>> you have excess savings dissipating by the end of the year, your students at tema is coming back so you think it is a consumer that is a lot weaker. >> you are in a world with high inflation and we have reset. >> i am optimistic the market is going to move higher by the end of the year into next year. >> if you do go into a recession, bad news is bad news. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: good morning.

this is "bloomberg surveillance" on tv and radio alongside tom keene and lisa abramowicz. for equity market is slightly negative on the s&p 500 after closing yesterday more than 20% higher from the october low. some may say we are back in able market. tom: and it feels like it. you saw it on the opening montage with ed yardeni. the bottom line is the debate is raging into this june weekend. jonathan: big time. michael harden of bank of america says we have gone from recession feared to goldilocks green. it is clear that when you strip out the base seven, the s&p year to date is down 1%. that is the quote this morning from michael hartnett. lisa a: this you mean this is fragile or just beginning. there is an opinion of whether this is a home market, whether

it feels like one or does not. it is basically seven stocks pulling everything along. we actually saw broadening out yesterday. is that something that could continue or the end day? tom: it is a friday in june. the vix is at 13.76. why do you feel so miserable? jonathan: my favorite quote this morning. have you all become ostriches with a short-term memory and the tendency to head off in one direction or another at full speed with reasons you can't remember? tom: it has been sports. i am in a 64 walk up and i cannot release. it is better today. philadelphia was worse. it is better and there are firefighters at row risk trying to get this fixed.

it is better? it is a bull market view of manhattan this morning. we only have optimists on today right? jonathan: i think so. tom: ok good. jonathan: the s&p 500 is at 4500. just softer, negative by 0.1%. looking to close out on a softer note. yesterday, closed on a very big notes. i know people hate the term of 20% off the lows but other people call it what it is. lisa a: we are going to have to call it that. it highlights how much of a rally this is. it is a slow friday heading into an early busy. some of the things we are watching today are the ecd vice president and supervisory board

chair speaking at different events which comes ahead of next thursday's meeting. very curious to see whether their tone is shifting after the australian central bank. i watch this every week, it asset -- outlines -- these are deposit flows. how much are things starting to accelerate deposits out? they are around 5.5% at this point. tomorrow, in paris, belmont stakes. tom: this is a new bramo. a sports report with drama? lisa a: -- jonathan: bramo has gone into sports this week. alcaraz and joe commits, what a tennis game -- djokovic, what a tennis game. coming up later this morning. tom: it is great.

that color green is seared with me forever. there is the certain french open rolling garros -- roland garros. i literally stumbled on it. jonathan: a beautiful thing. excellent story. tom: you should see you with a tennis racket. people fall over. jonathan: epic court coverage. [laughter] can you talk about the character of this rally off the lows in october? a lot of people might say it is riven by evan tech names and -- it is driven by seven tech names and the rest of the market is bad. >> it is driven by a pretty narrow of stocks but if there is a scarcity growth in the market than the market want to pay a premium for the narrow group of stocks. as a result, those are the stocks that have the best.

it worries as less for that reason. this year, it is companies that have positive eps momentum. tech falls into that category because of ai and other drivers and have been ordered for that. i don't think it is irrational. it is what lisa mentioned earlier, what gets you broadened out and makes you more durable and sustainable to the upside? tom: you against all the rest of the platform has been hugely that you have to be in the market. in the telegraph, it is a blistering china to england essay on what he perceives as the coming disinflation. what is the u.s. stock market do if you get disinflation like anaheim and david rosenberg are talking about? >> coming into the year you had to big tell risk out there. growth is clearly not happening or has been pushed into the future. the second is inflation getting

sticky at a level that was uncomfortable for the fed. i think this also releases money into the market. you are only 5.5% cash right now. tom: it is almost a societal relief if depending on the level, japan is at 4% inflation and gets to 2%. lisa a: if you get there. that's one of the questions on the way as people have a debate of whether you will get there or not. there is conflicting data of whether the economy is resilient or if you are seeing signs it is rolling over. what are you looking for to give you conviction that this is some that's the beginning of something more durable versus a head fake? >> this is the key to that inflation tell risk and if the strength of the consumer would probably drive a recession, our economists think if you do get a recession, it is more consumer-led if there is a

scarcity of growth in the market, how do you doubt that? you have more economics growth which drives more earnings growth that allows people to invest in more stocks. this is opened by the timing and the depth of a recession if you get it. lisa a: given where we are, where are you doing? are you fading this or leaning in? >> we have become uncomfortable with the tech train. it is a thing we have been bullish on all year but we do not see it coming down so we are reluctantly staying in the tech trade until we get evidence of growth improvement. coming into 2023, the view as you have a recession in the u.s. some thought that would be at the beginning of the year. they are in a very conservative portfolio and the question is, what gets them out of that? i think price action goes faster money into the market but they

will not allocate cyclicals if they still have a recession. it all comes back to growth. jonathan: you are raising the right questions. you have provided marco -- market analysis. the market is not the economy right now. how do you divorce is broader conversation about economics disinflation and the federal reserve away from what is happening at the top of the market? just accept that narrow leadership can be ok and last longer than you? >> i think if we get back to a scarcity premium. there are investors that have to be invested in the market. investors are telling us this year that if i have a recession on the market and then the rest is cash yields, there is good reason for me to earn a stack -- stop. what we have seen his money go into three sectors. industrials, health care amtek. industrials is a well known medium-term theme.

tech you have ai. health care is large-cap growth. those are the three areas where people are saying these sectors clear the hurdle for me to put money into cash. that is why we are seeing the breakdown that you are. tom: where it sure s&p target? help me with your money -- your morning equity notes. >> scott groner is our u.s. equity strategist. he believes that fair value with a range of -- tom: it is fair value but the market is not pricing their value. >> when you are at 4200, you are at the top end of the conservative band. i think you are saying that when you get to 4200, your risk-you or is fairly limited. you have two choices. you go all in on the cyclical rotation, or you find ways to go

into top growth. like a nest i've equal weights, you still have heavy tech exposure -- like nasdaq equal weight, you still have heavy tech exposure. what do people say? desperation breeds innovation. tom: the people at 3500 or 3600, how desperate are they? >> you are seeing pressure in stec -- in tech. tom: what about the skew of investors that have missed the october rally? >> you are seeing this in tech. it is a big theme in the market. for the first time since february, zero input goes versus zero outputs. people are a little hesitant to put into the forecast. jonathan: it is a huge deal going into summer. are trapped in cash. it looks good earlier this year.

tom: i deferred to mr. kaiser but it feels like jean 15. and it feels that i am so far behind, i don't have the top seven stocks by have the top 20. what do? >> a lot people that got this train rides are now wondering, what do i do with my money now? why sit with the stock and let it ride? jonathan: sell it to tom keene. this is great. stuart kaiser of citi. coming up, the former president charged over secret documents. we will catch up with the leader of pangaea policy. and an update from dan ives. this conversation is just around the corner. lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo.

new yorkers can breathe easier today. city environmental officials say the air quality improved overnight to moderate. but people sensitive to pollution are being advised to take precautions. new york's air quality and that's improved to 100 on a scale of zero to 500. it reached the most serious level of air quality earlier this week. tesla shares are poised to rise for an 11th consecutive session. this is after general motors set it would adapt its electric vehicles to tesla superchargers. it follows a similar share from ford. tesla shares have risen more than 90% this year. ubs seals an agreement with the swiss government to cover over $9 billion of losses.

the agreement covers around 3% of combined assets of the merged bank. bank of japan officials see little need to adjust the yield control program. bloomberg learned a move is unlikely at next week's policy meeting given improvements in the accident of the bond markets and the smooth shape of the yield curve. nearly all economists expect no major policy shift at that meeting. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ ♪ mmmm, your morning coffee hot delicious comforting.

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>> i am an innocent man.

i did nothing wrong and will fight this like you have been writing for seven years. it would be wonderful if we can devote our full time to making america great again. that is exactly what you did but now, our country is in decline. you are a failing nation and this is what they do. jonathan: the former president on truth social. present -- former president donald trump indicted over his refusal to return classified documents. it is extraordinary. tom: it is extraordinary and very opaque right now. this being lost fair and not cable news, we are going to wait until there is an actual indictment is what the adults will do. it will wait to see the actual indictment. jonathan: based on our reporting, according to three

people familiar with the matter, this is happening. you can see based on how the president responded to it in the last 24 hours or so. one thing to watch going into the race for 2024 is how the other republican candidates respond as well. tom: no question but these are federal charges in miami and of huge import. tuesday is the day, right? jonathan: according to a report. tom: we are going to talk to somebody who has an immense respect for legal prose. terry haynes has had decades of duty on capitol hill. i go to law fair like everyone else because these guys are the adults of the room and they say wait for the document. what are you waiting for? terry: we are waiting to see what the document says and what the charges are. there are a lot of what sources say. the former president wasted no time not only in getting out

there and talking about it. but one thing i found significant was the first fundraising email showed up about half an hour after the announcement. there is clearly an attempt by him not only to frame this thing before the indictment, whatever it is, comes out, as well as raise money and heads of his followers. tom: my experience goes as far as. mason and maybe law and order. you are going to help us. it is a massive extinguishing feature between state courts and federal courts anywhere in this case miami. what does a state court versus federal court distinction mean for the former president? terry: one is the sort of offenses. there are things that are exclusively federal offenses and you have in the donald trump case not only documents but also

investigations about january 6 matters. a lot of state court matters have to do with angst like his business and whether his business records were on the up and up. the tax evasion matter that they went through in manhattan. those sorts of things. but also, one of the cases, which is the georgia case possibly, has to do with whether or not he interfered with george's estate -- georgia's state election laws on january 6. the matter is civil versus criminal and also has to do with the degree to which the former president can be punished. either via incarceration or fines. lisa a: jonathan picked up on

the right point which is how did the other republican candidates pick up on this? do they embrace the deep state conspiracy or show he is not fit to run? terry: the answer is both. they have to attack donald trump head on. i think you will see intensification of the pack-swarm mentality where these candidates all talk about donald trump's unfitness to run and how he is not the best person and why. at the same time, they hedged their bets by raising concerns about the justice system. there are unresolved questions about not only whether or not the potential indictment here is different treatment. donald trump is not the only person that has had -- has taken records home with them. that includes his vice president and the sitting president, and

potentially others. there is a broader historical question about how these laws were enforced. former president trump is trying to make a case that both there is different treatment here for him, as well as a situation where the laws were never enforced in the way that the doj is proposing to to enforce those laws. those are both questions the justice department will have to answer as the case moves forward. lisa a: you mentioned that the fund raising emails went out right after the announcement by the armor president. does this type of issue have the same residence with voters? terry: i think it has residence. he is pushing the buttons. they talked about the russia hoax and that was wrong. they talked about this and that was wrong. now he he refers to this as the boxes host. on the primary battle, forget

about the national beauty contest. if you look at the early stakes, you have donald trump around 40% in the field. i think what happens is a lot of these candidates combined to take donald trump down and at the same time, appropriate the policies, and say i am your safer alternative. jonathan: it is going to get so messy in washington, d.c. i wonder how much pressure will build the most republicans on the sitting president. terry: i think there is no pressure on them. i think they put pressure on themselves. one thing i want to say here is that just because donald trump is less likely to become president as a result of this does not mean joe biden is more likely to become president. one reason is that these investigations intensify and ramp up. the other reason is, should in alternative to donald trump

emerged, and you will not know this for six month or so, but if the republican nominee is not donald trump, that person is better capable of putting joe biden on the back foot on policies as well as his health and age. this does not mean good news for joe biden by any means. jonathan: terry haines. thank you. a couple headlines in the last 10 minutes or so. i think you can file this in the category of things you do not want to say as the ceo of business. the former ceo of nobby and the current ceo of the business overseeing credit suisse, securing the swiss government guarantee of $10 billion for losses. ermotti saying this morning that most of the staff at credit suisse are "good people." he would not comment further.

a little bit clumsy to say "most " of them are good people. tom: it is a domestic story with the $10 billion as well. i am not up to speed on it, other than to say this has many different fronts decides the is will bloomberg continental europe bank talk. jonathan: will wait to see how the drama plays out. tom: lisa sent tom and john are good people. [laughter] lisa a: would you stand by the on the record? absolutely, some of us are good people. just kidding. [laughter] tom: can you say the offspring are good people? lisa a: some argan people. jonathan: looking forward to

that conversation. i promised a call on tesla and dan ives. most are playing chess, the others are playing checkers. 234's were retrade at the moment on tesla. the latest news is verity of gm is joining ford to use tesla's ev charging network. you're going to have an industry-standard in the u.s., driven by elon musk and haslett. tom: i don't know anything about this other than to say that everyone i know who has an ev says this is a huge starting point deal. jonathan: tesla up by 4%. gm up by 3.5%. this is bloomberg. ♪

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jonathan: let's get into the weekend. equity futures on the s&p 500 index just a touch negative. softer, lower, down by 0.1%. nasdaq 100 after closing in people mark -- s&p 500 after closing in the bull market, up 20%. the nasdaq is actually down slightly on the week but up slightly by 0.05%. the front end of the curve whip

soared over the last 24 hours. on the front side by surprise hike i the bank of canada that pushed higher. yesterday, yields pushed lower after disappointing jobs data. if you are on the wrong end of the jobs markets, claims are higher. rbc bluebay out this morning, looking for a 25 basis point hike next week from the federal reserve, due to inflation pressures. they are not alone. andrew hollenhorst of citi thinks they move next week. tom: i believe it is tuesday where we have a cpi report where everybody will adjust rapidly to the 24 hours. i like the data checked because it captures the equity lift that nobody believes in. the negativity out there and the comforting cash out there with a big yields is substantial. i can honestly say i have never seen so much doubt.

13.76 vicks. 4600 spx. the nasdaq is a moonshot. this is the strangest friday. jonathan: some pessimists in the market without a doubt leaning against that. want to finish on the fx markets and the euro. guy johnson and diver going back and forth over this yesterday. we had sex nation in europe in the economy and it did not bring racial lower. that is really important about what is sufficiently restrictive and how much does the inflation need to cool down to make it a good target? in europe, you had no growth in cute or, no growth in -- no growth in q4 or q1. tom: the answer is there is serious goods disinflation going

on. we are going to look at the litmus paper. that than equities, bonds, currencies and commodities. the global head of fx strategy at rbc capital markets joins us now. it is really simple. can fx provide an indicator if and when inflation rakes? can fx get out front and predict a disinflationary trend? >> fx is interesting because it feeds into it both ways. it is a forward-looking indicator has an impact on inflation. in some cases, where you see currency weakening, this brings further inflation. right now, we have had the initial headline in base affects heading out. core inflation is remaining really sticky and it is unclear if the trend lower extends or if you bought them out further than

central banks would like. tom: which pair is my friday for manometer -- their mom to know is core inflation breaks? on euro-dollar, should you see at 1.12 or should i say 1.03 or is this a signal of disinflation finally? also: it is a similar dynamic against many different countries but at different times. this time it was rva, and then the bank of canada. we have seen this from both the australians and canadians and the federal reserve is lagging. i would not be surprised if we get a catch-up where markets pivot away from canadians towards the week or the week after. lisa a: how would they signal why they are not the raising rates especially if the cpi report is as hot as people expect after norman saw a record

high in terms of ti this morning? elsa: it is deeply ingrained into markets that the fed does not like to surprise. it is fair. if they wanted to signal something, they would use a week ahead of a meeting. it cannot hike because there is only seven or eight basis points but you also have to ask, does it matter if it is a question of timing? they don't hike in june but they say almost certainly, they will hike in july, shortly over something completely unexpected. in many ways, it has the same impact because we are priced for a hike by july but this raises the prospect of other hikes later this year. lisa a: i just immediately went to one reporter to see if he had written anything but he has not. it seems that we have not gotten an indication on this point.

he fed has a difficult one to parse in terms of messaging. how difficult is the ecb job on thursday? elsa: i think the ecb is easier because they have done a fairly good job of guiding market to where they feel tumbling rates are going. when john mentioned earlier that you had a slowdown in activity and yet inflation remains uncomfortably high is definitely a lot easier than it was a months ago because you have basic facts and energy prices coming down. in many ways, the ecb is one of the easy ones but the federal reserve is the tougher challenge up ahead. tom: we have not talked all week about t.r.y.. i don't know what to say about this other than the political experiment and the announcement of a new central banker. it is frankly, and i am being

inflammatory, on the edge of zimbabwe. the answer is a 21 up to a 23. it is a massively long convex and outs, dare i say, 3.9 standard deviations. what do you presume will happen in this disastrous turkey? elsa: it is a great question. we actually have this conversation this morning and pulled up the bloomberg chart. we did a 40 year chart of tribe on a logarithmic scale -- of t.r.y. but on a logarithmic scale. it looks like a parabolic move and people think, how much further can this continue from here? i think the 40 year logarithmic charge really highlights this.

it does not look great. tom: very quickly. i know john was to talk about actually things that matter but i am fascinated with the new finance minister who bloomberg knows well. i have done many panels. the answer is, we are going to get a jump condition evaluation, i am going to readily pick up 35 as a wake-up on monday start point, and then what? is rpc -- rbc proceed turkiye to do a full evaluation and reset? elsa: it is a tricky situation to discuss. it is something you have been trading at are not very actively releasing public research on it. when your spots evaluation exceeds even, the very rich carry on your currency, then you have a rich problem on your

hands. jonathan: i think that was diplomacy there. thank you by the way for joining us. i know how the market is perceiving this but there is a broader conversation about whether there will be a turn to orthodoxy in -- a return to orthodoxy in turkiye. that question has been asked and we have been burned a million times over chasing that question. you have -- and comes from goldman, first republic taking up the central bank. is this going to be different or do we get more of the same? tom: i am biased but a lot of times in this symbol early one -- erdogan, you saw how a pro like elsa lignos struggled with this because no one wants to be inflammatory, but all of a sudden, there is hope with two

adults in the room. jonathan: there was a decision you wanted to make and ultimately there was pressure to make it. then it became the easiest job in central banking but you never had to do your job because erdogan just took over. lisa a:'s skepticism is outweighing the hope, even though on paper, the hope would make sense because these are professionals that do understand markets. tom: because of the nato affiliation and with the horrific war in ukraine, he wanted the pressure that the monetary fund would have the hope of this new central bank where the hope of an experienced finance minister. with these two appointments, does this give good gala -- this give -- the confidence to assist erdogan?

jonathan: objects are important but substance more so. on the optics, it looks like they are trying to restore credibility. tom: i would suggest it deserves a surveillance team road trip. jonathan: to istanbul? tom: without question, the best food i have ever had was istanbul. everything was good. i just eight. i was on british airways and the plane tilted like this when i got out. i loved it. i was very fortunate to be in a simple. -- in its temple -- istanbul. i am over by the palaces and i stumbled on the thing that is in james bond. there were roman cisterns underneath. they found that because people

have the best fish in town and they could not figure it out. they put a line down into the cisterns where james bond is walking in the movie. jonathan: years ago, tom and i proposed a documentary we were going to make. you where -- we were going to go around and have meals and his local cuisine and talk about the economy. that's got asked. tom: it was great. jonathan: it is interesting. if anybody wants to sponsor, you can make that happen. [laughter] lisa m: food and finance, i like the idea. keeping you up-to-date with news from around the world. with the first word, i am lisa mateo.

donald trump has become the first former u.s. president to be charged with committing federal crimes. a grand jury indicted donald trump in connection with his usual to return classified documents found at his florida home. if convicted, he could be disqualified from continuing to run in 2024. most people expect the fed to cause interest rate increases for the first time in 15 months. the federal open market committee will keep rates steady at its meeting at the 5% to 5.25% range. the white house is denying that china is building a base in cuba to spy. the white house told msnbc the press report is not accurate but cuba's foreign affairs ministry

denied the report. odey management is in talks with some largest investment banks. several began distancing themselves after new allegations of sexual assault began surfacing against the hedge fund manager. morgan stanley is cutting ties while j.p. morgan and goldman sachs are reviewing things. his lawyers are looking into the claims. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ conventional thinking delivers conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible.

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>> the breadth of the market is the seven stocks representing

most of the games. this is a global story that there are 10 companies representing 85% of the global gains. jonathan: kristen bell the on the narrow leadership of these equity markets in the u.s. -- kristin bitterly on the narrow leadership of these equity markets in the u.s. and globally. we are negative almost 0.2% on the s&p 500. tesla is up more than 90% year-to-date. it has been quite a run. we have more weight to it in the premarket, up by over 4%. higher on general motors by 3.4%. ford as well saying they are going to use tesla's ev chargers. one to get adapters and in between. we are moving toward industry standards. tom: tesla has a p.m. of 68.

gm, i cannot believe the number, has a p.m. of six -- of five but they are both auto companies. you have to be kidding me. jonathan: dan ives has this to say this morning. an upgrade to his price target. while raising our price target from $215 to $300 as the sum of the parts story for tesla now further comes into play with supercharger network. ai driven autonomous path, unmatched battery ecosystem, and increase production scale -- he is bullish by the way. lisa a: this time, there is something different. tom, you were saying this is a car company. is it? they are going to be providing the level for charging. tom: i just did a log

extrapolation from the beginning of elon musk to middle elon musk and end elon musk. tesla is dead on its log regression. this is not underpriced. it is on trend through thick and then. jonathan: what a win for tesla. no, for dan ives. they frozen out, then braced him, embraced ford, did not talk to him for a long time and now he is the guy coming up with the industry standard. gm is hopping on twitter to say we are designing the constant in that direction. that is a big win for elon musk. tom: who knows what elon musk is going to do this weekend and then will vilify him on monday. as his wife so many people are attracted to him. -- why so many people are attracted to him. this is a guy who is so

strategic. jonathan: guys come with extremes. how many times have you seen this throughout history? tom: you say this about michael purves as well. jonathan: every time he comes on. [laughter] lisa a: you are going to get michael purves. tom: it is analytical geometry for everybody who is a bear. michael purves. for a sense of your note this morning, like me, you are on the excess. everybody is looking at the parlor game. you are saying for belief in the equity market, you have to look at the time function and what the fed will do. michael: if you look at fed funds policy over the last few decades, it is of more than it is sitting someplace. the average time at the end of a hiking cycle is measured in months not years. one of the things i think will

be interesting to see, and i think you are starting to see signs from jerome powell, is there is a lot of lack of clarity about the inflation story. we have seen the search from supply shocks during covid and ukraine and -- the surge from supply shocks during covid and ukraine and every things -- other things. not to mention the fact you have employment and structural issues and so forth. one way to square the circle for the fed is to camp out a terminal, if you will. it may be another 25 in july and possibly next week, and stay there, even if data cools, until you see 2% is right there with a bull's-eye. lisa a: as a traitor, what is more important for you to track? that they could consider potential fed moves or what will

happen on the economic front or just clear sentiment with respect to economic investors? michael: it depends on what you are trading. the philosophy that will define the contours of the 10 year trades and to your trays is a much lower velocity then you have been looking to over the last year. last year, we have massive volatility because the fed puts it as one of the most aggressive hiking cycles we have seen. you can talk about silicon valley bank and the tighter lending standards. you can talk about whether the cuts are priced in will continue to be priced out. i think they do that that is a slower motion thing. the trade that i think has been a very -- it has been a difficult market to trade but the one trait i have been difficult on is volatility. now, it is probably time to

close out of those types of trade because we are pretty low. i do not think we should be surprised you are at 13. the sukkot we have been talking about how bearish everyone is -- lisa a: we have been talking about how everyone is bearish but every time they hear something bearish, they are sick of it. they go, you have been doing this but it has not happened. which means there is another case the rally, soma move. michael: fomo is a very powerful move. we have had some brighter lights on the earnings frontier from the nasdaq and other indices -- but that is, at 26 times, if you miss the rally, use sort of feel obligated. one of the conundrums is they bench to the s&p 500 is weighted to the tech stocks.

if there is all this material having a great rally, it would not be as much of an issue. but when you are being dragged up by nvidia at 25 times revenues, this is going to creates problems later in the summer. my vectors are focusing on q2 earnings season because if the ai narrative this. result in the meaningfully higher earnings outlook -- narrative does not result in the meaningful higher earnings outlook, at 26 times, you will be vulnerable. tom: you are beautiful on -- brilliant on adxy. is there an event that is tangible to your end? michael: it is two very different stories. tom: it is friday. [laughter] michael: i don't have a clear view on japan except that inflation data is waking up.

i think the experiment the boj did that everyone was lampooning last year was a risky experiment i wonder if they will be vindicated and finally wake up the animal spirits. then, of course, there are other positives going on in japan that will make equities more appealing. china is a different story. jonathan: good to see you. michael purves at tallbacken capital. we had a rally on cash money market funds. what will pull it out? tom: i don't memorize this stuff but the chart on pots and gloom and caution and cash as a proxy. it is a cliché off the charts. everybody is on board with the get off the stocks trade. how do you get to 12.75 percent?

that is way pre-pandemic. jonathan: the ceo of market fields asset management had things to say about the management in big tech. coming up in just a moment. the broader markets is softer. slightly negative on the s&p 500 but still heading for a weekly game. the nasdaq is actually down on the week so far. yields are higher by three basis points. 3.75 on the 10-year yield. surprises from the bank of australia and canada. i look at the road to absolutely nowhere. tom: and look at the 10-year and 30-year yield in tips and get this feeling. jonathan: it with sword by surprise hikes and weak jobs data. the final hurdle before the fed decision on wednesday is cpi on

tuesday. we will break down that in a moment. ♪ it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david. connect with an advisor to create your personalized plan. let's find the right investments for your goals okay, great. j.p. morgan wealth management. 5-hour energy wants to charge up your summer. just purchase any 5-hour energy product, okay, great. then enter for a chance to win an eco charger electric atv.

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>> you have excess savings dissipating by the end of the year, student debt coming back, so you think the consumer looks weaker by the end of this year. >> you are in a world of higher inflation and have reset. >> have a higher for longer narrative globally. >> ultimately, if you do go into a recession, bad news is bad

news. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. joe: -- jonathan: i remember a headline previously. live from new york. good morning. this is "bloomberg surveillance" on tv and radio with tom keene and lisa abramowicz. i am jonathan ferro. her equity market just a touch negative going into the weekend, -- your equity markets just a touch negative going into the weekend, softer by 0.1 percent. tom: 13.76 on the vix and michael purves saying this does describe a bull market. then what? you reading this weekend is very big on the "then, what." of it. jonathan: i think about the

story of the last year which is the handful of stocks dominating the market. i think this drowns out what is happening beneath the surface. lisa, you raise the right question about the rotation people have been waiting for. is it developing? not today. lisa a: the russell has been led by some of the smaller banks. in other places, it seems to be widening out. i wonder about michael purves' c omment that even if it is tech driving the force, do people catch up with other names? tom: how many people have enjoyed this from october rally? how many people really? jonathan: deutsche bank and evercore. there are two dominant names that stick out. last year, morgan stanley struggled to call the index.

struggling last year and this year at j.p. morgan. it has been difficult for a lot of people rated you have been paid to wait in cash and you are asking how many will have participated? i can $.25 trillion that is not participating the have sat this out -- point to 5 trillion dollars that is not participating that have sat this out. tom: can i give good news? i have offspring in shanghai who taught me air matters and looks at this religiously every day. new york is 87 on the list, down from number three yesterday. we have green on the screen. it is 44. atlanta is actually worse than washington. i did not know that. jonathan: it has been pretty

bad. i track -- you go running, you can feel it. lisa a: i don't go running in something like that. walking through the park with a mask on, it was empty. especially on wednesday when it was orange out. jonathan: back to the pandemic? lisa a: yes, it fell back to the pandemic. exactly, it was exciting. a -- the east to the vice president and the supervisory board char speaking before the

meeting. the six-month yield showing the flight of money into money market funds from deposits. they are around five or 5.5%. on the other hand, after earning nothing, you are now earning 5.5%. what point does this actually stipulates spending with some income? it is a big day in sports. there's nothing going on in markets except for this navelgazing. we did get the french open. the tennis women's single in paris. tom: does a lot have a chance against the juggernaut -- milan have a chance against the juggernaut? jonathan: the code to enter milan, when he was a player, he had to play second fiddle to his brother. his brother was so much better. it would be nice if you can do

something as a manager. tom: does manchester united have any hope of getting the glory of the modern manchester jonathan: city? jonathan: what do you mean? tom: for manchester united to get the excellence. jonathan: you would like to see manchester united come back and topple city? >> i would love to see that. jonathan: are you a liverpool household? lisa a: at the moment, it is a liverpool. jonathan: who gets supported on -- in the household? lisa a: i think inter. tom: are you ready to introduce the guest? jonathan: it is amazing to see him totally lost for words. [laughter] michael, good to see you. i think lisa is asking the right

question this morning. is the rally broadening out? >> i hope so. the last 10 days or so have had a much broader field. sort of weak wednesday to wednesday. the s&p was up. adding this 4 to 1 is sustainable but a lot of the stuff has been left behind. i think the overall state of the economy is better. it is much better than people expected it to be if you went back to last december and saw with the earth half of the year would look like. i think real economic activity is better than people would expect. the question is, what does financial engineering look like? lisa a: it has been one of the toughest years i can imagine,

exhausting a lot of people unless they were all in on nvidia if you missed it, what do you look for to know whether this will be a bobo and -- fomo or whatever you want to call it, or if it is lowering people in to get annihilated in a couple you. >> i think this takes time for a competent market like this to fall apart. it would take something different. i don't see any real deterioration in the economy. i don't think there is a lot of to cyclicality. that is still a fairly cheap part of the market. lisa a: you are going into equities right now? >> we have been in cyclical equity so far and it does not really work right now. i think a cyclical mindset will lead people to understand the economy is ok. i think people markets can play catch up. tom: back to analog in the 70's,

it was a horrific recent that's recession a set of a pandemic. we thought the world was going to end, there was a bounce, short squeeze, and then we went up another 29%. how do you generate a second leg to able markets that began in october? >> the bear market last year was not like 74. we used the 1970 four analog a lot back in 2008 when people really thought the world had ended -- use the 1974 analog a lot back in 2008 when people really thought the world had and did. i think you really cross back into positive territory this year. there is room for equities to do ok in this kind of environment. i am still of the belief that at some point, interest rates will be the story.

it is more likely to be the longer and of the cars -- end of the curve then the shorter that causes disruption. i would be hopeful that portions of the global markets, asian markets, have had a good year this year. it is not just japan. and a cyclical of the u.s. markets can generate ok. tom: does the asian market develop a disinflation pulse? >> no. i think it is the quality of corporate earnings over there that it's better than people expect. a market like korea is doing a pretty cheap market out there. jonathan: we have had conversations about a lost decade return. a few months in to the year and already we are talking about

u.s. exceptionalism driven by five big names on the essence 500. it does not feel like the conversation has changed. is that just a six-month moment in time that you leave behind or are you questioning the moments we leave over the last few months with you? >> i still think the headline index that you will add in 2021, i think you will pay for several years. the s&p 500 is still 15% below its peak in 2021 so you have a good way to go. but, i am surprised and impressed by this new wave of enthusiasm. it took something for people to get excited about but they have been given it with ai. the thing will have to run its course. jonathan: in the last decade, we had fang and europe did not. now we have nvidia and europe does not.

that is part of the question. other you can get the global cyclical story going at the equity market level with this being the dominance equity markets three at the moment. is this competing with the way you were thinking about things going into 2023? >> as i said, yes and no. there are portions of the global markets that behaved as i would have expected. some of these boiling cyclical indexes have had a good time on the others of the world. within the u.s., those equities have not performed in the way you would have wanted them to do so. in the u.s., there is a process of capital being sucked into the big technology names and away from the part of the market you like. tom: in dollars, korea of 36% off the bottom. jonathan: korea is way up and japan as well. michael, this was great. michael shaoul of marketfield asset.

supporting him into atlanta, i think. looking forward to a conversation. beatty thinks we could get out a few more points on the s&p. tom: has he nailed it or what? lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. new yorkers can breathe a little easier today. city environmental officials say air quality improved overnight to moderate but people sensitive to pollution are being advised to take precautions. the air quality and vex improved 100 on a scale of zero to 500 today, it reads the most level of hazardous earlier this week as spoke from wildfires in canada crossed. tessa announces the longest winning streak that was sent in january 2021. this after general motors said

it will adapt its electric eagles to tesla superchargers. tesla shares have risen more than 90% this year. ubs sealed an agreement with the swiss government to cover $9.9 billion of losses that could occur from the closing of credit suisse. bank of japan officials see little need to adjust its yield curve control program. bloomberg learned a move is unlikely at next week's policy meeting given improvement in the function of the bond market and smooth shape of the yield curve. nearly all economists expect no major policy shifts at the meeting. i am lisa mateo. this is bloomberg. ♪

>> i am an innocent man. i did nothing wrong and we will fight this like we have been

fighting for seven years. it would be wonderful if we could devote our time to making america great again. that is exactly what you did but now our country is in decline. you are a failing nation and this is what they do. jonathan: former president donald trump en truth social. he was indicted over his refusal to return classified documents found in his florida home. the former president donald trump about to appear in federal court in miami on tuesday. this will pick up through the weekend and into next week. tom: the brief from terry hianes earlier was great which was this is not the time to be a lawyer. we are blind until tuesday. it will be an important conversation about everyone, including the president, is blind.

jonathan: we are working on documents which say the charters include --. tom: it seems to not go away. we are talking state courts in florida. maybe incoming things in atlanta. was this a surprise for washington? annmarie: it was not a surprise because we recently saw donald trump's lawyers at this meeting at the doj in washington, d.c. what was surprising is the wrinkle that there has also been a grand jury you taking place in miami. we just learned about this last week, reporting from the new york times. the documents case started in washington, d.c. because these were taken from the white house and then found in mar-a-lago.

we all remember the search of the former president's result -- resort in palm beach. there was a subpoena to collect them into did not oblige. now that the special counsel was looking into this, everyone thought the investigation was just happening in new york but it is happening in florida. florida is a state that has his support. everyone thought if there was an indictment in washington, he would try to move it to florida, but now it is already happening there. jonathan: how many former officials and cranes officials have documents and did not know they had document? do you know what is different about this case with the former president compared to others? annmarie: you were to see that mike pence, who is also running

for president, has been cleared. joe biden, that cases still pending. the thing about mike pence and joe biden is they invited officials to come in and canvas areas and collect documents themselves. the former president was asked by the national archives to give back the documents and did not. you have bill barr two days ago on cbs saying this is a case of his own making. this is the former president's own attorney saying if he had just returned the documents -- he said the doj has provided a lot of deference to the former president and if you just provided the documents, case would've went away. lisa a: we have not seen the cases led -- laid out in the indictment but you can get information from his opponents including in the republican

party. that may be the key over the weekend. to his opponents back him or step away and say this is the reason why he should not be president? annmarie: this is going to be a litmus test. every single republican candidate is going to be asked, will you part of the former president if he goes to jail? we could potentially get the documents today. some come with presidential -- with prison sentences. they will all be asked, which you pardon the former president? mike pence could not answer that. he said he did not want to deal with hypotheticals. lisa a: is there a deep state that will pull out in the poll numbers? annmarie: i am not sure about the poll numbers but certainly in the base that donald trump has a handle on. every time donald trump is faced with a massive lawsuit, as

numbers go up it is advertising campaign donations go up. the bigger question is as this continues, you mentioned what potentially happens in georgia, and a potential lawsuit into his company in new york. to all of these become overwhelming as lead to donald trump legal fatigue and jesse lose voters -- and does he lose voters? tom: this reminds me of gerald ford and richard nixon from a few years back. is it safe to say the contributions president trump is getting are paying for his legal bills? annmarie: i am not sure. i am not sure that would be fair to say right now, but potentially some of them. tom: he has three geographies to deal with? new york, miami? annmarie: new york, miami,

atlanta and also washing 10. tom: i find this extraordinary. what will you look for tuesday? we are not going to get what you saw before which is cable tv news monitoring? annmarie: are you not? why wouldn't you? tom: i am asking. annmarie: it is a very quick drive from mar-a-lago to miami. i imagine that cable news will be following his road down from west palm beach to miami. tom: do you know a good lawyer? i have been cleaning out some stuff. i shredded good morning at politico, a photo of me and heidi and president bush from a few years ago. [laughter] jonathan: is not going to get

you in trouble? tom: it was a christmas party. annmarie:'s to it every year. it was a -- annemarie goes to it every year. jonathan: candidates are being asked whether they would pardon the former president. to go one step into that conversation, with the likes of governor christie, isn't this part of the pitch? so some come out and say this is it, the former president is clumsy, it is reckless, etc. annmarie: the issue is the former president is innocent in the country until proven guilty and that is the tone chris christie said. he said let's see the facts. as i said or, no one is above the law, no matter how much they wish they where -- were.

now that they cannot be seen as trying to weaponize this, they will play this very straight. jonathan: it will be interesting to see how this develops over the weekend. tom: red sox, yankees, where are you sitting? annmarie: i am sitting behind home plate of course. jonathan: amh, good to see you. tom: the red sox are so weak in this division that they are bordering on the 1960 i've red sox, which ruined -- 1965 red sox, which ruined my childhood. they played 160 games and lost 100. worst team ever. annmarie: say that again. boston red sox, worst team ever. tom: gerrit cole is really fun to watch.

he is really impressive. jonathan: is aaron judge back? lisa a: i don't think so. jonathan: caffe choses coming from charles schwab. look out for that conversation. on the data friends, really liked at the moments going into next week week but it picks up. on tuesday, cpi data. wednesday, the federal reserve. equity futures just about unchanged on the s&p. 10-year yield hired by a few basis points, 3.7491. getting you into the weekend, live on bloomberg tv and radio. ♪

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jonathan: equities on the s&p 500 shaping up as follows. on the s&p, we look like this. basically unchanged. on the nasdaq we are positive 0.08%. more than positive on the year. the s&p 500 off the lows of october up 20%. you will wake up to headlines about bull market, narrow leadership. month to date in june some of the small caps, the russell, picking up the slack.

the russell down 0.1%. for the month of june up around 7% or so. let's see if that continues and whether this equity market rally this year begins to broaden. tom: that is the distinction, the small-cap move. for me, it is a new conversation. it is not a bank conversation. jonathan: will it continue? this is what bank of america were looking for more of. apple is bigger than the russell 2000, which is something we are thinking about. the two-year, 10-year, 30- year looking like this. yields going lower. federal reserve on wednesday, good luck. 4,55 on the 2-year.

i want to finish on the euro. suggesting we have had two consecutive quarters of negative growth. many call that recession but i do not have time for that debate. no growth in europe in q1. i think there is a broader conversation about the economics. guy johnson bringing up this point yesterday. that is a problem for the ecb and even the federal reserve. softer growth they were hoping for, that was almost the target to get inflation down, and they have had and not much happened. lisa: how are they going to justify not hiking rates when it is clear any weakness is not that painful? we have been talking about it throughout the morning. tesla coming out with a huge win. general motors saying it will use its electric vehicle superchargers and got on the bandwagon that ford had gotten

on. his tesla still a car manufacturer? or is it the infrastructure for a broader ev network in the united states that is adapted by the auto manufacturers? shares are up 6%. the longest streak, 11 straight gains, going back to 2021. general motors shares up 4.7%. carvana is fascinating. yesterday a record 56% surge. the short positions absolutely decimated. all of these people trying to leave this company for dead and it said, we are improving. and everybody that was trying to short this company got blown up. tom: i think that is a moonshot. jonathan: what are we looking at? tom: carvana. [laughter] jonathan: you never know. tom: do you see the abuse i get?

they made it back to 24. lisa: you can talk about levels but the point is people are looking for the companies during the pandemic that were left for dead and they have been trying to pile on. all the, they are not dead -- oh yeah, they're not dead yet. what you have right now is shares up more than 5% after coming out, raising the outlook, seeing better-than-expected earnings. some of these companies that grew up during the pandemic are adjusting and here they are. tom: she is on it today. jonathan: she is on it today. [laughter] tom:tom: she is killing it. jonathan: what do companies do? tom: is it too early for a beverage? [laughter] jonathan: charles schwab out with their rounds. one more rate hike is possible. a shift teasing policy would

only be seen if the economy fell into recession or financial stability issues were to reemerge. tom: kathy jones joins us now. i'm going to go to something we were talking about with your exquisite ability to play piano, which is gershwin george. he said, life is a lot like jazz. you better learn to improvise. how do you improvise with the oddity of post pandemic economics and the ambiguity of where we are right now? kathy: i think that is the challenge not only strategists have but the fed is facing. how to they set policy in an environment that is unfamiliar? the way we have been doing it is either barbelling or laddering and not playing every up and down. you can stay short and try to roll out and time it perfectly but there was a lot of reinvestment risk if you miss.

these moves are so fast. tom: are you combining your work with liz ann saunders? are you doing it with the understanding there will be a junk condition in the short end or a dramatic move in the long end? or do you see stability? kathy: we think in the bond market it will be more stable. we had huge volatility the first half of the year and that was the market readjusting to fed policy. and yet, we have not gone anywhere. we had all this volatility and yields are about the same they were at the beginning of the year. but we think the second half should be more stable, barring some crazy financial market event that seems to happen every six weeks. barring that i think we should have a fairly stable move. lisa: there is a renegade theory out there right now, trying to justify the moves and the resilience in the economy. or else it is just true. we have been talking about the

lure of 5%, 5.5% of cash as negative. but some people say it is stimulative. you can get returns on your cash which gives you more money to go out and spend that much more. which is it? kathy: that is a tough question to answer. i think the 5% higher yields are more punishment than reward. a number of savers that are actually benefiting from that are doing fine. but you have a whole bunch of companies and individuals trying to borrow. either getting a mortgage, car loan, refinance at higher rates. i would say it is more negative. lisa: but nobody who is buying a home is paying 7% mortgage rate. everybody is getting something else. companies can get pretty low rates if they are a good company. on average they are high but those that have to pay through the nose are not borrowing at those rates. the punishment is not actually

rewarding the economy. the reward is driving more investment. is that an accurate way to understand the dynamic? kathy: i would say the credit conditions have been easier if you go to the capital markets than it would normally be under the circumstances. but if you are a low credit borrower, costs are going up and we are seeing weakness at the low end of the credit spectrum. it is hard to believe we can have all of this tightening -- 500 basis points in a short period of time, and cutie at the same time -- and not have an economic effect. lisa: one year forward, laddered or barbelled? are you clipping a coupon or can you position for total return? kathy: i thing the bulk of what you'll get is cutting the coupon, but you can position to get total return. tom: are you giving me double digit total return? kathy: i think that is unlikely.

[laughter] sorry. tom: 11%? kathy: no. tom: that was a discussion from 10 or 12 years ago. that was fun. kathy: it was. jonathan: can i give you one step? tom: please. jonathan: hi shares in a decade. one third. lisa: the others are bought from developers that are offering lower rates or refinancing or taking on other loans for lower. the impulse is not making its way into slowing the economy in a material way. this is why people are wondering why has it not been more painful? jonathan: the old ones are now up for sale because mortgages are 3%. this housing market is distorted. lisa: completely. jonathan: totally distorted. tom: i would suggest it has

always been distorted in a pandemic. the rent is now $4300. jonathan: it is nuts. this is built on what lisa is talking about. mortgages at 3% are 30 years long and i hope you did that. i did not do that. or are we finding out the economy is more resilient and 5% does not get it done? kathy: i think it is the long and variable lags are longer. let's look at the other costs that are going up. we have had sub 2% growth for some quarters. the manufacturing sector is very weak and we are starting to see the ism come down. i think it has been longer because we had such a fiscal and monetary policy response to the pandemic that it is taking longer for it to work its way

out. but it is hard for me to believe. that is not going to happen over time. i think that is the fed's hold onto high rates. if inflation continues to come down, holding is tightening. particularly withq2 going up. jonathan: i totally agree with you. you can keep the nominal rates steady but the real rates shift. kathy: real rates are up and if they stay up for another year or so, that will have an impact on the economy. tom: i modeled 2.05% before all this idiocy. do you suggest we will see the 10-year real rate that will go to the moving averages of another time and place? kathy: i think 2% might be on the high side but we are looking at tips right here. jonathan: interesting. good to see you. kathy: thank you. jonathan: wonderful conversation.

so hard to relate to the idea that one third of the houses sold are both cash. the difference between the haves and the have nots. one third of housing is bought with all-cash? lisa: guess who is buying? guess which one third? tom: you have heard this before but i am in the camp where we have disaggregated as a society. it is the haves and the have nots. but there is an america out there loaded into property with cash. jonathan: the spanish finance minister, coming up. talking about the drought in spain. bramo is concerned about the olive oil supply. lisa: it is bad. jonathan: this is bloomberg. ♪ >> keeping you up-to-date with news from around the world with the first word, i'm lisa mateo. new yorkers can breathe easier today. city officials say the air

quality improved overnight to moderate. still, those sensitive to pollution are advised to take precautions. new york's air quality index improved earlier today, the most serious level of hazardous reached earlier in the week as smoke moved across the u.s. northeast. the u.k. has posted fresh health warnings through the weekend. soaring temperatures caused by hot air have pushed the nation's health security agency to issue alerts until friday, signaling risk for people over 65 and those with pre-existing conditions. temperatures will reach nearly 82 degrees in the british and german capitals on saturday. binance being cut off from banking partners after a lawsuit from the securities and exchange commission. the cryptocurrency exchange says it could happen as early as next week and told customers it is suspending u.s. deposits and recurring orders from transitioning to a crypto only exchange.

binance calls the sec's allegations unjustified. former berkeley ceo jes staley has been out of sight for more than a year and a half as revelations about his relationship with his disgraced financier jeffrey epstein piled up. buddy new york, he is scheduled to give his look at events for the first time. he witnessed an assault and may have participated in a sex trafficking ring run by epstein. his lawyers deny the allegations. global news 24 hours a day on air and on bloomberg originals. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo and this is bloomberg. ♪ what do you get from the morgan stanley client experience? listening more than talking, and a personalized plan ♪ to guide you through a changing world. ♪

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>> you had a slow down inactivity and yet, inflation remains uncomfortably high. it is a lot easier than it was a

few months ago because you have got the base effect and energy prices coming down. but i think the ecb's jobs is one of the easy ones. i think the federal reserve has the tougher one. jonathan: global head of fx strategy at rbc commenting on the weakness in q4 and q1, in the lack of progress on inflation. the ecb coming up next week after the fed. looking for a 25 basis point hike. still up into the air as whether the fed makes a move on wednesday. tuesday might be the deciding factor. we get cpi inflation data. just to touch base with the price action on the s&p 500. unchanged going into friday's session. unchanged on the s&p 500 closing in a bowl market -- bull market. tech stocks doing the best this morning.

tom: the june 30 reset is happening a few weeks early as the bears -- i will not call the people in cash bears -- but there is a humbled tone. jonathan: the bulls, deutsche bank. binky is looking for 4500 on the s&p. tom: the inflation report next week and the fed meeting, what we are going to do is focus on the guesstimates for it. we are thrilled to bring you someone who runs an economy that is better than good. picking up a trophy in new york this evening, nadia calvino, spanish vice president and minister for the economy of spain. why is spain always the number one performer? jonathan: are you talking about football? tom: yeah. there it is but the answer is spain is unique.

we are thrilled the vice president could join us. thank you for joining us. i have got to go to the weather. there is a drought in africa that will grossly destabilize the agricultural dynamo that is spain. quite frankly, and this worry about drinking water as well. how urgent is the drought in southern spain? nadia: it is a very serious issue because spain is a world superpower in the agro food sector. it is impacting the harvest in some areas. drinking water is guaranteed and we are investing heavily, more than 6 billion euros, in the utilization of water management and the efficient infrastructure for water management. you may know that spain is the second-most efficient country in the world after israel and water management. we are heavily investing so that we can continue to be highly performative. tom: there are so many other

issues and there is much to talk about. what is changed his you and mr. sanchez have a snap election to deal with. alonzo soto says this is front and center. how will you approach the election? nadia: the economy is performing outstanding. tom: is it ok? i did ok? nadia: you did very well. it is better than good. the strong growth, strong job creation, inflation is down around 3% already. the performance of the economy is outstanding and i trust that spanish citizens will actually -- tom: i do not mean to interrupt but the political turmoil in spain is tangible. why, given good inflation and good economy? nadia: we had regional and local elections and what we saw was the rise of the right and the extreme right.

this movement is not only happening in spain. you were talking about it relevant in the u.s. it is happening throughout the eu. this is a movement that i personally hope does not continue. presden sanchez -- president sanchez decided to take the snap election forward. we need to have clarity and a stable government and not be in the middle of a campaign for the presidency. jonathan: there is work to do before we get there. one thing you mentioned was the drought and that had an effect on price pressure. you do have an anti-inflation package that will expire at the end of the month. is that something you are thinking of renewing? nadia: we are assessing which measures we should continue to have in the second part of the year and which no longer makes sense. because the evolution into international energy markets have gone down.

we are a pre-war level. we have to see if those measures should continue beyond june. jonathan: could you give me insight on that now? nadia: no because we are in the midst of analysis. what we have been doing since the pandemic happened is adjust measures every three or six months so we can have efficient use of resources. we talk about public money when we get public support. we have to be very focused and efficient. this has worked well so far and that explains why the spanish economy is doing so well. we should continue along the same line of responsibility and effectiveness. lisa: how much have you enjoyed the euro being weak versus the dollar and the tourism boom that has emerged? nadia: we have seen a strong performance of the tourism sector indeed. it has been a record month in terms of numbers of visitors and in terms of the revenue of the

sector. we expect the summer to be also externally positive. but the current surplus that spain is showing -- and this is a historical first. never in history did we have this surplus when we also have strong growth. but what is remarkable is not the good performance of tourism but known tourism related services. showing the spanish economy is gaining competitiveness and market share. not only the goods sectors but the tourism related sectors are being very positive and pulling growth up. lisa: is that what you are trying to emphasize? the non-tourism side even as the tourism side is one of the main drivers of the strength that has been unprecedented? nadia: what i think should be highlighted is what we are talking about is just not bouncing back to a strong recovery but there is a structural modernization and

transformation of the spanish economy ongoing, which has to do with the new green economy, digitalization, and it has a lot to do with the european funds. next generation eu investment and reform program. we have frontloaded that investment program and the results are visible. jonathan: have you had a chat with elon musk? nadia: no. jonathan: should you have a conversation with him? he is in talks to build an easy factory in spain. nadia: yes. we hear that regularly. we hear about a possible -- jonathan: have you tried to have that conversation? nadia: i personally do not have a relationship with him or have not had the chance to talk to him. but i'm sure the president's office is in contact with anybody interested in investing. thanks to the low energy prices, high penetration of renewables, and the competitiveness of the economy, we are attracting investment. tom: asking for a friend. the dutch finance minister could not get his tickets.

everybody wanted to go to amsterdam and see the vermeer. could you get us tickets to the prado? [laughter] the 50th anniversary of this giant of spain? we need to get. nadia: anything you need. tom: very go. [laughter] nadia: you know i have a sweet spot here. jonathan: vice president nadia calvino, good to see you. nadia: delighted to be here. jonathan: thank you very much. vice president of spain with a lot on the table. tom: in america, this is an under told story. this ketchup started by madonna who started talking about madrid as the place to be. it is a boom emotion in america. you go to -- jonathan: spain is known because of madonna? tom: the whole american investment thing to portugal and spain came off one interview

with madonna. jonathan: what has portugal got to do with us? lisa: those are two different nations. tom: people are moving over there that they've shut down the ability to buy real estate. jonathan: oh, the golden visas. tom: all of that. madrid, madrid, madrid, and then you go to seville. jonathan: i bet she can hook you up with a visa. tom: we will talk on the break. you're doing a great job. picasso. jonathan: you probably pay less in taxes versus new york at the moment. you know how much you can save by moving to miami? >> welcome to another special roland garros update. iga swiatek is one when away from claiming her third title after she got past haddad maia in straight sets. she will face muchova

for the title. you can watch this exclusively on tennis channel. our coverage begins at 8:00 a.m. eastern. conventional thinking delivers conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. ♪ because investing isn't one size fits all. ♪

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>> you have excess savings dissipating, student payments coming back. the consumer looks weaker by the

end of the year. >> we are in a world with higher inflation and we have reset. >> one condition is the higher for longer narrative. >> i'm optimistic the market is going to move higher by the end of the year. >> ultimately, if you go into recession, bad news is bad news. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: on friday on radio and television, we are resetting early for the midyear look of june 30. resetting into an inflation report, a fed meeting, and a vix of 13.67. jonathan: binky chadha of deutsche bank looking for the same. this equity market can grind higher. tom: in the backdrop's interest rates. -- and the backdrop is interest

rates. there is a quiet group looking for substantial disinflation. they have had an off 10 days. jonathan: they have had an off 2023. they sticking with it though. they believe earnings are going to get hurt this year. tom: i have had two guests this week as talking about ips being attractive -- tips being attractive. bond people seem to be hyper flexible trying to find -- binky: trying to understand where the distortions are. lisa: someone is wrong. people are trying to arbitrage the places where there seems to be more consensus. tom: the confusion of the morning, we have musk-barra

lovefest. i can honestly say i have never said that. jonathan: tesla up more than 90% year to date. one of the big winners along with meta and nvidia. the is names make up one quarter of the index on the s&p 500. there has been tons of discussion about narrow leadership and lisa brought this up this morning. we need to keep building on it. are we seeing signs this month that the rally is starting to broaden out into the russell, the small caps and other equities? lisa: the answer seems to be we are seeing signs. the question is how durable are they? we are seeing the initial inklings that perhaps this is something sustainable. i go back to what michael purves said. if you have fund managers that have gotten it wrong all year, and they look at the headline number which is distorted by the ai trade, they are going to catch up with everything else. at what point does it bleed out?

tom: did we see that this week? jonathan: strip out the seven on the s&p 500. the s&p 500 is down. the russell is up 7% this week. i do not know if we are going to see it next week and the week after. binky gets paid the big bucks to tell us. tom: mr. taleb was fantastic yesterday. jonathan: how was that? tom: on bitcoin he was skating. we have not talked about this week but a big shift by gary gensler. jonathan: equities turning positive, almost. now unchanged and slightly negative on the s&p 500. yields are higher by three basis points. i think we would all like a quiet session going into the weekend and focus on cpi and the fed after that.

tom: deutsche bank on equities and asset allocation, global strategist binky chadha joins us. you nailed the bull market. the chadha bull market took time to happen and with a vengeance, you nailed this. when we talked about going live you made clear 10% of the people who have participated in 90% of the people left behind, what does the look at for 90% of the people who missed the market? binky: the distinction that i was drawn was we have had a move up in equity positioning. we were at the bottom last year. that was the reason for the positioning squeeze. positioning today is in the middle of the band. but the entire move has come from systematic strategies as it

has come down from extremely elevated levels to extremely elevated lows. especially driven by early rates. discretionary investors, in terms of assets under management , their positioning has been what i would describe as firmly underweight for the last year in a very narrow -- tom: can i translate? [laughter] firmly underweight is chadha for long. binky: it is euro to nonexistent -- it is zero to nonexistent. the aaii has moved out. whether that translates into increased allocations we have to

wait and see. jonathan: the call from where we are at 4300 -- i read your research last night. it feels like it is about earnings. can you pair this with what is happening on the others of the research team with deutsche bank looking for recession? binky: absolutely. that is really easy because they are the same. my earnings numbers tee off of the economics forecast. but remember that the s&p 500 gets 30% to 40% from the rest of the world. i have a sales weighted global gdp measure for u.s. equities. the u.s. economy matters a lot. we have a framework -- i will leave aside as what it is -- but it tees off of the house economic forecast. it is a translation issue, if you like. it embodies recession in q4 and

q1. the things to note about it is that the forecast is for a mild recession. number two, we have growth happening until then. that means the recession kicked in from a higher level in terms of earnings. what i would emphasize is that the equity market, when it looks at aggregate earnings, tends to look year on year. year on year we are negative in terms of growth. it is slightly less negative than the prior quarter, but it is still negative. but when we look at all macro series we look quarter on quarter, which inequities we call sequential growth. our estimate of sequential growth in q1 is a solid 5%.

i would emphasize that is not annualized. lisa: markets are not the economy and we have to keep repeating that. i'm wondering whether this could be the start of a bull market even though the u.s. has not had a full-blown recession. binky: there are two elements about the recession that i would emphasize. this is arguably the most well telegraphed recession. recessions, in my view, in terms of their impact on financial markets, are not really about a couple of quarters of negative growth where everybody agrees it is modest and temporary. the market is going to look through that. if you listen to corporates on earnings calls, we are at the point where we have been talking about recession -- of the impending recession for three quarters. corporates are already

responding and the idea we put on the table is it is very possible that the recession slow down, part of that has been brought forward, if you want. if recession is well anticipated, there is little shock value to make you risk adverse. there will be negative impacts but a lot of the multipliers come from risk aversion. the concept of anticipated risk aversion and anticipated shock is not a shot. lisa: to end where we began. do you think we are seeing durable signs of broadening out? binky: i think it's choppy from here because of the positioning squeeze. as tom mentioned, the vix at 13 and 14.

we are not looking for discretionary investors to raise their positioning because there is this long list of concerns that they are focused on. i do not think the resolution of those is easy. we are going to continue to have tug-of-war but the positioning squeeze is done. but the demand balance looks constructive. i would say the grind higher, 4500 by the year end. tom: extrapolate. binky: soft landing will give you 5000. [laughter] tom: can i go home? binky: we have said that before. jonathan: you are so measured. binky had a tough year last year. goodyear this year same time. tom: you make the call but you never now. jonathan: the life of a strategist. does it feel a whole lot better when things are going right? or do you get nervous things are

about to go wrong? how do you think about that? binky: constantly paranoid. [laughter] why are you asking me on air? [laughter] jonathan: what is your approach to that? i talked with you many times. this year is better. how to you approach things when you are right? binky: the same as you approach them when you are wrong. you ask yourself what have you got right? are you right for the right reason? what have you got wrong? you adjust accordingly. jonathan: what was the lesson from last year that helped you this year? binky: the lesson from last year was confirmation of my view early in the year that we would get a massive amount of anxiety from the fed, but the anxiety was of their own creation. they decided for a variety of reasons to wait a long time. when i listen to the fomc now i hear calm. that reaffirms my view that a lot of their nervousness was about inflation, still inflation, that they were at zero to start the year.

we are at 5% now. there is a lot less reason to been anxious. tom: 100 shares of nvidia? jonathan: tons of respect. binky chadha of deutsche bank. coming up, mohamed el-erian on the fed next week. michael kushma and sarah hunt also coming up on bloomberg tv. ♪ lisa m.: keeping you up-to-date with news from around the world with the first word, i'm lisa mateo. relief is in sight. the national weather service says heavy rainfall in the eastern u.s. on sunday should help dissipate much of the smoke choking the region as a result of the canadian wildfires. air quality is already showing signs of improvement with the level in new york city returning to moderate. conditions remain unhealthy for many cities spanning from north carolina to rhode island. donald trump has become the first former u.s. president to be charged with coming federal

crimes. a grand jury indicted trump in connection with his refusal to return classified document found in his florida home. if convicted, he could face prison or be disqualified from holding public office, including seeking to recapture the house in 2024. most economists expect the federal reserve to pause rate increases for the first time in 15 months through december. the federal open market committee will keep rates steady at the 5% to 5.25% rate. they face a closer call on what to do in july. i'm lisa mateo and this is bloomberg. ♪

>> what do you say to americans to convince them they should trust the justice department? >> you notice i have never once, not one single time, suggested to the justice department what they should do or not do in bringing or not bringing charges. i'm honest. tom: that will be replayed in the coming months, particularly tuesday of next week when we have a summoning of former president trump to a federal court in miami. tom keene and lisa abramowicz with us.

we talked about this news that occurred last night. we are going to digress because this is important. there was times when you stand at bloomberg and two people are talking and you go, well, this i really need to listen to. annmarie hordern yesterday in conversation with a gentleman in chicago shockingly competent with the united states navy and our intelligence efforts abroad. i want to focus on your conversation with admiral rogers on the pacific rim. i was spellbound by the acuity of the discussion. annmarie: i think what was so interesting speaking with admiral rogers because this is an individual who has 40 years' experience at the navy. when you talk about and see headlines about the u.s. warship in the taiwan strait coming close to a chinese vessel, you

think how does this happen? he can explain, because of how ships move so slowly, the distance between that had to be provocation. he was able to take these moments we were seeing and extrapolate and explain why it matters so much at this moment to a business community. i think what he sees in the national security apparatus is it is no more just about hardware and the military. you actually need individuals with top-notch economic minds when you are trying to deal with the geopolitical issues of today. not just china but also russia. tom: what about the geopolitical issues of the beltway in washington? we are not asking the pentagon to solve the firestorms in quebec. but does the pentagon feel like they are on their own because of the gridlock and the political debate in washington? annmarie: i would not say they are on their own. the pentagon has always tried to take an above politics approach. they are in the news very much

this week, last week because of all of the talk around congress and the white house regarding the debt ceiling drama and caps on defense spending. that is a huge story going into the end of the year because to get that bill over the senate you had -- it was promised they would have supplemental bills to make sure they can get more money to the pentagon and mccarthy saying, that might not fly. tom: that is annmarie hordern talk. admiral rogers was talking yesterday and he felt like you were on one of those boats in the taiwan straits. it was stunning to get away from the beltway blather to somebody who actually knows what they are talking about. lisa: it is about the actual tangibles of the experience. this is where everyone's focus is on. i was speaking to someone yesterday who was saying it is not the fed, it is not the economic figures, it is

geopolitics and we track forward. how concerned with the admiral about what is transpiring? how we are shaping up right now? annmarie: tom heard it. it was quite depressing if you are looking at the geopolitical risks that are emanating around the world. there is russia, the invasion of ukraine. what is the future of this? he brought up the fact maybe this becomes a frozen conflict. i think more people are starting to feel that potentially is going to be the end of this. it does not end but it does not become -- tom: we call that world war i. annmarie: let's hope not. and china. this for the business community is paramount because the economies of these countries are so ingrained, the trade is at all-time records, they have a ton of investment in china. what so many strategists and

individuals that look at geopolitics are trying to learn about the lessons from russia and what that could mean for china. lisa: this is a digression from the news of the day in terms of the potential trump indictment. we have not yet seen the full documents and what that means for the republican election. i'm wondering how that dovetails into the u.s. perspective internationally. how much of the theater in the u.s. actually has a material difference to what the rest of the world does with his dealings? annmarie: i have spoken to a number of individuals abroad. they are so focused on 2024. they have individuals in the united states and traveling the country trying to figure out what the u.s. will look like come november 2024. is another president biden? is it another president trump? or is it someone else? this is incredibly important for

western allies. it is important to the decisions they make now in terms of how they are going along with the u.s. when it comes to things like china. and for adversaries, they want to know, say you are putin. you want to know whether the ukraine aid will continue at the level it has or is that going to be pared down? tom: sorry, folks, i do not have it in front to make, but i'm clear i saw some form of article that the white house is talking to cabinet officers about what is your plan? annmarie: this was in axios. tom: axios. are we going to see that from cabinet officers? annmarie: i do not think this is anything we are going to see immediate. i think what you see from the chief of staff is that he does not want to deal with headaches at the moment when they're going into an election campaign. if you are a cabinet, you need to go through the senate.

these can be long drawn not processes and they want to remain focused. i think his message was if you do not plan on staying until the end, give us the courtesy and be gracious and leave sooner rather than later. tom: ms. romondo, is she a candidate of some kind? annmarie: when you look at how she conducts herself and her cv alone, this is based on looking at her and talking to people who like her. she is great back. -- she has great respect. this individual has higher aspirations. lisa: what is going to be the sunday talk show talk around trump? annmarie: all trump. [laughter] let's hope the yankees are beating the red sox but it

depends on if we get the indictment text. tom: we could get it today? annmarie: yes. tom: that would be interesting. annmarie hordern, thank you so much and congratulations on a riveting discussion with admiral rogers, navy retired, on what we are doing in the pacific rim. lisa, we have got to go through the data which tells you it is to borrow from greenspan. oil at $71. i go back to the vix under 14. lisa: the rally to the bull market. although not in the ai shares and that seems to be driving everything. tom: it is there but there has been rotation. it sets us up for june and gets

us to that key data point, i believe june 13, the inflation report. lisa: let's see how much that changes the game. we are looking at people who are pricing out rate cut ands it does not matter for equity valuations that are driven by this belief in american dynamism. tom: we have been very quiet on housing which is had a respite down to 7.05%. 30-year mortgage, maybe that will move higher. this conversation will continue with citigroup. he has been dead on about interest rates. stay with us. ♪

tom: "bloomberg surveillance," good morning again. we will see the inflation report next tuesday. we are adapting to not being in the market. triple leverage all-cash fund. i missed that. vix 13.65. we are going to truncate the data check and lisa has got intelligent words from the guy at citigroup who was so right. lisa: this has been the big debate. everyone priced out the idea of further fed tightening after what happened in march and he

stuck with it. he said the economy was still strong and here he comes today, andrew hollenhorst at citi. still maintaining that next week is not off the table. the fed will raise 25 basis points saying, they will revise of gdp and core inflation and lower the forecast for the unemployment rate for 2023. dots will need to move higher. in our base case the fed will hike 25 basis points and raise the median dot by 25 basis points. tom: let's dovetail to finance and the investment part of this. chief u.s. economist at citigroup, if we get a hollen horst call, and you have been dead on, should amateurs assume the 10-year goes up to 4.5%

even 5%? andrew: the fed keeps pushing higher with policy rates but it is hard to get traction on the 10-year yield. tom: why? andrew: because the more the fed raises policy rates the more the market is going to price that the u.s. economy will go into recession, inflation will come down, and the fed will cut rates. the fed has to communicate that they plan to raise rates and continue to hold them there. tom: this is critical. dudley of the new york fed now writing for bloomberg opinion which is, all of a sudden, the time continua matters. how have you adjusted the longer in a given rate? andrew: that is the margin we might see the fed trying to play

with more. it is the case that policy rates are getting to levels that are close to restrictive. a lot of the last year was about getting to restrictive. there is the sense we are getting close. now the fed is in a much more difficult scenario because they have to guide to keep rates higher. they can do it with the dots. 2023 dot can come higher. not sure if they are going to do it at this meeting but raise the 2024 dot to show you are leaving rates higher for longer. tom: the bramo cam is over here. she is laughing at me. [laughter] lisa: why not just raise 25 basis points and that seems to be your view? and yet, that would go against historical precedent. it has signaled every which way they are going to pause. andrew: the simplest way for the

fed to indicate a hawkish or dovish vision is to show it. raising 25 would be a clear way to send that message. it is not that much of a surprise for markets. we have about 20 basis points priced for the next two meetings. we also have a cpi reading upcoming. but i think you are focusing on the right thing. it is hard to get markets and the public to buy your guidance for what you're doing in 2024 because there so much uncertainty. what you can do is something today to do something next week. lisa: one of the biggest divergences among the people we speak to is what they believe inflation is doing. whether it is sticky or whether this will be this disinflationary trajectory.

i'm wondering how you view the market's reaction. if the fed does not hike next wednesday, will you see a bleed up in yields? andrew: i think you could. i do not know next week is going to be the pivotal moment when markets realize that maybe inflation is going to stay persistent for longer and the fed's policy is not going to be as effective. but you go back to the basics of how they just the forecast with gdp coming up and core inflation being revised up. just raising the dot for 2023 by 25 basis points, that is staying even with where you are. if you do not do that, it would be dovish. lisa: i would love for you to comment about we talked about with kathy jones. what does it tell us that the economy has been so resilient even though the fed has raised 500 basis points? does it tell us the variable

lags are longer and more variable? or does it tell us this is an economy with more momentum than anyone imagined? andrew: i think the issue for the fed and all about analyzing is that both of those are true. in the housing market we have already had maximum tightening where we got mortgage rates higher, housing activity slowed down, but now it is coming off the bottom. house prices are coming up again. it is not a lag issue. the power in the economy was too great to be overcome. but you also have a lag issue. going back to march some people were looking for an acute tightening of credit margins. that did not happen. that does not mean we are not going to have more restraint on bank lending but that could take a year or longer. tom: michael woodford, you are

the only one that has read the book. it is 948 pages. it is all about convergence. getting to tuesday, core cpi with three exponential moving averages, converging to 0.4%. that is a lot of math talk where we have reached stasis on inflation. what could that signal for you tuesday if we break out of that convergence? andrew: i think that is what we are looking for on tuesday. core cpi coming in at 0.04%. that is what the market is expecting. that is well above the 2% target. that is close to 5%. 0.4% i think we price some probability that the fed hikes. the base case is that they do. if you surprised to the upside and we get 0.5% reading, even if that is because it is used car prices that went more than expected, i think optically it

becomes hard for the fed not to hide. tom: what about the other way? if we break 0.3%? andrew: you could have -- tom: i have never had this conversation. [laughter] that is how stupid this conversation is. andrew: it is where we are. 0.3% and the fed may point to the rise in unemployment rate. we are picking and choosing our data here and say, we are going to skip in june but probably going to be hiking in july. i think that is harder to communicate. tom: so much more intelligent. greenspan is carrying a ham and cheese sandwich. what does it mean? [laughter] lisa: the problem is we do not understand the parameters. we do not know what economy we are going back to. we are dealing with pre-pandemic or post pandemic distortions that are creating variable lags with respect to the stimulus as well as the fed tightening.

do you have a reset expectation of the parameters we agree to settle out in? will be a higher inflation environment with higher interest rates for a longer time? or are we going to rapidly distance light far out? andrew: i think the risk is we end up with a more inflationary economy. you heard the bank of canada officials talking about that yesterday. the idea that inflation can be stronger. we are seeing some of those indications already. some of this is geopolitical, some of this is just the fact that we now have a more supply constrained economy and we are not used to that. for many years we had an economy where there was plenty of supply and the issue is demand. now we have these more real supply shocks and that is going to be an inflationary world. lisa: can people actually earn something from their money and also you are getting nominal growth in revenue that will help foster some of the dynamism, and

will not create this relationship everyone thought? andrew: great point. there are winners and losers when interest rates move higher. you are moving income around within the economy. but the net effect is still tightening. the net effect of higher rates even though borrowers will see it more difficult, the net effect is moving. tom: we have had a glorious week talking about equities. how do you link your economics to your equity strategists? i know you do not talk to each other, but how do you link your world to the stock market? andrew: we talk regularly. tom: greenspan made a big deal about this. andrew: we talk about whether you can reconcile what is priced in fixed income markets, equity markets, and with the outlook for the economy is. the best you can reconcile the three is to have an outlook for

some kind of soft landing and unfortunately, that is not my outlook. but it is hard to see how you're going to sustain very low levels of equity, high levels of equity prices, and have a fed that is fighting inflation that remains too high. tom: the inflation call that you had is brilliant. at some point it breaks. we have never been here before. the fed has raised rates as we have never seen. we have never had an analog where they have to cut rates after that kind of derivative. andrew: it goes back to what we are talking about before. fed officials will be quite reluctant to cut rates. it does not mean that they will not want to see clear evidence the labor market is listening and inflation is on a downward trajectory. tom: what is your unemployment rate to make that happen? andrew: they certainly need to be of -- tom: about 4%?

andrew: probably above 4.5%. their own projections would have that at 4.5% at the end of the year and they would still be holding. tom: do you have to have negative non-front payroll? andrew: 39,000 new jobs is not going to do that. tom: congratulations on an extraordinary and persistent call. andrew hollenhorst is with citigroup. there is a lift to the market. andrew hollenhorst driving the market higher. lisa: i do not think i would characterize it as that. but the mother of all melt ups. tom: jeff currie, coming up. goldman sachs on oil. lisa m.: keep you up-to-date with news from around the world for the first word, i'm lisa mateo. relief is insight. the national weather service says heavy rainfall in the

eastern u.s. on sunday should help dissipate the smoke choking the region as a result of canadian wildfires. air quality is already showing signs of improvement with the level of new york city returning to moderate overnight. conditions remain unhealthy for many cities spanning from north carolina to rhode island. tesla shares are poised to rise for a record 11th session. matching the stock's longest winning streak set in january 2021 after general motors said it would adapt its electric vehicles to tesla's superchargers. it follows a similar move from ford. tesla shares have risen more than 90% so far this year. former berkeley ceo jes staley has been out of sight more than a year and a half as a revelations about his relationship with jeffrey epstein piled up. but in new york this weekend, he is scheduled to give his version of events for the first time. a pair of lawsuits allege she witnessed an assault on a young woman may have participated in a

sex trafficking ring run by epstein. his lawyers deny those allegations. odey is in talks with the largest banks to convince them to stick with the london firm. several begin distancing themselves after new allegations of sexual assault surfaced against the hedge fund manager. morgan stanley is cutting ties while jp morgan a goldman sachs are reviewing their links with the company. the ceo says the firm's lawyers are looking into the claims. global news 24 hours a day on air and on bloomberg originals. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪ it can happen to the people who teach us and rescue us, the people on our team and in our family. it can happen to the people who serve us and the people who served. the people we work late with

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>> it will be good for transactions is false. they are not the bad guys anymore. the federal reserve can very quickly replace crypto. tom: my first project with bloomberg before i wandered into the building was with a guy named dylan ratigan, long ago and far away. he called me up and said, we got this guy who is a quantum guy and he has a book out. is this going to be a big or small deal? i think they had to move the venue four times because 1200 people showed up. i will tell you what i finished yesterday at bloomberg invest. full by randomness is what started it for nassem. there is no one i know in our universe who has published so

consistently and so excellent with his heated opinions on bitcoin for jeff currie will come out with his version on oil. jeff currie, i say this with immense respect, how did oil full-year by its randomness -- fool you by its randomness? jeff: we have never been this wrong for this long without seeing evidence to change our views. some of the upside has been taken away by recent events to the upside. but the core thesis very much remains intact. i think one of the big drivers is you have lost 250 million

barrels. the market is as short as it was during covid when we saw negative prices. you have erased the link going into the early 2000's. i chalk this up to the great de stocking. destocking of sanctioned barrels and sprs, finished goods, even financial paper barrels. we have been continuously selling for about six months to nine months. lisa: can you elaborate? for people not in the nitty-gritty a lot of what you said was a bit opaque. the connection of high interest rates to a lack of interest in buying oil or lack of stockpiling physical or paper crude. jeff: i will go through the economics. let's say to borrow money today

to buy a barrel of oil you have to finance your physical inventory. let's say at 7% or 8%. libor is paying you 5.25%. your net cost to hold physical inventory runs somewhere between 13%, even 15%. why are you going to do that? you have nvidia and nasdaq going up. there are so many better places to put your money. the other point too, oil, copper, and the rest of these markets do not have positive carry so the cost you to own, cost you to store it. you're going to drain down these inventories as much as you can. oil and copper are a right now. they are not an asset. until they become an asset, no one is going to want to hold them in inventory or paper form. you can think about the cost to holding these commodities has

risen so much that ultimately uid stocking -- you are d estocking. nobody really wants to hold this commodity. we think that is going to change and i think it starts with lower inventories causing positive carry and then some people want to own it. lisa: for years people were decrying the financial is asian of crude. are you saying it is no longer -- it is traded but it is a liability another the financial is asian has come to -- financialization has come? and you are not waiting for a crisis but complete lack of inventory to spur prices in such an extreme way you get a violent shift up the forces the hand of people that are left in the

dust? jeff: i'm not going to say it is 100% interest rates. it is fear of recession. the government discharged their reserves over fears of inflation. there is other factors at play but your broader point is absolutely right. when was oil financialied? in the 2000's and now many costs something. tom: there is a set of world-class leaders and you are one of them with the general equilibrium theory. you parachute into riyadh and you have to advise the saudis on the elasticity of supply and

demand around this new world which is the old world of the cost of money. how do you advise saudi arabia in this new world of higher nominal and real interest rates? jeff: their market power has never been higher. one of the reasons why is you combine the higher cost of money combined with issues around the cost of funding hydrocarbon investments. they are the only game in town. they have no competition. when we look at the cut they made in october, that was the first preemptive cut we have ever seen opec do. we just saw two more cuts announced in the last three months. why? because they do not have fear of competition. yes, the oil coming on market is russian, uranian, and venezuelan oil and they will run out and there is nothing behind it. but is there competition from the rest of the world? the answer is no. tom: is the united states not

ignorant but unaware of the international dynamics of oil? of moving oil up to japan across the pacific rim and all of the dynamics of the middle east? have we gotten lazy? jeff: i think there is a bigger focus on immediate term issues. things like inflation fighting, which is why we saw such a sharp rundown in the spr. you put all the spr's together and it was 250 million barrels drawn down. that is a lot of oil. i think the focus from a policy perspective is get inflation down and keep it down. but here's a fact i like to throw out. you look at core cpi and it is around 5.5%. it was at that level going back two years ago. what is changed is oil prices went down taking headline down to 4.5%. lisa: do you think that is the reason why the u.s. is not refilling the spr more aggressively?

because they are concerned about inflation and that could push prices up? jeff: with the show down over the debt ceiling getting money to buy oil would be difficult to come by. but listen to france, listen to germany. the focus is building strategic reserves of green metals like copper, lithium, cobalt. if you are going to bring strategic reserves -- build strategic reserves, you should do in the green metals commodities. tom: i know it is an unfair question given the ambiguity but i have got to ask. we are down, down, down, right, wrong. scope out where we are in 12 months. jeff: our view is you are going to be seeing substantial physical inventory draws because of his opec production cuts, particularly third quarter and fourth quarter. that is going to push us up into the low 90's. the question is will you bring the investor back into this market? i put a question mark on it

because it will have to be a new class of investor. it will take that investor buying to pushing toward 100. a lot of them have gone left and it will be difficult to get them back, but the key question is can we get the market higher? once you turn oil into an asset you will attract capital back. but i do not think it will be in the same cast of characters. tom: thank you so much. brilliant with goldman sachs. this really rolls over to sonali basak's conversation yesterday. they talked about what you have talked about. guess what? the world has changed. there is an interest rate. it affects equities, bonds, currencies, commodities downtown. lisa: it was fascinating. i want to spend time thinking about what he said. the financialization into the crude market. tom: in the next hour, mohamed

el-erian is on. he is not with "bloomberg surveillance" but another show. stay with us on radio and television. good morning. it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david. connect with an advisor to create your personalized plan. let's find the right investments for your goals okay, great. j.p. morgan wealth management.

jonathan: let's get into the weekend. on the s&p 500, just about positive. back in the bull market. the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york. the s&p 500 bac