quarks the environment we are in should be that we have sticky core inflation. >> that is still our main concern. >> inflation will decelerate more meaningfully than expected. >> our case is still that we only have one interest rate hike in the pocket. >> we need to see consumers have to lose their jobs. >> this is tom keene, jonathan ferro and lisa abramowicz. >> good morning. jonathan ferro, lisa abramowicz and tom keene. it is the friday before the beginning of the summer. we welcome all of you to the end of q2. what a first half it has been. kathy greifeld is with a spread katie greifeld. we have a full friday ahead of you.

she is front and center. let's get the promotion out. top of the show, stay tuned for the real yield, because that is the only thing that matters on this friday morning. we are breaking out new inflation expectation highs. >> if we look at the five year, we are above two percent on the real yield you look at the two-year, we are on 3% watch. i'm glad you told me to look at the real yield because you are right. they are absolutely rocketing higher. things up a solid 10 basis points. blowing up to 1.68, and that takes us back to yesterday. i thought the team did great about the shock of the essay, framing up this coming quarter. we need to look for a higher yield regime. >> it was almost immediately vindicated because we have an essay at 6:00 a.m., and at 830, there is a gdp, and that led to

jp morgan ditching bullish treasury views, so immediately, we are thinking on the heels of that. >> this was a quote we showed yesterday on radio and some. this suggested a 10 year treasury note yield of 1.4 -- 4.4 5%. ahead of the fed exercise on where yields are heading. that changes everyone out there. it changes wall street. it changes your mortgage, your rent, everything to a higher regime. where are we? that's bring down the chart. nobody believes in this market. we are down a percent for the record highs. down 6%. nasdaq, even with the move, down 10%. the nasdaq is led by an apple 3 trillion. they are up 27% off the bottom. >> that is amazing that we are 10% down on the all-time high. it tells you how big the hole was for those big stocks, and a

lot of that was predicated on the fact that you do have rates moving significantly higher. that is not necessarily a hurdle anymore. let's look at the data check here. we are going to brief you on huge economics. a future lift with the nasdaq leading the way. the future is up 72, but 13.44. you wonder if there a 12 proof with what we see. the 10 year yield at 88%. really, the yield bears a lot of scrutiny on a technical basis to see if we get a breakout. 210 is spread there. historic lows with a bit of uplift above $70. a dollars trade yesterday, and in the brief, governor bailey enjoying a weaker sterling 126.36. we will see how the board changes at 830.

there is a lot of eco-data coming out, including pce. the preferred inflation measures with a cooling across the board. there also be personal income and spending numbers. there will be a university of michigan sentiment reading. i'm interested to see inflation expectations in that report. moving on, we are on supreme court watch. we are awaiting a decision possibly today on the biden administration's student loan cancellation plans, and that is potentially impacting 3 million people, so a lot of people are keeping an eye out for that decision, and we are on apple three. trillion dollar watch. hundred $90 and $.94. we are above that in market trading. that would make apple the first company to reach the $3 trillion market cap milestone. we will see if that holds

through to 4:00 p.m.. >> we will be talking about this. we are scheduled to be with them. we will not see mr. ives but he has a family matter. they are modeling for trillion. we will talk about that in the next hour. futures are up 14. part of a collective memory that john and i have about bulls and bears. people who are out, they switch their mind to get it right. one of these is max kettner. in asset strategists. we are joined from london ages ago, and we had a brief today from the gentleman. give us a redo. if you have to recalibrate, in 2000 23. >> an awful lot from the fundamental perspective. a lot has changed. when we look at the u.s. economy, particularly against initial expectations, the economy is doing well.

look at all the concerns we had. commercial real estate, the reality is that for you guys at bloomberg, you are running one of the surprise housing and real estate activities and that is on a 20 year high. the u.s. economy is doing fine. quite frankly, i don't think those recession calls that we have for q3 and q4 and prickly for the u.s. economy are recession calls. they are really going to have to come to fruition. i think those recession calls will continue to be misplaced, if anything. the risk is that they are continuing to be much better than expected, and we will have another short rate reprisal. >> folding here the linkage for the markets which will take a nominal gdp. if you have a persistent

inflation or even a breakout of higher rates, on the broad global basis, and if we get some form of real gdp like the prize of america, does that provide corporate residue going for. >> when we look at earnings, earnings growth over the last 30 or 40 years, it is overlaid with things like headline inflation, and that provides some tailwind because as you said, this is a discussion we should be focused on more, rather than looking at credit crunches and commercial real estate. that is misleading, and in effect a recession that is going to hit. we should be talking more. do we really care right now about real gdp growth, or is there an investor like you are saying with a connection to markets. is it real or nominal. we should be carrying much more about nominal growth, and they

are growing just fine. q2 reporting with consensus expectation. it is flat growth on q2 over q1. they are downgraded for six -- cyclical sectors like consumer discretion, energy, even tech. in the tech earning expectation, they are down graded by more than 10%. i struggle to see a big downside to this surprise and earning activity, in the due to reporting season. >> let's talk about the next half of the year we are sailing into. i want to talk about the expectations for the relative asset classes, and there were a lot of doom and gloom about corporate earnings, and was supposed to be the year of the bond, deer fixed income. it turned into another year of equities, specifically for big tech. is that the dynamic heading into

the second half? is that how we end 2023? >> i will give you a classic strategist answer. it depends. what it will be is at the beginning of q3, we are going to be more of the same. he growth the goldilocks environment we are in right now because growth is high, inflation is still going down, so that is really a goldilocks thing. but i think what will come in late summer towards q4, and we realize it could be headline inflation the u.s.. could start to pick up again because some energy bases are vague, they will converge on zero, so we will have a bit of a mechanical push higher for headline inflation, and that, of course, the economy is doing better, and that will favor the value of growth, so then we will make a switch from those big tech names into a more short

alteration name. towards the end of the summer and into the fall. >> what kind of valuations factor into this rally to broaden outside of the make a cap tech which is absolutely dominated. >> the short answer is not at all. valuations don't matter. they don't matter to me at all in the short term. when you think about seven to 10 years, they should matter more. in the next three to six months, they are quite frankly a random number. if you look at the panel of outright and absolute valuations of equities, and equity risk premiums and six a month performance, they don't really matter. the valuation side of things don't really matter. it is more inflation and the rate trajectory with sticky

inflation. that is what matters for the next six months. >> the left tail outlier, we cover this yesterday. there was an important essay by william dudley, the former president of the u.s. federal model. it was 4.5% on the u.s. 10 year, but the thing that no one is the higher interest rate regime. that goes against steve major, that goes against david blum, and a lot of the hsbc research heritage. are you prepared for the possibility of higher interest rates? >> not yet. we are in the goldilocks environment. yields are pinging from last year, and it is really restful for the second half. it is a risk. not on the long end but more on the front end. remember that the futures are still pricing around 150 basis points of rate cuts. it is really one of those risks, i think that the majority of

those rate cuts will be pushed into 2025. not saying they are will not be any rate cuts next year. but if the market shifts expectations from 2024 into 2025, that will have massive implications from an allocation perspective because what we talked about in that environment, that risk, it if that riskiest left to pan out, you will have to absolutely not be in growth. you want to be shifting into lu names or even the cyclical value names rather than a long duration of tech asset. >> thank you so much for the brief. he is with hs and bc. this is so interesting. the idea of a percentage of people that didn't participate in the seven or eight stock market. some of them were up fractionally, and may be if they are institutional, customers and

clients are saying there are accounts where they say ok. why don't we own apple? i wonder, are we almost getting in october or november window dressing and the institutional pressure of getting our act together after missing this mother of all bull markets. >> you are left chasing a rally, and it's interesting to hear said that the valuation in the short term don't matter. that's not what he's looking at. that is the touchstone. if you look at the valuations. >> they have to come down, but the other thing is we've talked over the last couple of days. the memory of how you can struggle a second leg of the bull market. it is clearly being felt, we are not advocating that, but i would say, you come off the mat with all of the october up we go, but then the now what is really

front and center here is a gamble or guesstimate on labor day, but what we brought up is a rate that is higher. perhaps structurally higher on inflation, that is still very much abnormal. >> lisa abramowicz and jonathan ferro are off on assignment as they say on a long weekend. program note. monday. we are open. i didn't know i was coming in. we may have flip-flops or floating zone. stay with us on friday. this is bloomberg surveillance.

>> unfortunately, again, we still need the ukrainian budget. it is fully funded, and we are discussing 2024. that is what will require all of our friends and partner in all countries to help us to go to 20,000 regardless of where we are on the battlefield and how fast we will win. >> the ambassador of ukraine to the united states. managing a message here. just a week or so ago, the shock we all had when we upset the muni in russia. the ramifications of that. the odd rumors at all. we say good morning to all of you on the final day of the second quarter, 2000 23.

we had some wonderful market gas coming up, trying to figure out the way forward in this bull market, and what we see in bonds, currencies and commodities. you should note that oil is 6998. it is a bit of a lift if futures do it they do, they confound people, but right now, we turn to europe. we are in brussels, but we don't have time. there is enough time to address the fact that if you come out of new york city in three airports, all points for tourists point to paris, and the immense guilt, we obviously have three or five in paris. everything is wonderful, until it is not. right now, cross france, it is really ugly. this is not just about paris. mr. mccraw is moving home to deal with these protests. >> brief is now on the urgency of the weekend.

>> very urgent topic as he has decided not to do a press conference here in brussel. very unusual. i cover him all the time, and i don't remember a press conference canceled in brussels. he loves the international politics, but now he is focused on a situation that is going on in his. there have been three days of protests, and at times they are violent. there has been a shooting of a 17-year-old, we should stress and europe, it is not usual to see the police shoot to kill. any time that happens, it is major pushback. they promised to the french people that the national date on july 14 protests will be in the past, the country will be forward-looking to a break future at this point. it is one banker to deal with three set are burning. we are told that this is a major concern for the president and he has been on his phone for 48 hours and decided i cannot stay

in brussels i have to go home. >> this distance were all of this tension began, and may be is a part that americans don't see, but this speaks to the conservative lift and europe. you see it in italy. you see it across eastern europe. is there any conservative surge in germany and across france and even for that mattered in northern europe? >> look. we hope to avoid that, but there is a shift in politics in your. you saw the play out in italy and sweden and finland. there's an election coming up in spain. they're not cooling very well, and it is difficult but on one hand, he wants to be seen as someone capable of maintaining order, but he has to explain why a 17-year-old was shot in what seems to be a very murky circumstance by a police man, and a lot of this is something we should stress. an idea that the police wills shoot to kill and it is just not

standard. it is not the usual. >> lets from paris back to brussels where you are, were all 27 leaders agreed to offer future security commitments to ukraine, and that comes on the heels of last weekend. we are seeing a mutiny arrived in russia. how does that impact these discussions how does that impact further support in ukraine? >> i would say not just 27 but 28 because mr. -- the head of nato was here, and this is now widely expected that he will renew as the head of nato for another year. he was supposed to leave for a central bank, but the idea is that he will be extended for another year. the fundamental issue here is not so much russia, but it is an internal matter and they don't want to comment on politics. is about ukraine and nato. what they want is a clear

promise from nato next month. when the war is over, they will join nato. there is a consensus to get a promise to say yes. you will join. and at this point, no, this is a delicate topic in europe, but also the united states and across nato. >> on that topic, what is the current thinking of the likelihood they will get a commitment next month? >> i have to be frank, i do not think there is consensus. we have to do something there is a promise for weapons, guns, money, whatever you need. it doesn't follow under the nato umbrella. when the war is over, they will join. they have up for this, shed blood for this, they want to see a commitment on paper. >> i'm not being snarky or snide, but in a general sense,

did mr. lukashenko have a good week? did he? did he come out of the week on the tumult of everything and say i am in a better position? >> that is an excellent question. that is actually the point. in europe, everyone was talking about this. it was a puppet, and we see that he is not a puppet. he is able to get his interest on the table, and at this point, he says he is in charge of the situation and he will handle precaution and vladimir putin owes me a favor. >> thank you. in brussels. a lot going on, and in europe, and we are looking at france. this is francoise. is not just paris as well. serious riots with many people injured. again. brussels. carolyn is following the story. we will come back with shock and awe of a bull market. i really want to emphasize that

the heritage of bloomberg surveillance is trying to remember that they want to get things right. there are other names involved. it is the low of october, the low. these are people of a certain contagious. they did not know what october would be. 23% standard and poor. off of the low. but you have a lesson to say let's look back, and where did i get it wrong that i was stuck on cash. the third week of october. i didn't have the courage to see what was forward. i would suggest the major thing was a miscast on earnings. >> there are a lot of people who are very much in cash, especially on cross asset view because their money in cash does not belong to equities, but credit folk. even though you have some of the junkie's credit out there, the triple see how performing, this

is just, they can't justify going into riskier parts of the market where they have or .55% on cash. >> this is competing, and i saw a chart last year. the zeitgeist of the piece outperforming dividends, and the belief there is that you will not see dividend growth keep up with the yield. it is a better yield. i really wonder what corporations do. do they apply a new regime of growth one year out, two years out, all of a sudden, or do they compete. going back to value alone. they mentioned apple earlier. i'm the only one who doesn't own it, and the answer is i have a 32 multiple on apples, trailing. i have single digit revenue growth, but i have a massive profitability and caths -- cash flow. where access the conversation i want to have.

do you have to reset valuations? to your point, you look at the balance sheet in the cash flow. do you put aside valuations? you don't put them aside but you rationalize them in the bull market until there is a fever, and the question is, is there able market fever any of these optimists would say we are nowhere near that. sounds like the end of the quarter conversation. katie is in for lisa abramowicz. really interesting friday. stay with us on higher yield. this is bloomberg surveillance.

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(chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch.

>> bloomberg surveillance, good morning. the end of the quarter. we are staggering into the third quarter. a program know, monday, we will be here. jon ferro will not be here. lisa abramowicz will not be here. will you be here? >> i will be here. >> katie will be here. that's a good and beautiful thing. it's a good thing because there's so much to talk about. there is so much that we've got wrong. let's observe how much we've got wrong. we do that with the vix. that screams bull market. we remind ourselves that 16 is normal. 30 is a lehman low laying and there is a lot of fear out there. it is 13.43 on the vix.

futures are up on the bond market. >> we are looking sharply higher. to the real yield we were talking about. you're looking at the five-year real yield above 2%. that is the highest since about 2008. >> will have to see about that. the dollar is stronger on the lead as well. right now, we can recalibrate on the american economy. what we have? >> the fed president reiterated the call for keeping rates steady. we also heard from ian shepherdson from the economics, weighing in on the path forward. we think the fed is done, but a further rate hike in july cannot be ruled out. another big increase in pay -- payroll will trigger a hike. we expect the data to trigger further rate hike's to be unnecessary. >> shepherd is always running

trillion lean for the economics, and i really want to say, outstanding work on china. we are recalibrating right now. we had a third look in the first quarter gdp, and that came in with a convenient 2% since testing it will we get a third quarter wrong as well? >> well, the statisticians get it wrong on the first go wrong as well. then, after that, there is a benchmark with revisions long into the future. you never really know where you are. all of the problems with tracking the economy, you get very excited about gdp data, it's a mid weight of weight a wide range. for the second quarter, it looks to me like the first estimate of growth will be something close to where we were in q1, but that will come from inventory. it will not last and actually reverse.

i am more concerned looking forward about the softness and final demand. consumer discretionary to spending is wobbling a bit, and the business capital intentions are actually rolling over. i think the net is not a sustainable strengthen the economy. >> the a sustainable strength gets the great missed call this year, which is on recession. he would i have been on a juvenile debate because and ber has been doing a definition, and may be someone like lawrence summers has a different definition as well, but will we continue this silly game of recession guessing through the rest of the year? >> no doubt. it misses the point because does it matter if the gdp growth is finest .5. or even .1 or plus one. it is not measured to a degree of accuracy. what matters in the perspective is not the headline gdp. it is what happens in inflation.

that is stronger than the payroll and it will be amazing, but we do have a bit of fraying now. clearly, the pace of layoffs is going upgrade you can see in the jobless claims. all going up. the hiring intentions and most of the servers are going down. eventually, that hits the payroll numbers. we cannot print these payroll numbers for hiring and firing, going in the wrong direction. there will be a very interesting summer, but by the end of it, we are looking back to see it softened materially on the inflation front, and that will set up a collision with some of those more hawkish fed members who are kind of missing the point of having done enough already. >> how lit are those pillars. the labor market and inflation. and in what ways that relationship flowing?

>> in the medium-term, i am on board with the idea that we can't have sustained inflation at the target and rapid wage growth. it is not possible -- plausible to characterize that as 4.5%, so i by the idea that they have to engineer a loosening of labor market, but in the short term, the labor market numbers are not closely connected, and the story we are seeing about margin compression is not so much in the cpi, yet. that story is independent from the short-term. with falling oil prices globally, the downshift we are seeing in rent increases, they are all baked in. regardless of how long it takes the fed to slow down a wage growth, but looking at the survey, the wage growth is likely to slow down as well. i have a bullish forecast into next year, and i was hoping that the fed will be patient enough

to see this come through, rather than continue to hike using backward looking inflation numbers to a policy decision. >> on that note, you expected both headline and core inflation to fall faster than the fed expected. what will drive that? is that the wage growth slowing down that we heard about or another factor schumer >> it is partly that. i think the wage growth will be slower and i have to believe that when employers tell me that it will be materially slower. you can see that in the survey, so i buy that. i also think the unemployment rate will go up, and that will do some work as well, but the margin compression still has a long way to run. we have seen wholesale gross markups during the pandemic. it is speak, but has not yet come down, so it has dropped to zero, but it needs to go negative. all the things which signal that margins will expand like the huge increase in spending and

all of the supply chain problems, they will reverse. i think it is a matter of time be or it works through and pushes the margins back down and pushes down inflation in a good sector, and labor market should fix the services sector. it is pretty bullish that they pass the worst of the inflation. >> you've done brilliant on china. there are linking articles and it has just been outstanding.

>> the momentum we were going to see in the property market, and the whole industry, and probably require policy reactions and more monetary stimulus going into q2. they were going to hit that at a gdp target and that will require more action, but i'm afraid that china was really going to lead a double recovery. were nothing in china or the rest of asia. that is just not happening. next full that into a dollar call. with the u.s. view, some of the struggles of margins, with what you see it and china, again, looking back. six months at a huge body of people are getting the dollar call wrong. where you see the dollar at the end of the year? >> i can see this moderating a bit. i do have a less aggressive call on the bed than the market, and the ecb will hike twice. i really hope the fed doesn't.

it is not priced in that the fed goes twice, but that puts a bit of a negative spin on the dollar, but i don't think that will be a huge story. i'm not expecting a seismic shift in develop market currencies over the next few months. i would fault the dollar to be softer by the end of the a. >> talk about the idea that we could see stimulus because we are having a conversation with leland miller, a leader in this program. it is sort of a fake out to expect a massive stimulus package when you think about the support that china could unleash. put that in context. what kind of magnitude are we talking about? >> is not very big. i don't detect any great appetite for large-scale fiscal stimulus. it will be targeted to specific sectors and to specific regions rather than a free-for-all handing checks in the mail to chinese citizens, but they are not keen on that policy

approach. the other approaches incrementalist. a less easing of all of 10 basis points. i think there is a reluctance, and there is more in the case of we will wait and see, and if we have to do more later, we will do that as well, but will not see a book deal. they are nervous about throwing good money out with bad, they want to see organic growth developing, so they will help with the margins, and we are not going to see a great blowout. >> if u.s. capitol eight this, what does that mean for the emerging market? the reopening didn't necessarily play out to some of the bullish fantasies we saw at the beginning of the year in emerging markets, but to the emerging markets block as a whole and need a strong rebound in china to do well here? >> it is better for them. it benefits the east asian

economy. you can see that one of the characteristics and the failure to launch is that weakness across the whole region, but other em's are further away, especially contingent on what china does because of the story and oil and commodity prices that are very driven by china at the margin, further those economies in that term, it would be helpful if china had a bit of momentum, so it will be disappointing for different reasons, but everywhere you look, moving into next year, if china can develop more momentum, that would be an uplift of the whole asian space, but right now, that is not something that will be much more of a crime. >> in the next few months, we are actually thunderstruck at the number of people buying victory in soccer and football and england. your beloved newcastle united, are they going to climb on board and start bidding because of all

of these fancy talents? >> the transfer season is in full swing. we have a midfield captain, so the money is flowing but what happens is that it is not just a plaything for rich states. the owning football closers are long gone, and is a rage -- race for oil dollars. >> it was fun to watch newcastle with the shepherds pass. macro economics. thank you for joining us. this is really speaking to us. we are making jokes here with football but i miss jon ferro, but i miss arrow some much. >> i wish i had anything to add on soccer. >> what about these british people. three or four weeks. >> god bless. >> he deserves it. >> we are not spread we are working on monday. what is that about? >> your site. >> i am psyched as well.

>> but you look at this, and it speaks to the resiliency, and this is the heart of the matter, and one of the great sas of the second quarter is lawrence mcdonald's writing. we go to a site, and larry mcdonald nailed the first order conditions which is just the mass of money that is out there. that is the number one thing we forget about. you can see that. it's not just a story. we have fiscal situations, but then you look at the data we've got from europe in terms of the euro zone inflation. a lot of these economies are still strong. this is what we are covering in july. but wait jobs report it will be a holiday. july 7.

he doesn't celebrate it, but you get to july 7 for the jobs report, and then out of the earnings season, the backdrop is the elephant in the june 30 room. he goes to the yield right now. 4.91% in the two-year yield, we go back to 5%. likely five basis points 3.92% on the bond. 7.25 dare i say 7.9 percent. 7.25 dare i say 7.9 percent. 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 and stay out late with. it can even happen to the person in the mirror. opioid use disorder is a disease that can happen to any of us. it's possible recovery can happen to any of us, too. >> we are anticipating prices to rise. from here. oil in particular. we are anticipating dollars to go back into deficit again. we are anticipating the forecast right now for june 2020, a year from now. to see the rent.

and $84 for the edi. >> are intelligent. the larger macro picture of commodities, reading into oil and business, but as we recalibrate, currencies and commodities, we have a short shrift given to commodities. through the year, and katie greifeld, this is simple. china, cop -- commodity, it is weaker. >> commodity weaker, but then you look at oil. that is the head scratcher. i don't know if this is a supply driven market or a demand driven market, but it is going nowhere for the last couple of days. >> will have to see here. with oil, this is a big bull market shock for the first six months, but oil is right behind there as well. brent crude, we have not made a -- hundred 70 under the oil, but on american oil, we have decidedly have. $69 with a visit, and everyone i

speak to, led by john tucker bloomberg radio, it is clear to me the price of gasoline is not following a barrel of gas down. maybe that is for the third quarter. a gallon of gas migrating down. on a microeconomic supply and demand, of hydrocarbons, it has been a cofounder of research and energy aspects. how do you recalibrate for the second half of the year? >> great question. i think the challenge we have is that it is a bifurcated market. crude has not performed as we've expected. but the product market has, and this is where we say that this is not a demand problem did if demand was week, we wouldn't have this problem, even diesel

has been weak overall, but demand is holding up, and demand has been coming in stronger than expected as you and i have discussed as well. there has been an issue as talked about before. high interest rates across the board. any business, they just don't want to hold as much inventory, so we have to come to the market as a result of that. but also, supply. i think you're an was a big mystery. we have raised that mn should increase production, but the interesting thing about the situation is that if the same volume of oil the amount of the united states or saudi arabia, it would actually be less bearish, but that brings a marginal price down. the availability of this discounted crude around russia, i think that is the big story. volumetric the discount has mended, and prices have not

mended the same way. >> there is a share of respect in citigroup who really looks into the geopolitics of hydrocarbons, 20 47. but as you know, ed morse absolutely nails the idea that oil wouldn't get to 120 and stay there. it would stay near $60 a barrel. give us your geopolitical spectrum, right now. what are the optionality's that saudi arabia has raise oil $10 a barrel. >> right now, given the macro environment i am not expecting a lot of optionality from a saudi point of view to be able to raise production because they have cut production and extended the voluntary cuts. there's not much more they can do. it is about abiding stability to the market, providing a floor so that even if there is a lot of demand uncertainty, you have some continued investment.

the market is tightening. you can start to see this in the heavier cruise, and this gets very technical. but we have a problem with nafta. a chemical sector is weak, and that is a china problem. the property sector is weak, but the issue we have is all of the benchmark it's. there is a lot of nafta cut in it. this is a problem for the market because we look at these benchmarks to give us signals of tightness. but you can finally start to see tightness come through in the heavier cruise. so again, the open cuts are working, but i think this will take a long time for a few more weeks before we see the tightness percolate to the rest of the complex. >> we want to talk about the crosscurrents of the supply picture that you walk through. you did have the uranian cut or production coming up, but you also had opec as well.

you balance this out. what is the bigger force here? >> the bigger cuts are opec. it comes from july. but those numbers are bigger. that is why i mention that even if uranian production has an average of 300,000 more than what we expected, the fact that we are discounting oil by 15 or $20, whatever the numbers, that is a big difference because suddenly, asia is a marginal buyer that doesn't have to buy a benchmark crude. it can buy cheaper iranian barrels. crude was around $64 set in may. is at the bottom. is at the break over the next few months.

this is a time when sovereign hedges happened from mexico. with all the volatility, most people would acknowledge that we are going on holiday and reassess. if we get hedges coming through, there is a price pressure in the coming weeks. it could mean in a low liquidity scenario, low prices, but other than that, it will be around 7071, the upside to be in the mid 80's, so that is the thing i'm watching for in the coming weeks. hedges being put through. >> thank you. huge help your for the first half of 2023. we look forward to speaking to you on the mystery of hydrocarbon. i will say this. this is widely understood on wall street. this is the single toughest thing to predict, and you have

the toughest job out there. i think the only research piece i have in my coffee table at home in the living room is the jp morgan 80 page piece modeling $120 a barrel because of emerging market demand. forget about esg. emerging market means hydrocarbon, and up we go. if we'd been wrong, yes. but give this some time. that is the hope and prayer out there. >> you can let me that book because it's definitely a mystery to me, and we look at the price action over the last few months. i was reading a story about brent being on track for the worst run of data in three decades. this is so difficult to read. >> you take saudi is an older series and you and just for inflation and you adjust for the rising incomes, and it's amazing how is not an oil depression, but it is quite weak.

we have not seen that in q1, and going back towards the low, with bitcoin. what was the low? you've seen 26,000, or may be in your head, where do you see 37,000. >> at 30,000, it's a holy moly. we are up a lot. below $20,000. everything rebounded in october. bitcoin was no exception. we have seen a big crown -- move over the last few weeks. there are fancy names out there. crypto was worshiped, and those twins, what were their names? the rest of them, all of the usual names of people out there. they have been big on bitcoin. have they been made whole by the move on bitcoin, or are they trying to get to 40,000? what is the move? >> that helps, but if you think about the fact you need to drill

and some of the retail players that got crushed from the move to 69,000 dollars per coin, all the way back down to the low 20 thousands, that is extinguishing a lot of retail interest in this space. you are left with a long-term believer, so if you think about what will propel the next wave of excitement, you really need to bring in a marginal buyer who is still at the trading go. there's not a lot of interest. >> how do you look at bitcoin doing so well with other coins underperforming? >> that's a haven currency. >> you're killing me. >> that's a laugh. this camera still on, even though were still here. there is a monitor, and she is laughing at me. over -- you don't understand. you are idiots. you don't get it. >> this is a haven currency. that's what i've learned. save me. save me.

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>> i think the environment we are in should be we have sticky core inflation. >> that sticky inflation is still the concern. >> we think inflation will decelerate more meaningfully than the fed is expecting. >> the fed has one more interest rate hike in their pocket. >> consumers need to feel they might need to lose their jobs. >> this is bloomberg surveillance. tom: good morning, everyone. it is bloomberg surveillance on radio, on television. jonathan ferro is on assignment.

lisa abramowicz is on assignment. katie greifeld does not have a life. this is an important show today because the real yield really is front and center. greifeld holding court at the real yield this afternoon. it is a lot to talk about within the fixed income space. it is part of our second quarter -- that graphic is beautiful. for those on radio, ferro designed that. we were at the nat, the hotel next to our shop in london. john and i were at beverage of our choice with alix webb and he started sketching out the background. tom: i wish you could hear the music. katie: i wish you could hear the music. tom: ferro picked it out. right now, we are going to clash with how we got it wrong the

last six months. futures up a teen in the continued melt up. dow futures up. deutsche bank, good morning on that statistic. 34,000, dow. nasdaq continues to go up. katie: we are going to talk about -- that is number three. we will see how these boards change at 8:30. the price action was driven by the data we got yesterday. jobless claims and gdp. this morning, we have pce coming up. tom: we have a lot of data today. get your bloody mary out. i know you are sliding into the weekend. katie: 8:30, pce. then, personal income and spending figures. an important look at inflation in this economy. then, you missed sentiment.

have sentiment broadly among consumers. i am interested to look at the inflation expectations. i know the fed is, as well. we will get those numbers around 10:00 a.m. today, we are on supreme court watch. we got the affirmative action decision yesterday. now, we are looking for the student loan decision. the biden administration's plan to cancel student debt impacts 40 million people intentionally. big ramifications there. we are on apple $3 trillion watch, the number two watch with closing level. we have to get $190.98. we are comfortably above that -- firmly above that now. apple up about .7% in the premarket. tom: can i point out that nvidia is $1.008 trillion. i do not know what is more important. who does not own apple?

nvidia, which i do not understand or know or get, general mills cheerios -- i get it. ok. nvidia, i do not get. it is a $1 trillion company. katie: i look at what that was a year ago. the rise of nvidia has been amazing to watch, a stunning move higher. it seems you talked to a lot of people and they say it has more legs. tom: ferro is hoping for a call option. tesla, market cap, less than nvidia. 816 gazillion for car must company. -- car musk company. tracy mcmillan joins us now. what has changed in your midyear

recalibrate? >> good morning. what has changed midyear is we have continued to be selective in our asset class selection. and, our sector selection and in particular we have been favorable, information and technology overweighting our equity portfolios. we pulled back on that thinking that asset class is overbought. we will take some profits there. we are moving that into materials and energy, thinking that commodities prices here relative to low levels could rise as we move through the rest of this year. tom: this is important, this is a sector analysis. you pick five sectors and hope, did you win information. technology, energy, that is not good enough. are you going to buy big oil,

middle grade oil? when you say energy, what do you actually buy? tracie: we are looking at the integrated oils. we are looking at the broad sector as a whole because we think that underlying energy crisis going to support it and supply is going to continue to be constrained and demand will stay relatively firm, so we see oil prices moving up today between $85 and possibly $95 a barrel by the end of the year. we think that supports oil companies across the board. katie: do you pair that with buying the equities as well, in addition to buying the actual commodity? tracie: we do. within our portfolios, we look at various asset classes within equities and we also have an

asset class for commodities. we do have a commodities position and we are taking that viewpoint on commodities through to our equity sector holdings, as well. within the asset classes, we stayed up in quality and continued to do that as we look to the end of the year. that has benefited investors because it has those higher beta park at -- higher beta parts of the markets that have underpaid tight holdings. katie: as we enter the second half of the year and take the temperature of this market, is it still a defensive tilt or is it time to go on offense? what are you playing? tracie: we are staying defensive. we think as we move through the rest of this year, we are going to see that earnings recession that has already started. we have already had two quarters

of negative earnings. we think we are going to see the third quarter of negative earnings as we start to get earnings results in the next couple of weeks. we are staying up in quality. i mentioned before, large caps over the beta sector with fixed income, we continue to like quality over high-yield. we do not think the spreads represent the amount of risk there in high-yield. tom: what is the ramifications if we get a higher yield set? i get the theory if you have a coupon, you get a higher yield, you are going to pick up a further coupon while price goes down. that games claims -- that game plays itself. do we get price down, yield up enough where the carry up yield falls apart? tracie: that is one reason why we are staying shorter-term and bar billing with short-term and

long-term strategy and fixed income. we think that interest rates now are retesting a level that we saw back in march. if you recall, when we hit these people to the marketplace, we did start to see some destructions. we started to see bank failures. investors had written that off as idiosyncratic, thinking the fed was able to take care of that. we are not so sure. we think as we move into these higher levels of yields again, we could see additional disruptions. we would stay short-term. we put those 5% plus yields in the near term. if we get near 4% in the longer term bonds, we would be buying those because we think is the fed pulls inflation back to 2%, that 4% yield is going to look good in the longer term. tom: it is going to be

interesting to see. i look at the recalibration and the heart of the matter, a lot of people out there who were not on the seven stock juggernaut. what do you do if you do not own those seven stocks? do you take a minimum position? do you just say, i have to wait until next time? what do you do with those glory stocks with the first half of 2023? tracie: a lot of those are overbought in our viewpoint. however, we would continue to purchase those higher-quality names. a lot of those names are those seven stocks that have performed so well. we would look for better entry points, but you really need to be in the higher-quality names. we would hold positions there, but not necessarily initiate them. jonathan: thank you so much. tom: thank you so much.

i think what is great there is people talk about 60,000 feet, that is bank ceos where they go, what do you think the economy is going to do? with asset allocators it is like, 60 -- 40. what you heard from ms. mcgill and was, ok, we are going to lighten up on tech. we're going to go long energy. then, how do you affect that? that is the hard part. katie: across assets, i enjoyed talking to people who manage a multitude of assets. that is a two-sided trade. you can do it through the actual commodity market and energy stocks. there has been a bit of a diversions between those two but it is an interesting bet. tom: what it is interesting -- what is interesting here --would

say, you have got to diversified. i was thunderstruck at the brian murphy obituary in the washington post, always said i wish i owned more stocks when i was 25. that is a huge deal. i wish i would own more stocks, you are going to hear a lot of that. futures up 17%. s&p up .4%. we say good morning to all of you bloomberg surveillance, on radio, on television. lots to talk about. i want to talk right now about a momentous day. for those of you younger, this is not a big deal. you can take it back to your viewing of mary poppins a few years ago. the movie came out in 1966.

in the great bank seen, david thomason and dick van dyke, libor was in play. they were doing libor when they were doing railways to india. libor is back to the 1970's or so. we are seeing now the end of libor, bloomberg reporting the final libor fixings published overnight. these are the different tenors, this is one of the most famous charts in the history of modern wall street. i have a huge pride the team at bloomberg surveillance live this from 2006, 2007. i have the clearest memory when this blew up in august 2007 with the leading firm seo -- cfo. this is pure libor, the three-month 90 day fix. the huge calm as it came down after lehman, after bear stearns

was flat. some of the angst of the last decade and with this pandemic, the absolute surge in short term interest rates. stay with us, with the end of libor. we have a jewel of this company, ira jersey and his team and bloomberg intelligence will help you with the new libor, which is so for. sofr, is what it is. libor, the final days of libor, extraordinary. this is bloomberg, good morning. from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

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>> -- inflation still exists in america. today's decision does not change that. the student has had to overcome adversity on their path to education. college should recognize and value that. the court has effectively and it affirmative action in college admissions and i strongly disagree with court's decision. affirmative action is so misunderstood. tom: the president of the united states on fire yesterday over the controversy of affirmative action and in a statement of a 6-3 supreme court. full disclosure, michael bloomberg published on this opinion yesterday, very much in support of the tone from president biden. mr. bloomberg is a majority

owner of bloomberg lp which not only keeps us moving forward but bloomberg television and bloomberg radio. katie greifeld is in for lisa abramowicz and jonathan ferro will be with us on monday. to dive in to this debate, we go to annmarie hordern, our bloomberg affirmative action correspondent. you brilliantly lay out as reported across the news organizations of a footnote that justice roberts wrote that -- at west point annapolis and colorado springs are different. they are going to have affirmative action, but any given school is not? annmarie: there is this carveout for military academies to continue using affirmative action, race-based, conscious program provisions in these military academies.

the president made a nod to that and did not quite connect the dots. our military is the in ve of the world, the justices are allowing the military universities to do this. this is because the military wants to make sure they have diverse officers, not just individuals on the front lines. they want diverse officers, that is where this stems from. there was going to be criticism from the fact there are still officers in the u.s. military that do not come from military universities. think of rotc programs on campuses. a tremendous amount of pushback from this white house and the democratic party. that was an interesting foot note of this supreme court decision. tom: i think for this decision -- this is a modest uproar across this nation. rather than do the rehash of everything out there, i want to focus on one small vignette out of this.

there are two black supreme court justices. to be polite, they do not disagree. can we say that about a broad latino and black immunity in america? annmarie: i think for the most part what you saw from the black community, the latino community, the individuals like the head of the naacp is that they firmly agree with the liberal weighing of the supreme court, that this should not have been struck down, that this negates decades of accident in the united states -- precedent in the united states. to make sure when you are applying for college admission, campuses are doing their best to make sure they have a diverse body. coming out of this is everyone watching this decision yesterday, universities have been gearing up for potentially having to go back to revamp their admission processes.

some legal experts we were speaking to last night on balance of power talked about the fact this opens up a can of worms for not just universities but everything else, especially businesses and corporate america. tom: as with any major decision down the road, it is going to be extraordinary. the put tarsha -- the partition from clarence thomas to kentucky brown jackson is extraordinary, the anger of the language, the acuity of the anger is something i'm not quite sure i have ever seen before. katie: this was broadly expected. you are right, reading what these justices had to say was stunning. annmarie, you mentioned this does just not affect universities. this impacts businesses. if you look at some of the response, you had the hr policy association basically filed friend of the court saying its members rely heavily on colleges.

what does this mean for the pipeline of talent going into corporate america when it comes to diversity? annmarie: there is one thing we should note and a nuance. affirmative action as we know it has essentially been abolished by yesterday's supreme court ruling when it comes to universities. there are other ways universities can make sure they are still recruiting from diverse backgrounds, especially black americans, hispanic americans. in the opinion they did talk about the fact students could talk about race in their essay and how that is impacted them. it does bode a question of, what does this mean as these diversity programs have been set up for years and decades regarding this, and companies like universities want diverse talents? diverse groups bring diverse thinking, diverse workforce into a company. what legal experts are saying is we could potentially see more of this. you have seen more red states

trying to crack down on any sort of de i is yours that orbit america is using or universities are using. it is going to get harder for corporate america to navigate state by state what is allowed when it comes to diversity, inclusion and things like the environment, etc. katie: a lot of work ahead for universities and corporations. let's talk more about president biden's response. after the decision yesterday, he said we cannot let this decision be the last word. what can the biden administration do here? annmarie: they are pointing to the department of education, but there is not a lot they can do unless they were able to get congress on board. the other thing they could do, which the president then said in an msnbc interview he would not do is potentially try to stack the court and add more justices. he said that would be a mistake.

the president did call this current makeup of the court, which yesterday you saw the six-to because justice jackson accused yourself, he is calling it a not normal court. this is going to be a huge debate going into 2024. we saw a lot of outcry about affirmative action but many are pointing to the fact democrats were able to keep their majority in the senate, even pick up a seat in there was not a raven the house because of abortion. today we are going to get student loans and potentially a lgbtq decision, as well. tom: one final question because you are so well read on the american, political experience. do people vote in a presidential election because of their beliefs of supreme court and amex? -- supreme court dynamics? does it really matter in the booth or the right in ballot? annmarie: it depends what the

supreme court decision is. the democrats were not only able to campaign aggressively on the striking down of the roe v. wade and dobbs decision but that likely save them from a red wave. abortion really matters, especially to independent women voters. when you ask republican presidential nominees what they are going to do regarding abortion, it is a difficult topic for them to answer because they do not want to ostracize the middle of society. on affirmative action this could potentially be an issue for the youth vote that democrats want to pick up. tom: thank you very much. i guess this supreme court day starts at 10:00 a.m. katie: that is the time we are looking for. it is not necessarily have to come at 10:00 a.m., but that is when the supreme court watch starts. as annmarie brought up it is not just student loans, we have that

free speech and gay marriage ruling expected today. it is a hefty day for the supreme court heading into this holiday weekend, you could call it. tom: let's not forget the people bad -- like to very bad corporate news late friday into the holiday weekend. july 3 markets are open. that came to me and katie months ago and said, we will give you the month of august off into the week of september if you do july 3. we will be here monday. it is able market. futures up 16.

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tom: bloomberg surveillance. the friday before the fourth of july weekend. we are thrilled you are here. bramo, ferro gone. greifeld, in. katie greifeld will be on the real yield this afternoon. she had a tantrum and said i am not doing the summits the real yield has moved. the real yield has moved. i am looking at the real yield, 1.66%. a changed landscape. i do not know where the level is, hi norman steel for the stock market. katie: your member with the 10 year yield was -7%.

everyone said that would keep the bid into growth going. that bid for growth stocks is still there. interesting moves along the curve, especially in the belly. five year, i have talked to a lot of bulls on the treasury curve, looks like it is not working out today. tom: the question is, do you see the high yields of the two-year dissipate or the high yields of the two-year migrate to a new higher yield? that is a raging debate. two year yield 4.91%. we have been there, but just for a cup of coffee. 10 year yield, 3.87%. the 30 year mortgage has not breached up new tension, there is raging debate about what this bond babel does. there could be a real impact in

the housing market. katie: you would expect there to be. we will see whether the housing market truly has bottomed or where we had from here. tom: there is a resiliency to that. we saw it yesterday. in one hour, a seattle slew of economic data. on the equity markets, ferro sent to me a note from his third island in italy. he says you have got to splash in with the fama and save more. i have got a carnival cruise. katie: i'm going to believe you. let's talk about carnival, it is cruising higher in the premarket. got upgraded to a buy at jefferies, a new street high for its price target. jefferies bumping it up to $25 from nine dollars. the reason why, they are thrilled with josh weinstein's performance so far, the new ceo.

he took over last august. they say he has had a positive effect so far, when you look at the sales boost and marketing efforts. carnival up this morning about 3%. not having a great day is nike. tom: wait we have got to stay in carnival. i have not had a vacation since christmas. we are looking at a four-day western from miami florida to $244, average per person. two person room. this is, people love this stuff. have you ever been on a cruise? katie: no, do not trust the ocean. tom: ok. katie: a lot of people love cruises. you have seen the travel stocks do well. tom: tough travel weekend. you see how she said that? katie is like, shall we move on?

katie: let's talk about nike. after the bell yesterday, down 3% premarket. quarterly profit just missed expectations. it was the outlook that investors are not too pleased with. full-year revenue for fiscal year 2024 expected to grow mid single digits according to its cfo. a little bit of a disappointment there. you can see that in the shares. i want to talk about apple. tom: apple on the brain. katie: we are on $3 trillion watch. trading in the premarket, already therefore it's market cap. the news that caught my eye this morning, it got a new buy rating from city. they say apple has another 30% upside, this is a stock closing in on a record market cap. citi says apple's ability to expand its margins is underestimated. tom: what is important here, we

are on a 3 billion-dollar valuation. i did the math this morning. i was shocked how soon on the trend of apple, over the last decade if you extrapolate that trend out, where do you think we get to $4 trillion? thanksgiving next year. katie: thanksgiving 2024? tom: literally in 17 months or whatever it is, we are watching the detroit lions with michael barr on thanksgiving and watching apple with a $4 trillion stock, i had no idea it would be that soon. katie: trend do not always hold. the performance of apple has blown away once of skeptics that say there is a lot of good news in this price. tom: shall we move on? katie: shall we go unto the bond market? tom: i think we should. katie: there is a big debate out

there calling for the possibly of the 10 year treasury yield hitting 4.5%. you have "we expect yields to gradually decline over the coming year as we retain our call for a .25% 10 year treasury yield by year end. the yield curve should turn moderately positive here as the fed lowers policy rates in a recessionary context. tom: my head is spinning on equities and even more so on bonds. the fact is, a lot of yields are moving up here. i am looking at the 10 year real yield in the u.s. and it is sobering. what are the ramifications to you if we see the 10 year real yield breakout to new highs? >> i think the impact is going to be felt not just in the bond market but all risky assets.

we are trying to recalibrate to a much stronger economy but a lot of the data we have been looking at like the first quarter gdp, the third take is backward looking. we have to be looking at forward-looking indicators. if the fed were to raise rates by 50 basis points or more, i think you are going to see that more sharply into the broader economy. the forward-looking data has the potential to be meaningfully weaker if the fed continues to hike rates. our call is that the fed will probably stay in and around current levels for the remainder of the year, it is not out of the question they raise rates 25 or even 50 basis points by the end of the year. that is only going to bring the recession forward, if you will. we have a rescission penciled in

for the first half of 2024. that seems to be the timeline we are looking at. a lot of the data we are placing our optimism on is backward looking, not forward-looking. tom: what are so important here are the dynamics, katie mentioned the belly of the curve. in that interesting to year to five year space, what is your belief we will see their? do the high years of a two-year, one year space come out to a high of a warrior or five-year space or do we get relief? annmarie: a lot of it is a front end phenomenal. that is why we do not think the 10 year meaningfully rises above 4%. i think we get close, it is going to be a buying opportunity for bond investors. they missed their opportunity this year to go along bonds.

the rise in yields, at least in my view, is going to be much more of a front end phenomenon and not a long end phenomenon. the twos tens part of the yield curve is back 100 negative basis points or below, that might be the opportunity to think about the rainy -- the steepeners in the on market. the more the bed hikes, the more the slowdown is going to be and the fed is going to have to perhaps adjust policy during 2024. katie: i am excited to talk to you about that twos tens curve. over 100 basis points inverted. you say you expect the yield curve to actually steepen and that language masks a huge call. if you expect the 10 year yield to drop and stay there, what does the front end look like? how much do two-year yields have to plummet and how much does the fed fed have to cut to get there ? subadra: that is a tricky

question. it is fair to say the fed can keep policy -- fed can keep policy stable. i think the fed is committed to keeping policy higher for longer. this time around with inflation, not just a u.s. phenomenon but a global phenomenon, i think global central banks will keep policy restrictive well into the first half of next year. in that context, it makes sense that the front end remains sticky and you do not see that dramatic repricing lower in the two-year part of the yield curve. that is why we are calling for a gradual we steepening of the yield curve. typically when the fed pauses, six months after you see the twos tens parts of the curve steepen out meaningfully. this time around that process is going to be somewhat gradual. for the 10 year, we get the tens get to 50 and a quarter by the end of the year. that is not a meaningful decline where we were at the lows of

this year in tens. the decline in yields is going to be much more gradual across the curve in this cycle as opposed to past cycles. katie: what gets us back to positive territory on the twos tens curve if the happy -- if you have the 210 anchored? subadra: we will eventually get to positive territory, but it is going to be perhaps in 2024 and not in 2023. we have the twos tens part of the curve steepening out, but getting to anywhere between -15 and -25 basis points by the end of the year. the steepening is going to be more gradual. broadly speaking, look at the broader economy and you are going to start to see the market respond to higher interest rates. we did see some improvement in the housing market in the last couple of months. if we start seeing 10 year

yields starting to get towards 4% again and mortgage rates start to rise, you are going to see that impacting the housing market in the broader interest rates sector of the economy are going to respond to higher interest rates. tom: thank you for the brief. looking forward to talking to you about the dynamics of fixed income. futures up 15% right now. nasdaq led by apple, i am making it up but i have not looked. katie has been beating me to death with the apple watch all morning. standard force up. we say good morning to all of you, on radio and television. katie greifeld in for lisa abramowicz, and jonathan ferro -- i think bramo gets back on the 15th. ferro, he wants to get back for the opening of premier league which is august 20, but we will have to see. you've got the real yield this

afternoon, let's discuss this. amy, if you could give me the bill dudley quote from yesterday, how do you make up a guesstimate on the 10 year yield? you make it up in terms of pieces. the phd from berkeley nails this in his critical esther -- his critical essay. suppose the federal reserve short-term interest rate target adjusted for inflation averages about 1% over the next decade -- 10 years. inflation averages 2.5%. the bond risk premium, the noise out there of risk, is one percentage point. some that up and you get one plus 2.5 plus one and 4.5%, that is not outlandish is what dr. dudley was saying. katie: he is far outside of the consensus on this, an outlier call.

-- is looking for the 10 year rate versus the 10 year rate forecast from the fed survey of professional forecasters and consensus says tens going to fall to 3.5%, a full percentage point below. tom: futures up 16, dow futures up 89. nasdaq, 15,172. oil, 69.92 on american oil. 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.

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>> if i like cash at these levels, what companies have cash and what companies can take advantage of that cash number? it is big tech. they have a lot of ability to manage their balance sheet the way other companies cannot. that does give them an

advantage. tom: marvin loh on fire yesterday. looking forward to the second half of 2023. what are you going to do on your 60/40, your 7030, maybe you are all in cash? marvin loh with ideas on allocation. our next guest is so important. we've got equity, a lift today. you've got to buy stocks on june 30 two catch up in your underperformance. i've got bitdog for katie, 31,000. katherine greifeld is in for lisa abramowicz and jonathan ferro. what have you got? katie: i want to talk about apple. premarket action up .8%, above that $3 trillion valuation. with the amazing rally we have seen this year, citi initiating

coverage with a buy rating at eight $240 price target saying the stock has room to rally another 30%. the analyst wrote apple is navigating the macro slowdown and inflationary pressure on consumer spending by consistently gaining share from android phones. we believe the street is underestimating continued gross margin expansion. tom: the margin expansion is important, but also this word. it is the ecosystem. how many airpods are under the greifeld couch at home? katie: [laughter] so many. they are impossible to keep track of. tom: we decided to go to the only man in america who has not lost the family airpods. what is important in this conversation is for his expert on the chips, the wiring and all of that, he is not a fan boy. you are neutral on apple. discuss.

>> i am neutral. i think a lot of the good news is priced into the stock. when you think about the marginal 3 trillion, it has been on the back of the iphone. the iphone continues to move forward well. when you think of the next trillion and think of vision pro and augmented reality, virtual reality, there are structural challenges even for apple starting with price. $34.99 is not going to result in a mass-produced, massmarketed, mass adopted item. i wish i could tell you that i have not watched many -- washed many airpods in my washer and dryer. tom: everybody owns it, but i continue to read from pros like you that apple is institutionally under owned. on june 30, his long only by side out there going i have got to buy it? tom: to that point, that is a

fair yes. aside from warren buffett where it is his number one position, yes, it is probably under owned from an institution standpoint. if you look at the basis points holdings versus the index, there are likely equal weights or under weights out there that is going to negatively affect their performance for the june quarter. katie: i want to talk about the next trillion dollars. you have a neutral rating on the stock, it would seem you would say to take a breather here. what is going to propel the next trillion here? is that the vision pro? tom: i would have told you the vision pro and at some point, the apple car. i have concerns if they make a car they are going to price it at $200,000. the good news is the iphone keeps on chugging along. that is still the most important product right now, generates the largest percentage of sales and profits and is still

well-positioned. to go from three to six, we are going to have to see some contribution from the vision pro, potentially a car, new products and i think that is going to be challenging. katie: can we talk about the price tag on the vision pro? when they announced that there was a clip of people gasping at that pricetag. $3499 for that augmented reality headset. is that price going to have to come down? tom: yes. did apple tipoff their strategy by naming it the vision pro? are they going to have a lower price point ar headset, not unlike what they do for their laptops? i think that is a possibility. even for apple to generate mass adoption, they are going to have to have a lower-priced offering. four meta-platforms, they are

$3000 less. to the extent apple gets people excited about a rvr, that will lead people to purchase products from meta-platforms. katie: i want to bring you the bull case, that citi call initiating coverage with the buy and talking about this underestimation of apple's ability to protect and grow its margins. how are you thinking about apple's abilities when it comes to its margins? tom: the story for apple under tim cook has been a rule out under higher services which has resulted in a higher multiple for the stock. with the analyst is not pointing out is on a short term basis, we have seen pressure in the services revenue. we have seen pressure in the advertising revenue. yes, iphone sales have held up amazingly well in a global, challenging macroeconomic -- macroenvironment.

i think that is optimistic over the next 12 months. tom: i want to fold this into the share buyback and the belief they will show up and buy 422 shares in an odd lot from fidelity.com. i've got free cash lot double pre-covid. margin discussion that bulls like ives are talking about and critically, i've got apple with 4.1% of capital is debt. can't these guys keep doing bond deals and buying back share after share after share? tom: they are cash register and generate free cash flow. if foreign buffett is not buying the stock, apple is buying the stock. we will see about those institutional investors, see if they want to ramp thor portfolio to equal weight.

tom: are they going to buyback so much shares? is tim cook point to privatize a apl? tom: it does remind me of another warren buffett investment being dairy queen, there was an extended period of time where dairy queen had no new unit growth but bought back stock. there is potential given the free cash flow apple generates, they are going to retire a lot more shares. privatize, i do not think so. tom: in the history of bloomberg surveillance is the first time we take a mother of all blue-chip stocks and compare it to dairy queen. [laughter] thank you so much. hugely valuable with a neutral rating on apple. this is extraordinary. we get a lot of criticism we only talked to van boyce. -- talk to fan boys. he is an informed fan boy.

it is not just apple, let's buy the new toy. there is a guy who says it is up 40%, now what? that has been the way it has been for 15 years with us. katie: 46% on apple, to be specific. when it comes to the institutional side, is it under owned? what is the next trillion dollars outside of just the fundamentals when you think about the products they are introducing? tom: it goes back to index and active management. when bloomberg reports today, an important article from bloomberg on pimco having shortfalls and a conversation about pimco having trouble bringing in funds . a huge active management pressure and equity is less talked about but even worse. i am sorry, it is june 30. from a long only by side where i have missed the october low bull

market up 23%, if i am up 7% and out of 23 percent, is my window dressing of october 24 going to be done on july 3 when you are the only two -- when you and i are the only two working on wall street? going, can we get hundred thousand shares of that? right now -- we talked about this at dinner last night. right now, on wall street, globally and particularly in america, nobody is networking this weekend. i do not care what they say. they can be having a lobster roll in the hamptons, baloney. it is a mess out there. have a fun weekend while greifeld and i are working. ♪

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>> even if there is a recession i do not its vector rebound. >> there will be massive discretionary spending come december. >> consumers believe that something is going to happen which the indicators are saying, that will slow the economy and

inflation. >> fiscal policy has been so worded -- supportive of activity. >> inflation is still -- a recession is still a main concern. >> this is bloomberg surveillance. tom: good morning we are here on a friday. june 30, last day of the second order. union profit, item profit. we are celebrating with katie greifeld because everybody is off work. katie greifeld is here doing double duty. look for her in the final hour of surveillance. are you doing a.m. as well? katie: i have two hits that is matt miller. tom: she will show up here at 9:00. and she has the lead statistic of the day. thank you for talking with us yesterday about the yankees perfect game and his and mine

memories of this and as covax in 1965 with the perfect game. outside of a few days in early march, the u.s. two year yield is kissing the highest level in 16 years. that folds right into your discussion this afternoon. katie: you basically keep underestimating the fed. the market has been a threat -- underestimating the fed in terms of conviction. there going to get inflation under control and hike until they get there. there going to hold witches and and as the puzzle -- old which is an important piece of the puzzle. tom: we will do the equity chat here in a minute with sam stove all. we will do a dated debrief with katie greifeld. i do this in honor of the last

day of the -- t-bill 5.3%. could you imagine a 6%? we will talk with ira jersey about that. i'm on 5% watch. 10 year yield three point 87%. and real estate looking 3.92%. the 30 year bond, i do not know how to calibrate that. katie: yeah. tom: a percent? i don't know. katie: i would pay someone to do that math but either way it is hairy. tom: can you imagine if they continue to outperform? even the bulls. in apple. katie: in apple? tom: apple, nvidia, tesla all of them. katie: we could get another 30% on apple. the leadership discussion has

been under a big debate of whether it will continue to be tech or laggards will catch up. katie greifeld driving the market up right now s&p 500 up .4%. you have a bible and it will be in the office floor in you trip over it every few days you have a cigar in your hand and you all over the revalue line. look at the three-star, four-star, and five-star stocks. they stood the test of time. cfra strategist sam stovall joining us. how did they do in this market? sam: a lot of the markets have done well. we had an overweight recommendation on the sectors that were dramatic underperformers in 2022. you know the old saying that

investors tend to rotate from first to worst meaning they move out of the defensive areas that held up best in the downward market and gravitate toward the sectors like communications services, consumer discretionary , and tech. the dramatics of -- dramatic underperformance and they are doing -- in the past but they are doing well in 2023. tom: you have to be in the market. we have able on the october low. i call it the active quarry or did nilo. you know those two. but then there is a second leg. what is the details we need to know about a second leg of a bull market? sam: good questions. first off, in the short term, the first half strength tends to indicate second half strength as

well. around world war ii the second half is up traditionally tim present. if we are up more than 10% than right now the average is 8% not 4.5. and you can add 13 percentage points to the batting average. item number two is that june 8, we advanced 20% off of the october 12 low. history says the market unlike the messenger from marathon saying we rejoice, coffer -- conquer, and then default. we continue an average of 14 point 5% until we stumble into a decline averaging around 10%. we tend to do well in those short term. we stumble a bit, but 12 months later we are up 18.5% overall. katie: how does positioning factor in? you look at money market fund and there is some cash. there is $5.4 trillion in money

market usual fund. can you buildable based on that alone? sam: i would think so because the first half you have a lot of the money managers who are underperforming. those who wanted to earn their bonus or keep their jobs. they will probably put their pedal to the metal and try to play catch-up and exceed the market by year-end. history also says that you want to look at the first quarter or first half meant some because the top three sectors in the first half continue to go on to be the market in the second half after a positive first half. usually doing so by 100 basis points and outperforming 60% of the time. katie: that being said there will probably be a massive game of catch up. is it fair to call this a risk on our get? do you see a big -- market. do you see a bid for big tech not just an ai market but haven

as well? sam: i think the pressure also has to do with leadership and the narrowness thereof. i would say it is broadening quite nicely. right now 75% of the 150 37 industries in the total u.s. stock market -- are above their 50 day moving average. we are looking at more than 6% above the 10 week and four-week moving averages. 60 percent are above the positive territory this year. tom: i just want to point out that you saw katie greifeld channeling the inner grandma. ammo. katie: was it bearish? tom: just captured on that. we got this earlier wary we said

rotate to energy stocks. what does big oil look like right now? the price of west texas comes crashing down but i would suggest energy stocks is pretty resilient. what is the five-star or or store -- four-star call on big oil? sam: we have the recommendation right now. we certainly see the downward move because energy was the best performing sector up 59% last year. the only one in positive territory. i think esters are essentially taking profit. from a relative strength perspective they give one standard deviation below the mean. i would say that if you are longer-term investor you would want to be looking at it. tom: i bring this up with the immense respect for your father as well, he was the foundation of academics of everything that you and i do. in the washington post, brian murphy's great effort at the top

of the story, there is harry markowitz saying i wish i bought or stocks in -- more stocks in 25. and i thought of your father. our -- our our younger people under own in equities because of the daily financial media? sam: i think that is true. if it bleeds it leads. basically financial once to say the world is coming to an end at midnight. so i think that really does put an artificial clause over the market and investor confidence. investors have to realize that the only -- you only need about a 12 year holding period to go back to world war ii. and it never have a decline. and that traditionally you want to be in equities. we really did not want to be a fair if your goal is -- be elsewhere if your goal is to outpace taxes.

tom: thank you so much. the coming this weekend the world is going to end and because of that you will have to stay closed on monday as well. when he says that in the markets there was a great quote put out on twitter years ago. harry michael with was on the financial team. he was too optimistic to diversify and own it and never sell it. it was message and the miracle we invented here, and a really was not part of the script. the script is omg yields are up, we are all going to die. bit dog 60-30,000 total failure. west texas, 120-169 out of royal. omg i am afraid. katie: or go into cash. that has also been one of the highest -- tom: when you say cash say

triple leverage cash. katie: go to triple leverage cash that is the trade the past year. it is unwinding now but do to the -- to your point just by an index fund. stay in the market by your index fund. tom: one of the best conversations i have ever had in all of the history of interviews is the late john bogle in cliff assets. the interview was out there i will have to find it we will redo it for you. but he was a piñata for 20 years, and the answer is we are still asking ourselves what is the non-efficacy of an index fund? there isn't one, it is pretty good. should we caught the equity arc it with optimism? the s&p 500 up .4%. we say good morning here. staggering second-quarter it is june already. we are in the front of the third order.

-- quarter. what has really changed from a number of years ago is that we also used for say and we believe for 2025, and were not doing that anymore. katie: it feels like we talk about 2020 for the year ahead, but it feels like all of the focus and conversations are centered on where do we go in the next six months? how do we end this year. the big debate is in the bond market. the stock market like we talked about this morning, has shocked people not just with its resiliency but also robustness area the rally we built this year has been stunning. tom: we will see it here again as we have earnings season. and as committed to doing more on earnings. the world interest rate probability updated fresh and it evaluated extending the timeline. and i do not understand, excuse

me, may of 2024 starting to see rate cuts. says who? katie: certainly not the fed. we have heard time and time again from fed jerome powell rate cuts are not in the conversation. but you look at the broader conversation and people are talking. tom: libor ois 0.2674 seven. what is the world without them? this is bloomberg, good morning. ♪

>> a strong majority expect to raise interest rates two or more times by the end of the year. >> we believe the fomc needs to do more to get inflation back to our target. i have to can best -- confess i do not fully share this view. tom: mr. wasik are in atlanta. he has been fourth light -- forthright. with the speaker of the fed, the messaging will be really something. thank you to princi mark warner for complete coverage there and piercing questions. it is part of the fed debate we have going forward. catherine greifeld here with us

today. and she will be here this afternoon as well. this conversation is so valid. this is the basic idea that the dow across the pacific ocean and the western world is to borrow from steinback, the summer of chinese discontent. more importantly the great summer novel or winter novel i should say it is a mystery -- expert -- leland miller is the export -- expert of this. with china beige book. with the governors and mayors of these selected cities what is the measure of the summer of discontent? leland: the major problem here is that china is moving off of its old economic model. it is not moved comfortably into what is next. you see slower growth overall.

a multi-structural slowdown in the chinese economy. they have not prepared the road -- the world or people for that. it is in predictable -- unpredictable and it is different than a few years ago it is compounding a lot of investors. tom: the summer three years and five years ago was the brilliant elizabeth economy fighting on -- writing on the new chinese state. give us an update since the economies -- at commerce. give us an update out of the power of mr. xi right now. does he have political power to help china? leland: xi is the chinese economy. that is why it is so ridiculous to continue to watch people predict reversals of xi's economy as if he's going to get up and say i think i've been

managing the economy for -- incorrectly for the number of years. none of these things are going to happen. there is an introductory for china it is governed completely by xi's inclinations. it has been for a long time. the idea he will jump in and help out investors is ridiculous. katie: why won't he? what is the feeling on the ground among xi jinping and his administration? why would they not unlace -- unleash a stimulus? leland: he has worked hard for years to constrain property growth and credit. they been working hard. we have beautiful charts of how this in china economy shows less

borrowing and credit pumped into the sectors. they do not want to reverse this. they are not cared. and the economy is not in the need of being backed stimulus. everybody talks about monetary stimulus, we saw that at the beginning of 2023 and it is not working. it is not the cure off -- cure all that everyone thinks it is. katie: it would be -- they would not reverse this and alleviate it to a substantial degree. is there a chance the economy deteriorate to where it forces their hand? what is your outlook? leland: at the end of year inflation in china looks relatively healthy like the rest of the world. if you have a problem when things slip into inflation by the end of the year there will be more policy support. if there is more of a global economics down and exports fall

off of a cliff, they have not yet, but if they did, you would see policies or. the reality is people have given up on the chinese recovery. the comparisons made sims control improvement calling it very difficult. we are trying to cut away the noise. are things improving month to month. they are improving and retail, services, the economy looks better bennett did in q1. there is an improvement here. -- better than it did in q1. there is an in room in here. but it is not as bad as people are making them out to be. tom: we look at all the domestic vinyl sales and do the math. can you do that with china having a domestic vinyl sales gdp measurement? leland: we try to stay away from the gdp number because there is

additional juice to china and for it to not mean anything. it is almost and input versus an out. but with export orders, things are not looking great. if you go westward, things are slowing down. the domestic standards are fine. they looking better. if your expectations for -- work for a mega rally, a you definitely have hands on your head disappointed. if you're looking for a economy with a significant -- better been the first quarter in expectations. that is where china is at. tom: this is a devaluation. do we get a further depreciation of renewing this which exports the disinflation across to america? leland: i think we do continue to see -- we have the simple fact that not because the economy is falling but because

the fed is vigilant in terms of keeping the rates high and they are not high in china. they are under some economic usher. the fact that they are being hit and we see a depreciation move i do not think is surprising. this is all within at a window. it is expanding a little bit from what we have seen traditionally because we are in new territory with what the fed is doing higher for longer. it is not a signal of the bottom calling out of the on ami and the currency is failing. if you get on twitter you could lose your mind with this nonsense. tom: take us away from the western babble on china, what is the clear beige book message? leland: there is a recovery in q2. the government is going to be above expectation and market x vacations rut -- market expectations right now. people should stop inspecting

big stimulus it will not happen. it's not going to happen until the economy is much worse. tom: thank you for the brief on china beige book this morning. -- it is not a believable statistic. we talk about 6% or 5% omg down from six years ago. 3%. i'm not sure if i can believe the numbers. katie: when it comes to china, i cannot believe -- tom: are you ok there? katie: i am good. the pboc is fixing stronger than expected. and when you think about what is going on in japan with the yen it is another story about the strong dollar. tom: there is uncertainty just say the least. i'm looking at the dollar, cny is like the old-school vanilla statistic. i'm looking at a moonshot of

depreciation from the third week of april. the answer is, we have gone from 6.9 0% up to 7.26% you have to give more than what you want to give abide in the u.s. dollar. -- a bite in the u.s. dollar. that was brilliant. we will continue business discussion. coming up we anticipate ubs wealth global message -- management. ways speak with paul donovan. work staying for. -- work staying for. futures up. this is bloomberg. ♪

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tom: bloomberg surveillance on a friday, june 30. usually nobody in economics is working it set me. but there is one data point, there is a ton of economic data coming out here in nine second. we do it again at 945. right now, there is really important economic data for jerome powell. mike mckee, why does jerome powell care about the date of this morning? mike: this is their favorite inflation monitor the personal income data it is dropped wait

4% which is the same as the prior month. and a little bit better than the 310 that was asked -- .3% that was expected. personal spending up .1%. that is worse than expected and down from before. but the numbers the fed cares about is the deflator pce inflation on the headline bases up only .1%. that was expected with the .4% rise the month before. this is the first time it is below the 4% level since the pandemic began. on the corn basis, we are at weight 3% for the month. it is expected a little bit less than it was last month. 4.6 sent it dropped on the ace effect and has been anticipating. personal income spending has been revised to a .6% gain in

april. the drop to .1% is not as big but somewhat interesting that americans are spending less now. i have to get the actual numbers here. tom: i will let you do that. you are a market we were mike mckee. this is important data. we have a hold -- we have paul donovan coming up from ubs. we have a lift on the markets. 15 or 16. standard futures up. s&p futures up .6%. and the trillion dollar apple statistic expected. the nasdaq is up 126 future points this morning. the vix comes in at 50 45. we give up the higher yield scenario. that has to be the deflationary intent here. you guys have the chart made up

on pce inflation for pre-pandemic? this is a big deal, folks, on radio the world of powell as he knew it. mike mckee moonshot to 7% on pce deflator. have we given back after the inflation, am i right? mike: yes, and the move downward in the headline number is continuing good this. it is the core the fed is worried about. sticky inflation. it is not much of a move the last couple months with the big traded -- treading water on the core side. katie: let's talk about the core side a little more. we heard from powell a lot this week. one of the things he said is he sees us getting to 2% core inflation by 2025. still a long way to go. mike: yeah i am waiting for our chart to update that will show you what the fed favorite number

is on pce services. i will get that for you in just a second. tom: we will move on and come back to mike mckee. at we have a meeting with matt miller as well. this is one of the amazing inflation statistics. chief economist ubs of global wealth management paul donovan. with china and america, he is a former student of gregson and continental europe as well. welcome all donovan. -- paul donovan. i love your comments on sintra. everybody is pounding nation bandwagon. your with diamond and dave rosenberg, disinflation is in lace to discuss. paul: we see disinflation. the three waves of disinflation we have, the demand shock of the

pandemic, the supply shock of the war, and the profit of him nation. wave wind and wave two. we have six months of deflation in durable good prices in the u.s.. the price is fading completely from the picture. now what researches he is the margin is coming true. every company called weird technical stop with inflation numbers creating more distortion. draw up any information around the world and you are seeing the numbers coming down. that is the disinflation narrative that will start to become a bit more apparent. katie: i want to talk about profit led inflation how it differs or is the same with what we the when it comes to margin. what will be the biggest impulse in the disinflation you're talking about. is it the martian -- margins decreasing? how does that move through?

paul: the inflation it is a win. profit led inflation does not take place across the entire economy, it place at the end of the supply chain. it is with retailers, and strong food and clothing brands. people who are close with the consumer. what happens is you have stable-ism up. and companies finding a good excuse to pass on this. if we were in the united states, retail profit margin, retail gdp pre-pandemic, that is averaging about 14 -- 14% gdp. now 21%. you see the market expansion coming true. large and small. customers are saying you know what, i do not believe that story. i do not think the profit increase is something i should

and it about. i do not believe prices going up. you're seeing politicians starting to get involved. with that, the price of rand damage, companies are starting to be more cautious on the market mention. expansion. with at the final inflation is turning into -- tom: you're doing a broader economic chitchat. let's play asset allocation read what are you in your ubs global wealth management saying after the bank got will market we see how do you recalibrate with the allocation of is is in equities for the second half of year? paul: for the time being equities our and underweight because there is optimism about learning. -- earnings. there are challenges around the world. with the equity market, the

color goes service sector based. -- the economy is service sector based. we expect more moderation of demand and risk coming through. the microeconomics are not creating a vibrant equity market , i'm not saying that they are, it is just where equity is more likely to underperform. in the central bank needs to be trusted by the inflation rate that continues to come down read the expectation about the rates will shift as well. they cannot keep typing forever. powell will have to stop the policy in some way. and with that the market gets more flexible. tom: can we withstand higher yield? i get your case from very egg -- respectful ed hyman, and others. but the idea is if we delay on disinflation and get a form of higher rate regime, there is a

belief that we all fall apart. says who? paul: i am a little bit skeptical about the idea we all follow our. i think the economy generally has become less rate sensitive over time. monetary policy has become what tools -- blunt tools in the range of the stocks. absolutely i think it is less likely to be a collapse. what remember is will be look at the economy it is the engine of any advance. middle income is -- consumers are doing ok. they are resilient, they are slowing down, but low unemployment. with rising participation in the workforce. very important fact. middle income consumers have a lower inflation rate than headline consumer price inflation.

on both sides of the atlantic, ball of it -- all of a combined is giving the consumer power with spending. not enough to reverse a slowdown at this stage but to make sure the slowdown is not going to be to big. katie: maybe the economy has become less interest rate sensitive as you say. if that is the case, does that mean the fed ultimately has to go higher on the terminal then cycles previous? if the upward bound is 5.2 5%, do we need to go above 6% to cool down the final areas of the economy that ours will be hot at this white? -- this point? paul: that is a difficult question because you need to pause and reflect on what is changing and what is not. that is why the relentless chant of hiking coming out of the fed is troubling. stop and think for a moment, i think what you've got to assess,

it is not necessarily changing. there's a desire to go on vacation and travel all the time. and in a totally different world emerging in that sector but when you look at the deflation that is coming through in durable goods. you have to balance it out with what is relative to prices and the anchor. how much of it is the fix and -- we know it will come down in the future. i think the central bank also needs to broaden their fault. they got one state of policy as an additional weapon but they also have regulatory policy which will be a topic in the united fades -- united states. that's going to be something that will have a cooling aspect on the economy as well. tom: thank you paul donovan ubs

global wealth management. chief economist. that was 48 hours to see bill dudley framing a higher rate regime. some of them are saying that the disinflation is in lace. we have to frame out where we will be a september. katie: we see the extent of pricing power. interesting stuff on profit led inflation. this being the last part of it. tom: i think paul answered it well on the time basis. my take on it, i am -- i could be wrong on that. equities are up, as dx, 610 -- .6% we say good morning on bloomberg radio and television. katie greifeld in for lisa and we will be here monday. we got the surveillance world -- and the people ash person who will be with us as well. mike mckee on monday as well read what is wrong with with our seniority.

mike: if katie is going to be here if she's going to work hard of got to show up. tom: did you find our service sector statistic? mike: i did and it is the core services x housing jay powell's number drops to a point to three -- .23 increase in may. it had gone up a little bit in april but right now we are at or .5 percent. down from the previous level. we have easing there. one number that might concern the fed, people are saying wages are not driving inflation now, but we did the wages rise .5% of the strongest amount since january. tom: that goes back to the jobs report july 7. katie: i'm actually off on that day. tom: lisa brendon witts will be back by then. tom: what is your first look at

employment july 7? mike: we get a lot more forecast in from economists as the week progresses. right now the expectation is that we see unemployment dropped back from 3.7% to 3.6%. the forecast is for 200,000 jobs. that is interesting. tom: it is terrible. mike: after the claims yesterday the number went down. tom: you have no idea how surreal it is for us to talk about an economy that has 200,000 jobs. futures up 29. it is a good -- it is a bull market. and keep more of what you make. start saving today at godaddy.com

>> airlines are doing less with more. more employees now than they had in 2018. the government has fewer air traffic controllers than they did four years ago. the mess will continue for the next 5-7 years because the faa

does not seem to have a plan to resolve the shortage of air traffic controllers. tom: holly becker with decades of experience. the major message, you look at is with dick allen company. -- they own the business for 30 and 40 years. it is an incredible area of expertise. miss becker says she has never seen this before. it is a friday, we have not even talked about this mode in new york -- the smoke in new york. i would say it's not as bad as a couple weeks ago. do you agree with the? katie: i agree with that. we will see with the weekend rings. tom: we will give you updates on that. but what is important there is serious ramifications to this airline mess up. we address this now.

the void sky changes the way that all of us traveled read absolutely revolutionary so much so that clint henderson was also an iconic guy and on the tv network doing this charade we do every day. he said if there's going to be fliers in alaskan air i'm going to join them. how did you become the points guide? -- points guide? clint: we are obsessed with points and miles. that is our dna. but over the years we expanded into a media brand. and they wanted someone who had media experience and that was right before covid which was perfect timing. tom: i suggest the debacle of fourth of july weekend is new and original, right? clint: unfortunately since covid we see this holiday after holiday read we got through memorial day but christmas time

was a mess and we had a real mess last summer. we were blaming airline staffing, now it seems like they've been able to hire and it is air traffic control ratio that is pumping to drive this. storms are a normal part of summer. you should plan for that. unfortunately the airlines are acting as if there is no such thing as under storms. there is lame to go around that air traffic control is a real issue. katie: i real issue. talk about the demand picture. a lot of people want to fly so maybe the shortage with the air traffic rollers is being felt. clint: business travel has not fully recovered but it has been made up or by leisure travel. the demand is insane. covid we cut back on the number of lights and seats that were -- flights and the seats that were for sale people decided in covid i will travel i do not care what happens and that is what we are seeing the pent up demand.

people deciding that will be a way of life for them. katie: way of life. it is interesting the business travel has not caught up. i want to talk about the summer leisure travel season but is business travel coming back and are we not going back to 2019? clint: it depends on who you ask. i do not think it returns fully ever. people have learned how to do zoom meetings, companies have realized it is expensive to send employees around and they do not need to. tom: on a planning basis, the points guy is a concept and you guys reinvented how we travel. what if i -- what i find fascinating is the same old, with limited airports and dates, we have a major argument between gates, and jfk is one discussion , and we have air traffic controllers, they are making 100

3100 $50,000 a year. i am in the air and there is a guy with seven lights on the radar screen. i look at the pilots who work 90 at making 60 grand a year. which is worse than a bartender. i did not get the salary structure we are to leaning about. should we pay that air traffic controllers more? shouldn't we pay the pilot more to solve this labor conundrum? clint: i think that would set it but it cuts into the airlines bottom line in they do not want to do that. air traffic controllers is a good middle-class job you could end up doing well. i am not sure why it is not an attractive option for young people. they are trying to do recruiting in colleges and places like that. it is tough to bring on. tom: yeah but i did not buy this if kirby or sebastian was here i would say you guys are fancy and you want to make your off it. but the fact is on this friday, i think of -- who is in atlanta

right now -- why are we acting like a third world country where families with kids are sleeping on the floor in the new terminal eight at -- terminal a at new arc? clint: my own personal opinion is that we should have a passenger bill of rights. there is a proposal of that even though -- even if it was passed, it is unlikely, the problem it does not cover for weather so the airlines -- the chain reaction started because of the storm on tuesday. we have to compensate passengers. i think maybe something stronger has the bm lace. katie: is there a blueprint for that? when you look overseas, houses that get handled bear? clint: i would like to see something get passed in the u.s..

like a compensation -- if the flight is delayed in extreme amounts from 3-6 hours or if it is canceled the airlines have to rate passengers in almost -- have to compensate in almost all cases. there is an exception for weather in those cases. katie: a lot of people who make a lot of money when you think about the cancellations we have seen, let's talk about number. with the conditions we talk about the demand is off of the chart especially internationally. we have several airlines talking up what they expect to see in overseas travel. is that going to materialize? clint: absolutely you see $2000 flights from new york to rome you know something is up. part of the issue is they reduce the number of frequency of flights. what is happening is the seat are in demand and rices are spiking. there are tales out there i promise you and every day we

publish a deal. there are deals to be had. [indiscernible] katie: katie is killing it -- tom: katie is killing at the discussion we are seeing is phenomenal. it is important she grew up in the crucible the rude reality in the odd horse thing called resize. and where the east judge and -- german judge gives a bad score and you are like omg how could they cheat her? let's go to the drews stage -- dressage ranking of catherine guy frail -- greifeld here. bushy excellent? katie: oh no. where did you get that? tom: interns can do anything. katie: oh my god. tom: did they give her a sufficient or fairly bad ranking. katie: i've gotten then eight and i've gotten into. i have done well and i have had

some major breakdowns. is that your horse? i've never gotten a zero. no one has been executed. tom: this is intricate moves with the germans and austrians. tell us about that man who is like 400 years old? katie: that pony is 26 years old i have had him since i was 11. we grew up together. he is an incredible animal. he has been retired from dressage. he hangs out. tom: i know she was the kilby this afternoon. we look at this score being executed. are you still doing this? katie: i am with a younger horse. in fact i get a break after -- i thought the older one could get a break after decades of service. tom: katie greifeld and dressage there. she just killed it. so well that we dragged her in

word july. -- for july. we start the third quarter on monday. frankly looking at the third quarter. this is an incredibly unusual time coming out of the pandemic. we encourage people to come out -- they are trying to make the right decisions sometimes they have an some they have not. but it has really been about using the market and be economy to monitor where we are. i guess we have a fair amount of gloom out there for q3. first-quarter gdp, with the equity markets think we have something to study as you come through monday and the third quarter. futures up 28, i cannot believe i've rounded up 4500, standing the course of 500. on the open, raymond james was in the market. this is bloomberg. good morning. ♪

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>> from new york city, i am matt miller in for jonathan ferro. we have futures rising as window pushes the s&p 500 over 4400. the countdown to the open starts now. >> everything you need to get set for this star of u.s. trading. this is bloomberg the open with jonathan ferro. matt: coming up, u.s. inflation cooling as consumer spending stalls sending futures higher and treasury yield lower.