tv Bloomberg Surveillance Bloomberg June 14, 2022 8:00am-9:00am EDT
>> this is going to be a very different communications challenge for all central banks. >> inflation expectations. >> the difference between soft, softish and something else. >> the economy will require higher real yield to slow down. >> trying to satisfy the market and short-term inflation might be the wrong approach. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. lisa: and messy and low rate era. this is "bloomberg surveillance ." tom keene, jonathan ferro, lisa abramowicz. jonathan ferro is off but kailey leinz and with all of her knowledge. are we there yet? have we seen capitulation? how much further do we have to go? people are trying to buy. tom: futures up seven.
futures have not been red this morning. at 2:17 a.m. we had the peak enthusiasm of the day and it has been down on the constant of going negative. but maybe with the president's announcement to saudi arabia and futures getting a little bit green on the screen. >> what i gather is a lack of understanding and what is driving this. yes, it was inflation friday, but what is the response mechanism? you have been covering this well. the fed poised to raise rates by 75 basis points, maybe. would that be perceived as a good thing or a bad thing for markets looking for harder action from the fed? kailey: interesting question and frankly, we are not going to know the answer until 2:00 tomorrow. but it does raise an interesting point. if inflation is the problem and
we risk running hotter for longer if the fed is too dovish, they are now given permission to be the better scenario. it is a different kind of narrative then we had prior to the cpi print on friday. lisa: tom, you have been good at emphasizing that it is fragile. the dollar is just trying to weaken with people saying maybe we can move away from this and yet, continuing to reassert the strength versus the pound or other areas. how much can we avoid risk off environment as long as the dollar continues to be the haven and you see that underline bid? tom: we don't want to give our opinions, but we can look at the drift of any timeseries and say, what is a conviction, what is a belief? everybody waiting for this to slow but you look at the individual items, including
sterling well under $121, crude still at $123 level, and the flightiness. lisa: also watching the nasdaq. it is outperforming the s&p. the nasdaq is down more than 30% year to date. that blows my socks off considering the drawdowns during the dot com bubble. tom: these large moves are important. i really want to reframe that into the data check of the correction, 10%. my bear market is 18% at the history of down markets is not 18%, it is 25% and even some 35%
as well. on the data check, dollar resilient, the yen $134.42. futures bounce off six now up 14. the vix 33.64. lisa: yesterday was a scary thing for people, their words, not mine. people were looking at the nature of selling or the lack of buying and not understanding the depth. saira malik, billions of dollars for your investors. what were you doing yesterday as markets melted down? saira: we are thinking about the next three months. we are looking at three fomc meetings. what that is going to depend on
is moderating inflation over the demand. there are no signs of inflation alleviating. there are signs of demand reduction. we do not think the fed has been hawkish. a below average market multiple, the markets are trading down at 3600 up to 4200. we are just not there yet. tom: you invented this question. you own the high ground in chicago. is the shop saying you need to take advantage of tax-free bonds right now? saira: the good news is the fundamentals are strong from a state level. it is the higher rates that have been an issue. if you look at total return, they look really strong. that is an area that is
interesting. the fundamentals are going to be in place for that sector. tom: i have to ask the unfair question of the day. do you suggest with the new research that the tax take of some of these states is going to sustain? or is it a pandemic one-off? saira: i think there is going to be mobilization post-pandemic. we are seeing that across the board and a lot of sectors but it is still going to be high going forward. this trend continues. we are seeing that across the board with many companies. tom: saira malik just crushed that. she just absolutely nailed that. lisa: why do you think she is on the program? she is smart and answers our questions. what would you be buying on a morning like this one? saira: coming into this year
energy was our favorite. we liked the tight supply dynamic, strong demand, but predictor discipline. they are returning cash to shareholders. that keeps the sector tight and energy strong. a lot of trouble with walmart and target on the lack of spending on goods. costco is good because they can raise prices. the nasdaq has been hit so hard. we are looking for quality strong companies like salesforce. quick, strong to digital, quick customer growth, and they are helping customers grow revenue at peak levels. pricing power is going to be key. lisa: you mentioned target and walmart. you think they are more idiosyncratic at the company
level than anything emblematic of something broader happening as consumer tastes change? you don't think this and ability to pass on higher costs for discretionary goods is going to be a broader problem? saira: you look at the consumers continuing to spend and eat into their savings and that is something we are watching for. walmart and target is an issue of the pandemic. people were spending so heavily on goods, these companies had trouble gathering inventory that they over planned. we are now spending more on services and experiences and they ran into an inventory problem. that was specific to walmart and target and not an issue that would be a broad retail issue. tom: thank you so much. saira malik talking muni bonds.
lisa, this is going to be the next number of days. we mentioned with kailey leinz microstrategy, but there is a headline from coinbase which, to be honest, i am not sure what coinbase does. [laughter] lisa: it is a crypto exchange. tom: they are going to cut the team by x percent. i think we have to go to kailey on this. we are going to see a lot of this right? kailey: in the crypto space you likely will. we have already seen it from a number of companies in the ceo of coinbase saying there is a number of things that have changed the last month that led to this decision to cut 18% of jobs. economic conditions are changing rapidly. they say managing cost is critical in down markets. that is not exclusive to crypto companies, everybody is having to do that in a market in which
it has been brutal. finally, we grew too quickly. tom: i am going to punch somebody. [laughter] lisa: i remember when we were talking to scott minerd and he talked about how he had been able on crypto assets and then there was no reason to buy. that is looking somewhat pressing today and we have the fed special tomorrow. maybe we can ask him about it. tom: say something, kailey. kailey: we are doing this again? [laughter] tom: there really publishing the press release that they grew too quickly? kailey: at the beginning of 2021, we had to 50 employees -- 250 employees. while we tried our best to get this right it is clear to me be over hired.
[crosstalk] lisa: it is not just amazon. microsoft is talking about that well and the number of companies expanded during the pandemic. tom: let's do a quote, $21,904. crypto, 1:00 p.m., be there. this is bloomberg. ♪ ritika: keeping you up-to-date with the first word. i am ritika gupta. president biden will meet in saudi arabia with the crown prince. he once promised to punish them over the human rights abuses. this will be a trip to isolate russia and lower gasoline prices. hong kong's outgoing leader carrie lam says quarantine has
weekend the country. she pointed to the fact hong kong is still requiring one-week week quarantine for incoming travelers. >> everything is relative. when people are opening up and hong kong is imposing the seven day quarantine, that weakens our position as a national city. ritika: [indiscernible] hong kong residents will now have to show a negative covid test to enter the city's bars and nightclubs starting thursday through the end of the month. this as the city is seeing an increasing number of infections driven by transmission at entertainment facilities that recently reopened.
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>> if you are going to do 75, do it sooner rather than later when policy is at a low interest rate. but it also goes to tech. it lost control of the dialogue over this. they need a monetary policy approach. tom: chief economist and investment strategist, wonderful at linking earnings and profits into the greater picture. we digress. futures up a fragile 12 after yesterday's festivities. vix 33.68. 3.33% on the two-year, 3.3 4%. [laughter] lisa: they are all the same. they are flat. tom: the yield curve is flat.
lisa: you did great. when you look at the 310s or 530s -- tom: james camp joins as at eagle asset management who has been dead on about higher yields. do you just assume the verbiage of a terminal rate moves higher in that flat yield curve we described goes 3.32%, 3.34%, 3.34% and that migrates up to 4%? james: i think interest rates are going to find footing around these levels. the 325 was the highest 2018 experience. the fed and the markets are tightening conditions more rapidly than the predicted
funds. with equity volatility, equity prices, spreads across the high yield, the fed is crushing credit conditions and that is part of what they are trying to do. this is full on demand destruction. maybe we touch recession but the only way out is mixed in terms of timing of the fed getting the inflation story right. unfortunately, it is a slow acting command. >> ed al-hussainy was on half an hour ago and said he could see the fed stopping the run off of the balance sheet because of the credit conditions, because of how quickly the pace of tightening of financial conditions, particularly with respect to top rated companies. do you agree? james: i think that is possible but i don't think qe and qt is
very revealing. the effects of quantitative tightening, i don't think given what has happened with the inflation data, that there is any choice. there are really no good options. we are going to have a couple of quarters of this and we will see what happens thereafter. >> do you buy into this if you are looking for income considering you're getting income the likes you have not seen since 2009? or do you step back because there is nothing that is going to stop the runaway selloff in the near-term? james: i like the fixed income markets, quality, treasuries. i think they have room to widen. i think the municipal bond market for those in the nonqualified world looking for tax-sheltered income. july, as you know, will be a
massive cash flow month. i think we are going to reverse the big, negative outflows of municipals. the fixed income is very generous. it is a pretty extraordinary move. kailey: and there may be value in treasuries now that they are north of 3.3%. when do you think more people are going to come into that camp? james: i think it is close in the risk markets have to see a correction. full stop. you have to get this rotation into the bond market. the fed will no longer be the indiscriminate buyer. you will have to find real investors, real hard dollar and that is a bonus right now. tom: thank you so much. james camp of eagle asset.
3.31%, 3.33%, 3.34%, flat yield curve. coinbase, lisa, it is trouble. they have a nine year piece out of 31 and it is yielding 11%. kailey leinz, it is down 41% since september. i mean, kailey, is coinbase a going concern? kailey: that is not the only price going down. you also have coinbase shares down dramatically over the year, down 7% this morning after this announcement that they are cutting 18% of their workforce. the ceo, brian armstrong, really saying they grew too quickly, they were too aggressive on hiring. and now that the market is bullish things have to change. what that translates to is cutting 1100 employees. even outside the crypto ecosystem this is something we have been hearing. tom: lisa, help me here.
lisa: don't be a drag. [laughter] tom: what in god's name is a crypto ecosystem beside a made up marketing phrase? lisa: you can call it whatever you want but people bought into it. with coinbase it is not just the average joe or retail investors that bought into it, it was institutional investors and individuals on wall street who wanted to leave wall street to go to the crypto universe, the ecosystem of crypto magic. a lot those people actually saw their jobs revoked at coinbase recently. the left goldman sachs, they left blackrock, and then had a notice that said, we don't have a job for you. how much were the tea leaves saying things work rapidly shifting? tom: there is a small new york city toothpaste company called colgate. do you think they sit around the desk talking about the colgate ecosystem? lisa: i am not sure how to
respond. [laughter] but they are ecosystems. kailey: it is an emerging ecosystem. that is abundantly clear and you see these projects that people had hope in devolving. lisa: you want me to talk about the toothpaste ecosystem in response to coinbase and crypto assets? [laughter] really? tom: do you see? kailey gets engaged about crypto. lisa: she should. she has a great show and it is a great moment. tom: what are you doing today on the show? what have you got today? kailey: we are going to talk to one guy who called the asset freeze withdraw, my alfred and nick carter as well. we will also look at the technicals because they matter. tom: john emails in, enough of bitdog.
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inflation we used to stop 20 years ago and say, we have to look at this. michael mckee stops and looks at business inflation, the three levels of ppi. mike: that will add to the pressure on the fed. the numbers as expected which is a little dip in the headline but not enough to get anybody excited about inflation going away. 8/10 rise on a month over month basis which is higher than the 5/10 rise, but a year-over-year rate of 10.8%. it was 11% last month. the year on your headline dips a little but with the ppi like cpi we want to look at the core. excluding food and energy, we were up 0.5% which means an 8.3% down from 8.8%. with the ppi we add in trade
services. if you want to look at it this way, it is retailers margins, what they are having to pay for the goods that they buy and sell onto you. including that we were up, 5/10 which is a drop from 6/10 the month before. 6.8% year-over-year basis. the news is marginally better but it is not going to change what the fed is thinking tomorrow, especially with cpi coming in on the michigan numbers and new york fed numbers for expectations. tom: marginal move? lisa: it is a marginal move. marginal downside surprise. one that you kind of want to see. it is not coming in as hot as people expected. the nasdaq in particular climbing 8/10 of 1%. the s&p up 5/10.
just a little bit more of a bid to the bond market but really showing people are looking for any sign of relief for the runaway inflation projections. tom: i have a 10.8% ppi final demand year-over-year. michael mckee, is that the first look at double-digit inflation? mike: no. it was 10.9% last month. tom: second? mike: we tend to look at the year-over-year figures because it is the most dramatic and those double figure numbers are certainly scary. but if you are the fed or other people, you look at the month over month because you are looking for sequential gains. that is what we are seeing. the situation is getting worse. the base affects bring the year-over-year number down, but we doubled the ppi in the month of may from april. the increase was 4/10 in april
and 8/10 in may. a lot of that is energy but that is what the fed is talking about tomorrow. tom: i have got eight more questions. we will have to do it later. michael mckee leading at 2:00 p.m. in washington with chairman powell. michael mckee whispering always at the fed. carl weinberg with us, chief economist from high-frequency economics. lisa wants to dive into the field. i have to go to your scathing china note yesterday where you say flat out, we cannot trust the chinese data. how close to worser is china? carl: good morning. china's numbers are strong. the trade numbers are surprisingly strong. that perhaps points to a drop in the volume of imports,
that exports are over the top. it is hard to believe for the month of may we saw a 15% rise in exports. i am skeptical of the numbers we are seeing. of course, we will get more numbers this week in industrial production and investment spending at the end of the week. they paid a darker picture of the economy. lisa: do you see anything that will put a crimp on the pressure we are seeing upward in the near term? carl: central banks are going to put a crimp in things. [laughter] lisa: aside from that. carl: but that is the core story. every time central banks have done this they have caused recession. almost every time we have seen recession we have seen prices fall dramatically. a few people remember how fast inflation dropped from just before the spring of 2008 until six months later we went to
deflation. $140 a barrel to $135 a barrel. every time we look at history and we have seen the economy go into recession, we have seen prices slowed dramatically. that is the story here. you look at the current data and it is fair to say there is no evidence that inflation is slowing. that is true. but all other things remain equal and not all other things will remain equal for the interest rates we are seeing from the central banks around the world, except for the japanese, and that will bring prices down. kailey: this is important because people were saying the only way for the fed to achieve soft landing was of other aspects coordinated with it and allowed slowed down in inflation that was faster than people have been expecting. lisa: if that is not the case,
they are going to cause a recession, they need to cause a recession to get price control into the market? carl: we heard chair powell say the fed's track record on soft landings is not that good. he could only think one or two instances in the last 50 years they actually achieved this. maybe they will actually get it but we see the same thing for the europeans. that is certainly going to be a factor. oil prices are not going to continue to rise and again, as we saw in 2008 and 2020, if the economy gets slammed harder, gas prices can go to $35 a barrel in six months. they can fall just as fast as they went up and that is going
to be part of everything. kailey: the thinking goes that the higher prices eventually demand destruction will kick in. we have seen sentiment waning and yet, you have not seen the robusta demand destruction when it comes to consumption. consumers are willing to spend money. when does that start to happen in a more robust way? carl: good morning, kailey. you just have to be patient to see it work out. we see evidence consumers in the u.s. are running up credit card debt. they are reducing their savings. these are always to cushion the impact of the drop in real income which is caused by the higher energy prices and other prices households are facing. but that cannot go on forever. i think we just have to be patient that it is coming. everything in economics says it is in the works, it is just not here yet. tom: what should they be doing tomorrow? you have been doing this for decades, tons of experience. what should jerome powell
do tomorrow? carl: i think he has got to pursue the course of convincing people that the fed is going to do whatever it takes to fight inflation. to not let expectations become entrenched in wage demands and consumer spending. the new york times today, and i have to agree with the four mature bernanke, that this is the most important thing they can do. germany fared better in the 1970's that the united states. and i think that is the most important thing the fed can do, stick to it. tom: great briefing as we go to the fed show tomorrow. michael mckee in washington.
lisa i love this sentence, the cfo of federal express, the increased dividend we announced today is a culmination of our board's thoughtful efforts over many months. hogwash. absolute hogwash. te shaw went after fedex. they announced the new seven and a half percent -- 7.5% move in the stock explodes higher. lisa: how much will this be an increasing strategy for companies that don't see a place to put their money elsewhere? i .2 target and caterpillar among those that have boosted their dividends. target being most interesting after cutting their forecast several times in the same number of months. how much are we looking at companies do not see an optimistic place for their cash and they are going to return it to shareholders to be disciplined? tom: buffeted by the pandemic, no question, but the model for
fedex right now, this is not coinbase. this is a moneymaking machine when we send the package out. lisa: and it wants to remind its shareholders by saying, here you go, you can have some. how much of this is getting ahead in terms of the turmoil to bolster their position? but again, where are they going to put it if people are not confident in the future? where do investments go? that is something you have been asking about. where do they put their cash? tom: what did they do with it? the catalyst of te shaw, this will enhance stockholder value and updates the board governance. an important announcement. maybe we will see more of this in the coming months. kailey, i'm not going to see that from coinbase. kailey: it is not looking likely. brian armstrong says raining and cost is with the company has to prioritize.
they are cutting their workforce. it was a different environment a month ago. he said things have rapidly deteriorated the last month and coinbase is not the only one feeling that. tom: fedex agreed to customary standstill provisions. i guess they have come to an agreement. the most eventful morning. futures lift up 27. ♪ ritika: keep you up-to-date with news from around the world. president biden in an overall meeting last week indicated he is leaning toward removing some products from the trump administration's china tariffs list. inflation at a 40 year high in the biden administration is looking to show action on bringing down prices. hot, dry and windy weather is
challenging firefighters from california to new mexico, forcing hundreds to leave their homes. 2500 have been evacuated because of two blazes on the outside of flagstaff, arizona. u.k. households fell after the lowest wage increase in the last two decades. [indiscernible] south korea's top diplomats as north korea completed preparations for a nuclear test. antony blinken in d.c. said the north would pay a price if it moves ahead. the test would be north korea's seventh test. global news 24 hours a day on air and on "bloomberg quicktake." powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. ♪
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a very important conversation with someone who is always over the decades tried to think harder than everybody else about what the future will bring. david rubenstein joins us. i want to mention that the ppi data doing better off the two day gloom we have had. what to me is so important is ian bremmer's essay last year on the power of technology. you talked to mr. khosla about technology and the tension between china and the u.s. who holds the power? david: vinod is one of the leading venture capitalist investors the last decades at kleiner perkins, and now at his own venture. he is an indian immigrant. he got his degree at carnegie mellon and then stanford business school.
he really has made the most impressive venture investments over the last several decades, making billions for his investors. he said he thought there was a war, perhaps a techno-economic war, between china and the united states that could arise the next few years and he things his native country of india could be an ally to the united states. there is no doubt there is technology tension between china and the u.s. and he things the venture capital community can play a big role in trying to moderate that tension and maybe bring those countries together by cooperating, if possible, on investments. tom: you are a leader on this and i want to bring in dr. bremmer's thoughts from his essay last year. there has to be responsibility on the part of the young turks of technology in america to think internationally and to think interdependently. are you optimistic they are able to do that? david: i think they are more
likely to be able to do it them political leaders, because i think the political leaders cannot cooperate. the business people are willing to cooperate, and if they are not government challenged, sometimes they put blocks in between cooperation between venture investors from china or india or the united states. i think the technology community recognizes it has the future of the global economy in its hands, because so much of what we are now doing, the way we live, is dependent on technology investments. 20 years ago people would not have said -- they did not know about google, they did not know about apple, and i we cannot live without these companies, or amazon as well. kailey: any yet, they have seen share prices decline in remarkable fashion this year. valuations coming in across the tech space. what were his thoughts around that on these valuations becoming more depressed?
david: it is one thing when you had the bubble burst in 2000 or 1999 because companies had no revenue and had essentially no earnings at all. now you have gigantic companies like apple, amazon, google, facebook, netflix that have large amounts of revenue and earnings. maybe the valuation is high today. i would not think these companies are going away the way they went away in 1999 or 2000. these companies are embedded in the fabric of our society and i think the valuations may fluctuate, but they are not going away. lisa: let us talk about nascent companies seeking venture money. the exit may be getting difficult. would be a rough market to go public. it is a rough market to raise capital. how was venture changing in an environment where money is no longer free? david: there is no doubt valuations have come down in the private market and public market, but these things happen from time to time.
the question is whether it is a good company or not. take spacex for example. it raised money at a large valuation, i think over $1 trillion -- not over $1 trillion but $1.7 billion at a high valuation. i think the valuation was $125 billion. there is a valuation where $125 billion is still a large amount of money to raise and a private sector. the technology valuations have come down for sure, but they are not exactly disappearing and going to zero. tom: very quickly, we have got to get back to the crazy markets. you said a number of months ago, maybe weeks ago, that the genie is out of the bottle on crypto. we are seeing painful losses in bitcoin with announcements from people that i mentally respect, carlyle group and what you have
done for years. give us an update on bitcoin and the rest. is a believable? david: i am not a leading expert but my view -- when i said the genie is out of the bottle -- so long as you bought bitcoin at $.50 or a dollar and now it is that $20,000, if you bought it at $60,000, you have lost a lot of money. not saying these are great investments but these investments are not going to go away and i don't think the whole crypto economy is going to collapse. or do i think blockchain is going to disappear. we are in a market decline and in a market decline goes down. it is not surprising something as ephemeral as crypto would go down. i don't think people are going to abandon the idea cryptocurrencies just because the market is down the last few weeks. tom: david, thank you.
david rubenstein with vinod khosla. look for that at 9:00 p.m. i just did that, kailey, so you have a nice soundbite. vinod: we can replay that at 1:00 p.m. eastern. excited for that conversation. but as david said, we can talk about what is happening idiosyncratically but it is emblematic of what we are seeing more broadly in a macroeconomic environment that is getting more and more difficult for companies across the board. that is what you are seeing playing out in risk sentiment, not just cryptocurrencies, but any risk asset. even if we have a semi refined rally -- rebound rally. tom: let me do a data check. futures pretty much stable, excuse me, the vix pretty much stable. the futures off ppi to up 19.
the dow futures up 100. the nasdaq moving up 0.8%. the yields come in a little bit but i don't want to write home about it. 3.2 9% on the two-year yield. the real move and this was for -- -- the president will attend the royal family in riyadh. dollar resiliency today and sterling having a tough go of it. maybe the president will visit with the queen on the way. an eventful day coming up. this is bloomberg. ♪
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