that peak in march. mortgage rates are based on the bank rates 30 year mortgage. jonathan: if you have got that mortgage 30 years at 3%, you're not letting that go, are you? tom: this is original. i do not think we can see in any other housing crisis we have seen this. jonathan: look at the data coming out of manufacturing versus services. the distinction is massive. manufacturing worldwide screaming recession. services, take a look at airlines. i have had a lot of people reach out about how busy the airports are going into this weekend. that does not look like a recession at all. tom: i talked to my driver and he said the hamptons will boom this weekend. he is spending the entire weekend in the hamptons. he said it is back to 2019. jonathan: i'm going to say something foreign to people who

live in new york. ? whatis it about the hamptons i do not get it. i am sure i am going to offend so many people. tom: the beaches. jonathan: they are not that spectacular. one hundred million dollars for a house on a beach. tom: this is a guy with 400 square feet on capri. jonathan: you pick up a house, a villa, you can do it for several million. go and have a look at how much it costs to pick up a house in places like southhampton. tom: a shack. jonathan: we are talking 50 million, 75 million, for what? tom: i can see what the hudson river off the rafts. jonathan: no thank you. anyone who is thinking of doing that, send me a message. i will construct a global property portfolio for you for the same money were about to spend 100 million of the place in mont tog. .i do not get it tom: what this could be instead

of happy friday, happy tuesday. jonathan: go to the jersey shore. tom: happy tuesday. jonathan: happy. tuesday coming up, jeanette low of strategics next. ♪ >> keeping you up-to-date with news from around the world with the first word. a deal made -- may finally be shaping up to avoid a catastrophic u.s. default. sources say republican and white house negotiators are closing in on a deal to raise the debt limit and cap federal spending for two years. the agreement would include measures to upgrade the electric grids and cut 10 billion dollars for budget increase for the irs. another republican may be gearing up to enter the 2020 for u.s. presidential race. wall street genre -- journal reports doug burgum is planning an event on june 7 to make a major announcement. brigham is a wealthy software

entrepreneur who was first elected in 2016. bank of japan governor says the boj's balance sheet is not necessarily in a normal state, given the bank's large holdings of government bonds and etf's. he played down the importance of wages or any single economic data set. as atrigger for economic change this suggests his desire to hold onto policy flux ability leaving speculators guessing about the timing of policy shift. global news powered by more than 2,700 journalists and analysts in over 120 countries. i am madison mills and this is bloomberg. ♪

>> speaker mccarthy and i have several conversations. the american people deserve to know if social security payments will be there. veterans hospital will remain upland -- open and we will continue to make progress. a default puts that risk. congressional leaders understand that and have all agreed there will be no default. jonathan: the president of the united states with a touch of happy talk into the weekend there will be no default. the latest news,.follow

the numbers this from the treasury cash balance going into the weekend dropping below 50 billion dollars according to the latest data, down from more than 76 billion the day before. the context of the deal coming together based on reporting from our colleagues in washington, d.c. the two sides have narrowed some of their differences in recent days. negotiators said to me moving closer to raising the debt limit and cap federal spending for two years. we are not there yet,.we are getting closer tom: what conservatives are going to say is we are there but as you said, the key raise is two years or 18 months. it seems it is all most a collegial band-aid to not kick the can down the road, but they have a termination date out there. that is what i am looking for,? what are the termination dates jonathan: the consensus, we will be doing this further down the road. how much further down the road that will be? tom: we do this every three or

four years. end the three-day weekend, a long weekend for politics and washington, they will look at policy and the outcomes of it. joining us now, the managing director of policy research at strategic. what is the distinction for you? what will you listen for this weekend? >> thanks for having me. we have one deal coming together, which is good news. there are a lot of details that need to be worked out as you continue to hear they have made progress and are limiting the number of issues that still need to be taken into account and finalized along the negotiators. there does seem like we are getting closer. we are going to be looking at how this deal is structured. this is definitely smaller than what the republicans initially proposed. they were looking at 10 years of discretionary spending caps.

how that is going to be structured is going to be important for the markets because there is this anticipation we are going to get some austerity out of this deal. even if we do not get austerity, we think there is more fiscal austerity in the years ahead for the united states. tom: this is really important. this is the history learned at richmond and bu. what is the difference between our austerity and let's say the united kingdom is living? they seem to be drowning in an austere psychology. i do not see that in the last eight or 10 years in washington. i see if it moves, spend every dollar. what has changed? jeannette: what we have seen is that obviously, the pandemic, you had extraordinary fiscal stimulus coming into the government. we have had inflation come on top of that. what has been the key change now --to your point, we have been able to spend and cut taxes

freely for the past number of years. now that we have had interest rates rise so much, that is increasing the cost of the u.s. debt. net interest costs for the u.s. are increasing. we have seen historically once those rates hit 14 percent of tax revenues, financial markets begin to impose austerity on policymakers. we are currently at 12.7% and anticipate we will get to 14% by the end of the year. that is where we are looking. that is going to start to squeeze the federal budget. even if this deal is not particularly austere, which given the current contours, that does not seem like it will be, we are looking at the fact over the next couple of years, policymakers still have a number of other times they are going to have to come into play to think about how do they bring the u.s. fiscal budget into a better alignment to handle some of these costs they are dealing with? jonathan: can we finish on the x day, the treasury does not have a precise idea of when that falls.

we are all guessing. they have information about tax receipts. how are you reading the tea leaves of that situation? jeannette: right. i think the negotiators want to operate off the fact we have june 1 as the x date. there always is a little bit of flexibility with that. treasury wants to have a little bit of a buffer so that if we were to cross over the x date, you would still have may be some cash to continue to make payments before the treasury department. would run out of cash maybe they might be able to make it to june 3, maybe not. they did put out an option this morning that does make it seem like they might have more cash at the x date. i think the more important thing is negotiators are focused on the x date and if we were to cross it, we think that would be a market jolt. it would help get a deal. i think the actual loss of cash

is less important than that x date right now for policymakers to be able to control their focus. jonathan: when they start to think about prioritizing spending, there can be confusion between going for the x date and defaulting on debt obligations. how do you think the treasury start to prioritize spending as we, if we, go through that day? jeannette: it is a great point. the big thing we are trying to focus on is this would not be a default if we crossed over the x date. treasury we believe would prioritize making interest and principal payments on treasuries. this would be about prioritizing spending and payments to bills that need to go out at some point. we think the treasury would prioritize things like social security, medicare, defense. then, it is whether or not you pay federal contractors on time. it seems like it is more of --it is not an actual default on u.s. treasuries. jonathan: thanks for clearing that up. jeanette low of strategas.

there has been conflation between going for the x date and defaulting. they are not the same thing. tom: i am proud of what our team has done with this. when she said, we are moving from 12% to 14% and the cbo -- forget about the politicians, says in 2053, 30 8% of our interest expense --38% of our taxes are going to go to interest payments. that is how out of whack this is. we are trying to get out to june. cbo says we are going to go from 14% of tax revenues to pay the interest bill to 38% in 2053. you and i are going to be on set in 2053, i'm going to be 20 years to that austrian bond and

the interest of math does not work. jonathan: i will say this about that. they are becoming more like europe without the strengths, it is not good. once you get through this it does not mean the debt conversation goes away. there needs to be a conversation about this. there has been a total failure of those who care about this issue out of power, forgetting about this issue when they come into power. this is something that quite clearly needs to change based on the trajectory we are on. tom: the recent catalyst was a pandemic, everyone can look back on history. books will be read. we had this natural disaster. now, we've got to get back to the austerity. jonathan: government spending significant money off the back of this natural disaster, which makes me wonder why there isn't a bigger willingness from governments worldwide to get to the source of that natural disaster, to understand what was behind it? i am still surprised by that today. the lack of interest to get to

the bottom of that when it has cost the global government so much money responding to it. tom: i agree. how do you prepare? for the next disaster i do not hear more conversation about that. jonathan: a lot of distractions at the moment. equity futures on the s&p negative not even zero point 1% on the s&p 500. great lineup this morning on the federal reserve, global economy as yields retrace some of the move of the last 10 days after going through 4.50 on a two-year. this morning, down about five basis points. your yield about 4.48. this is bloomberg. ♪ rock star? what do you know about rock stars? billy idol? i mean where's the skin-tight leather? my shoes are leather. where's the unnecessary zippers? that thing! billy, rock star is just how doug feels when he uses

workday. thanks, rory. i'll show you rock star! be a finance and hr rock star. workday. for a changing world. billy idol just stole your golf cart!

jonathan: let's get you to the long weekend stateside. equity market on the s&p 500 unchanged down by 1% so far this week through thursday. nasdaq slightly positive. nasdaq 100 yesterday, best day of gains so far this month even with this in the bond market. shaping up as follows, to year around 450. we have had 10 consecutive days before today of yields climbing. yields dropping today by five basis points. over those 10 days with yields

up 60 basis points higher, the nasdaq one hundred is up more than 4% over the same period. that rate story has not taken a bite out of the enthusiasm in the equity market. tom: the enthusiasm of pretty good gd -- gdp numbers. further inversion now, i do not know if 70 basis points of inversion is up with trends in place and the real yield 10 year real yield 1.53%, that is a change. jonathan: nominal yield week to date up 20 two basis points on the front end in the u.s. in the u.k., 58 basis point move this week. tom: germany -- jonathan: cpi, pressure on them. really interesting moves in the fx market. euro against the dollar right now at about 1.0733. yesterday coming in close to a

break of 1.07 after getting close to breaking 1.11 not so long ago. yesterday the low of the session 1.0707. tom: i mentioned a couple of days ago, a freefall to 1.05. it is going to be and ask ordinary day. i am nervous. we've got ricardo coming up. a bigger superstar than ricardo coming up right now. jonathan: you said tom is a bigger superstar than danny rick? do you want the good news today into the long weekend? no fed speak whatsoever. they take the day off going into the long weekend. tom: when dominique talks, it is fed speak. jonathan: the fed speak we have heard so far this week, we expect fed to pause officially in june and the next cut -- the next move will be key -- will be a cut. as the, layoff rate continues to

rise there is scope for a sharp rise in unemployment on the back of lower vacancies. this is the conversations people are still having. tom: a conversation 90 days ago was dominic, let's get an update. it is simple. there is to americas out there. there is everybody else flat on their back and people who own nvidia. they are in the hamptons celebrating this weekend. what is your super restrictive take on the fed mean for the hamptons? i'm fascinated by where we are. your super restrictive fed and where we are going to be when the first leaves fall in the hamptons in october. >> i think this is the calm before the storm so to speak. nothing has changed over the last few months in terms of the underlying trends of a slowly slowing economy and basically

you are having credit conditions tightening and lending growth is slowing. a number of things in the pipeline such as when the debt ceiling has passed, a lot of t-bill issuance takes place, that will challenge the banks again in terms of potentially losing more deposit. i think the idea is discretion patients. the immediate crisis where in some since the fed needed to -- at the june july meeting, that has backed off but it does not mean the underlying problems have gone away. they are still there. the real risk is the unemployment rate rises much more sharply towards the end of the year. that will have a new meaning for the fed. right now they can fight inflation because it is the main issue. it will be a problem if unemployment starts to rise faster than most people expect. tom: what is the rate of change

on that? this has been a debate on the show, the basic idea of nonfarm payrolls 250,000. everyone agrees it is coming down. what do you suggest will be the way it will come down to 40,000 or dare i say a negative nonfarm payrolls statistic? dominic: the issue goes back to a debate the fed itself had governor waller had in terms of you can think about how unemployment rises. it rises either because demand for labor is going away. it can rise if supply of labor is going up due to people getting fired or rejoining the labor market. what happens if both happen at the same time? if people start getting fired and that demand is going away? the demand is refunded in vacancies. you could see a sharp rise in unemployment as those things collide. those statistics are governor waller -- governor waller put out himself last year.

they had an example where a 50 cent jump in layoff rates could lead to unemployment doubling from these levels. i think the path for a quick drop in payrolls around and of q3, q4 is plausible. the fed historically starts to cut rates when unemployment only rises on average 22 basis points. they need much of a excuse to start cutting rates if unemployment starts to rise as much as some of those indicators would suggest. jonathan: is it the objective now to see that happen? dominic: that is part of the problem. inflation is sticky, we know that. most of us understand why it is sticky, it is to do with more of the supply side than the demand-side. the fed can not be patient if appointment is so low. it needs to see the unemployment

rate rise. it has got the credit tightening on its side for that. then, they can switch gears. until it does, it does not have much incentive to preempt any kind of loosening up of the labor market of why inflation is still sticky. you mentioned u.k. data. a lot of people were surprised by that not just because it was higher-than-expected, but the good side was higher. you saw yesterday fed officials were talking about concern around goods inflation not coming down as much as they might have expected in the last couple of months. those feed into this nervousness around inflation being too high. it has got to come down. if unemployment is still low, you keep fighting it. it does not mean you keep raising rates, but you have a pause and may raise rates again if unemployment is still where it is and inflation is still where it is. jonathan: you clearly have a different view of where unemployment is going to go from here.

you mentioned vacancies. we saw reports and studies the last six to nine months, some people leaning on this idea you can have vacancies come down without unemployment going to much higher. what is the reality check to that? dominic: the answer is no one knows. empirically, it is true. if you go back three cycles as vacancies come down, unemployment does rise a lot. covid was amazing in terms of how the labor market restructured. companies were getting rid of people in one part of the country and rehiring people in another part of the country. the efficiency around the job market was temporarily destroyed and has been reshaped. the truth of it, no one really knows. there is obviously some good, theoretical arguments on the side of the fed you could get vacancies coming down quite a lot without necessarily having on up a lot.

some people, people like myself, we tend to rely on historical models and the idea that if you are going to get a slowdown in vacancies, the risk is that unemployment rises more than you think especially when you have this strict policy in place by the fed. they are not giving themselves much wiggle room. tom: you are set cut and chiseled. people do not realize how many years you have been around. your first day at credit suisse i think was in the 1990's. it is simple. i am looking at the chit chat we have to put up with every day from austan goolsbee of chicago over to james bullard of st. louis. are these people talking too much? dominic: [laughter] they are certainly talking a lot. the question is whether it is helpful for the markets. in my mind, it is a lot of

noise. i think in general, the governors are good people to listen to. i think the presidents can be a little white noise around the whole conversation. especially if they are not voting, it is much less relevant for markets. tom: 24 months out, where is the 10-year yield if we move from constant restricted to something new with labor deterioration? dominic: the key is what happens to the supply side, the supply driven inflation we are observing is still high. my guess is, a lot of that is covid pandemic related and that will dissipate especially as you see the labor market normalize. on that basis, 10 year yields should come down to three percent or below because the fed needs to be getting back to a neutral rate, which william now confirms is different than what he thought it was before. jonathan: [laughter]

he cannot let that go. what did you make of that? dominic: anyway, the risk is a stagflation and that supply inflation does not come down. we have done modeling on that which suggests the 10 year stays where it is, a 4% yield. it is no big deal, which means the upside to tens is capped. you are not going to see if i percent or 6% yield. jonathan: i'm not letting you go without answering. what did you make of that williams peace? dominic: well, i am not surprised. hi think if you massage the data enough you are going to get the result you want. my intuition is -- tom: be clearer, please. [laughter] dominic: the low era of interest rates before the pandemic has not suddenly changed because of the pandemic.

statistically, he is able to show that by doing more fancy analysis. we will see. my bias is that the low era of interest rates has not changed. there is a lot of reasons people are worried about it changing. no one really knows. i am happy to run with the flow. tom: i think the invitation to jackson hole just went out the window for dominic. [laughter] jonathan: mohamed el-erian things that may have changed. we are going to catch up with him. tom: these folks started it. everybody is on born and in camp with rogoff. jonathan: coming up, an absolute rock star of the grid. red bull racing's daniel ricardo ahead of this weekends grand prix. .that conversation up next ♪ >> keeping you up-to-date with

news from around the world with the first word. a deal may finally be shaping up to avoid a catastrophic u.s. default. sources say republican and white house negotiators are closing in on a deal to raise the debt limit and cap federal spending for up to two years. the agreement would include measures to upgrade the electric grid, speed permits for pipelines and cut $10 billion from a budget increase for the irs. turkey's central bank has kept its benchmark rate on hold for point 5% in a bid to stabilize the lira. policy decision becomes ahead of sunday's.election the president is looking to extend his rule after leading the first round of voting but failing to take 50% earlier this month. the cyclone that devastated large parts of new zealand's north island in february has been less inflationary than first feared. rbnz initially --cyclone would

add three percentage point to inflation. the central bank had downgraded that impacted 0.1 saying it drove up food costs and did not affect other goods. ubs and swiss government have agreed to the precise terms of state guarantees for the emergency takeover of credit suisse. sources say the deal's completion could be pushed back to june. ubs and the government are still haggling over the regulatory implications of the takeover, including capital requirements and acquitted the rules. global news powered by more than 2,700 journalists and analysts and over 120 countries. i am madison mills and this is bloomberg. ♪

♪ ♪ the biggest ideas inspire new ones.

30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ >> while inflation is still too high, there are promising signs of moderation.

i believe we may be at or near the point where monetary policy can pause raising interest rates. this will provide an opportunity to more fully assess the impact of the actions we have taken to date. jonathan: some good news, that was susan collins boston fed president. no fed speak today going into the long weekend. we do not have to talk about the and interest rates anymore. finished, done, wonderful. tom: peter at lazard will take over the reins. i have known peter for years. he is a world-class economist out of london school of economics and brings major policy credit in health care toward the lazard boutique. we are going to get to this quickly. every moment is important in monaco. jon ferro is far more abrupt than i am. in every sport, there is someone that transcends the day-to-day

grind of the sport. , you have your heroes maybe it is michael jordan, a. guy named judge for the new york yankees daniel ricardo is so large for red bull and for f1 racing and --anne hathaway keeled over at the met gala when she met him the other day. anne hathaway fell apart. jonathan: who knew anne hathaway was the fan boy? tom: the problem is, he is wearing tom around at the met gala. he puts on a fake bowtie. can you talk to him when you are in monaco this weekend? we need ricardo in a real bowtie. jonathan: we can talk to him right now. he joins us going into the race weekend in monaco. talk to us about how special race weekend is in monaco. >> hi felt we were just going to talk about bowties. [laughter] jonathan: [laughter] >> let's talk about monaco.

let's put it this way. i have been coming here now for 13, 14 years. it does not get old. that feeling, monaco is so special. it transforms into this magical place for the race. that rhymes. you have to experience a monaco grand prix at least once in your life. it is surreal. jonathan: one thing we have discussed, formula one's explosion in the united states with your boss, others as well, is whether we risk losing the heritage of the sport as we explained in places like vegas, miami and elsewhere. how do you feel about that? daniel: and i think there is --

-- needs to remain in place for the historic venues. your monaco's, belgium. these places should always have a presence on the calendar. i also love going to new places and how we are able to open ourselves up to new markets. i enjoy spending time in the states. having three races there is unreal. i am somewhere in the middle where i am open to having new venues, but i think you still have to keep those core few. they should always remain. jonathan: i would love to talk about your future. your personality is trans -- has transcended the sport. i know deep down, you are a racing driver. i want to understand from your

perspective how frustrating it has been being on the outside of the sport, being the reserve driver, what it is like being in a simulator, if it is anywhere near like sitting in the car? daniel: this year serves a purpose for me. i did need to remove myself a little bit from the driver's seat, just to fall back in love with it again and miss the sport. i had come off a more difficult 12, 24 months competitive wise and i was starting to have too many bad days where i needed a bit of a reset and refresh. i'm getting that this year. sure, it is frustrating to be on the sidelines and to watch but that is building this fire and desire back. the plan is to find myself a seat next year.

i do not just want to be there. i do not just want to get a seat to say i am a f1 driver. i want to find my way up to the podium. tom: you are in the in between age. you got alonso making a splash at 40 years old. tell us the experience value whether miami or monaco, what do you sell to a new team or red bull when you've got a lot more experience? how does that matter in a given race, including this weekend? daniel: i think experience is very valuable, because it comes in terms of driving on track situations, the more you can read a situation, that can help. building a car or helping the guys that build and design the

car, helping them with feedback and understanding this helps the team move forward. that is the value and experience. i am 33 at the moment. alonzo is in his 40's now and is having one of the best years of his career. that is encouraging for me. there is daisy feel a bit old. [laughter] --saying, i feel young again. it is how bad you want it and i am still in shape and if i want it, i believe i will get back to it. tom: jon ferro has been great about explaining to me the red bull distinction. i was comparing them to the west coast eagles of australian football, who are in last place right now. you have been red bull since you were like 16. what is the red bull pixie dust? daniel: [laughter]

i do not know if that was a jab at me because i won the eagles in an absolutely terrible season. red bull, they are the opposite right now. they have been the program. that was the franchise, if you will, that everyone wanted to be a part of and sign for. they had the resources to progress you up the ladder if you were having the results. that is the family that gave me the opportunity. being back in the family feels like it is the biggest family i have ever had in racing and the place i feel like i belong. right now, that is my dream, to be back here with this team racing and hopefully winning another monaco one day. jonathan: you think there is potential to get a seat again in red bull racing or are you looking elsewhere?

daniel: in this sport, things can change so quickly. even at the end of 2018 when i moved onto red oak, people thought i would never wear a red bull polo shirt again. never say never. i am also like, if i focus on myself and keep working hard, anything can happen. it helps when you have got good looks in this sport. jonathan: of course. like charles leclair. you've got that italian blood running through your veins. can you imagine being in a red outfit over a for lori? daniel: never say never. i feel like it probably would have happened by now if it would have. that one is probably more slim. honestly, this is a lot --that

is where i am at. jonathan: this was a pleasure. if you make it to new york, drop by. tom: bring anne hathaway. [laughter] jonathan: tk is going to teach you. what a legend. what a great guy. tom: what i would say, i am an amateur at this. last race, a colleague of mr. ricardo's went by those two cars unlike the straightaway. you could see their cars differently. jonathan: so much faster. tom: it was just, it flew by. jonathan: looking forward to the race this weekend. qualifying could be interesting. tom: starts today at noon or 12:30 our time? you and i could be watching the qualities at the 8:00 hour.

jonathan: practice, then quality. [laughter] from new york, this is bloomberg.

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>> if you would look at tech, it continues to reinvent itself over and over. >> the big picture in terms of the economy is, it continues to expand. >> there is no way the fed is going to be easing financial conditions anytime soon. >> i think they will probably try to hold all year and next year start to cut. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: itching to get to the

long weekend. good morning for our audience worldwide, this is bloomberg surveillance on tv and radio. your equity market positive on the s&p 500 up by 0.2% after the back of a monster gain on the ai revolution, the frenzy is here. tom: we saw yesterday, the concentration with nvidia. the top six stocks nasdaq 100, i am framing 28% of the nasdaq 100. that is out of control. how about 51%? jonathan: that is nuts. tom: nvidia number three after facebook. jonathan: the numbers were up 27 percent year to date on the nasdaq 100 right now. last 10 days before today, two-year yields have climbed about 60 basis points.

10 consecutive points of yields higher. nasdaq up 4% on the nasdaq 100. that relationship between bonds and equities, that move in yields has not stopped the enthusiasm between those names. tom: the analysis behind that doozy at some, what is our comfort factor of terminal value of the profitability of those companies? we are talking retail this week, they make three cents on the dollar, six cents on the dollar, $.12 on the dollar, these people are clocking 30 cents on the dollar even higher. jonathan: and systemic growth, as well and potentially much sooner than anticipated. let's get to the price action in the equity market s&p 500. equity futures shaping up positive by 0.2%. we take back some of the move we have seen on the yield curve. 10 year down three basis points. two year down four. we will keep turning to what has

been developing in the foreign exchange market. three legged stool, u.s., europe and china. it has developed into this story where dollar has started to regain strength and euro-dollar has come up from that 1.11 level from april down to 1.07. tom: we are going to be at ban green houses party -- dan green's house party. if you are in china, that is when you act. are we going to see china act this sunday because we are all asleep waiting for happy tuesday? jonathan: dan green might be asleep. good morning to you. this move in tech, phenomenal. what do you make of that? >> there is clearly a developing in ai and i do not have anything

insightful to say this is another evolution or appears to be another evolution of the tech space. you had the advent of the internet, the shift to desktop, the shift to cloud and this is the next iteration in the development. i think there is a fair level of enthusiasm that is warranted. training at 40, 50 times sales is always a question. the argument among growth investors is whether the denominator is going to be wrong and ultimately we are proven right overtime. tom: the study this weekend, we are making jokes about china, is what does hold mean? if i own these things, should i buy them, should i sell them? the character of a hold right now is opaque. i do not know what hold means for apple, luxury goods, nvidia. dan: we are particularly deep

value credit and equity investors. what we are talking about is not in our wheelhouse. in a general sense, for a lot of these names, developing generational technologies whether nvidia, microsoft, etc., the idea of holding is you are going to go to up 30%, go up 100%, there is going to be volatility but you are supposed to write it out. you are going to realize the gains allah amazon in 2000, etc.. tom: these numbers are estimates. right now large-cap up 30%. large energy up 3%. is energy deep value? dan: we think so. you mentioned this before. tom: i am sorry. i did not build the script. dan: you mentioned before about the stock market is up while

treasury yields are up and there is plenty to talk about in the treasury market. to be clear, the names we are discussing are driving the gains. i looked yesterday, the median stock among the fang, magma, up 35% year to date. median stock in the remaining 4.95 is down 2% year to date. there is a tremendous bifurcation in size across cap, whether large, mid or small cap. particular lien large-cap, you have -- particularly in large-cap, you have outperformers and everybody else is not doing as much. looking at the headline index in general belies beneath the headline developments even more so right now. to ramble further onto energy, i think energy presents a lot of value. you have had tremendous developments in the space that have resulted in more attractive

investment opportunities for several funds willing to step into the space. esg has scared a lot of investors out of the space. the implosion in energy prices the last couple of years has resulted in energy focused managers stepping away. that has created value opportunities for the likes of us. at the same time, the names are not just plays on oil themselves. oil is off 40% from the high. broad energy stocks are down half of that, somewhere down less because they are more capital of return investment story than purely a production story. that presents an opportunity for firms to exploit dislocations in the market. jonathan: the s&p 495, maybe we should build that as an index at bloomberg. strip out some of those big tech names. tom: the dow jones industrial average. jonathan: price weight it?

there are other things happening in this equity market. we were mentioning offline the homebuilders since last june are up 70%. let's walk through these dynamics. elsewhere, you've got manufacturing and recession services booming in certain places. we have these generalized conversations about the economy. underneath the surface, you got 20 different economies doing different things. dan: admittedly, that is largely true. the best example when you mention that is the 2000 15-two thousand 15 period when the industrial part of the economy was largely in recession and we were worried about broader economic recession that never materialized. $20 trillion economy that is hard to drag the entire thing down into a recession. to the builders, this is largely the result of the activity post

gmc, which is everybody under built. we knew that as it was happening and you were set up for a moment in time where, if there should be a surgeon demand for product, a.k.a. houses, you would not have the inventory to be there. ku -- covid came and blew the metrics out of the water. 95 percent of homeowners are locked into sub 3% mortgages, so they are not selling and taking on a new 7% mortgage unless they have to. you are forced to buy a new home, which is more expensive and the result of the builders. the builders are excited about this and ultimately it is driving a lot of development's we see in the space. jonathan: this gets to the recession call. do you think we face that scenario? do we face the different scenario this time, or is it the same again? dan: every recession is a new

spin of the roulette wheel. this is a good opportune moment to push back on something people talk about all the time, the idea we have been waiting for this recession for -- this is nonsense. when the fed started raising rates, people were saying we were going to have a recession probably next year, 2023. my view was, a recession in the middle of 2023. that doesn't mean i expected a recession now. when the fed raises rates, they usually break something and you have a recession. the recession was supposed to happen around now. it appears it is not going to be the case. now, you have your first real instance where you are pushing your recession call q2 q3, q4 q1. tom: you have largely identified with --, talking about doing trades and that.

our people trading too much to create a --? dan: probably. we know the holding period for equities has been in decline for decades. tom: it is kramer's fault. jonathan: [laughter] dan: i love that we can blame purely jim cramer for that. we all bear responsibility for that an element. the research is clear that long-term holdings of value stocks tend to outperform. there are period's of time that is not the case. tom: where are we right now? into the end of this year, do you need to be supple? dan: i think a lot people do not have our holding curve. we have some names in the portfolio that the pm has held for 12 years. a lot of people do not have that. i have owned home depot since 2009. i do not think a lot of people do that anymore.

what you are dealing with now is a quote on quote expensive market when viewed from the headline. the second derivative of that argument is, you have a huge expansion in tech stocks which is going to drag up the markets pe. it is not as simple as you are saying the market is expensive. on its headline, and expensive stock market up against a federal reserve not cutting stocks anytime soon and trying to engineer an economic slowdown. the last 60 years of data shows anything, the fed generally gets what it once. jonathan: we should do another segment of your pushback's. dan: things of which i have a problem? jonathan: love that. tom: home depot two thousand nine up 23 percent rear. jonathan: enjoy the weekend. from new york city, this is bloomberg. ♪ >> keeping you up-to-date with

news from around the world with the first word. republican and white house negotiator said to be moving closer to an agreement to raise the u.s. debt ceiling. sources say the emerging agreement with cap dashwood cap federal spending for two years. a vote in the house of representatives is likely to take place tuesday. peters or zack will become lazard's new ceo. he will have to contend with a slump in dealmaking weighing on profits. jacobson will become his second chairman. shares of marbella technology surging in premarket trading after the chipmakers said it expects sales of ai related products will double this year. adjusted earnings for the forced -- first quarter beat estimates. nvidia's market value jumped past 900 $30 billion on

thursday. wealth bankers in asia at ubs and credit suisse will get a rare incentive for bringing in new money. they will get a cut of cash equal to 15 cents for each one hundred dollars of new client money according to people familiar with the matter. asia was once a key battleground for swiss rivals but are now trying to show client stability after that emergency merger back in march. global news powered by more than 2,700 journalists and analysts in over 120 countries. i am madison mills and this is bloomberg. ♪

>> the reason why we are here, we've got more money at any given time coming and. democrats are spending an hour debt is higher than any time in history. >> it is my understanding the needs of president biden and speaker mccarthy will talk. it is unfortunate that house republicans have chosen to get out of town before sundown when we are facing a dangerous default. jonathan: house speaker kevin mccarthy, house minority leader had team jeffries, the blame game continues in washington,

d.c. privately behind the scenes, the contour of a deal might be coming together. we talk about the details in a moment. big gains yesterday on the s&p. big gains on the nasdaq off the back of that monster move of nvidia. nasdaq one hundred had its best day of gains for the month of may. towards the end of may, yields have been on the climb. yields are lower by three basis points, 3.78. down three or four basis points of a two-year on --to year versus 10 year, curve back to -70 right now. tom: this is the vanilla spread. the difference between the two year and 10 year spread, any kind of inversion is a big deal. -- came out and said we are going to .6%.

we said you are nuts. she recalibrated with ira jersey. we pulled back and this week are coming back down again with greater inversion. jonathan: forgive the bond market jargon. what started to develop was that classic bowl --the two-year starts to rally anticipating a rate cutting cycle. what we have done the last couple of weeks is take a lot of that back, christ out rate cuts and started to price in rate hikes off the back of fed speak which has encouraged that stance. there has been persistent effort from federal reserve speakers, ultimately no cuts. it has been validated and supported by information. whether you look at economic data, we looked to claims yesterday. claims yesterday adjusted off the back of that massachusetts

story and the fraud. we've got to take some of that out. we are coming down, not coming up. tom: dominic earlier, that was sobering. it is going to happen quickly, in the autumn into the winter. what we know for certain is, annmarie hordern is our long island hotdog correspondent. she knows famous charlie's hotdogs is the place to be on memorial day weekend. they are going to be barbecuing, there is going to be hotdogs, hamburgers for key players in the debt debate. just as importantly for those listening are their constituents. this long weekend, what are the constituents saying to the politicians of our debt crisis? annmarie: i think that is one potential issue that these negotiators will be dealing with. you have members, whether very progressive or right-wing, they

need to make sure they are going to get enough votes to pass this negotiation which we are starting to get more details of this debt limit bill. speaker mccarthy has told the house they will have 70 two hours for any legislation to read it. if we were to get an agreement today and they have 72 hours, they have the memorial day weekend --we will talk about john's rudeness about the hamptons later. whether they come back emboldened and they want to potentially ask for more, whether pushing back on the white house if you are progressive and not liking some of the caves they had to make, or if you are part of mccarthy's caucus and you already voted for a bill and you like some of those deep spending cuts, is this going to be too easy and you are going to want to seek more? tom: i look at the idea of coming back and think there has been a media frenzy to look at

five,, six eight people. greg makes it clear this morning, it is 100 on one side and maybe 100 democrats on the other side. there is a lot of people to play with to get to an agreement. mi right on that? annmarie: that is exactly right. to get a deal through, there needs to be votes on either side of the aisle, which is why if you look at the contours of the details coming through, you can see where there are wins for the left and right. the issue though, and joe and i have been speaking to lawmakers every evening on balance of power. last night, what are you hearing, what is the agreement? he said, i do not know. they have been keeping this very much so in a small circle in terms of hammering out the negotiations and under cloak and dagger's before they release this text. then, they are going to start

whipping the boats. if they get through the house, the issue could be the senate because one senator has a ton of power to gum up the works and make this long, difficult and cumbersome. that could be difficult if we are approaching less than a week the june 1 deadline, where the treasury secretary says they could run out of cash as soon that date. what we saw from senator mike lee of utah yesterday, he says if there is non-substantial spending cuts, i'm going to make it difficult to get this passed in the senate. that's where you have leader mitch mcconnell come to get the republicans in line to get this over the finish line. jonathan: you mentioned a couple of names. if we managed to get contours of a agreement, who are the names to watch beyond this weekend? annmarie: i think some of the names to watch is the group, the freedom caucus, like chip roy of texas on the house side.

that group has sent mccarthy a letter saying, please hold firm on the deep spending cuts. in the senate side, it is the likes of senator mike lee of utah, senator ron paul, these individuals we have seen try to use the filibuster, try to not make it easy for senator schumer to get something through quickly. even if they are able to come up with a deal, that is the first part of the hurdle of getting this over the finish line. it is a positive step. goldman sachs is alex phillips says he can see this happening today, and could see a vote happening as early as tuesday in the house. it is not smooth sailing. jonathan: the floor is yours. we have the time. tom: educate young ferro here on the lobster roll at lunch. if you are going to go to lunch and have the lobster roll, it is

going to cost you 60 dollars to have a lobster roll. go. annmarie: it is quintessential if you have celiac disease or other dietary issues, they do a lobster roll on a gluten-free bun. it is a must stop of the summer. jon clearly has not been. if he has been, he would not be sitting here and ragging on the hamptons. he needs a weekend out there. jonathan: jon has done a memorial day weekend in the hamptons. saw the price at the end of it and decided we would not do it again. annmarie down in washington, d.c., wishing she were somewhere else clearly. tom: it is a lobster roll, nobody calls it a lobster roll. it is called lunch. jonathan: i do love a lobster roll. tom: they were more consistent

years ago. people are trying to do their own thing. jonathan: i ordered an extra bun. you get so much lobster in the bun. tom: the big thing is, is it warm or cold? jonathan: a toasted bun. tom: is it cold lobster or do you do the hot? jonathan: i do not want a cold lobster in that. i would say, thank you. this weekend, all about sport. tom: the colonial. jonathan: the playoffs for the premier league. tom: coventry city, we should have asked ricardo about coventry city. jonathan: i am sure he would have had a lot to say. from new york, this is bloomberg. ♪

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jonathan: equities of going into the weekend. i'm s&p 500 positive .2%. nasdaq positive .4%. you can think own. you can think nvidia. ray talking $150 billion in market cap. in the bond market, this been happening despite this move with

two year at 450. tom: that is the story of the week. single story. jonathan: equity market not feeling it. fx market is feeling good. the euro close to breaking 1.07 the. 1.0745 right now. stronger euro in the makes but it has been about a stronger dollar. it has been about beating consensus positions coming into the ear when consensus was i did not like to take because it did not work last year but tech has worked this year. rate cut story is being challenged. what is left? tom: i think this imbalance. every day after nvidia

yesterday, -- it is historic where we are now. it is not 2001. jonathan: here is my question. spent a long time talking about u.s. equity market exceptionalism because in you as you had google, facebook, amazon, netflix and those names are not in europe. it is always our outperformance on the s&p 500 and now were talking about nvidia and ai revolution. when we talk about this we are talking u.s. companies listed on u.s. equity market. where do you stand on the idea of u.s. exceptionalism as people start to think about europe and china? tom: this is really important. the distinction is profit. these companies are minting

money and even companies less successful making profit versus 2001. there is a massive distinction here. the growth may go away. the 30 multiple might crash 223 multiple but the fact is -- to the 23 multiples but the fact is they are still minting money. jonathan: if you go back to me three years that was not the story in many places. tom: like the crisis in 1998 had a little bit to do with losing money as well. someone with historic perspective -- this is a terrific show. james camp a student of the market with decades of experience. we welcome him. i am looking at the bloomberg total return index. we still call it the lehman index.

the bottom line is you and i in bear market and bonds price down we never imagined. we barely come back and in the last number of days with the high yield we are rolling over again. when did the bonds recovered to the glory we knew three years ago? james: good morning and thank you for having me. i think it is close because if you go back i have been through five tightening cycles and every time we get a tightening cycle or beginning of the peeking process from the fed, subsequent returns to the bond market are unambiguously good. what is happening now is the short-term yields attracting lots of capital. when the folks wake up and realize they can lock in north a 5% yields for the next decade, we start to see the flows come back into the bond market. suspect we get a peeking in 10 year early summer but we are

close to strong but i -- strong buy in the bond market. tom: you predict we see adjusted inflation return on yield? james: i think we will because inflation is trending down. i think the fed is making a mistake being dogmatic about 2%. i think they will have to relax that but high-grade corporate credit we can get 6%. the suppose approaching -- mena suppose those bases. they're starting to compete with equities. it is a good time to own duration. jonathan: we have notes from the team here. i am reading the notes right now. recession likely starting q4 2024. james: i apologize. that is q4 2023.

jonathan: your notes are wrong. ok. walk us through the actual view. james: revert back in october/november. we have a 300 day lag. also, with the banking situation credit conditions are tightening. you have monetary pushing up. credit conditions getting tighter. banks are not going to lend when they are trying to mark the books. the ten--- it lines up as a q4 phenomenon. we had a recession last year. we will have a earnings recession. you're talking about ai. recession are not that think. reorder capital and the industry. companies have to look to productivity which is the

lifeblood growth. this gets us to a better place. it will be choppy to adhere to the end of the year. jonathan: i did not care about the word recession so much. i did not care about a group of individuals getting together saying that was it, it happened. i want to understand where you think the weakness is going to emerge. at the moment manufacturing as -- homebuilding not in one based on stock price performance since last june. that market up 70%. ai not in one. tons of enthusiasm. what do you see the concentrate economic weakness? james: you talk about service sector. you look at opentable data you're seeing pullback in consumption. you know what real wages even though nominal wages are higher, real wages are negative year-over-year. credit barring is picking --

credit leverage picking back up. going back to the 2% rate, the only way you get to percent is with a recession or labor market rolling over. that is where they are pushing. the other thing in terms of where the market is getting bullied is housing. we get a bump in housing. we get a little balance prerecession. let's see if housing follows through arose over. we know we have a lack of capacity. we have a lot to supply all the way back to the great financial crisis. i do not know how big the ways are there. tom: i want to dovetail this see all your work. you bring an vanderbilt engineering. people want to know can they clip a coupon and get a title return someday.

how far are we were you clip a coupon and you get some gain? james: 10-year treasury yield was 40 basis points three years ago. the s&p now has a yield of about 170. the script flipped stock bonds. tipping a coupon now is in the current offerings. people have to understand these yields if we do have a recession, the fed does have to relax short-term interest rates, you have a much better return profile and income profile locking up long-duration assets. it is counterintuitive when yield curve is upside down but historically the right trade for individuals. tom: what about competition from equities? tech is on fire but it is simply

sick to state the yield is now better the dividend because i have dividend growth as well. when do equities compete again? james: in our programs we use the equity side aggressively that includes companies that are paying above market but have the growth. you have to have quality. we have to have pricing power. you want to compound the dividend over time. those two asset classes -- 2022 was tough. the correlations were positive. even if you had a balanced approach he had a negative total return across the board. use both of the asset classes to make sure you get the optimal yield per unit relating -- the optimal yield. well anymore to the bond side. -- we are leaning more to the bond side. if you separate s&p because issuance -- the handful of stocks leading are the market

story. even other dividend as they are, it is growing from a return standpoint, it is a lack bonds year to year. jonathan: this is great. enjoy the long weekend. how many messages are you getting about lobster rolls? tom: it is ridiculous. jonathan: can we get one for breakfast? i am craving one. loose lobster opens up at 11 a.m. eastern. tom: down at chelsea market there is when i go to. cannot member the name but it is like lobster house they have one side and together when you sit on stools if you can find one because it is packed all of the time. chelsea market in new york. their business is so huge everything is fresh. in america that is not often the case. there always be one see -- think

i've not seen and i will try it. usually i hated. jonathan: what is that? tom: something you step on in philippines. you put your foot on something. jonathan: be careful. there's a wife at home. tom: i would try to keep the marriage together. usually it goes up in flames but at least i tried. jonathan: coming up next dan ives. i'll clean market positive .2%. from new york -- your equity market positive .2%. this is below. >> keeping you up-to-date with news around the world with the first word. a deal may be shaping up to avoid a catastrophic u.s. default.

sources say republican and a white house negotiators are closing in a deal to raise the debt limit and cap federalists bending for two years. the agreement will include measures to upgrade the electric grid, speed permits and cut $10 million from budget increase for the irs. another republican may be gearing up to enter the 2024 u.s. presidential race. north dakota governor is planning an event on june 7 to make a major announcement. he's a wealthy former software osborne were first elected in 2016. an economist thinks china central bank cut the reserve requirement ratio for major banks by 25 basis points before the end of the third quarter. that is earlier than the previously anticipated. this comes from bloomberg's latest survey. gdp expectations to 5.5%. etf closeout is nvidia stake in

january missing out on the stock recent powerful rally. it is at it more than half $1 trillion in market cap since would dump the shares. would holes nvidia over smaller funds but investors missed out on the video's blistering rally. peter will become the new ceo on october 1. he currently leads the firm's advisory business to have to contend with a slump in dealmaking that is weighed on profits. jacobs will become lazard executive chairman. global news powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. >> if you look at tech continues to reinvent itself over and over. latest generations will be ai and you look at visibility of

earnings you continue to see strong earnings coming. that is important. people say tech has gotten expensive but you factor in how much tech been able to beat their earnings, i do not think it is us expensive. i think the trend continues. jonathan: it is nice to hear from larry adams. some are reached out on twitter just now on the restaurant you were talking about. tom: david westin emailed watching this morning. he said it is not called lobster place. jonathan: he goes there? tom: yeah. i had a brain freeze. it looks pretty nice. jonathan: i have a brunch spot. i would not share it because it is quite.

dan ives is with us. he wrote recently the following. in 22 years of covering tech stocks we have never capitalize's. this speaks to our thesis that the monetization of ai microsoft, alphabet, amazon, sales force is well underway in this game of thrones about so among the tech players. tom: this is the interview of the day. he's competing with dan of formula one. this is what matters. dan ives leading the way with tech optimism. cupertino saw what you saw. what does the nvidia 4.4

standard deviation mean for alphabet? what is it mean for apple? daniel: it is 800 billion of incremental spent now over the next decade. when you look at read-through for apple there no better read-through in overall demand. the ai revolution is opening up total market for the big tech players that was not there six months ago. tom: is it profitable? will it be profitable? dan: it is a gold mine in profitability for a margin perspective. right now they're popping the champagne because for every dollar you see a i spent that is marginally 15%, incremental margins. what is starting to happen is street starting to look through the trajectory.

you get a higher margin business, growth that is count in two hands the amount of players benefit of the first second derivative. you saw from nvidia that it is real. not hyped theme like metaverse or crypto. jonathan: we going to the weekend and there are family members who follow this stuff who will hear the first time. they've been performing well for a long time. it is not exactly a household name outside of wall street. can you run people through what they do and what they are leveraging? dan: when you think nvidia i view it as the heart and lungs, the epicenter, of ai and big data technology from a chip perspective. nothing works without nvidia chips. it is all feeding off of nvidia and it is why i viewed as the foundation, best derivative in

terms of what you see in forecasts. that is now going to feed into microsoft. that is going to feed in big tech. it is not just about the guidance. it is a historic day that shows ai revolution. i believe it is probably the chaz formation of tech trend i've seen since covering tech in late 1990's. jonathan: let's strip some that down. when it because momentum in names like this, how relevant are valuation metrics given the store you are describing is a big future you are expecting? dan: we become laser focus on valuation over the next year, you will miss every transformational tech stock the last 15 years. to look at that is look at the leaves in the force of the trees. you can look at incremental five dollars per share of earnings

power when you start the trajectory it out. on apple, i view apple -- i could argue ai adds another $30 per share to the apple story. jonathan: what is apple doing with ai? dan: i think we will see at the developers conference. the billions they have spent on ai is going to be another use case you're going to be able to deploy within their install base, the 2 billion iphones. jonathan: siri on steroids? were you describing? dan: from ai perspective, they give users the ability on the service aside from the cloud, from music, from television, for more devices, to get different information within the apple user and i think what cook will talk about is ai could be another foundation, another

monetization of the cupertino growth story. tom: any research report halfway through it there is three paragraphs on total risk. what is the lead total risk to add?-- dan: u.s. china decoupling because you can argue that is a risk from ai perspective. tom: is taiwan a risk? dan: i was in taiwan a week and a half ago. the biggest risk is yes companies do not spend. i think this is green light to own take in would leave you and this is the start. tom: apple 32 sent on the dollar. what is aib to that in five

years? dan: you can say apple can add $30 per share as it all gets monetized into the basis. jonathan: it is amazing isn't it? i reflect on this a couple of times and was more recently. there a great exchange between analysts on wall street and a generalist for 60 minutes. the generalist sitting with this -- journalist is sitting this and says it does that make sense? he is convinced he is right about amazon being the bubble and sayers being what it was and i'm trying as hard as i can to be open-minded about this moment. even reflection on this period and that one? dan: this period reminds me of what i view coming out of the apple launch with jobs in 2007.

it reminds me of my visits with e-commerce companies in late 1990's in -- i would say two other times i would compare today's. i believe that is why the della, cook, jensen are going after ai. tom: your bite recommendations but half the houses in the hamptons. would you like to weigh in on the lobster will debate in the hamptons? dan: super bullish on the lobster roll in the hamptons but i continue to believe the best lobster rolls are 617 area code. even though i am a long island guy, i more base 617 with lobster rolls. tom: you do not have to go to maine. jonathan: i have had lobster in boston. i am very well traveled. thank you.

dan: the guy is a legend. jonathan: thank you. i just got this message on twitter and a thank you for writing it. lobster landing in clinton, connecticut. it looks like a little shack by the water. looks fantastic. tom: jonathan says in coney island. nathan's, there it is. dan: there are under the radar lobster places. there are a little off of the grid. jonathan: very cool. going to the weekend with some of the names ripping. mike wilson, margin -- morgan

stanley with a different perspective on the equity market. that conversation coming up shortly. from new york city, good morning. equities higher. ♪ oh booking.com, ♪ i'm going to somewhere, anywhere. ♪ ♪ a beach house, a treehouse, ♪ ♪ honestly i don't care ♪ find the perfect vacation rental for you booking.com, booking. yeah.

>> you're always flying blind in this economy. >> is a good performance in u.s. equities there is dispersion

within that. >> i like equity markets longer-term for people who have a long-term horizon. >> this is classic late cycle behavior. >> this is "bloomberg surveillance." tom: good morning. bramo off today. it is a three island tour for memorial day. we are having fun today but as we said on wednesday, there is some real news flow going on. michael wilson will join us from morgan stanley in a moment. pushing against wilson is nvidia and moments ago futures up 11. jonathan: it depends how you slice and dice the equity market. in the last hour he talked about s&p 495. s&p 500 doing its thing and the nasdaq doing is think. we take away the big players,

there is a surface. we going to the long weekend stateside and there will be conversations about fear of missing out as a i revolution starts to take old. a great note weekly on a friday and he talks about zeitgeist of the moment. he says if you're going to lease -- lose your job and replaced by a i might as well hold ai and that is zeitgeist at the moment. tom: there is silliness going on here. can identify the silliness and a genuine part. ives was sitting here like a piñata. the hate mail on dan eyes is tangible. he's enjoyed apple. the point here is profitability. i do not hear anyone saying it will not be nonprofitable. jonathan: it is use case. i want to understand when people talk about apple and ai. dan did his best to expanding

it. i was not quite there. when we start to make stock selection because off the back of the story, i want understand use case. tom: i would suggest revenue growth and income statement but the real question is it roll over to the rest of the american economy and increase productivity? will talk to michael wilson in moment. mike wilson is riveted on policy people at morgan stanley. jonathan: do you think there's going to be asleep this weekend anywhere? tom: no. it is a ballet the president knows well. we have a president who has been through this 20 times. jonathan: he has been around a long time. seen it a few times. tom: vix 18.73.

jonathan: s&p up breed yields dropping back three basis points around 380. it is amazing to see the two year backed up at 450. two year yield down by deuces basis point on the day. tom: right now and this is important, you need to reset for the weekend. you need to reset it for the second half of 2023. particularly if you are not participating in the seven tech stocks. mike wilson will breed on the caution out of the air he's at morgan stanley. what are you writing this weekend to recalibrate a cautious call? mike: good to see you guys. our call has not changed. we are very disciplined price.

we got tactically bullish last fall at 3500 because that was a good price and now we are back to high end of the range and that is not a good price. that is at the s&p level. that is not what is been interesting. what is interesting is under the service. in the fourth quarter there was a heated rally because it was led by the old economy, financials, industrials, materials. it was based on china reopening story which was legitimate. technology stocks disappointed and not trade well in the fourth quarter. now s&p trading at the same price it was early december. we got a cautious again. tech is going to the moon. this rally is loved because this is what people want to buy. it is a lot more interesting and exciting to own ai and the technology revolution.

it is an interesting development. we would characterize this as the bear market continuing. this is what bear markets do. they are designed to for you, confuse you, make you do things you want to do, chase at the wrong time, sell at the wrong time. we think the overriding driver of this year's rally has been liquidity. the quiddity has improved dramatically on a global scale and a weaker dollar itself going the wrong way down again. ironically the banking failures that happened in march led to an injection of liquidity from the fdic and the fed. we think those things conspired to drive the market. no one talks about the fact crypto is up this year. the next one is techworld. this is what is going on. we think the fundamental case is not support. whether it is at the index level or at the single stock level and the second half is going to be a

bit choppy year and probably downward than the index. jonathan: let's talk about the index and bit more. you really start the debate this week on this program and we reflected on your note from over the weekend into monday when you said, many technical cynical is that conflict with the idea getting of a new cyclical bull market. a short list after that offer those signals and one was extreme narrowness, port breadth . we presented that and she said it is not a precursor for doom and gloom. i want to give you the opportunity to respond to that. mike: i think you can debate this one way or the other meaning we make a market low, you do have severely negative breadth. that is a good sign but the index is done with it. we think where we are is index is telling you things are rosy and find an than otherwise.

with the our fundamental overlay over that, we are out of consensus on the earnings front, we can make conclusion that the internals, brightth and leadership is telling you growth is going to be a problem. whether there is an economic recession or not. we think it's going to be an earnings recession that is way worse than what people are currently -- i want to go back to the beginning of the year. you remember in the beginning of the year i was somewhat nervous that everyone was in the same camp. our view was consensus. the fire and ice, lightning and and the slow down. we are trying to figure out how everyone could be right. that does not work. we have worked off the oversold condition and more importantly, the consensus is optimistic on earnings again. that is where we disagree. jonathan: can we build on the challenge on the index level,

retesting the loans -- lows of last year giving the muscle of five or so names doing ridiculous things? is that a big enough challenge to the view we can retest the lows of last year? mike: not necessarily. it kinda of sets us up where it is inevitable because what is happening is you are forcing people into these stocks and the prices down. valuations last fall on the stocks were strongly attractive. if you look at performance of all of these names, exception one this week which earnings are going up, the earnings are not driving these stocks. it is 100 percent multiple expansion goes back to a liquidity question. the price is wrong in our view because the earnings are probably going to be wrong for most of the stocks, not all of them, but most of them breed -- but most of them. of the seven stocks i guess two of them will be ok and the others will not.

they cannot avoid economic slowdown at the top line. tom: i got to go here. percolating in zeitgeist in two june is the debate of active versus index usage in equity market. give us your update on the value of active versus value of index investing. mike: really interesting conflict because you can argue both are working at the moment. having the right to stocks in your portfolio has been the only way to make money this year. the problem is though stocks are just a big part of the index, to say the past is working as well. we still think active will have a come back here. darlie -- it already is the sum degree but the market once again doing a good job to fling us into what we want to believe.

we think active will be a place to be for the next two or three years. tom: dovetailed this. take the recession call into your personal equities. mike: they're not looking for a hard landing but they are looking for a sluggish economy. that is fine if you have a price. our view is 0% gdp growth will lead to a bad price. we see that in good sector and we did consumer work or we see signs that even high-end pulling back on spending intentions on services. services 70% of the economy. good 70% of the s&p 500 earnings. the economy can say at zero but that is not going to be a good outcome for s&p earnings. jonathan: do bears eat lobster? mike: we cannot afford it because we are bearish.

lobsters are expensive. i'm cheap anyways. jonathan: we will try to hook you up with one. thank you for appearing this morning. tom: who cares about economics. for the price we get -- forget about come $35 for lobster roll in new york. in portland there is a plaque gerard cassidy at memorial is mkc price. $42. jonathan: we need to fly from new york to maine. it will be cheaper to fly to gerard cassidy and get a lobster roll there and get one in new york. ok. 8:30 tom keene sitting down with megan greene and feature member of the monetary policy committee at the bank of england. that conversation coming up. >> keeping you up-to-date with news around the world with the

first word. a deal may finally be shaping up to avoid a catastrophic u.s. default. sources say republican and white house negotiators closing in on a deal to raise the debt limit and cap federalist spending for two years. the agreement will include measures to upgrade the electric grid, and cut $10 billion from a budget increase for the irs. default worries intensifying as the treasuries cash balance drops to its lowest since 2021. data shows it fell below $50 billion wednesday in debt ceiling standoff continues. treasuries bank account has been under downward pressure recently as government implements measures to avoid reaching the $31 trillion debt cap. bankers in asia at ebs and credit suisse will get a rare incentive for bringing in new money. they will get a cut of the cash equal to 15% for each hundred

dollars of new client money -- 15 sent for each hundred dollars of new client money. they're trying to show clients the ability after the new emergency merger in march. shares of marvell technology surging in premarket trading under the chipmaker said it expects sales of ai related products will at least double this year. as the earnings for the first quarter also beat estimates. latest chipmaker with a rosy forecast on a high. the video market value jump past $930 billion on thursday. global news powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> i don't think we're in the ward were equities that especially not when you have the interest in yields and fixed income and i think for investors that is the consideration. there's money on the sidelines but the days of just buying equities blindly because you had easy money -- monetary conditions behind us. jonathan: great conversation yesterday. reminding us we have frontier and spirit airlines to take us places. tom: mohamed el-erian at sign

frontier -- is fine frontier. jonathan: i never been our spirit or frontier. tom: why is joe biden not talking to mohamed el-erian? jonathan: we have him on in two minutes. we as a network as a company have mohamed el-erian. tom: it is an important day. she flops oral authority she -- she is our lobster authority. we are going to talk to her right now about risk and shadows and opaqueness that is out there from two years ago or july of 1998. i will go to the top of your story. how leverage is the leverage discussion of a bond transaction? sonali: a lot of the trades are

significant lead levered and it is ok because it is in the treasury market. this is the most safe liquid market in the world. until it moves and now it is move it -- moving violently. thanks have been asking hedge funds to call it -- banks have been asking hedge funds to cool it. lots of the leverage comes from money market funds. there are worries here under the surface in treasury market. tom: he wants clarity. we have opacity. we understand we had a banking crisis because we do not know what was going on in svb. what is his name? griffin? he will buy the miami marlins. ken griffin, do we know what he is doing? sonali: these are bases trade. there simple trades.

citadel, william r some of the biggest players in the space. our sources say cedillo is not levered to the trade as they have been in the past. we know not only has this caused major losses among hedge funds, the reason it is a problem i discussed the fed to step in. people forget in 2020 the fed's had to step in on the trade. tom: are they stepping in and 2023? ira: there's a place it understand in the market the fed does step in they have to step in. the hiccups in treasury market are not the making of the hedge funds this time. this in washington. it is not clear the fed wants the bill out hedge funds. jonathan: why would they had to step in? why would you be called a bailout? sonali: in 2020 when the fed to step in there with the pandemic going on. it was more about the pandemic and less about hedge fund.

between 19 when they had to step in to repo markets because more drastic movements and a lot of hedge funds were levered towards the trade. this time if there are any major issues you can say we did not cause the treasury market volatility or downgrade. tom: are there major issues or are we reporting there seems to be shadows? sonali: there are issues now. issue underpins the trades is repo leverage and the idea that there were any potential downgrade in the treasury than all of the collateral underpinning the trades are not worth what they were yesterday. there are real issues in the market that the debt ceiling does exacerbate but again, these are highly leveraged trades and the leverage is bilateral so it is very opaque. the changes have been planned

and talked about since the obama administration. it is not changed much at all. we see such violent moves in treasury markets is when inks regulators -- jonathan: is there a danger of blaming hedge funds that is a response ability of washington? sonali: it is not blame per se. it is a market structure question. there are been calls in recent years to make the market more transparent. it has not gone that way. when we think about what happens now and potential risk, even if you are clear, you have to remember it is a market with history of blowups. it is a market where there has been asked for change. by the way, it could be forgotten about at they have a debt ceiling compromise and some of these -- tom: i get rating these crease idea. after his -- are the clearest message.

the key question here is what is the so what here they are just hedge funds and that they lose money why do i care? sonali: you're making the hedge fund point which is we do not see blowups. tom: i want to get on billions here. what is he so what if hedge funds -- sonali: do not forget the fed has had to step in before. that is the problem. if there are moves that are violent and exacerbated because you have a ton of leverage in market as well and that creates moves that are more violent in repo markets which moderates are markets that are just not hedge funds, that is the worry here. toying with the market that is supposed to be the underpinning of the entire market. tom: should allie as our chief

correspondent, what is a distinction between lobster roll and southhampton? sonali: there were a lot of restaurants recently purchase. you're probably paying more. they're trying to get out there but remember people expect to come back after we had the debt ceiling issue resolved and treasury. tom: that is the hope. sonali: they are staffing up. it's of the summer staffing levels stay high -- in the summer staffing levels are going to stay high. regulators and bankers are asking about it. the idea of taking a whole lot of time to chill out of the summer is not a popular idea. jonathan: i do not get the hamptons think. i do not think i ever will. sonali: i would rather watch paint dry. tom: i am there are three out of

four weekends of the month. jonathan: i just did not get it. flying to europe, you know? tom: that is a different story. jonathan: if you got that kind of money. sonali: and even if you do not comply to europe. spirit airlines. jonathan: what is wrong which is? i used to go to jersey shore. tom: it is a different think. sonali: that is where i am from. jonathan: what is a distinction? sonali: other say it is pure great, personality, music. jonathan: keep digging. very cool. sonali, this was great. thank you. offended a couple of people along the way, why not? ok.

mohamed el-erian coming up in 45 minutes of queens college cambridge. to close out i have to say things got interesting again this week. globally. gilts, inflation in u.k., moves in treasury market, ai. breakdown in euro. tom: we are not talking japan. it is interesting to see what they do with the economics of japan. jonathan: i'm going to run if i did not see you, have a nice weekend. tom: lobster roll breakfast. we can do that. jonathan: i was see you soon. tom: this is bloomberg, good morning. ♪ look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star.

hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪

tom: tom: good morning. thank you so much for the response today. we are having fun on a friday before the celebration of memorial day, the remembrances of memorial day. the celebration in the market is simple. futures doing better through the early trading. you have to believe smaller trading today. the vix 18.52. there are two bloomberg strains of economic data through the morning with the michigan coming up later.

michael mckee has the task of looking through 20 items in four pages of data behind each of those 20 items. what do you see? -durable goods orders are out right now but we do not have income numbers yet because everybody is hitting internet at the same time. personal income for percent -- .4% better than .3% last month and it matches the estimate. spending stronger than anticipated up .8% compared with flat reading in march. pce deflator. the fed is watching. it is stronger. .4% up from .1% and stronger than the consensus forecast. it puts us at 4.4% for the headline number over the march number of 4.2%.

core is up .4% which is stronger than anticipated. that puts us at 4.7% from 4.6%. if we are looking at the pce numbers out of this release, you are seeing pressure being generated on the fed to maybe raise rates one more time. we would check in on what the bets are in a moment. durable good orders up 1.1%. that is compared with a 3.3% increase in the month of march. durables ex transportation down .2%. we probably got boning in there. capital good orders, nondefense, 1.4% compares with a .6 percent drop. one of the things that was a concern was business spending had to drop off. we got the revision to gdp yesterday. we saw business spending raise a bit and this looks like it is contributing to may be a return

of business to the world. tom: this is really tough. this is what mike does better than anyone in the world. it feels like three days of economic data on steroids and what it is the markets are going to react. moments ago the two year yield 4.56%. critically, it is not about the intraday chart. on radio we are showing the intraday chart. the ghost 4.55%. we are getting up to a breach in high-yield we saw the two year a number days ago. the current version is further. -75 basis points in difference in yield between two and the tens. the 10 year real yield adjust higher 1.56%. these are global wall street key data points indicating angst out there about stickiness. from where use our sitting --

you sit, is this a sticky inflation some of data? michael: sure and it is not particularly good news for the fed. one number to give you beyond what we, 4.1% personal savings rate drops down from four point 5%. americas did dip into their savings to spend what they spent. spending was up on the month by .8% compared to .1% in march. this is going to be a problem for the fed. this is their indicator. this is the one they watch and base policy on. it is going the wrong direction. it is not they did not think it would happen. they expected volatility. half of what -- half of them a morris said in speeches into minutes they are going to probably need to raise rates more. do they do it in june? do they do it in july? it most of the timetable to perhaps june.

tom: we peaked on the pce deflator 5.46% in early 2002. a vector is in place to disinflation there. is it tested this morning? is he vector under threat of disinflation? michael: disinflation is not under threat at the moment. we are looking for that kind of progress but so far we are not getting enough restraint from the fed interest rate increases to get us there. i told you i would look this up. we are 86% chance of a move by july. 46% chance of a move in june. those are sniffing at lehigh than they were before these numbers came out -- significantly higher than they were before those numbers came out. tom: i've made clear the bank of

england simply does not -- does it better. maybe because it is surprisingly new public institution versus the fed and the codified history of the fed but they take in people with different views. i think of adam posen at international economics. i think of david at dartmouth. now they go brilliant in number of months by bringing in somebody really original, economic analysis and policy discussion, megan greene of brown university would join the bank of england. -- will join the bank of england. she cannot speak about the bank of england. she cannot speak of the united kingdom. we checked with her entourage. she cannot speak of the future of spurs. i cannot speak about the

politics between cambridge and oxford -- she cannot speak about the politics between cambridge and oxford. congratulations on this important employment -- appointment. i want to talk about the american economy and servitude we have of guessing vector of inflation. you are expert at the history of study of that. can we game inventor of inflation? megan: the inflation data was always going to be bumpy coming down. that is what we are saying. but we can gauge its underlying trends and look for signs of persistence of inflation in u.s. the core capital good sedated they just came out surprise on the upside. that is 70% of fixed investment suggests demand is strong in u.k. economy. core pce was stronger than many had hoped. i would not read too much into one data point.

it does suggest the fed is not done. even if the fed does pause, i do not think it is finished here. we see corporate earnings strong. that means there is labor hoarding that may will continue keeping labor market strong. that keeps demand strong. keeps upward pressure on inflation. i think the fed has more work ahead of it. tom: one of the realities is plain language. you speak in english which will help you with the bank of england. you speak of this as a weird time in history. define that phrase. megan: it is a weird time in history given the excess of shocks we have had on the economy between a pandemic or. -- pandemic war. lots of indicators are not responding to monetary policy and the labor market is a great example. labor market is holding up freakishly well given the tightening in u.s..

it keeps demand strong. the fed is trying to kill off demand to bring it back in line with the supply so we can see price stability but it is not transmitting monetary policy into the real economy as we expected it might. tom: kostin made clear between demand driven inflation and supply-side inflation. that is a pandemic inflation. are we still living the pandemic in the wall of data seen in america this morning? are we living the pandemic in our friending savings ratio and what that means for income and spending? megan: i think we are. it is too early to see how long it will last but we are seeing it as consumption patterns, people's decisions to leave jobs. the pandemic is still with us and i think something things will structurally change going

forward as a result of the pandemic. were not sure what it is. look at labor force participation different demographics, it is recovered in u.s. overall but there are differences particularly among older workers. i think that will be with us for a well. that said, we struggled with supply constraints. i just in labor market but with global supply chains -- not just in the labor market but with global supply chains. inflation remains stronger than what we had hoped. tom: inflation is stronger than we hoped but there is a belief of getting back. the former vice chair of the fed richard clarida and others are debating a 2%. idea would you suggest the greater theory of our macro policy forward is going to be an adjustment of any given central

banks target they are getting back to? megan: we are beginning the debate about that among the intelligence but i do not think we have made much progress on that. some are calling for higher inflation target in u.s. reticular, some are route 3 percent. the fed and most other major central banks have defined price stability as symmetric target around 2%. the academic literature shows until inflation gets 4% of people do not notice it. i'm not sure -- whether it is 2% or 3% that may be more of an academic debate. tom: you nailed this. research out of ec calling sentient inflation. are we near sentient inflation where we are comfortable with our inflation rate? megan: no.

i do not think we are near inflation rate that we as the public or the fed is willing to tolerate in u.s. i think it would need a -- to come down nearly 2% target for the fed is ready to be done with it. we might get a pause in june but i would not take a pause to mean the fed is done. i think there more work to be done. tom: i'm trying to stay away from the bank of england. one of the great things about fenway park and -- is the yankee lobster company. can you give us a rating on the lobster company at fenway park? megan: i can't. why would anyone get anything but a fenway frank at fenway park? tom: bottle that. megan greening congratulations. she is 100% correct about hot

dogs and beer at a fenway. stay with us. >> keeping you up-to-date with news around the world with the first word. republicans and white house negotiators are said to be moving closer to an agreement to raise the u.s. debt limit. sources say emergent agreement with the cap federal spending for two years from a different spending. -- defense spending. if a deal is reached soon a vote in the house represents those could take place as early as tuesday. a condom think china central bank will cut the reserve -- economist think china central bank will cut the reserve. it is earlier than they previously anticipated. this comes from bloomsburg's latest survey. they paired expectations from gdp to 5.5%. bloomberg has learned ubs and swiss government have agreed a

precise terms of state guarantees to the emergency takeover of credit suisse. sources say the deal's completion could be pushed back to june instead of late may. ubs and government are also still haggling over the regulatory implications of that takeover including capital requirements and liquidity roles. peter will become lazard new ceo on october 1 succeeding multi-chief ken jacobs. he currently leads the firm's advisory business while the contend with a slump in dealmaking that has been way on profits. jacobs will become lazard executive chairman. global news powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ playing golf? it's expensive. we're outlawing golf. wait. can i still play? since we work with emower, we don't have to worry about planning for a third kid. you can still play golf... sometimes. take control of your financial future to empower what's next.

>> you always flying blind in this economy. there is choppiness and noise out there. the big picture here in terms of

the economy is it continues to expand. it seems the call modest pace at this point. tom: i want for perspective yesterday. this is been in the years i've been doing this this is been the strongest friday before memorial day we have seen. it has been an extraordinary week. it is not and today. two year yield 4.58%. it is a wow's statistic. and brought it from -50 -- negative yield curve goes from -50 to 60. the 10 year your yield 1.45%. peter definitive at the london school of economics. this is one of the rarest times where you see within wall street a true academic and policy wonk

to achieve executive officer of one of our storied names. this is lazard. peter owns the high ground on research on our terrible medical system. as a young turk he was absolutely definitive in changing the debate on health care in america and particularly on the process of our complete garbage retirement system. i cannot say enough about that. you hear me say the phrase glide path which is mathematics, maybe it is from his father, but when you hear the glide path phrase, it is a direct steel from peter orszag. futures up and were going to get to the only interview that matters. were not going to talk about lobster rose with helane becker.

what is going on with the airline industry? i'm going to talk with the safety issue. wall street journal had the chart yesterday. it was on collisions and near collisions of aircrafts. why are we seeing that? helane: i think there's a lot going on in airline industry right now in aviation. airports are packed. the run rates are equally -- the runways are equally crowded. i want to say u.s. aviation system is safe. probably one of the safest in the world. the runway issues are temporary as you work through some of the issues that are out there. tom: how far are we back to the

summer of 2019? helane: we are there. we are past their. we are forecasting beginning yesterday through monday labor day so little more than three months. 275 million people will travel via air this summer. that is an increase over what we were four years ago, when we were last year. double-digit increase last year. really strong summer. tom: what is the constraint moving forward to a better experience? is it the plane see? is it the pilots? i saw an article some pallets do not want to be promoted because it is not worth the money. what is the helane becker constraint limiting us to a better experience? helane: i think it is the level of people and lack of

infrastructure. we have been talking about this for years. probably since 2013. in terms of pilots, they're the most senior pilots are retiring or have retired. they're being replaced with younger pilots who just have to get up to speed. not unsafe. i want to redecorate the fact that pilots who work in u.s. are safest can be and well trained. we do have a lack of air traffic controllers. each secretary transportation and said we were short 3000 and when you think about how long it takes to become a traffic control it you realize will be short thousands for years. it is not a problem that is going to be resolved this year or next year. it takes at least two to five years to become proficient. imagine pallets do not want to move, controllers do not want to live in new york, chicago, san

francisco, l.a., miami where it is really busy and expensive to live. they do not make enough money to afford. tom: to securities analysis of the moment. i have been thunderstruck how to pick on united airlines. they collapse during the pandemic. they bounce off a bit and they have gone nowhere. our airlines the mother of all opportunities to rebound pre-pandemic pricing? helane: i think they are. i think were going to have a record summer as we talked about. as you point out the stocks are back to 2020 lows for the most part. the pushback i get from investors is this is as good as it gets. pricing is strong. demand is strong. i will discontinue especially -- why will discontinue especially if we head into a recession? i think we are back to 2000 18

levels in passenger levels but capacity is down 10% so you have more seats for departure. you have fewer departures per day and so you got 90 plus percent both factors which makes recovery from irregular operations difficult but in terms of valuations the airlines are going to make a lot of money and nobody believes it. nobody believes this is -- investors for sure do not believe this is sustainable. tom: is our fleet aged? the guy in this week was a small airline and i think it is out of ireland called ryan air. he's talking about the purchase of airlines from seattle, chicago river boeing will last -- land here in the last 12 months. i'm worried about the age of the fleet. it seems to be ok. my right?

helane: absolutely. america has one of the youngest fleets. this is slower year for them. united is in the middle. they were the ones that did not retire wide-bodythe pandemic bu. delta has been re-fleeting. we have a young fleet. tom: the youngest at the thought -- males in can you ask the wonderful cookies delta serves, when they come down the aisle with the tray with cookies and potato chips, do they pay for that stuff? is that given to them free because people want the advertising? helane: they pay. it is included in their food budget.

tom: i learn something every day. you so much. really interesting time. i cannot say enough about bloomberg news aviation coverage. it is world-class. you see the graph in wall street journal and you got to lead with the stuff about we come through this terrible pandemic. we are back and what i'm hearing is that may be a lack of experience out there in different parts of our asportation system -- transportation system. stay with us throughout the day and will give you any slowdowns we see. for those of you thinking lhr, serious british airways problems the last two days. technological difficulties that is led to disasters at terminal five -- not disasters but slowdowns at terminal five at lhr. futures up.

we have a change yield landscape. 4.59% up five basis points further from the move yesterday on the two year yield. is the headline statistic. we do not talk about the oddities of the three-month t-bill market. look to balance of power today and our government coverage for the weekend on the debt crisis. i would assume there will be no let up on that through the weekend. that is expressed in our world and three-month treasury bill 5.31%. crude with a bit of a bid here over the weeks. 7263 on west texas intermediate. that is still darned cheap. dxy 104 we're watching euro. euro weaker through the week.

coming up on lobster rose, comedy el-erian of queen's college. this is bloomberg. ♪ ♪ ♪

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jonathan: let's get you through the weekend. equities will talk about coming up. countdown to the open starts right now. >> everything you need to get ready for the start of u.s. trading this is bloomberg to open with jonathan ferro. jonathan: live from new york, coming, the ai frenzy driving