Bloomberg Surveillance 03/27/2024

Central bank policy, particularly withregard to the Fed, is very, very binary. They either cut or not.They don't need to wait for inflation to come all the way back down to 2% toactually start cutting rates. We just need to be confident that thingsare evolving in the right direction. They're kind of trying to tell us thatwe're on a path to get two rate cuts now.Inflation has come down enough that they think that they can be cutting interestrates. We can still get three rate cuts despitesome of the hotter inflation data. They're trying to play the waiting game.Eventually, they're going to have to.

Suppress the front end.This is Bloomberg Surveillance with Jonathan Ferro, Lisa Abramowicz andAnnmarie Horden turn. Live from New York City this morning.Good morning. Good morning.Our audience worldwide. This is Bloomberg Surveillance yearequity mark on the s&p 500 positive by a third of 1%.Three very mild days of losses behind us.Let's see if we've got a day of gains in front of us.In front of us this hour. Expect plenty of updates regarding theBaltimore bridge collapse.

Police are finding out just how bad itwas and how much worse it could have been, especially if we hadn't gottenthat mayday call from the ship that prevented more cars from entering thebridge. Honestly, I was watching the video onrepeat last night. And again, the question just remains,how could a bridge just collapse like a couple of toothpicks?That's what it looked like in the imagery.What else are the vulnerabilities that we have out there and how long is itgoing to take to work through all of this?In a matter of seconds as well?.

Promo Just absolutely stunning picturesfor us all. I think the team here at Bloomberg isstill tracking the disruption and working through 2.5 million tons of coalcars made by GM, Ford Lumber. The list just goes on and on.Yeah, when you think about this port, it is what they would call a second tierport, but because of where it's located, is incredibly important for cars.It's inland. It's close to all these railroads.Think about all these cars going to say Detroit and then using it agriculturalmanufacturing. Trains that can go to Chicago and then,of course, an export for coal.

Everyone is working through what thismeans. But Anna Wang of Bloomberg Economicssays point two percentage points potentially could be a base case higherfor inflation given the disruptions at this port.And people judge and officials are saying is going to take a lot of time.It's going to take a ton of money. To me, it's also this sort of anothertest on top of tests of what happens when you start to reduce some of thecapacity. How much does you get?Do you get clogged up ports in New York, in New Jersey, in Virginia, if you doget that sort of redirected traffic, is.

This sort of a much smaller scalepandemic type supply side disruption, 2.0?Or is this something that's completely different on a much lesser scale?The county lines is going to break down some of the headlines for us on theground in Baltimore in about 10 minutes time.What it says, financial markets, just briefly, one currency part jumps outthis morning, It's dollar yen. Let's talk about some levels in dollaryen. So October 20, 22, we're talking aboutone 5195. Japan intervenes overnight, one 5197 ondollar yen prime.

And this is what happens.Literally hours later, a meeting between the finance ministry, the Bank of Japanand the Financial Services Agency. And the headline coming from a topcurrency official in the finance ministry is we will take appropriateaction against excessive moves. We maintain the readiness to act asusual, and a 4% move in two weeks is just not moderate.Now, that's the verbal intervention. We've heard that three times now, twicetoday, once in the last week. Is that going to be enough to move thiscurrency market? The answer is in the currency marketright now, not yet.

It feels like traders are thumbing theirnose at the Bank of Japan right now and saying, really, this is all you've got.You're getting a little bit of a retracement of some of the weakness.But still, we're close to the 34 year lows that we that we really hitovernight. You have one Bank of Japan member comingout and saying that the central bank must proceed slowly and steadily towardnormalizing its ultralow this policy. That's what triggered this.And then authorities come out will take really serious actions and we have noidea what those actions are. And they haven't really shown awillingness to flood the zone in the.

Past couple of months.You go from negative rates to zero. It's your first time since 2007, 17years, and then you come out and start complaining about speculative movesbehind a weak Japanese yen. Is it really just speculative movesbehind a weak Japanese yen? I'm not to say they can speculate allthey want about the speculative moves. I think a lot of people are looking atthis and say you've got inflation that's really coming back in Japan for thefirst time in a very long time. And you've got otherwise very easymonetary policy. You put those two things together.The currency move is pretty obvious.

So, you know, call it speculative, callit whatever you want. How they're going to address it reallyis the issue of that verbal intervention.This is what it's worth. One 5133 We're negative on the sessionby 0.1%. That's how much things have moved offthe back of some of that chart. We'll pick up on that in just a moment.The broader market looks like this actually.Futures on the S&P 500 shaping up as follows.Futures at the moment positive by 0.4%, yields basically unchanged on a ten yearat four 2376.

And the euro go an absolutely nowhere.Euro dollar one away 27. Coming up this hour, mark in lower statestreet as the rally takes a pause for a third straight day.Bloomberg's Brendon murray on the bottom of bridge collapse and Bruce kasman atJp morgan on America's rising debt pile. We begin with the top story in thismarket. The equity market rally stalling for athird consecutive day ahead of comments from Chairman Powell and Koepka to roundout the week. Martin lower stage three saying this Wewill see rate cuts starting in June. Most will be justified based on fallingeconomic activity.

The Fed is still an outlier given growthand inflation performance today, but it's clear that there is a fairly highhurdle for the Fed not to start the cutting cycle.Marvin Lo joins us now for more. I think good morning to you.Just how low is that bar for that first cut from this Federal Reserve?You know, they want to cut it's pretty low, kind of just.Based on where data is and probably what they should be saying around that data.But for the most part saying they're going to ignore the data so they want tocut. There's an election cycle that kind ofgets into play with this.

And, you know, they still firmly believethat policy is restrictive. To me, it's a function of how much theycan cut. And I think even though they pulled backon their expectations, you know, they might be surprised how sticky inflationis. It doesn't really matter what they say.We've just had this equity market review, five consecutive months of it.We've heard the complaints. RBC has talked about it being stretched.Evercore yesterday on this program called it exuberance, I think economy.Peter Chair was talking about taken out downside protection.Why do you think now isn't the time to.

Fight the strength?You know what? Because we've got a lot of central banksthat are lining up for really the, you know, the start of releasing the hounds,if you will. If you kind of think about a marketthat's expecting three or four very large central banks to start cutting inJune. And then the modal aspect of that whereyou get these quarterly expectations for, you know, the next year or two yearand a half. All of a sudden you've got severalhundred basis points of cuts in portfolios that are all going to benefitfrom that.

Marvin, yesterday's trading action didremind me of Peter shares conversation and that's something that he may or maynot have Pingree on and said, See, this is exactly what I was talking about.I think liquidity kind of moment, the fact that you could see a sort of selloff into the close in a sort of unprovoked way, how do you trade arounda lack of conviction and really thin liquidity with the appearance of tradesleading to sudden moves for no reason? Yeah, I mean, it certainly is achallenge if you're in that world. Certainly taking a projection around ishow you approach it. I'm more of a, you know, intermediate,long term investor.

You know, I look for fair value and I,you know, ultimately just sit through it and expect kind of that story to playout. We are going to see several hundredbasis points of cuts around the world over the course of the next six months.We do have liquidity that's still fairly robust, making its way into the system.And we've got the Fed talking about slowing down Q2 at a time when reservesare still quite, you know, quite high. You know, all of that to me is still arelatively positive story for risk assets.Do you add then to risk assets? Do you say, okay, it's time to lean ineven further because it's unclear what.

Could potentially disrupt this?I wouldn't be leaning in heavily. I'm more for the most part, you know,we've all added to our portfolios over the course of the last 6 to 9 months,hopefully, and that's put us in a fairly positive position.I think I think I'm looking for potential changes to get my portfoliointo a better position, if you will, up in quality.If we're talking about credit, you know, potentially looking at parts of thegrowth equity story that get me more comfortable.But adding adding aggressively in here is harder, I'll admit to that.Let's talk about verbal intervention.

Start the week with it from Japan.It continues today and overnight this morning, we get more comments.They're going to take appropriate action against extensive moves.They say dollar and is still through 150 for you in this market.When you hear words like this, what does it mean?You know what? It's a bit of a bit of a paper tiger.Ultimately, they laid the groundwork in terms of how to think about their policywhen they until viciously hiked to zero. The rate differentials around the worldstill remain fairly robust. I think when you have a very lowvolatility world that we do in affects.

And we're always looking for the carrytrade, you've got another potential funder that since they've taken out kindof that big gap from the perspective of if they actually aggressively approachpolicy, which they didn't. Do you think that it was a mistake thenthat they insinuated that financial conditions were going to remain easy?I don't think they needed to. I don't think they needed to ultimately.And I think that they probably should have gotten more clarity in their mindin terms of when the cutting cycle was going to begin.They waited for so long. Ultimately, if they hiked while whileeveryone else was cutting, it would.

Certainly make the interest ratedifferential story a bit easier. I guess hindsight being 2020, you know,I don't think they need to be as dovish as they as dovish as they are.Do you think this story is specific to what's going on at the BOJ or also whatwe're seeing from the Fed? The Fed is a story that every centralbank follows. The Fed is a story, you know, for betteror for worse, given how the dollar's role is in the capital markets isimportant in that discussion. So yeah, it's it's twofold for sure atthis point. We were talking a lot yesterday aboutthe potential for ongoing Fed.

Intervention to offset some of the billsfor the U.S. government, and that's raised questionsabout a longer term weakening in the dollar, especially as people realize,okay, the US is going to try to inflate its way out of out of its debt issues.How much do you see that as a long term trend that you can actually bet on?Yeah, I mean, I think that overall term premiums are too low in the market.I think that you've got a lot of things coming together, whether it's the debtlevel or whether it's the amount of bills and whether whether or not kind ofthe Fed could get to 2% inflation target, inflation volatility and all ofthose aspects.

Equal equal some.Challenges at the Long in the Curve. So really thinking about better staplerslater and later in the cycle is something that I've been spending timeon to put this whole conversation together.How much are we looking at a moment where bonds are the risk asset andstocks are actually a haven in the sense that they're more hedged to the growthand the potential stimulus that's coming from all sides, whether it's fiscal orwhether it's monetary. Yeah, for sure.I mean, earnings are nominal. And if we were to kind of break down themarkets, you know, the US growth aspects.

Are remain the strongest in the world.One of the final thoughts on the events of yesterday, if we can, if you sever anartery in global supply chains, no matter how small it might be, relativelyspeaking, it can have global consequences given the challenges togoods disinflation in America. What was your reaction to what happenedyesterday in Baltimore? You know, ultimately, I rely on yourreporters and your folks to kind of get me educated on this for sure.But it doesn't make it easier at a time when the Fed needs to see thecontinuation of these disinflationary trends.That somehow took a pause over the last.

Couple of months, make their way back inthe market. They've got some hard decisions to makein the next couple of months, and this doesn't make it easier.We'll see how big the challenge might be.Marvin, Thank you, sir. Fantastic to catch up.Marvin Loder of State Street, if you want just joining us, Lisa, equityfutures right now on the S&P near session highs.We're positive a third of 1%. Let's get you caught up on some storieselsewhere this morning. The search and rescue operation afterthe collapse of the Francis Scott Key.

Bridge in Baltimore is now a search andrecovery mission. A road crew is working on the bridge atthe time of the collapse. Two people were rescued.Six remain unaccounted for. The area remained closed.It remains closed to traffic, cutting off a major artery around the city.Japan has stepped closer to currency intervention, as we were just talkingabout. The country's finance minister ramped uphints of possible action maybe after the end touched its lowest level versus thedollar in 34 years. Policy policymakers there were kind ofrunning out of choices short of.

Purchasing the currency to prop it up.After the Bank of Japan's first interest rate hike since 2007 failed to changethe trajectory. Shares in Chinese EV maker BYD closedthe day more than 6% lower in Hong Kong after an earnings mess triggered itsworst sell off in seven months. China's largest electric vehicle makermissed its 2023 earnings estimate by $138 million, raising questions overwhether it can sustain strong profit growth amid a pretty intense price war.The company almost tripled its final dividend payment, but that was notenough to allay investor concerns. And that is your Bloomberg briefed on.Honestly, to me, it raises this question.

Whether the whole EV trend, regardlessof the region, really is under pressure in many ways under their own doing witha price war, but also just with respect to demand.I was thinking the same thing. This is supposedly the market leader.Exactly. Also included in the race to the bottomfor these names. This is a massive struggle in this spaceand it really bodes maybe a little bit ominously about how close people aregetting to questioning whether this is truly the next step and how quickly wecan get there. More on that story a little bit later.Will be catching up with officials from.

VW and Nissan as well.Up next on this program, Biden family, federal support for Baltimore.I told them we're going to spend all the federal resources they need as werespond to this emergency, I mean, all the federal resources.And we're going to rebuild that port together.That conversation up next. From New York City this morning.Good morning. Trying to bounce following three days ofvery mild losses on the S&P 500 equities up by a third of 1%.And the bond market yields just about unchanged.Your ten year for 2356 under.

Surveillance this morning.Biden vowing federal support for Baltimore.I told them we're going to send all the federal resources they need as werespond to this emergency. I mean, all the kind of resources andwe're going to rebuild that port together.Everything so far indicates that this was a terrible accident.At this time, we have no other indication, no other reason to believethere's any intentional act here. Here's the latest search and rescueeffort suspended with six individuals unaccounted for after the collapse ofthe Francis Scott Key Bridge in.

Baltimore, Maryland.Lawmakers pushing for an aid package to help rebuild the bridge with thepresident saying he'd work with Congress to fund it.The collapse expected, of course, weeks or possibly even months of disruption.Split Bucks County Lines joins us now for more can be found at the scene nowfor the last 24 hours or so. What's the latest on the ground?Well, as you say, John, the search and rescue operation was suspended around7:30 p.m. last night and starting at 6 a.m.today. So really just moments ago, according toMaryland authorities, the Maryland State.

Police, together with their partners,are beginning now the recovery efforts. This is now going to be about actuallyfinding the bodies of these six unaccounted for individuals,construction workers who were on the bridge working on potholes at the timeof the collapse. It really right now is an effort to tryto provide closure for some of those families affected.Of course, that isn't all that will go on today.We could very well see the National Transportation Safety Board, the NTSBactually board this vessel, the Daily today.They did not do so yesterday as they.

Didn't want to interfere with the searchand rescue efforts, which were the number one priority at that time.But they could begin the work today of the actual investigation.They're going to have a 24 person team investigating this, looking at therecorders on the ship, trying to figure out what exactly happened with thiscrash and what role the owner or operator may have played in any of this.And then, of course, it's going to be a matter not just of investigating, butactually trying to get the ship itself out of the harbor and start being ableto clear some of the debris from the shipping containers that fell off theship, as well as from the bridge itself,.

Which of course, is in large partsubmerged underwater as we speak, trying to get all of that cleared out so thatthe port of Baltimore can reopen. Authorities here, though, have been veryreluctant to put any kind of timeline on just how long that might take daily inthe meantime. And our thoughts are very much with thefamilies of those six individuals. I am wondering in the meantime, wheretraffic is being diverted, what the scene is like, what the plan is,especially given that this is a main thoroughfare, both for trucks but alsofor commuters. That's absolutely right, Lisa.Roughly 35,000 commuters every day were.

Crossing this bridge to get to wherethey are going. And obviously today they will not beable to do so. There was heavier traffic during rushhour last night. And today will be the first real test ofmorning rush hour as these drivers will not be able to use IE6 95 instead willhave to divert to other routes, including I-95 895 as well.For commuters, that may mean more traffic on the way to work, but fortransit, the actual freight that was moving over this bridge, some 49,000commercial vehicles are 4900, rather, commercial vehicles use this every dayas well.

If it was containing hazardous material,they are not allowed to use the tunnels that go underneath Baltimore Harbor.So their transit period could be much longer.Tens of miles being added to their journeys is realistically what we aretalking about here. And that is really why reconstruction ofthe bridge after the port has reopened in the channel has been actuallycleared. Reconstruction efforts are going to bekey to releasing pressure in this very vital artery in terms of transit here inthe mid-Atlantic. But that is a timeline that could beincredibly long and incredibly.

Expensive.We heard from the transportation secretary, Pete Voodoo judge.She was here on the ground at the scene yesterday.He said this will not be quick, this will not be easy.And he said it will also not be inexpensive.This is going to take time and a lot of money.Katie, great work over the last 24 hours.We'll catch up with you a little bit later this morning.I need to talk about global trade with our resident trade expert, Bloomberg'sBrenda murray.

He joins us now for more.Brenda, let's talk about how easy it is or not to shift cargo to other EastCoast ports. I'm thinking Boston, Miami.How straightforward is that, Brendan? It's not a hugely complicated process.And in fact, we're already seeing ships go to ports like New Jersey, New York,Virginia and places like Savannah. This morning, you can see those shipsalready gathering outside other ports that have that have been diverted fromBaltimore. The problem comes in with each one ofthose containers or the ship load of of of commodities.They need another source of ground.

Transportation.So that that is that that's where the complication comes in.And we're talking about thousands and thousands of containers and andthousands and thousands of tons of goods and lots of cars.Baltimore is the country's busiest port for for for auto imports and exports.So they're going to have to find some other way to go through.Some of the car companies, we understand, have have some have theirtheir their docks on the on the ocean side of the of the now collapsed bridge.So they might not be affected. We're picking through some of thosedetails right now, but certainly the.

Auto industry is one of the moredisrupted ones from this from this tragedy.GM and Ford already saying they're rerouting to Georgia out of all theseEast Coast ports. Jonathan mentioned who is most preparedwhen it comes to the auto industry, given how important and criticalBaltimore was for auto vehicles. Virginia is one of the names that one ofthe ports that you hear talked about frequently.Brunswick, Georgia, is another one that where a lots of vehicles flow through.You know, in the southeast, there are, you know, a number of European carmakershave their facilities there, so that.

Services a number of European importsand exports. So that's what we're seeing.The bigger vessels, the the ones with more than 12,000 containers are some ofthose more southerly ports aren't deep enough to handle those big vessels.So they're going to wind up in in New York, New Jersey.Looking a little bit more broadly, how vulnerable is the entire supply chainindustry right now? You see what's going on in Panama.We had the disruptions in the Red Sea and now we have a pretty critical porton the East Coast down. Most of the folks we talked to arecautiously optimistic that this is not.

Going to be a hugeit's going to have a huge impact on the on the on the national economy.It will certainly affect the region from weeks, if not months.But we'll have to watch and see. You know, we saw 10%, 20% more cargocoming in to the ports of Los Angeles and Long Beach during the pandemic.And the bottlenecks, you know, grew and grew and grew for a year or longer.So we'll have to keep an eye on whether these whether these are just sort ofisolated chokepoints that get resolved and ironed out pretty quickly or whetherit's, you know, sort of the domino effect that we saw just a couple ofyears ago.

Exactly.To that point, Ryan Peterson of Flex Port yesterday was saying thatessentially this is really the test, whether or not a sudden 10 to 20%increase in some of the volumes at places like New Jersey and New Yorkcauses the same kind of hang ups. What makes people optimistic that we'renot going to see those types of backlogs that were really problematic for a lotof different companies during the pandemic?Yeah, the U.S. economy is solid right now, but it's notgoing gangbusters. So there is some capacity in thelogistics industries that we cover.

Shipping and trucking and rail.There is some of these ports are running at something like 70% capacity, whereasduring the pandemic they were they were, you know, at 100%.So there is some there is some flex in the system to deal with this.There's also, you know, the sort of wild card in all this is the is thedockworkers on the East Coast have a contract negotiation this year.So they're going to become very important to workers at the East Coast.Ports are going to become very important to making sure these these goods flowsmooth smoothly. And, you know, maybe perhaps this givesthem a little bit more leverage in those.

Talks.Brendan, what do you think the template is?The lesson from the West Coast negotiations for what's about to happenon the East Coast. Well, I think the you know, you know, asI said, the dockworkers, you know, now that the spotlight is going to be onthem to see if they see if there's enough labor even to handle all thesediversions. So the it looks like, you know, there'sa lot of, you know, big talk during negotiations like this, lots of threats,you know, coming from both sides. But but it sounds like, you know,heading into the November presidential.

Election that, you know, there's they'reyou know, they can't the parties on all sides can't affordto, you know, to see a strike where, you know, the East Coast ports shut down.So it sounds like they're going to try to resolve it rather than have itbecome, you know, yet another supply chain disruption.Brendan, appreciate your time this morning.Thank you, sir. Brendon Murray there at Bloomberg out ofLondon, which released some of Rendell's work yesterday.Just the uniqueness of Baltimore's port for coal.This is what jumped off the page to me,.

The second largest terminal for U.S.coal exports and the shutdown of this. And we don't know how long it's going togo for weeks, months, potentially hitting shipments to India.And this goes back to how we started this hour.You can get a severed artery no matter how small.And the global implications take a while to sort of figure out the disruptions aspeople try to figure out where else is going to come from to places like India.Also, I was reading, which I put out a page to me where some of the farmequipment and construction at a time that's crucial for planting things.Now, this is one of the main arteries.

For all the tractor trailers instead.To your point, there are very specific industries catered to in specificarteries. And if they get severed, how quickly canthey be adjusted elsewhere, especially given some of the extra costs involved?The coverage continues this morning on Bloomberg TV.Up next on this program, Bloomberg's undercurrent as China's president looksto mend ties with American CEOs. That conversation up next.From New York City. Equity futures mid-session highs,positive 0.4% from New York. This is Bloomberg.

Stocks these session highs.Welcome to the program. Equities up by 0.4% on the s&p.Just a few days of losses. Really mild margin was enough once againwhen you see some outperformance. We saw this last Wednesday didn't wait.Following Chairman Powell. The outperformance starts to come fromsmall caps. We'll see if this sticks the RussellLaser up three quarters of 1%. If you look at the correlation betweenexpected rate cuts and the Russell 2000, it's getting closer and closer.It seems like people believe the smaller companies are much more leverage to thecutting cycle and will benefit that much.

More from some easing.Five months of gains on the S&P 500 couple of days left of March.We believe that Q1 is finally over. You're happy with that?No, but it feels one feels like quarters with you.Feels like the first half, doesn't it? I mean, how many directives have we beenthrough? We've talked about the idea are we did adependent or did Cedar not matter because they're just going to cutanyway? Are we talking about a Fed?Are we talking about in video cycle? Are we talking about the death of themega caps or are we talking about the.

Magnificent two?I mean, these are some of the narratives that have kind of percolated out with noresolution. For the first, I'd say this, I thinkwe've seen just as many narratives in this quarter as we did last year, butthey're changing more quickly. So last year, for the whole month ofMarch, it was hard landing talk rate, regional banking issues.This time, what did that last couple of days and why see be stuck up and down?Maybe some mutterings of hard landing, but no one really bought into it anyway.Bear with me. It feels like people are just exhaustedby it.

Sure.And so they sort of half buy into it, don't really have any conviction, don'treally trade that greatly, and then just sort of hope for some sort of shift thatthey could get excited about. You're convinced everyone's bought rightnow? I've heard that directly from a numberof traders. Oh, no.You know, look, if someone's very excited, please reach out to me and Iwant to hear it and I want to ride that excitement.Let's get to the bond market. So your ten year 30?Yeah.

There's nothing excited about thisreally muted price action. We said this yesterday.It's like depths of summer price action in some places.The ten year for 2356, the tier four 5951.If you want a bit of price action, look to Japan authorities all over the place.So give it a score and I'll get to the story in just a moment.And one 5116 that currency pair is negative a quarter of 1%.That is the smallest to wince. Is that what T.K.would say? Takes what tracked the tiniest bit ofyen's strength against the US dollar?.

Because there might be intervention.They will take strong actions after seeing their currency weakens.That low is going back 36 years. At a certain point they have to comethrough with something. And how much conviction do they reallyhave behind trying to bolster a currency when it's clear that their central bankhas no interest in tightening policy materially until totally and one 5118under surveillance this morning, six workers are presumed dead afteryesterday's collapse of the Francis Scott Key Bridge in Baltimore.Authorities have yet to offer a timeline as to when operations will resume asofficials look to remove debris and the.

Cargo ship daily from the entrance tothe city's port. Businesses are diverting cargo along theEast Coast. In the meantime, the port of Baltimoreis a crucial stop for European carmakers and the US exports of coal as well.There's two dimensions to this story that I think are worth exploring rightnow. There are many, but has to.One is how much worse this could have been.And the second piece of this is liability.I remember yesterday we were all talking about this.We wanted to understand the time between.

The mayday call and the collision.And Governor Westmore gave us some color on that.Basically said this. Lisa would think, though, that betweenthe mayday and the collapse, we had officials that were able to beginstopping the flow of traffic, which just gives you a sense of how much worse thiscould have been yesterday. Never mind the time it happened.I mean, you think about rush hour. This could have been seriously tragic.I was watching the video, as I said on repeat, which I probably shouldn't havedone, but I was watching it and I was just every car that was going across inthe 10 minutes before I was told, go,.

Don't go.And you're just so grateful that a number of them didn't go right beforethe collapse. At a certain point, we're talking aboutcoverage that might go up several billion dollars for the ship, but thisneeds to be immediate. How do you get immediate financing tothe whole region to start the reconstruction effort that took twoyears in some of the other disasters? I think in Italy, for example, inprevious years, it's going to be key and it's going to be speed that's important.This is a liability question. Who ultimately has the liability, Buthow long before we have to find out The.

Answer to that?I imagine in between is the president just going to offer the credit line tothe federal government? He said that yesterday.He said his got his full commitment to rebuilding this bridge and helping outthis port. You also heard from number SenatorSenator Ben Cardin as well, said he does think Congress is going to step up.But, Jonathan, to your point, a reporter when the president was briefing askedabout this, it seems that a ship is at fault.Does that company have liability? And the president said that could be,but we're not going to wait around for.

That.I want to turn to our next story, the latest out of Japan.Top currency officials in Japan expected to speak after the yen hit its weakestpoint against the dollar since 1990. A meeting earlier this morning betweenthe Ministry of Finance and Financial Services Agency Reserve Rice and theBank of Japan will intervene after the Japanese currency surpassed the one 5195mark, which prompted the bank to step into in October of 2022.We had some comments from officials saying the Fed.So the top currency official spoke earlier this week.It's a repeat of what we've already.

Heard and we've said a million times.For verbal intervention to be credible, there has to be a policy effort behindit. It's unclear what that policy is goingto look like and whether it's enough, especially because they keep sayingwe'll take bold action if needed, if it's not needed when it falls to 36 yearweakness. I mean, to a certain point, where's theline in the sand? We were talking about 150 being the linein the sand. That's 151.So this raises questions about their credibility as they've jawbone before.And it's not clear to your point what.

The policy response is and what thetrigger is to really engage. It apparently is something very close to152. The promise, the words, is not sure whatprompts the actual words. That gets the words which are in line tothe center. Let's turn to China.President Xi Jinping urging U.S. CEOs to invest in China, saying theeconomy has not peaked. Blackstone.Stephen Schwarzman. Qualcomm CEO Cristiano Amon reportedlyamong the business leaders involved in today's meeting in Beijing.The talks lasting more than an hour and.

A half, according to Bloomberg'sreporting. Bloomberg Center.Karen joins us now on the story for more.And that was this for the CEOs or was this for Xi?Which one was it? I think it's something of a sales pitchfor China, as you mentioned there, John. Our colleagues in Beijing got somedetails in terms of what was discussed. Like you said, it went for over an hourand a half, some Q&A, the central message from President Xi being thatthey welcome U.S. investment.He doesn't see the need for the U.S.

And China to decouple.He wants cooperation. And he said the survival of both nationsdepends on each other cooperating, by the way.And, of course, this all goes to this kind of idea that China is now on an Afully fledged sales pitch. Given the hit the FDI over the pastcouple of years. It's at a three decade low.We know on the portfolio side, money is also leaving.So when you have the top CEOs of U.S. companies in town, it seemed like aperfect opportunity for President Xi to meet them and try and soothe some oftheir fears on both the economy and on.

Policy direction in China.And that's China's message. We're open for business.I wonder what corporate America's message is.Do you think it's Our views are independent of our governments.Well, it's often said there is some division between where the governmentwants to go and where the underlying culprits wanted to go.But look at what the data is telling us, John.Clearly the tension is now moving to the real economic data.FDI is at a three decade low. It's not that U.S.companies or other companies are pulling.

Wholesale out of China.But it is that sentiment is very negative when it comes to expandingtheir business. They are looking elsewhere foropportunities, and we're seeing that in the FDI data and we're seeing it in theportfolio of those. U.S.investors often make the point that China is on investment.It's not what it was. They're also putting their money wheretheir mouth is. So there is some disconnect betweencommerce and the government are always, always is when it comes to China.But as I would say, there's also some.

Alignment now between the data and wherewhere the political direction is going to.It feels like it might have been an awkward moment to have this meetingearlier in the week where the US and UK talk about accused state backed Chinesehackers of going after companies, politicians in the U.K.basically scrapping voter information. And is this something that stillconcerns American companies and can she actually assuage those concerns?And we had China lodging the case at the WTO on Tuesday against U.S.electric vehicles. This is all this is a common recurringtheme that even when you have this kind.

Of headline effort to stabilizerelations between both governments or stabilize relations, at least on acorporate level, you know, beneath it, the tensions continue.And to your point, Anne-Marie, you're talking there about the hackingallegations. Again, another reminder of some of thecharges against China, of course. And the flip side, you have China makingthis case at a WTO. That's an example of where thegeopolitical economic race is at the pointy end of things.It is no doubt that, broadly speaking, relations have stabilized compared towhere we were a year ago around at the.

Time of the balloon incident.Both governments won't talk to each other.But none of these other underlying concerns have gone away.It feels like we're on time out until we get past the U.S.election and see who comes out of that. We know one side will be very hawkish,but of course, the other side will have to from probably matched up in terms ofhawkishness if we're to get through it. So as I say, it feels like a time out,but none of the other problems have really gone away.It's getting increasingly difficult to sort of parsed the politics from theeconomic reality in the region.

And I do wonder, especially yesterdayhearing about Apple, their iPhone shipments in China falling 33% inFebruary. Is this because of increased nationalismor is this because the Chinese economy is doing far worse than people expectand is a less fruitful place for international businesses to look to pickup some some extra profits? I think there is a sense that the go goyears are pretty much behind China's economy at the moment.Lisa, I mean, the consumer story, it's probably not as bad as the overseasperception of it is, but nonetheless, it has been more subdued than has beenbroadly expected.

You see that in, for example, that'splaying into the to the Apple story. Xi Jinping apparently told the CEOs thatthey have the economy in hand, they have the issues in hand, and that the economyhas not yet peaked. But at the same time, when you speak tobusiness people both here, both here and those who operate in China, they makethe point that China's government appears to be very reluctant to reallyturn things around and to wrap things up.And that is frustrating overseas investors and those who do businessthere. So I think it's something of a wetblanket over China's economy at the.

Moment.They have a very aggressive growth target of 5% this year.Obviously, that's a political target. So chances are they will do what needsto be done to meet it. But in terms of animal spirits, I thinkit's a night and day in China's economy today compared to what it was, say, ayear ago. And I know you pointed to thisreluctance by officials to really engage in any kind of significant stimulus.Do you have a sense of what some of the business leaders would like to see interms of stimulus and where is sort of the wiggle room is for the CommunistParty?.

Well, I think people still can't pushpast a real estate story until that gets turned around.That's going to weigh on consumers. That's weighing on broader activity.It's such a multiplier in the economy. But then don't forget, people are alsokeeping an eye on what's happening on the manufacturing side of the economy.China is really putting in a lot of effort in into the innovative andtechnology space. There is a lot of concern that China'sexporting a gangbuster reason to key sectors.Some some trading rivals of China accusing them, of course, of dumpingproducts at a cheaper rate on world.

Markets.So even though the consumer side of things might be subdued and of course,the real estate story is very much subdued.China is pushing hard on the manufacturing and innovation space, andthat is now drawing political attention around the world as well.But are they trying to drum up that demand outside or inside China?And they're exporting surplus demand?By all accounts. The the suspicion and the allegationagainst China is that they're exporting, obviously, we know, to every story intothe similar story, but they're exporting.

What surplus technology they have tofind new markets for it. Now, of course, to counter charge andsay business in Europe and the U.S. is that they cannot compete with whatChina is doing. They're flooding the market with thesekey goods. The you know, it's an uncompetitiverace, and that's one of the underlying tensions in the story.So as I say, the conversation on China's economy is that it's pretty muchunderperforming. But don't lose sight of what's happeningin the manufacturing space. There's a lot of innovation going onthere.

They are investing hard in technology.It is a big priority for them and they're clearly making ground increasein key sectors. And one of the best is going to catch upwith this and the current there of pulling back on the latest between themeetings between the US CEOs and Xi Jinping of China.This one man I'd like to speak to Mr. Schwarzman Blackstone sort of Trumpwhisperer, get his view on China and maybe, maybe what he'd say to the formerpresident. Do you think that Schwarzman wanted tohear what she had to say or you think she wanted to hear what Mr.Schwarzman had to say?.

I mean, and is talking about exportscoming out of China. The Trump campaign is talking about a60% blanket tariff on Chinese imports. If he were to get in power, I would saythis. I don't know the answer to that, but Iwould say this the balance of power between U.S.CEOs and China has shifted. Given what we're seeing on FDI,absolutely. We're looking at, what, 30 year lows onforeign direct investment. This was on the Xi Jinping had to comeout and had to really make a moment. You know, we supposed to go to the Chinain Davos and he's not going there, but.

He made sure he met with theseexecutives. It's an ugly number.Let's turn to the price action. Equity futures on the S&P 500 shaping upas follows On the S&P at the moment, trying to bounce back from the mildlosses of yesterday. Futures positive here, Lisa, by point4%. All right.Let's get you an update on stories elsewhere this morning.UBS has finalized a deal with Apollo Global Management for the carve out ofCredit Suisse's securitized product group.Apollo will purchase $8 billion in.

Senior secured funding facilities.The deal allows UBS to close another chapter in its acquisition of CreditSuisse. It will book a net gain of about $300million in the first quarter on the sale, and the private investment worldwill get bigger. Shares in GameStop are lower in thepremarket after a videogame retailer reported plunging fourth quarterrevenue. One of the original meme stocks.GameStop had seen gains following the Fed's messaging that a rate cut thisyear will likely be appropriate. Gamestop's net sales were down 19% froma year earlier and the shares are down.

About 19% in pre-market trading.A landmark, landmark agreement struck between Visa and MasterCard.Millions of U.S. merchants will see holders of luxurycredit cards charged more at the checkout.The deal will allow retailers to pass on the premium charge to them forprocessing cards carrying the Visa Infinite MasterCard world elitebranding. The plan is estimated to save merchants$30 billion in swipe fees over five years and set up a war between some ofthe card potential brands. Because if you have one particular typeof visa, you're going to get charged a.

Different fee than another one.And this is the bread and butter of many different banks.If you've run a restaurant before, you know the story.This ends up this is in our story today. I'll give you the numbers.A $100 transaction at a small restaurant.The customer swipes a visa infinite card that would cost the merchant to 60 andfees. Traditional visa rewards cards wouldcost just $2.10. That adds up over the year massively.And you've even seen it in bodegas and things like that.Well, to say, if you use a card, we're.

Going to charge you a 2%, 4% surcharge,because that's what they're being charged.This is massive. Who's going to bear the brunt of this?It's not Visa and MasterCard. It's all of the banks that are providingthe base resource. What about the airlines?I know there's a complaint in there somewhere.Well, my my complaint is, look, this isn't that profitable for you.Go back to the people who actually just travel and give them the ice cream.And that's really the way to deal with some customer service on the airline,without a doubt.

Up next on this program, America's debtdilemma. We're getting to a point where ourpublic debt is going to start crowding out private capital and we're going tohave structurally higher interest rates. That conversation up next. Obviously I'm going to different typesof restaurants. I say doing so many places, we're doingfine, thank you. How are you guys doing?I'm good, mate. Do you have a credit card for the pointsfor perks, for cash back credit?Yep.

All of the above.Bruce, the granted man, He's got a Chase Freedom account.That's what I have. Yeah.Entry level. That's my house.Yeah. Equities right now in the S&P positiveby 0.4% in the bond market, yields just about unchanged for 2376.There's so much going on in the land, the commodities craze, just a smallpiece of it. We're down by 7/10 of 1%.$81 on WTI. We'll talk about this a little bitlater.

But 888, it's talking about $4 pumpprices this summer. That's a problem across a whole list ofthings. It's a problem potentially for the goodsdisinflation story and arguably especially time wise.It's a huge problem for the political season and cocoa as well.Going through 10-K yesterday, which I know you want to talk about.It's crazy. I just am thinking the fact that it'sactually more expensive than copper iron ore.I mean, at this point we're talking about a commodity.If you built a cocoa house, it would be.

Incredibly expensive.It would be more expensive than building that entire house out of metal.You're talking about chocolate house here.Right. Okay.I didn't know where you were going with that.I meant so it's like if you wanted to become a cocoa exporter.You mean, like, physically outside of cocoa?Like, if you were going to go back to, you know, Hansel and Gretel and try todo that? Sure.You ever made one of those at Christmas?.

I was so bad at it.Did you do a good job at that? No, no, no.Law again at the ends would come off and the gumdrops say gumdrops.That's a way to say. All right, maybe not.And this event is this morning. America's debt dilemma.The cost of financing our deficits are going to erode more and more of our ofour disposable income as a country. And I do believe they're we're gettingto a point where our public debt is going to start crowding out privatecapital and we're going to have structurally higher interest rates.Here's the latest this morning.

The BlackRock CEO, Larry Fink, in thelast 24 hours eyeing the risk of rising U.S.debt and its impact on the Fed's fight against inflation.Think writing to shareholders, quote, More leaders should pay attention toAmerica's snowballing debt. Is a debt crisis inevitable?The answer, he says, is no. Here to discuss J.P.Morgan's Bruce Kasman joins us now for more.We're going to talk about monetary policy, the Fed to be okay.Can we just start on this with America's debt pile?I know given the team at J.P.

Morgan have talked about the boiling ofthe frog, Bruce, when does it start to get a little bit too hot?Well, I think it will get too hot if we're right that the Fed just doesn'thave very much room to ease. And over time, that begins to affectbalance sheets. It keeps credit tight.It weighs on pricing power. It's a slow moving story.And I think we have to recognize that so far the effects of high interest ratesjust haven't done nearly as much damage as we would have thought to the privatesector. So that this story is playing outagainst a another narrative, which is to.

Say the private sector is healthy, we'regetting supply side improvement. Maybe we can live with high interestrates and actually generate a soft landing.We've kind of moved from being very much in the boiled frog stance to beingagnostic about where this story is going to lead us.Can you talk to me, Bruce, then about the supply side narrative that theChairman seemed to endorse in the news conference last week?What's the question? Do you have the sort of linger beforefully embracing it? Well, I think we should embrace it.There's an immigration story which is.

Playing out right now and is boostinglabor force growth, limiting the pressure on labor markets and inflationfrom from rising jobs. I think we've also generated some prettystrong productivity growth, and that seems to me to be linked with what we'vebeen doing on spending on R&D and intellectual property.The question is, though, we still have a tight labor market, we have elevatedinflation, which I think is sticky. I think as you mentioned a minute ago,the goods price story globally is shifting here.I'm just not convinced that's going to be enough to get inflation all the waydown to what will make the Fed.

Comfortable over the next year or so.Bruce, we've been talking a lot about the bridge collapse in Baltimore andunderstanding that it's just, you know, one particular port and that potentiallyother ports can take in some of that traffic.But does this highlight to you that supply shocks have not gone away andthat there are these vulnerabilities that will kind of put some sort of floorunder this goods disinflation that we've seen for the past couple of years?Yeah. I think what you're seeing in somesenses is a little bit of that with the idea that there's some new pressures onshipping costs and this port closure.

Might be part of that.But also you're just losing the benefits of having unwound the dislocations thatyou know, you've had over the last six, seven months.U.S. goods pricing, excluding energy, fallingat to two and a half percent base. I think most of the indicators, bothdomestically and globally, are saying that's going back at a minimum to zerohere. Know, so when Chair Powell talks aboutshelter inflation coming down, I think there's an offset here of quitesubstantial, maybe even complete what's happening in the goods price story.And then that leaves the focus, of.

Course, on inflation very much on howyou think about labor markets and other service price inflation, which I thinkwe're going to see is pretty firm when we get the PC report on prices onFriday. So taking a step back.This raises the question and we were talking about it with Mohamed El-Erianabout whether this is sort of a tipping point for this Federal Reserve intacitly accepting a two point something or a 2 to 3% inflation rate for theforeseeable future. Do you think that we have shifted thatthis past hour press conference from the Federal Reserve was really the keymoment in that transition.

I think what the Fed is telling us, itwants to start the easing process in the middle of the year and it's willing todo so even if in the first half of this year it's getting uncomfortably highinflation performance. What I don't think this means is thatthe Fed is willing to accept on a sustained basis inflation close to orhigher than 3%. And what we think is going to happenhere is that you are going to see a pivot sometime around the middle of theyear where the Fed maybe delivers one or two easing, but it really then starts toshift its guidance. The market today has over 150 basispoints of Fed easing priced through the.

End of 25 unless the economy gets intotrouble. I don't think we're going to see thatdelivered. You say they want they want to cut,which echoes a lot of individuals that come on the program.But they also continue to say how data dependent they are.What would they need to see in the data to actually say, you know what?We're waiting. We're not going to cut this year.I think that's an interesting point because as they're talking datadependent, you could see Chair Powell in his press conference really talk as ifthe bar is pretty high to prevent an.

Easing.So I'm not sure I have the the numbers. I'd want to be confident about wherethat is. But I think what they've told us atleast to start the easing process around mid-year, that they're fairlycomfortable. They've made enough progress.Yeah, there are data prints here that could take them off of that.And I would argue the committee, as you look at the the projections are probablymore evenly divided on this issue, but I think the bar is pretty high here.I'm not even sure that if we get a couple of point threes on coreinflation, which I'd say a higher.

Numbers, that that's going to be enoughto prevent a June, June easing. I think it'll stop them from doing much,but I'm not sure it'll stop them from easing in June.There's one inconsistency that jumps out to me and perhaps we should finish here.How can the Fed simultaneously say we're restrictive and then at the same timeembrace the supply side narrative of the labor market, but also point to thelabor market as evidence of being restrictive?How does that add up? Well, I think there's a there's a levelissue of how tight the labor market is. And then there's an issue of how muchsupply side performance is helping it.

But I think you are raising an importantpoint, which is that the supply side is improving and helping the Fed, but it isalso a signal that the neutral rate is higher.And I think when you look at financial market performance here, it is embeddingthis idea that some combination of supply side performance, a friendly Fedand some other things going on here is allowing us to do a lot better withhigher interest rates than we might have expected.So I do think you're Roger, right here, policy is not as restrictive as the Fedseems to be suggesting. I think growth will do better if we'reright that inflation is sticky.

I think they are going to have to changetheir tune somewhat here. But it still looks to us like they'regetting ready to at least start an easing process around mid-year.It's hard to disagree at the moment. Bruce.Thank you, sir. Bruce Katzman of Jp morgan.Economic Data on Friday morning. Coming up next on this program, KatieDixon of Northern Trust, Bucks County lines on the latest in Baltimore.Jeremy Thompson of Nissan America and a lineup of Black Rock.All of that and a whole lot more in the second hour of Bloomberg Surveillance.Up next.

It doesn't pay to be bearish, right?That theta is way too good. You've got to stabilize and you've gotto stay bullish on equities. And this is among the most recordsetting periods of momentum that we've seen.We don't have a magic seven. We've got a couple of stocks reallydriving it. And what we've just started to see and Ithink that's accelerate as we go through the year is the rally broadens out.We're still in a bull market and I think you stay invested.This is Bloomberg Surveillance with Jonathan Ferro, Lisa Abramowicz andAnnmarie Horden turn at the line from.

New York City this morning.Good morning. Good morning.The second hour of Bloomberg Surveillance begins right now with yourequity market on the s&p 500 positive by 0.4%.On the s&p continuing to track the fallout from the collapsed bridge inbaltimore. And later, as we said repeatedly alreadythis morning over the last 60 minutes, just how much worse this could havebeen. The distance, the time between themayday call and the ability they had on the bridge to stop the flow of traffic.This could have been so much worse.

Yesterday.What a horrific event. And you're absolutely right.The idea that they were able to halt traffic did keep other cars from gettingcaught up in this. It does raise a question, though, howmuch time was there? What exactly was the cause?How long is this going to disrupt some of the traffic and some of the shipping?There's so many questions that remain. The focus right now is still on the hereand after the immediate aftermath of this.At this point, though, this is an artery that has been severed, as you put it,could be weeks, perhaps even months.

Before this port reopens.And then you've got to get into rebuilding the bridge.And that could take a long, long time and a lot of money.It could take a long time and a ton of money.We heard politician after politician and the United States yesterday say that thefederal government will support the rebuilding of this bridge.It was interesting, a reporter, Jonathan, in his quick news conferencesaid, well, shouldn't the company responsible for that ship that causedthis problem? And he said, potentially, but I want toget the funds there immediately.

But you have to think Congress hasstruggled to pass the most basic appropriation bills.This is a divided Congress, a dwindling Republican House.How are they going to get this funding through quickly?I don't know. In 1977, it took five years to build a141 million USD. This is going to cost a heck of a lotmore money than that. Can we build it a lot more quickly,though? When you take a step back, it alsoraises a question about the ability and willingness for the United States toinvest in infrastructure and able to do.

It well and quickly.This is to me, I mean, it's sort of this comes at a moment horrible tragedy.It also highlights a lot of the key issues that a lot of people in marketshave been talking about for a long time. There needs to be infrastructurespending. We got it.Okay. How are we going to pay for it?How do we continue it? And what infrastructure is mostimportant to prioritize when the nuts and bolts are aging?But you also have the big tech wars that continue.So number one question in economics, I.

Think following this, there are many,but I think this is probably the number one, the disinflation we've seen ingoods over the last six months. It was a little bit fragile, perhapseven some challenges to that over the last two months.And you wonder just how fragile it is given what's developed just yesterday.People are speculating this itself won't necessarily materially shift the needlewhen it comes to some of the overall national metrics.That said, and you put it well over the past couple of months, we already gotthis drumbeat of have we seen the end of disinflation in goods?This just sort of highlights how supply.

Shocks can exacerbate that floor undersome of the disinflation that we had seen.Let's talk about some of the shocks. Let's get to the currency market.Let's bring up dollar yen and take a look at what happened with dollar yenovernight, dollar and overnight getting very, very close to 152.So close. In fact, the Bank of Japan officials,Japanese finance ministers, get together with the Financial services Agency andstart making some noise. Brianna, they have a meeting.One 5197 is not where they want them to be.They come out, they start talking about.

It.But that's all they do. All they do is talk about, say, when arewe going to see the action to do something about it?They get together and make some noise. I mean, that's essentially basicallywhat they did. I know.So this raises this issue, which is is the market basically pushing and daringJapan to do something? Are they basically saying, let's see howmuch you actually care? What is the line in the sand?Is this a test in a way? Because we've seen this movie before andyet still we're hovering at 36 year old.

Weakness levels for the yen.This is what that verbal intervention bought them.Session high one 5197 on the screen right now one 5118 that currency pair inthe men's favor just a little bit by 0.2%.Coming up this hour, we'll catch up with Katty Nixon of Northern Trust on how thestock rally can broaden out. From here, we speak to Jeremy Papa ofNissan on how the automaker plans to compete in the EV market and AmandaLyneham of BlackRock and the competition for capital.We begin with the top story in markets, tech tracking the S&P 500 to its thirdstraight day of losses.

Carrie Nixon of Northern trust thank abroadening count could extend the rally in stocks.Writing this. Financial services stocks have foundtheir footing as the outlook for interest rates appears clearer.These developments are positive signs for investors.It is. Clear that the market can advance beyondthose large cap names in tech carry a place to size with its rent a table.Katie, good morning. Good morning.Let's talk about interest rates. This is ask this question a milliontimes.

The banks need higher rates or lowerrates. Are you saying they just need clarity onthe right path? I think clarity is is key here,Jonathan, and it's been really interesting.It's not just clarity, but it's lower volatility and interest rates.And if you look at the MOVE index, for example, that the volatility expressedin in that particular fear and greed index of the bond market has fallensubstantially. And I think that just gives clarity forbanks on what the what the environment's going to look like going forward.Lower rates certainly help.

A less inverted yield curve certainlyhelps, but lower volatility really helps the banks.Why do you take this as a sign, a bigger sign that maybe this momentum, thisbroadening out can continue? Why you extrapolate out this moment,extrapolating out this moment beyond just the next few months?Right. So it's not just the financial servicesstocks, Jonathan, but when I look across the board, the laggards have started tocatch up slowly and unevenly, but they've started to catch up.So you can start in the U.S. with mid-cap stocks, mid-cap indicesreaching highs.

You can even look at value stocks withinlarge cap and mid-cap starting to starting to beat growth stocks over theshort term. So that's a good sign.You can look at some of the laggards in terms of the energy sector starting topick up steam here. So the broadening beyond just those MAGseven, those big tech stocks is really healthy.And then you broaden it out to looking around the world and you can seeEuropean stocks finding their footing and starting to perform well.So I do think this broadening is is a good sign of more confidence in themarket rather than that sort of narrow,.

Brett, that we had in 2023.This is such an interesting moment in markets and I keep going back to this.I wonder how much we're seeing bonds is the risk asset.Government bonds is the risk asset in equities is actually in some ways a surebet because you got a Fed that basically is saying we're we got your back and youhave an economy that continues, you've got fiscal stimulus.What's not to like? Have we gotten to this level wherestocks are sort of the safety and bonds really are the risk?I don't know if I would go that far, but I would say it's it's pretty hard to betagainst U.S.

Stocks here at least.And as you said, you've got sort of the macro working in your favor.You know, we've had better than a soft landing.We enter the the year with a lot of positive momentum.Inflation is falling again, albeit stutter stepped but falling.The micro picture looks better broadening out of earnings.So we had very narrow earnings growth in 2023.That is now broadening out. I think eight of the sectors of the S&Pare going to have positive earnings in 2024.And then you've got the policy, as you.

Said, I wouldn't necessarily go as farmaybe as to call it a Fed put at this point, but I would say it is clear thatthe Fed is on the path towards lowering rates in 2024.And that, again, is very supportive. And if you look at history, Fed ratecuts without a recession tend to be very good for risk assets.Meanwhile, you have the likes of Larry Fink, but also even just governmentofficials coming out and raising concerns about what's happening with thedeficit. Do retail investors care about thedeficit? Do they start asking, hey, is it a goodidea to buy ten year, 30 year bonds of.

The US government if we think this isgoing to become a problem at some point in the future?I can tell you I think investors are starting to get concerned about thedeficit and I think that's why you are seeing potentially a set up where wejust have a higher term premium down the road.Right? There's a higher chance that we're goingto have inflation run hotter. There's a higher chance that we're goingto have these funding needs going going forward.And a huge supply, frankly, of treasuries that have to be absorbed.So I do think the average investor is.

Starting to get concerned about it.We're certainly getting questions about it all the time.Begs the question, let me ask you one then.If I'm looking at the yield curve at the moment, I can get full 60 on a two year,then thereabouts. Why should I go out further along thecurve to a ten year say to lock in for 23?What's the incentive to do that at the moment, given what you just said?I'll tell you though. So here's the thing.So the upside here is that rates stay where they are because the economy issort of Troy trudging along, inflation.

Is coming down.It maybe not as fast as as we would like to see.And the Fed cuts rate. The downside, though, is that the Fedhas to cut rates because we do see that the economy in the second half of 2024slowing down. Actually, we think the Fed's forecast isa little bit too bullish. So it could be a situation where ratesdo fall on the short end a little bit faster.And in that case, those juicy yields that you see today are just not going tobe there for you when you really need them four or five years from now.So, Andrew, which was in was it in the.

F.T.yesterday? Right.And PIMCO over at PIMCO in the FT. I get my words that bear with me.And he's basically saying, if I want you raise some risk, I'll go elsewhere forit. There are limits to the cutting cycle.I can take this exposure elsewhere, maybe in Europe.What's the argument to take? Kid in the United States?Well, I mean, again, you are you're having clarity right now on the path ofof rates regarding the Fed. And then you can see again, if you lookat what's happened to the ten year.

Treasury, for instance, this year,Jonathan, it's been really interesting because you had a little spike as we hadinflation prints come in. You had the Fed come in and say nothingto see here, don't worry, a bump in the road.And you had yields back up pretty quickly.And now we have the ten year back, you know, below our our forecast range.So I think there is a lot of demand for for fixed income and for treasuriesright now given the given the environment in the outlook.So I think you're going to see that demand come in as we see rates go up andit's ultimately going to put a ceiling.

On how high rates can go.Just kind of put a bow on it and sort of underpinning what Andrew Balls wasgetting at in in his F.T. piece, PIMCO being cited there.How much are you looking at a higher inflation regime at the United Statesthat is different from the regime in other countries?Well, I think it's a great question. And I think we heard a clue in the pressconference, not not in the statement, but in the press conference last weekthat there is a bit of a tolerance for a longer period of higher inflation,perhaps not for a ultimate higher inflation goal, but to tolerate a highera longer period of higher inflation in.

Order to maintain economic growth.Sort of recognizing now that there may be a tradeoffbetween higher getting inflation down to the target and maintaining economicgrowth and maintaining full employment. So I think there's much more of abalancing act going out, gone going on now in the Fed than there was earlier.It was just to fight inflation. Now it's sort of like, well, we want toget inflation down patiently, but we really want to maintain unemployment ator around 4%. When I look at some of the equitystrategies that come around, higher inflation.They all point to oil.

You're mentioning energy.How much is that sort of the sweet spot right now as a hedge?Well, Lisa, you mentioned earlier the supply shocks that we're seeing.Many of them are around energy. You know, we see issues in the Red Sea.We see issues in the Panama Canal. There are issues with transport andlogistics now around energy. I think we're seeing now a not just asoft landing here in the U.S., but we're seeing recoveries overseas.So you're going to see demand, global demand for energy come up.So I do think it's a great place for investors to be.And, you know, again, Jonathan, to your.

Point about, you know, broadening out ofthe market, that's an area of the market that was left for dead last year.So, again, investors should look at their portfolios and see where am Ipositioned for the next year, the next five years?Do I have my small mid-cap? Do I have my non-U.S.exposure? Do I have my energy exposure and myinflation hedges in my portfolio? Because it is possible that we areliving in a higher for a longer inflation period.Well, Jp morgan's talk about $100 a barrel of oil potentially this year.When you talk about exposure to energy.

Across the board or do you want to moveinto more of the old school energies that are picking up pace or are youstill like maybe potentially clean energy as well?I think it's both. And at this point, and I would evenexpand it beyond energy to the broader commodity complex.It's been interesting to see all the attention on artificial intelligence,for example, and it's certainly driven the Meg seven.But if you sort of scratch beneath the surface, you see there are all sorts oftentacles into the commodities market, into the energy market and othercommodities that are required to support.

The growth in AI that's getting all theattention right now. So I think for a variety of reasons, youreally want broad exposure in the energy market and in the commodities markettoday. Katie, This was great.It's good to see you. Nice to see you, too.Thank you. Katie Nixon of Northern Trust WealthManagement. Brent Crude at the moment down by 0.7%.8565 on Brent equity futures bouncing back on the S&P 500 slightly firmer thismorning, Lisa, higher by 0.4%. All right.Right now, let's get you an update and.

Stories elsewhere this morning.We've been talking about this all morning.Japan stepping closer to currency intervention.Maybe the country's finance minister ramping up hints of possible actionafter the untouched its lowest level versus the dollar in 34 years.Policymakers are running out of choices short of purchasing the currency to propit up. After the Bank of Japan's first interestrate hike since 27 failed to change the trajectory.Chinese President Xi Jinping has told a group of American business leaders inBeijing he wants U.S.

Companies to invest in China.Putting aside differences and what he said were, quote, minor issues.She met with leaders, including Blackstone's Stephen Schwarzman,Qualcomm's Kristie Cristiano Amon for more than 90 minutes.China is seeking to restore confidence in its economy, acknowledging issueswith the domestic economy, but saying it hasn't yet peaked.Drug maker Altima could have cracked a problem which has been weighing onobesity. Drug makers.Patients in the latest trial of its experimental drug saw 74% of theirweight loss coming from fat tissue.

The company says that mirrors theresults from diet and exercise programs. By comparison, trials of the activeingredient in ozempic and wegovy show a higher rate of.Lean muscle mass loss compared to fat. That's your Bloomberg brief, John.That's a big deal. They should call that shred.They really should. That is the ultimate dream.That's the dream thing. That is the dream.I mean, this is one of the complaints that I heard anecdotally that peoplewere trying to work out and the trainers were saying, really, you guys can't doanything because of those epic shots.

That were just stripping them of alltheir muscle. If they can shred Operation Shred, thereyou go. I mean, if you watched the Oprahspecial, I actually went back and watched a little bit of the relationbetween lean muscle mass and longevity is a real deal.So this is a big issue. Reminds me of another story, actually.You see this one at the ACP, which won olive oil.This story is the funniest story ever from Politico.There was a staff mutiny over the quality of olive oil sent to theEuropean Central Bank.

Have you seen this?Oh, my God. In the canteen, a narrowly avoided afterin-house caterers acquiesced to demands to bring back extra virgin options tothe table. It looks like on the internal messageboard, the Italians were going after the Germans.You're so in Frankfurt. I'm so proud.I know this is the way it is in the car on the way to work this morning, readingthis story from Politico. And I just smile from it.It's just like, thank you. God bless the Italians for trying tobring some health and sanity to the.

Diet, you know, just to try to bringblood real food to the people of Germany.Up next on this program, a big revolt in Baltimore.The path to normalcy will not be easy. It will not be quick.It will not be inexpensive. But we will rebuild together.That conversation up next on the Graham cabinet is just around the corner. Drew Matisse met life just writing ingreat story says one time he was delayed ten hour delay in Rome and all theAmericans immediately went to the counter and asking for any flight to theEast Coast.

And all the Italian passengers wereasking who was going to see them. That's amazing.My wife and I still laugh about it isn't a great story.Well, who and what are they going to be fed with?It's just fantastic. I love that.If you're just joining us, welcome to the program.Equity futures on the S&P 500 shaping up as follows.The S&P positive by 0.4% yields just about unchanged on a ten year for 2258.Under surveillance this morning. A big rebuild in Baltimore.Our work is just beginning to rebuild.

This bridge and deal with impact in themeantime, to reopen this port and deal with supply chain impacts.The path to normalcy will not be easy. It will not be quick.It will not be inexpensive, but we will rebuild together.Here's the latest we have this morning. Officials suspending search and rescueefforts with six individuals unaccounted for after the collapse of the FrancisScott Key Bridge in Baltimore. President Biden pledging federal supportto rebuild the bridge with weeks or possibly even months of disruptionsexpected. On the ground is Bloomberg's countylines.

We've been talking about this throughthis morning, how bad it was, but how much worse it could have been.Absolutely, John. Of course, there was this constructioncrew present on the bridge at the time that the dolly rammed into a structuralsupport beam and subsequently collapsed. It is those six individuals that theyare now not searching for, for rescue purposes, but for recovery purposes.But the fact remains that there was enough time from the mayday call of theship in which they, of course, were experiencing distress, ultimately lostpower and control of the vessel, hence the the collision with the bridge.They were able to alert Port Authority.

Soon enough that they stopped furthertraffic from coming on to the bridge. So it is likely that that action wasable to save some save some lives here, even though, unfortunately, it doesseem, according to officials, that six other lives are presumed to have beenlost at this point. That recovery effort is ongoing as wespeak, and then it will move forward into the investigative phase.The NTSB likely to board the vessel today to begin their investigation witha 24 person team. And then, of course, it's going to be amatter of trying to actually get the ship out of the harbor and clear thedebris, not just from the ship and its.

Containers, but from the collapsedbridge as well. This is going to be a multiprongedeffort. And I actually spoke yesterday with aDemocratic senator of Maryland, Ben Cardin, about those future steps.This is what he told me. Search and rescue is the priority, butthey're already planning on what's going to be necessary to get the channel openand to get this bridge replaced. Every day it's close, every day theharbour is close. It's millions and billions of dollarslost to the local economy. People are going to be out of work.They're not going to get paychecks.

We've got to move with great dispatch.So clearly there is an economic impact here locally for Baltimore.There are more than 100,000 individuals whose jobs depend on the operation ofthe Port of Baltimore. But there's also the consideration ofthe ripple effects that could have for the national economy.And the fact remains there is just no timetable at this point firmly thatauthorities have been able to point you to estimate, to indicate when the portmay be back open or when this reconstruction may happen and how longit may take. Great interview with Senator Cardin.He also told you he's hopeful that.

Congress will actually act and step upwhen it comes to the funding to rebuild this bridge and the funding to supportthe port. KELLY How quickly could we see Congressact? Well, that's an excellent question.And Ray, of course, we heard from President Biden in remarks yesterday.He said he does intend for the federal government to pay entirely for thereconstruction of this bridge. In theory, some of the funding breakdownwill happen more immediately from emergency funding.There's a question of what infrastructure funds that have alreadypassed Congress could be drawn upon for.

This effort, but likely it will requirea supplemental request from the White House to Congress.And yes, Senator Cardin, as well as his other Democratic senator from Maryland,his colleague Chris Van Hollen, both expressed confidence that Congress willdo what it takes to get this passed and that the Maryland delegation will bepushing for it. We have seen that funding is verydifficult to get across the finish line in terms of the actual appropriations,the fiscal year that it took almost six months to actually finish and getthrough both the House and the Senate. And of course, a supplemental fundingrequest related to emergency aid for.

U.S.allies still has gone nowhere in the House.So we'll see if this can happen in a more expeditious matter.It is worth keeping in mind that Congress is in recess this week as wespeak. They won't be returning until later onin April. The International Longshoremen'sAssociation six year contract Ceilidh is also coming due this year.How does this impact those negotiations? It's a good question.Obviously, we have seen some disruptions of port workers broadly, not just hereon the East Coast, but the West Coast as.

Well.It took some time to get that dockworkers contract sorted.And as I said earlier, there are thousands of individuals who areemployed by this port who are probably worried at this time about job security.This is something that I actually had indications of in my conversation withSenator Chris Van Hollen. He talked about how, yes, we are seeingcompanies already diverting cargo, some of these shipments moving to portseither to the north like New York or New Jersey or to the south to Norfolk downin Virginia. But he wants to make sure that thingscome back to Baltimore when this part.

Port is reopened, that this is not apermanent disruption to trade flows, but just really a temporary diversion untilthe port can be reopened, that there will be job security for all of thosehere in Baltimore and the wider economy. That depends on the operations of thisport. That is likely something that they willbe looking for in the months to come. Can we just finish up with a descriptionof what you actually see with your own eyes?Because I think it's amazing to be sitting here talking about the rebuild.We need to talk about the cleanup. There is a 1000 foot ship stuck thereand the bridge debris all over the.

Place.How long is that going to take? It could take some time, John.Really, frankly, the scene we see before us is almost apocalyptic as you'recoming in off the highway. The highway, of course, that you cantransit to come here to the actual port area.You see a bridge that once was very prominent in the Baltimore skyline thatis just no longer existent. Parts of it still sticking up, manyparts of it submerged. Right behind me is a highway thatliterally goes to nowhere. It just cuts off because there is nocontinuation over the water of a.

Structure that can support vehicles togo across. This is really extensive damage that hasbeen done, of course, because this is, as you say, a very large vessel that randirectly into a beam of support for this bridge.It only took seconds for all of it to come crashing down.And it's likely going to be a long effort not just to get the debris off ofthe ship to figure out what is happening with the actual shipping containers thatwere on it, whether any hazardous contents were inside.Once you get the ship out, then you've got to start getting everything out fromunder the water.

And, Kate, a wonderful to hear from yourcounty lines there in Baltimore. Lisa, just going through why thiscleanup could take a long, long time, which is the reason why there are someestimates that that ship isn't going anywhere for weeks, if not evenpotentially months. Yeah, never mind the rebuilt.Got to get through the cleanup effort first.Coming up on this program, Jeremy Papa, the chairperson of Nissan America, onhow they plan to compete in the EV market.That conversation. Up next.

Stock market bouncing back by 0.4% onthe S&P 500. Pretty stable gains through this morningso far on the Nasdaq, up by almost a half of 1% outperformance on theRussell, the small caps by 0.7 in the bond market to yet ten year 30 year looka little something like this four 5848 Yeah it's a little bit lower by not evena basis point on a two year similar price action on a ten year at four 2218.And actually pretty interesting what Mr. Bull was over at PIMCO had to say in theF.T. yesterday.If you want duration risk, why take it in the United States, given the limitsthat people perceive there are to the.

Right kind of cycle and ultimately thegrowth story in the US is much better if you want to take duration risk on agrowth slowed down in a big rate cutting cycle, should you take it elsewhere?That, to me honestly also raises questions about is the U.S.in a uniquely inflationary moment that's different than, say, what you're seeingin Europe just simply because it is a beacon of strength and yes, maybe theirproductivity gains. But there also are limits to that.And we're seeing that in the good sector with maybe the end of some of thedisinflation there. Speaking of unique moments, switch atthe border and get to foreign exchange.

Daily and overnight session high one5197, triggering some verbal intervention strongest yet without anycurrency intervention off the back of it.What if 50 106 is where we are now, down a third of 1%?That is Japanese yen strength. The BOJ, the Finance ministry, theFinancial Services Authority over there getting uncomfortable with the one waytraffic we've seen in the currency market.How uncomfortable are they? And basically that's the question thatthe market is asking because it doesn't seem like there's particular concernthat there's going to be some dramatic.

Intervention that's going to reverse theslide in the yen. At this point, you have to get thefinance ministry and the Bank of Japan on the same page or else, frankly, thismarket is voting with the Bank of Japan. And the Bank of Japan is in no hurry toreally raise rates materially. Yeah, that dovish hike a regret, do youthink? Maybe it doesn't sound like it becausewe heard from a Bank of Japan official overnight and this is what triggered theadditional weakness, basically saying we need to be cautious.We need to be very, you know, deliberate and slow, basically doubling down on themoves that they just took.

151 on dollar yen under seven is thismorning. Six people presumed dead after thecollapse of the Francis Scott Key Bridge in Baltimore.President Biden saying he wants the federal government to pay for therebuild, vowing to, quote, move heaven and earth to reopen the port and rebuildthe bridge. The collapse poses a further strain toglobal supply chains with the port one of the busiest on America's east coast.Amari the rebuild, you've got to do the cleanup first, which is what we talkedabout with Caylee just moments ago. Absolutely.What you're hearing from officials is.

That this is going to take weeks, if notmonths, just for the cleanup before we even start talking about the funding andwhat's going to be needed in terms of the infrastructure to rebuild this.I'll go back to what Brendan Murphy said earlier, though.Is this an isolated choke point or can we potentially see a domino effect?It looks like at the moment companies are really able to reroute GM, Ford,they're saying we're going to move to Georgia.You brought up a great point about coal to India.That's a lot of coal that actually goes to India from this port.Are they going to have to rely more on.

Russia and potentially Australia tobring in some of those coal? And then at a time we are seeingcommodity prices on the upswing. What I want to understand also fromexecutives in some of the industries that use this is just how much are theybuilding in things that previously were thought as inefficiencies to compensatefor disruptions in supply chains? How much do you have to do overlap justto keep that security in place post-pandemic?And that is something a lot of people have been really looking at.Well, this could be a big disruption. Here's our next story.This from China is filing a complaint to.

The World Trade Organization overAmerica's EV subsidy, saying parts of President Biden's inflation reductionact are, quote, discriminatory and have seriously distorted the global supplychain for electric vehicles. The US hitting back top trade officialKatherine Tai saying China continues to use, quote, unfair policies andpractices to undermine fair competition and dominate global markets.Now often economics can come up with some jokes promotes, but the complaintthat we're getting from China is very similar to what we heard from someEuropean officials on the same issue. Okay, There is maybe some legitimacy interms of what measures are being taken.

At the same time, it is a bit rich forit to be coming from China. And basically the tit for tat.We have Janet Yellen, treasury secretary, speaking in Georgia thismorning, talking about China's overcapacity, distorting global prices,and talking about how this is a real competitive disadvantage.This is going to be the tit for tat. But now, how much is this protectionismand nationalism and all that? And this is sort of the new reality forthe global economy. I had the same thought you did,Jonathan, when I saw this. I said, well, there are some Europeanswho actually would agree with Xi Jinping.

When it comes to this.But I think the nail in the coffin for China was, in the recent months, theUnited States finalizing those reductions.And if you are from a country of foreign entities of concern, a.k.a China, youcan't tap into the subsidies, which means no one's going to buy your cars.The United States stones, glass houses all round on this front.Right. I think we can all agree on that.Sticking with Avis, shares have been widely falling in Hong Kong tradingafter the Chinese EV makers earnings missed estimates, raising questions overwhether it can sustain its strong profit.

Growth amid an intense price war.One. Company looking to double down on feesis Nissan. The Japanese automaker targeting anadditional 1 million vehicles by 2027, including reducing the cost of EVs by30%. The CEO saying, quote, We have to changeour ways to compete with companies like Big White.Joining us now is the chairperson of Nissan Americas, Jeremy Patton.Jeremy, great to catch up with you, sir. Let's just talk about the new releasefor you and you help me understand what's going on in this market at themoment.

Nissan Kicks.I know you're excited about it. I want to understand if there are toomany EVs in this market or whether you just think there's not enough at theright price point. Yeah.Look, we're very excited about the Nissan Kicks.It's it's I think the car the customer wants at the moment in the US it's it'sa combustion engine Absolutely Great design affordable price point we'rebringing a lot of technology, a lot of fun to drive to the market place and andso we think we're just hitting the market with a new vehicle in the sweetspot of where the consumer is wanting at.

The moment.That's all the new kicks in terms of the EVs, The growth is there in the market.Perhaps the consumer moving into the the EVs is at a slower pace than what somehad dreamed about. But the growth is the growth is there,the interest is there, consideration is growing.And once people have driven EVs, they are very loyal to that type ofpowertrain. And so we think we will be seeing asteady growth in the market. Jeremy There are some reports that youhave to offer dealers at the moment anywhere between $500 to $2000 cash pervehicle to take on more inventory.

I'm just trying to gauge, get sometransparency from you just how difficult things are in this moment.Jeremy, is that story true? Can you verify that?I think I think the story is a is a market story.I think there are a number of of brands that have to deal with some inventorysituations. And helping the dealers with a floorplan. And availability is a it's part of ourjob. We're doing it in cooperation with thedealers. And so it's just, you know, short termphenomenon.

I think the key is having an excitingbrand advertisement and bringing the new cars to the market for the consumer toshow up on the showrooms and and take those cars home.So there's nothing specific to what Nissanis doing to the market at the moment. We're just we are adjusting to gooddemand. And the fact the consumer is looking atthis monthly payment and we're helping them in every way we can.Our dealers pushing back. Jeremy, More on having more electricvehicles on their lot simply because there hasn't been the demand that manypeople were expecting.

I think the dealers are they do see thegrowing interest. They do also face the need toperhaps spend more time is through the process of explaining all the technologythat goes into the into the into the EVs.I think there's one point of notice that Nissan is offering is that we knowthere's a lot of technology that goes into EVs.We are offering a second delivery, which is an opportunity for the customerseight days, 15 days after buying an EV, yet Nissan, to actually have someonecome home and we explain and we introduce and make sure all thetechnology is being used the right way,.

Whether it's EV charging, propilot,assist the driving assistance or any of the connected services features that wehave to offer. I think that's that's what we all needto do, is that educating and supporting the customer into getting the fullaccess to what we have to offer through is because they are ACT technology cars.But how do you keep up when BYD continues to cut prices?That's a story of the industry. There has been always the need to becost efficient. And so I would say we're very used to itourselves. We're working on breakthroughs for forour easy production, fewer parts, more.

Simple to produce, uh, greater economiesof scale. I would say it's just what the autoindustry is about. There's no there's nothing specific.One day when company is more aggressive on prices, the next day it will be maybeanother one. And we keep up with the pace of it,transforming those productivity gains into more affordable products for thefor the customer. So it's healthy competition.Do you think the market missed an opportunity to push hybrids, given thefact that we've seen more uptick in hybrids and people have been a littlebit resistant to go full EV.

I again, I think what matters is thefact that we can all offer what the consumer wants in our plan that you'vementioned the new plan, the mid-term plan.We will be launching 30 new cars and trying to grow the business by a millionunits. 15 of those new 30 cars will beelectrified. And and in the US we will get seven newcars over the next four years in all powertrains combustion engines, battery,EVs, hybrids, TVs. Because what matters is just to be ableto offer the consumer what he wants. And so that's coming.That choice, I would say, is coming in.

Greater numbers, including at Nissan.Jeremy, I feel like we should call all executives of car companies ambassadorsat this point, because it seems like you're trying to navigate thegeopolitics of the world in a very fraught moment.And I wonder how much you're having to change your business structure toprepare for increasing tensions in different regions where you're notallowed to sell vehicles with parts from other countries that are specific.I think the industry praises stability of rules and can cope with any rule thatis being set. And so that's the most important for us.We make decisions early on.

We make decisions today on the productsthat will hit the market in 2028, 2020. Nine billions of dollars are beinginvested. And so what matters is the stability ofthose of those rules, essentially whatever they are.And so that's that's what we're very focused on.We know how to adjust to any any set of regulation that is being thrown.They'll set up for us. And and that's how we mean, that's wherewe make our business is going to be. What I struggle with now is how you gaineconomies of scale, trying to do three different things simultaneously.So to satisfy the Chinese market with.

The ISVs and to simultaneously satisfythe US market with hybrids, you've got to do different things in differentplaces. How do you generate cost reductions,achieved economies of scale when you have to do all of those different thingssimultaneously? Yeah, I think your regional size is whatmatters. China for China at Nissan is somethingthat's working very well and we will be launching in China over the next fewyears for new energy vehicles completely developed localized in the and andproduced obviously by uh by our Chinese for China business and then elsewhere inthe US, in Europe or in Japan business.

We are trying to leverage global scalewhere it's work. So regional scale where it can.We've got a very big presence in North America, both in US, Canada and inMexico. And, and there's enough volume togenerate, again, the economies of scale to be competitive.And being competitive just means bringing the cars at the right price forthe customers to be very happy with those.The question that Lisa asked, though, I think it's a really important one and itplays into this discussion that we are having.Can you generate global scale when it.

Feels like these markets are becomingincreasingly regional? And you mentioned the regional effort.I want to understand and I'll ask you direct, what happens if we get theformer president coming into power and he doesn't just put big tariffs onwhat's happening in be white and with Chinese automakers in Mexico, He does itacross the board, puts the walls up and shut everything down.If we shut down the global auto market, it becomes heavily regionalized.Does it change what you do or do you think the market was already moving inthis direction? I think the market is moving.I mean, with COVID and the semiconductor.

Crisis, we've been obviously much moreknowledgeable and careful as to how the logistics routes are set up across theindustry. We've been thinking about the dualsourcing and more ensuring of the activities.And so that's a trend that, you know, we want to continue building.Where you sell is a recipe for success in the in this industry.And so we are obviously very committed to making investments in North Americathat will that will help manufacture all the vehicles that will be sold here.And that's really the and so, again, any change in regulation, I would say we cancope with and adjust gradually.

They just need to be stable over time.Jeremy, thank you, sir. Nothing stable about the last few years.Jeremy Pfeifer of Nissan Americas, thank you very much and good luck with the newproduct launch. We'll speak to VW a little bit later.And I think a conversation we have to have with VW is how do you plan for yourmanufacturing footprint in the United States of America before getting clarityon the future? Clearly, they'd like stability.Stability is not what we have in Washington, DC at the moment.Also the point about if Trump were to come into power, those subsidies thatare driving some of the EVs, even though.

This market is seeing a glut and we'renot seeing that demand, the subsidies are there to try to help.If Trump comes in, maybe they won't attack the full array, but he canrewrite the Treasury rules and make it much harder at the Treasury Department,make it much harder to claim those subsidies.So until you know who's going to be president, it's also very hard to seethe demand and what's it going to be for the EV market in the United States?Some pretty lofty goals for Nissan will catch up with VW in about 60 minutesfrom now, if you want. Just joining us, equity futures on theS&P 500 trying to bounce back near.

Session highs.Lisa's still positive about 0.4%. Right.It's basically stability there. Elsewhere, maybe not so much.Let's get to an update on stories elsewhere this morning.The search and rescue operation after the collapse of the Francis Scott KeyBridge in Baltimore is now a search and recovery mission.A road crew is working on the bridge. At the time of the collapse, two peoplewere rescued. Six remain unaccounted for.The area remains closed off to traffic, cutting off a major artery around thecity.

UBS has finalized a deal with ApolloGlobal Management for the carve out of Credit Suisse Securities Products Group.Apollo said to purchase $8 billion in senior secured funding facilities.The deal allowing UBS to close another chapter in its acquisition of CreditSuisse. It'll book a net gain of about $300million in the first quarter on the sale, and Brent could hit $100 this yearif Russia's decision to cut production isn't balanced out by othercountermeasures. This according to analysts over atJPMorgan. The bank saying the actions could seethe price of oil hitting $90 next month,.

Close at triple digits by September.Russia saying its decision to deepen its production cuts was based onexpectations for global oil demand growth.So this really raises this question, is this the boy who cried wolf againbecause we've heard this before, or is this truly going to be the time wherethe market wakes up to the fact that demand isn't falling off a cliff?Yeah, And we are seeing supply that is being constraint.We reflected on the Morgan Stanley forecast, which was something like $90Brent free kick and 90 sounds like a big number.Then you look at Brent, which is.

Basically 86 with $4 away.We've had this sort of stealthy rally back higher in crude, which raises a lotof questions about the timing, because not only were we talking about thedisinflation narrative and whether this challenges it, but we're also talkingabout, you know, the silly season for politics in particular, and that's thelatest in the commodity market. Up next on this program, the competitionfor capital. You really have started to see thecompetition between public markets and private markets drive credit spreadstighter over time. You're going to see a convergence ofthose of those two markets.

And it does create a bit of froth withwith pushing spreads tighter. That conversation up next will becatching up with BlackRock's M&A lineup. Following three days of losses on theS&P 500 equities bouncing back on the S&P up 0.4% through most of its morningso far, yields just about unchanged, too, down a basis point on a ten yearfull 2218 disadvantage this morning. The competition for capital,I think the story has changed where there's such a competition for capitalthat you really have started to see the competition between public markets andprivate markets drive credit spreads tighter, start to make covenants alittle bit less strong.

Now you're seeing it look much moresimilar to public markets where there's lending groups, including private andpublic lenders. And I think over time you're going tosee a convergence of those of those two markets.And it does create a bit of froth with with pushing spreads tighter.Here's the latest. Credit spreads at their tightest levelsgoing back to 2021, with investors weighing how Fed rate cuts could seethem tighten further. Amanda Lyneham of BlackRock expectingcuts to start in the second half and writes in this While a far longer costof capital environment poses fundamental.

Pressure for some floating rateborrowers with limited financial flexibility.Competition between syndicated and private markets, coupled with ampleprivate debt dry powder has encouraged tighter pricing, especially for largeborrowers who have access to both markets.Amanda, I'm pleased to say, joins us now for more American Morning to you.Good morning. Thank you.Adam Perabo with this yesterday and they were talking about a soft landing incredit. Is that your kind of world, your view onthings at the moment?.

Good morning.Thank you for having me. I did see that interview with Meganyesterday. I think I would agree with that.I think the bar for significant disruption is really high in thecorporate credit market. We do, though, expect dispersion and weare actually seeing that to a pretty significant extent more recently in theUS, European and Asian credit markets. Two things I would note on the point ofkind of competition between public and private, I think the way we're viewingit as maybe several years ago, if you were a corporate and left, then youwould have made the decision between.

Issuing a bond and issuing a leveragedloan. Now there's a third option.And so you've actually seen private credit become a viable option for theopportunity set for a lot of corporates. Not every corporate, not every corporateneeds the size to become index eligible in that market, but it is a viable thirdoption. The other point is, I think on just theterms of having more access outside of the banking channel and the publicmarkets, we believe has been a good thing for corporates.And you actually see that in what I would argue is a pretty muted defaultrate given the interest hikes that we've.

Had since March of 2022.And I think that that shows that it's working.And Bob Michael of JPMorgan was talking about that the ballast kind of to someof the credit spirit. I do, though, want to just sit on thisidea of froth. And that's something that Megan wastalking about, that there is this froth developing and tighter credit spreadsbecause of the increased competition. Sounds a lot like the equity marketexuberance, but it makes sense. So it can go on for a long period oftime. Is that kind of what you see?We see it, and I would say it's not.

Exclusively limited to the LA Fin marketwhere there's overlap with private credit.You also see super tight credit spreads and investment grade.To me, actually it reflects a few things.One is fundamentals are pretty good, economic backdrop is pretty strong.But if you look at spreads, they look really tight optically.If you look at all in yields. However, if you look going back to thepost financial crisis period, we're talking really cheap levels on apercentile basis. If you were to look at just dailyspreads, daily yields back to 2010 yield.

Screen, really, really cheap and spreadscreen really rich. So I think that's part of it is that themarginal buyer in credit is actually yield based.So when they're coming to deploy capital, they're not looking at it on aspread versus an index. They're looking at where can I lock inall in yields? And I think that's fuelling some of thatoptically tight spread measures and credit as opposed to it's notindiscriminate because again, we are actually seeing triple C's lag.We're seeing actually a pretty significant share of credits that aretrading above a thousand basis points in.

Spread.You're seeing dispersion in the single name capital structure over leveragedcapital structures that are doing liability management.So I would say if it were kind of a rising tide lifts all boats andeverything was rallying, I would say we are entering into kind of maybe possibleoverexuberance, but we're not seeing that.We are actually seeing some discrimination under the surface.And that's what I really wanted to get into.If I just go over a part of that again and just read it out loud for theaudience, competition between syndicated.

And private markets, coupled with ampleprivate debt, dry powder has encouraged tighter pricing, especially for largerborrowers. Is it just the larger borrowers?Who's getting left for debt here? I think it's it's largely in the highend of the size spectrum where companies have the ability to run dual trackprocesses so they can actually see, okay, again, going back to that point ofI've now got this other third viable option, where am I getting bestexecution? I think the pricing is most competitiveat that end. But but again, it's it's not I do thinkit's it's there's there's not a sense.

That folks are being left behind in thesense that that competition is pricing them out.I think what it is doing is. It's just changing that mix shift.In late 2023, we saw a lot of public debt being refinanced with private debtthat shifted in the first quarter. Now that the syndicated markets are openand we're seeing a lot of a lot of private debt actually getting refinancedin the public markets. But those companies need to be ready tobe public market. Just following up on Meghan's point, howconcerned are you about weakening covenants, weakening deal terms?Is this something that you see sowing.

The seeds for something they might notcome home to roost this year, Maybe not in 25, but maybe 26?Well, most of the syndicated market is of late, as you know, on the leveragedloan side. And as the high yield bond market hasbecome, more institutionalized, covenants have become less of a bindingconstraint in that market, too. It's really the private market that hasa lot of the covenant protections. I think the big risk that I'm concernedabout for risk asset valuations is a sustained reacceleration in inflationthat the Fed cannot deliver at some point in 2024 on rate cuts.Not that that rate cut in the in the.

Form of rate relief is so game changingfor those credits. But I do think that it's reallyimportant for sentiment and I think that's where you would might start tosee things really unravel from a risk asset side is that we don't get any ratecuts in 2024. We're in this extended high for longerinto 2025. And I think the key there is if that'shappening because inflation is sticky, that is problematic.If rate cuts are very shallow in 2024 because of high growth, I would viewthat as less of a problem. But if that gets postponed, I thinkthat's an issue.

Just quickly, maturity.Well, red herring or not big issue or something to ignore.I was very concerned about it in the fall of 2023.I think the fact that the capital markets have remained open to lowerrated issuers to allow them to get that refinancing done, it's it's released alot of press pressure and European high yield.It's a steeper maturity wall than the U.S.So I'm watching. They're interested.Thanks for that, Amanda. Great to catch up.Thank you.

Madeleine in there.If BlackRock had to get something bearish in for the very the conversationbasically any time she was didn't really buy it, she said ignore it.What's in Europe though? Yeah interest.Thank you. Thank you.Thank you during that meeting this morning here at the Paris place.Coming up, caitlin of service. What's new about that?Yeah I know rich founder of PIMCO and Pablo to save a Volkswagen.All of that and a whole lot more from New York City.This is Bloomberg.

Central bank policy, particularly withregard to the Fed, is very, very binary. They either cut or not.They don't need to wait for inflation to come all the way back down to 2% toactually start cutting rates. We just need to be confident that thingsare evolving in the right direction. They're kind of trying to tell us thatwe're on a path to get to rate cuts now. Inflation has come down enough that theythink that they can be cutting interest rates.We can still get three rate cuts despite some of the hotter inflation data.They're trying to play the waiting game. Eventually, they're going to have tosuppress the front end.

This is Bloomberg Surveillance withJonathan Ferro, Lisa Abramowicz and Annmarie Horden were in the third hourof Bloomberg Surveillance begins right now live from new york city thismorning. Good morning.Good morning. Equities trying to bounce by.Let's call it 4/10 of 1% on the s&p 500. Pretty stable gains through today.Nothing stable about the last 24 hours. A tragic bridge collapse in baltimoreand a big question being asked in the world of economics, just how fragile aglobal supply chains and how fragile is that good disinflation we've seen overthe last six months coming in to PC.

Lisa.Friday morning, we thought that supply chain shocks not were behind us, but atleast had subsided. And this raises questions of howvulnerable the global economy is to one artery that's not even that significanton a global scale being disrupted. A lot of people gaming out that itwouldn't necessarily be massive. Nonetheless, disproportionate effect onspecific industries. You pointing to coal?Yeah, coal in a big way. The word I've heard a lot in the last 24hours is just time. This is going to take time to figure outthe disruptions.

It will take time to clean up an MRI.It will take time to rebuild and a heck, a lot of money as well.Absolutely. When it comes to time, BloombergEconomics is talking about if this isn't quick, potentially it will have thatinflationary impact on the end of the year inflation numbers.Time to rebuild means it's going to take also a ton of money.We're going to get an update actually this hour from Governor Wes Moore ofMaryland, potentially before before. Jonathan, your point earlier, before westart talking in the rebuild, he's going to really lay into what's happening interms of the the cleaning up of what is.

Going on, getting that ship actually outof the way and opening up that channel on the you can always question decentconversation with Andrew Hong, host of city just yesterday.I want to go through the quote that you shared in the newsletter just yesterdaymorning, Lisa, that the period of deflation in goods that we've been infor the last six months or so, we're probably coming out of that now.And how much of a challenge will that be?Particularly, we need the services now to do some of the heavy lifting, a lotmore of the heavy lifting. Andrew's point is that for services todo that, it's going to require an.

Economic downturn, which is not thecentral case, the base case on the FOMC at the moment.It's kind of what Bruce Kasman was referring to as well when he talkedabout how, services aside, inflation has remained stickier and he expects it tocontinue. So.So in other words, a lot of the disinflation that we've seen has comefrom the goods sector. And we've heard time and again beforethis additional disruption that might not be that significant on the overallnumbers, significant for the region and for the lives.But what we're looking at right now is a.

Situation where commodities are comingback up, goods prices are coming back up.It's a new era where a lot of people are going to see some real challengesfighting inflation, crude front and sense to that.Without a doubt, Friday morning PC data that's just around the corner a few daysaway. Then you hear from Chairman Powell a fewhours after that as well, setting up the market.The price action this morning, equities into an overnight episode of 1% on theS&P in the bond market. Things shaping up as follows.Yields down by, let's call it a single.

Basis point for 2179, see a call and getboring. Some people might say maybe it's juststable. Things have calmed down.Just a touch. Well, this is where I would push back ifit was just stable. Why the dramatic sell off and thingslike in video last night, in the last half hour of trading, it doesn't feellike there is necessarily a ballast of calm as much as a lack of conviction.It is a different kind of moment that's fraught, I think, for the potential forsome news to really disrupt things. We'll ask that question to Keith Lernerof True as he joins us in just a moment.

Weighing in on the market resilience.We'll catch up with the former Fed vice chair Richard Clarida on the centralbank's path forward and VW North America CEO on the company's strategy.That conversation about 40 minutes away. We'll be giving that top story inmarkets. Stocks mixed as investors await theFed's preferred inflation gauge coming Friday.KEITH Lerner of Truist saying this. The equity market has been fiercelyresilient since the rebound off the lows last October.Strong price momentum like we've seen over the past five months tends to occurin the midst of bull markets and it's a.

Sign of underlying strength.We still expect to see normal pullbacks along the way.However, we suggest investors stay with the primary market trend, which is upand look to pullbacks as opportunities. Keith joins us now for more.Keith, Five months of gains, that's what we're on track for.It's almost been uninterrupted, I think in that period, just three weeks oflosses and two of them came in the last month or so.Keith, why do you believe this can continue?Oh, first of all, great to be with you. And as you said, I mean, it's it's anextraordinary five months.

I would say, just looking back as astarting point when we've seen five months of gains of more than 20%.We've only or what the cumulative gain has been more than 20%.We've only seen this happen about ten times since 1950.And a year later, you've been up every time with average gains of doubledigits. Now, to be fair, that's only ten times.So that's just a starting point. The market on a shorter term basis issomewhat stretch, sentiments a little bit stretch.But in general, when you see strong momentum like we saw late last year,like we saw breaking out of that two.

Year range in January and now this,those are things that tend to happen in a bull market and the surprises tend tobe to the upside. So again, I want to be also balanced andso far that, you know, historically you've only had three years since 1980where you haven't seen at least a 5% pullback.But if you're in a bull market, you stick with the primary trend.You look at those those pullbacks as opportunities, a case this hasn't justbeen contained to the United States. We've seen in Europe, we've seen it inJapan. Are you more confident in the story athome or abroad?.

We are still Team USA.Jonathan. We've been Team USA for several years.I mean, as you pointed out, we're seeing better global breadth, meaning we'reseeing, you know, Germany, Spain, Italy, obviously Japan, which was, you know,talked about a lot this morning, you know, at multi-year high.So so I think we're seeing a broadening of the overall market.But we still like the US for several reasons.One, the economic trends that if you look at global economic revisions, theUS is still powering those upward revisions.Secondly, the earnings trends are still.

Much stronger in the US relative tointernational markets as well, and the relative price momentum is also better.So for us to get more positive international, we want to see thoseearning trend start to flip. And normally those international marketsdo better when the dollar weakens. And also coming out of a major low, amajor like out of a recession. So, again, we're watching the cheap, wethink even cheap for a reason, but we're being patient before we shift thatlongstanding US bias, the US bias being equity focused.I wonder if that really applies to bonds.As while we were talking earlier about.

Andrew Balls of PIMCO quoted in aFinancial Times article talking about how he likes longer duration bondsoverseas not in the US because that strength is also coming with perhaps astickier inflation going forward. Do you agree?Was no more focused on the US. I think in some ways as you investoverseas in the fixed income market is also that currency component and you getthe big kicker both in the equity market and the fixed income market.When the overseas currencies rally or the US dollar weakens, our view is morethat the US dollar is in a choppy range. I think the relative economic strengthand maybe the Fed being somewhat slower.

Will keep that US dollar somewhatsupported. So we would prefer to just stick withhigh quality US bonds and and the most liquid bonds still in the world.And we're still even with even though they're staying pretty much in a tradingrange is still having the highest carrier coupon and ten year treasuriesthat we've seen in about 15 years or so. So we want to keep it simple and to staywith the US. We were just speaking with AmandaLyneham and she said that we're one of the big risk cases to her is ifinflation remains sticky for longer, if the Fed is unable to cut rates.And that really does create a real.

Problem, real questioning in just howmuch the Fed has the back of markets. Is that something that would shake yourview as well if the Fed was forced to keep rates here simply because inflationand strength has just been so consistent?It's a delicate balance. I mean, you know, our motto really formost of this year is that we would prefer less rate cuts and a strongereconomy to a weaker economy that needs more rate cuts.I think the environment that would be most problematic would be here, more ofstagflation. We're not seeing that as well.I think if the Fed if if the markets.

Shifted from basically where we've beenall, you know, all year long is three rate cuts, two no rate cuts, I thinkthat would be problematic from a valuation standpoint.There would be some offsets, Right. Why are they not cutting inflation?But also that likely means that earnings are also moving higher as well.So it's it's not just straight forward that the Fed doesn't cut rates in themarkets, sells off because earnings should stay strong.And in a nominal environment where economic growth in inflation stayssomewhat higher, I certainly think it caps the upside and likely probablyleads to that, you know, a gut check at.

Some point in this market.Okay. So I've got no idea what happens in thefuture. But I do want to understand the pastjust a little bit if we can, Keith. We have priced out a load of cuts overthe last three months or so and valuations haven't come down.And I'm just wondering what the relationship actually is.Well, there was an extremely close relationship for a while, whereas theFed or the expectations for the Fed to cut rates came down, the McCoys movingup. That became unhinge earlier this year.And I think the reason why that is, is.

Because if you look at GDP estimates onBloomberg, right, you can see that the revision trends for GDP estimates forthe US continue to move up. And you also see forward earningsestimates for the S&P make a record high week after week after week.So I think, you know, I think the market can still do fine as long as thoseearnings estimates and GDP revisions stay strong.That will offset the need for those cuts.I think the market's also getting more used to these higher rates.And also, you know, if we look back historically, we did a study, I thinklate last year.

You know, the average cash rate for thelast 40 or 50 years has been about 5%. The average tenure has been around 10%,I'm sorry, around 5%. And the equity market has done just finein that environment, up double digits in general.So it's almost like we have this recency bias after the global financial crisis,where in some ways we've moved back to somewhat of a normal environment on theinterest rate front. And stocks are you know, stocks can dowell in a normal environment when inflation is a little bit higher andinterest rates are back to more of a normal state.Okay.

Do you believe this is sort of thesnowball, a return to that? You know, it's a new normal, right?I mean, it's not it's not the just the state we've been in since the globalfinancial crisis. We're not going back to the seventies,so we're creating a new normal. But I think in some ways it's I thinkmore what was really more abnormal was really that last decade.And maybe it's somewhere in between those those those two different phases.But I do think that economic growth is probably going to be a little bit higherthan on that post-financial crisis. I think inflation just stays somewhathigher as well.

And I also think valuations for themarket, they're elevated by any metric. That's a risk, but it's not an apples toapples comparison either. There in 1990, the technology sector wasabout five or 6% of the S&P today is 30%.So and those those sectors tend to have higher multiples as well.So, again, you know, history is, you know, it's not always an apples toapples comparison. Before we let you go, Keith, I want tojust circle back to something that we've been talking about a lot over the pastcouple of weeks, and that came into real clear focus yesterday.Even though we seem addicted to our.

Phones, we're very much living in aphysical world and the nuts and bolts that haven't necessarily seen the samekind of investment. How much are you sort of trying to ridethe industrialization wave or the re industrialization that we keep hearingabout? That's been part of some of thecommodities story that we see playing out.No, it's a it's a good point. We've been overweight tech incommunications and financials. Our work is starting to be somewhat morefavorable toward some of these deeper cycles.And I think if you think about the.

Industrial sector, it's at an all timehigh. It made that all time high rightalongside technology early on. If we look at a lot of theseinfrastructure bills, a lot of that money is hitting now as well.So I think there's a if you think about the next 510, even longer than that, Ithink this industrialization, this on shoring has a long legs to go.And I think that's will be an attractive area of the market for some time.I could get your thoughts. An update from Truist.Keith Linebarger of Truist. Thank you, sir.I appreciate it.

On the growth policy mix, the optimalmix at the moment, and why this equity market rally can continue perhapsthrough to the end of this year. Equities right now still rally at leasta positive by 0.38%. Yeah, although coming off just a coupleof basis points. Let's get you an update on storieselsewhere this morning. The search and rescue operation afterthe collapse of the Francis Scott Key Bridge in Baltimore is now a search andrecovery mission. A road crew is working on the bridge atthe time of the collapse. Two people were rescued, but six remainunaccounted for.

The area remains closed off to traffic,cutting off a major artery around the city.Chinese President Xi Jinping has told a group of American business leaders inBeijing he wants U.S. companies to invest in China, puttingaside differences and, quote, minor issues.Xie met with leaders including Blackstone's Stephen Schwarzman andQualcomm's Cristiano Amon for more than 90 minutes.China is seeking to restore confidence in its economy, with Xi acknowledgingissues with the domestic economy, but saying it hasn't yet peaked.Trading platform.

Robinhood is rolling out a credit cardas it looks to further push into the consumer market.The Robinhood Gold Card will be offered exclusively to members of the company.A subscription based Gold Investment Suite members won't have to pay annualor foreign transaction fees and will receive 3% cash back on all purchases.That's your Bloomberg brief, John. The goal is for all our customers tohold all of their assets in Robinhood and for all of their transactions to gothrough it. It's a pretty good goal, isn't it?Okay. Just taking a step back, everybody goingto say whether that's the shape of the.

Loan.Well, I just want to say everyone wants to be a credit card company, whetherit's the airlines or whether it's Robinhood.That's number one. Even at the time of some potentialpushback in the antitrust market puts one or two.How much is this gold card going to help to fuel the zero days to explorationoptions market that people say is fueling a lot of the volatility inmarkets? I mean, this is this is a great story.You said this is an additional line of credit to buy stocks.Is that what you think this becomes to.

Say, you know, cash back, Where does itgo? It goes directly back into zero.The stock market, the vibrancy of American capitalism, which is exactlywhy that money should be recycled. Do you think so, rather than thephysical world? No idea.Up next on this programme, Baltimore's bridge collapse straining supply chains.It's a large port with a lot of flow through it, so it's going to have animpact. We'll have to divert parts to otherports along the East Coast or elsewhere in the country, and it'll probablylengthen the supply chain a bit.

That conversation coming up next livefrom New York City. This is going back. Flight from New York City about an hourand 13 minutes away from the cash open. In New York, equity futures positive buythird of 1%. Bond yields a little bit lower than asingle basis point for 2179. And in the commodity market, Joe Bidenmade some good news fast, $81 on WTI, we're down 0.7% for the president.triple-A warning for dollar crude at the pump this summer under Savannah is thismorning Baltimore's bridge collapse straining supply chains.It's a large port with a lot of flow.

Through it.So it's going to have an impact. It's just at this point, we'll have tounderstand what that means for us specifically.We'll work on the work arounds. We'll have to divert parts to otherports along the East Coast or elsewhere in the country, and it'll probablylengthen the supply chain a bit. Here's the nice is this morning.The port of Baltimore now closed indefinitely, threatening to disrupt thetransport of 2.5 million tons of coal and shipments of Ford and GM cars.The port is the second largest terminal for US exports of coal and handles thenation's largest volume of automobiles.

John Cat Sonus of Breakaway Advisorsaying the situation will, quote, create disruptions in global trade, some thatwill be felt in the US market given the importance of the Baltimore port when itcomes to importing cars and consumer goods.John, I'm pleased to say is with us around the table.John, good morning to you. Good morning.I'm sure you've been super busy in the last 24 hours and something we haven'tdone enough, nearly enough, I don't think is really explore how big theship's on. I know this is something you want tospeak to.

We're talking about something that isalmost 1000 feet long. And when you hear things like it'straveling by close to ten miles an hour, it doesn't sound like that's that fast,You should be able to slow it down. Could you give us a better framework tothink about the size of these ships and the kind of forces involved?Absolutely. I mean, people have to think these arehuge structures, you know, tens of thousands of tons that travel.The momentum for these structures to stop could take like, you know, ten, 15minutes for the moment you lose propulsion.So people when they see the ship hitting.

The bridge, this the engines havestopped way before, minutes before is not easy to really stop this at themoment. It's not it's like we're used to like,you know, with our car, for example. The other thing is obviously when thishappened, a lot of the procedures were followed the right way.I mean, the ships throw the anchor, for example, try to slow down the momentum.Right? They try to to rout away from there fromthe pilot. But it is not something I think it'smore of the timing. The timing was really bad when thisblackout happened.

If it had happened like a few minuteslater or before, this wouldn't have happened.As an observer from the outside looking in, when you see the lights go off, comeback on, go off, come back on, and black smoke starts to come out of the back.What was it that you thought was coming all at that point?Well, I think like what people are doing in the bridge, trying to figure out whatthe situation is. Right.They see like suddenly things are not responding the way they should.Probably the emergency generators or the emergency systems didn't work or theyweren't you know, they were.

Malfunctioning.I mean, I'm pretty sure there was a lot of like, you know, the attending to likesaw the situation and they did the right thing, like they called the authority.You have to stop the cars. Right.So they did the things that they should have done.Probably. We don't know exactly what you know,what the situation was, but that's what I would imagine.But there is not really an easy solution.Is it timing more than actually what happened?I mean, a lot of ships get under these.

Conditions, but you never hear about itbecause it's not in a bridge or in in an area that affects anything.So it's not unheard of. But these are timing.When we talk about risk controls, some some have postulated that maybe this isa result of dirty fuel. Does that ring true to you?Is there a sort of a theory that you see is something that's more common for someof these malfunctions in the past that could be at the heart here?So contaminated fuel could be the reason.And it's something that you hear in the shipping industry.I'm pretty sure that there's an easy way.

To find out.You can test a fuel, and I'm pretty sure that the investigators will find that.But yes, that could be one of the reasons.One economic consequence people have been talking about is that even a 10%increase in capacity inflow to New Jersey, New York, Virginia ports willcause the same kind of backlogs that we saw during the pandemic.How concerned are you about that, that that kind of additional traffic willcause ships to have to wait out in the harbor to get unloaded and get to get itsufficient dock workers to get it all done?So the good thing is that we're in a.

Slow shipping period, right?We're not in there in the in the Christmas period or pre-Christmas periodright now is a slow shipping period, especially for consumer goods.So that's a positive. But you're absolutely right.I mean, the 10% sounds not a big number, but if the ports of New Jersey or downto Norfolk, southern Charleston, Savannah, are already close to capacity,that can really create a situation there.And I think that's something that you cannot really guard, You cannot reallymeasure. Also, like probably the West Coast cantake some of the cargo and then rail it.

To the East Coast.That definitely increase prices. And that's part of like a.Seeing the effects you might feel on the consumer side, but I don't think that isas. In terms of size, it's not going to beanything close to the pandemic. Right.We're not talking about anything like that.But keep in mind, this comes on top of what's happening in the Suez Canal andthe Panama Canal. So this is not like an isolatedincident, because if it goes by itself, then it's not a big deal.But you have the Suez Canal, all the.

Divergence around the Africa.And then you have the Panama Canal where you don't have enough water for theships to transit, at least not to the to the rate that they used to.This ship was built in Korea. We hear a ton of protectionist policiesand rhetoric coming from Biden and Trump ahead of November.You don't hear it about shipbuilding. The U.S.doesn't make ships anymore. Well, they do, but it's like three timesmore expensive. So it's not I think it's a cost issue.It's not really you don't do that. And you cannot compete in a protectedeconomy in the ship, in the shipping.

Industry in the U.S..So that has been going for four decades in the U.S.And everybody either complains or try to protect the industry, depending on whereyou are. But I don't think that that's an issue.I mean, Korea built two very high quality ships.This is a new ship, high quality built ship.It was maintained. Well.I mean, it's not really something that I think the focus should be on, given allyour experience in the space. What do you think the timeline is forthe cleanup and the rebuild?.

So if you go back like 20, 30 years ago,a similar incident happened down in Florida.It took seven years to rebuild the Bay Bridge.When you talk about that, I'm not a structural engineer, but that'ssomething to to think about reopening the port.My personal view is that it's going to take months.People talk about a few weeks, but if you see everybody can see the structureand what how much steel is in the water. Think about the salvage operations.How are you going to build this? How to bring this barges and cranes totake all these steel out of the water.

And then, of course, the shovel is theactual ship. Take the containers that were broken inthe water, the cars. So I think it's going to be longer thanwhat most people think. You've been an investor, an analyst, formore than two decades, I believe, 20 plus years.I'm trying to understand where the liability might sit.How are you thinking about that at the moment?The president's come out and talked about using federal funds to rebuild allof this. But as you think about who might beresponsible for this Web with the.

Liability set and whether the insurancebe. Well, I mean, if you take the whole costof this is running to multiple billions, I don't think there's going to beanywhere close to that for whoever was responsible in that shipping site.Obviously, the nightclubs will get involved, I think is a much morecomplicated situation than just an accident, a shipping accident, becauseit's very rare that a shipping accident affects actually ordinary citizens or astructure that is standing there idle. So if two ships collide, then it's veryit's very simple. It's not simple, but is easier tounderstand where the liability stands.

Here you have like a sitting structureand a ship hitting the structure. So it's totally different.I think a lot of different parties get involved on the shipping side, but alsoon the actual commercial side.John This was thoughtful stuff. Love to do it again sometime soon.Thank you for that, because this is going to be an issue that lingers for along, long time. Later, as the cleanup effort continuesand as John was saying, it's not an isolated incident in the sense thatwe're seeing other shipping disruptions, which just raises this question, how isit going to be felt?.

John, concern is that of breakawayadvisors Coming up next on this program, do not miss this.The former Fed vice chair, Richard Clarida, he said last year this Fedwould be willing to accept two point something, two point something oninflation. Are they willing to accept just that? 60 minutes away from the opening bell.Equities doing okay positive by something like a third of 1% thismorning on the S&P, up by third of 1% on the Nasdaq.The Russell fighting just a little bit earlier on this morning was up by 0.7%.Now by about 0.5 in the bond market, two.

Year, ten year, 30 year, the two yearstill in and around for 60 for 58, 68 for 22.18 is where we are on the ten year on a 30 year for 3875.If you want some volatility, look to Japan.I'll give you a little bit. One 5197 was the session high?Apparently that's the line in the sand for a bit of more verbal interventionfrom Japanese authorities. Overnight we dropped back down to aboutone 5127, -5.2%, a slightly stronger Japanese yen.That's all verbal intervention this morning.Lisa has bought them.

I love that you just said slightly.I mean, we're talking about people fading.The move that came after Japanese officials said, please stop.We are going to intervene, we're going to do something.And people said, no, we're not going to do it, because essentially the Bank ofJapan has shown their cards and their cards are dovish and that's all thatthey need to show me the think and make sure that I'm aware that that threat ofhigher rates potentially is pretty credible because based on what we heardlast week, you just know what the bigger priority is.And I think that's what stands out.

For me.The ultimate priority is that we've got this once in a generation opportunity toreset inflation expectations higher. And we don't want to do that.We're willing to take negative rates away and go back to zero.But if you think we're going to go on an aggressive tightening cycle any timesoon and undo what's taken decades to build, you're wrong.The priority is on something else. I'm wondering if Japanese financeministers are getting on the same page as Bank of Japan members, because at thesame time that we heard this from the finance minister, we heard this from aBank of Japan member basically coming.

Out and saying that the central bankmust proceed slowly and steadily toward normalizing its ultra loose policy.They're not singing from the same hymnal that the finance department is.Yeah, the currency is just not the priority at the moment.In the grand picture of things, the big picture one 5126 on dollar yen underseven is this morning fallout from the Baltimore bridge collapse continues.Six construction workers are presumed dead, but authorities are resumingrecovery efforts. The conditions improve.Cargo is being diverted to other major US ports along the East Coast.Maryland lawmakers are pushing for an.

Aid package to help rebuild the bridgeas President Biden calls on Congress to approve federal funding.Which begs the question, Anne-Marie, how quickly that's going to change?Well, one is that you have officials on recess, Jonathan, but then, of course,it's going to be an immense amount of pressure for them to secure funding, torebuild and help their support. Kaylee was just in a gaggle withGovernor Westmore, and she wrote to me that what he's talking about is thathe's working with state government, a federal congressional delegation, tomake sure that they are able to get that funding and also support those Marylandworkers that rely on this dock for.

Support.And if that dock is going to be closed for a while and that port's going to beclosed, you're going to have an issue of this local economy.Look for more reporting from candy lines throughout this morning.Our next story from the FTC. They've been investigating Tik Tok overalleged faulty data security and privacy practices.Politico reporting that the agency could decide to bring a lawsuit or settlementagainst the platform in partnership with the DOJ.FTC officials accusing TikTok of deceiving users by denying thatindividuals in China have access to user.

Data.The FTC and DOJ are reportedly holding discussions about next steps, includingcivil penalties. The case is unrelated to the for salebill that's now stalled in the Senate. But you imagine the Senate and senatorswill begin to lean on whatever comes out of this, Lisa, sometime soon.Exactly What I was going to say is that basically national security was doing alot of the heavy lifting, and now it's actually doing the entirety of thelifting from the through the Department of Justice.Is this the avenue that will be the quickest way to get there, given howmany hurdles we've talked about with.

Getting through a sale or some sort ofdivestiture? You've raised the question about Europein the last week in data privacy. The focus was on Apple and what'shappening with Alphabet and all the other tech companies.What's going to happen with Bytedance, with Tech talk in Europe?So good question. And honestly, how worried are they aboutthe potential data breaches and how much does the U.S.and Europe get on the same page at a time where there are other differenceshaving to do with certain, you know, antitrust issues that Europe has raisedabout?.

The U.S.senators may now rely on the FTC, but actually this originated from SenatorWarner and Rubio in July of 2022, writing a letter to the FTC saying, youneed to look into this. And now it's come full circle, verycircular, everything down in Washington. Let's turn to the Fed speak, continuingtoday with Governor Walla set to deliver remarks at the Economic Club of New Yorkon Friday. You'll hear from the San Francisco side,President Mary Daly speaking ahead of champ Paul himself.That remarks coming after the Fed's preferred inflation gauge.PCE is due out 830 Eastern time on.

Friday.Bloomberg Economics expecting core PKA to rise the most since September,backing the Fed's patience on rate cuts. I'm pleased to say that we're blessedwith the presence of the former Fed vice chair Richard Claret.And Rich, it's good to see you and I'm blessed to be here.Thank you very much. I've been singing your praises for thelast week because I was thinking back to the second.Outlook from PIMCO in the middle of last year, where even the team wrote downthis Fed will accept two point something.Can you describe what you were looking.

For back then, what you saw and whetherit started to come your way? Well, John, I think it has played out.Look, I think Chair Powell and the committee deserves enormous credit.Inflation got up to five and a half or 6%, maybe ten on headline, and it's nowrunning in the twos. Our view then was two point somethingwould be the point at which the Powell Fed would start to pivot towards easing.I think they think they're done. I think they're signaling that they'regoing to be cutting starting this year. I think it's important to remember thegoal is to get to 2%, but they're going to start cutting before they get to two.Based upon their view, the financial.

Conditions are tight.So we'll see how it plays out. But I think so far that's played outlike we thought. A phrase you've used is opportunisticdisinflation. Can you help me explain the differencebetween what you see and maybe what others see when they start to say thingslike I was talking about on this program, a higher tolerance forinflation. What's the difference?I don't think, John, I don't think there's the tolerance.Opportunistic inflation actually is something that folks thought theGreenspan Fed did 30 plus years ago,.

That if you're tighten policy, you getinflation close to where you want it. But for that last mile, you just waittill the next recession to get it done. And that could well be what we end up inthis cycle. That is, the rate cuts will start beforeyou get to the long run goal of 2%. And at some point there'll be adownturn. Inflation can fall further.Then the tricky thing is, of course, the Fed wants to avoid the downturn in thefirst place, which means at minimum, Chair Powell will have somecommunication challenges ahead, I think. Well, there's a lot to unpack there.Just let's start on the first issue,.

Which is something that Andrew HollandHorse was talking about earlier this week, that essentially you cannot getdown to 2% without a recession. Do you agree?Well, I think historically that's what you would say.But look, the progress has been remarkable.You mentioned Governor Waller, a big fan of Chris's, worked with him.You know, Chris has been making the point you can't get back to 2% without alot of unemployment if vacancies are cut.So I don't want I don't want to say that you can't get there.But but it could be a heavy lift.

Yeah.Well, and the other part of what you said is it's really important.The Fed doesn't seem to want that weakness.And they even said that they would cut rates in response to a weakening labor.I noticed that. Yeah.What does this mean for for the longer term inflation rate?Does it mean that two point something is the floor and kind of we could see sortof bouts of volatility in inflation in the upcoming years?I think that is a risk case. I think the progress on disinflation isremarkable, but it's inflation still.

Above where they want it to be.And there's some evidence that it may be more sticky and stubborn than than folkswere thinking. Again, I'll let the data speak foritself. I hope the Powell Fed really is datadependent. I think they need to be open to thepossibility that inflation is sticky, and I think that changes theircommunication and the rate path. Can you help us understand theinconsistency that we struggled with last week?And again, on the program this morning, we caught up with Bruce Kasman of Jpmorgan.

He's brilliant and acknowledged thedifficulty in explaining the following. When the Fed is asked if we'resufficiently restrictive, Chairman Powell will often speak and point to thelabor market, then simultaneously embrace and confirm that a lot of theimprovement came from the supply side. Now, I'm trying to understand whetheryou could really point to the labor market as a sign you are sufficientlyrestrictive and also acknowledge that a lot of the improvements come from thesupply side. Can you do those two things at once?You can. I think, look, there has beenimprovement in the labour market.

Wage inflation has stepped down fromfive and a half down to around 4%. But that's still a little bit hotcompared to where they want to get. But the chair is right.There's been important supply side benefits, in particular labour supplyproductivity has also picked up.I actually think, John, if I could, I think maybe a little bit more of adisconnect is on the financial conditions predicate itself.Know, if you just look narrowly at the federal funds rate, it's well aboveinflation. That looks very tight historically.But of course very few people, including.

Banks, borrow at the federal funds rate.If you look at mortgage rates and you look at other things, they they've comedown and credit spreads are tight. You know Bloomberg financial conditionsindexes including Bloomberg's are easing and so he got that question last weekabout financial conditions and he says we think they're tight.Well, they could be, but they're certainly easier than they were inNovember. So what do you think he's pointing towhen he says, we think they're tight? What is he pointing to?Well, absolute borrowing costs. If you want to get a car loan, if youwant if you want to get a mortgage rate.

So traditional indicators of the cost ofborrowing are elevated, but obviously other indicators are moving in the otherdirection. So as usual, with the data, it'sprobably a mixed picture. Do you think that it's clear that it istruly a sufficiently restrictive rate currently at the Federal Reserve?That would be my base case. But there is a risk that that is not.And I think importantly, the focus on the baseline, of course, is reinsurance.We want to know what's going to happen. But I think there is a risk managementcase here where it may not be restrictive enough.I think the Fed's view of I don't think.

People care what I think.I think the Fed's view is if they if inflation stickier and more stubbornthan they want, they'll just keep rates at the current level longer or they'llreduce the pace of rate cuts. I don't really think the Fed is thinkingabout hiking any more right now. I think they think they're done.You said if the Fed really is data dependent and I don't think you'renecessarily casting doubt on whether they look at data, but what data mattersmost, if what we're looking at right now is inflation data that is coming inhotter and frankly, goods, disinflation, that seems to have ended.Certainly the the January February data,.

If the PC comes in, that that would bethe reason there is some evidence. I think the chair's correct ofseasonality. You know, that's always tricky.And in recent years, most of the bad news in inflation has been in the firstfour or five months. So I don't think we want to remove thatpossibility. I just think that a sticky inflationscenario is maybe not a baseline, but it's a very realistic case.And I think investors and and people looking at the economy need to startthinking about it. How do you perceive the balance of riskholding to longer, cutting too soon?.

What is the bigger risk for you?Well, I'm no longer there, so it probably doesn't matter.I think, given that the last three years, inflation has substantiallyovershot the target. Look, I was a charter member of TeamTransitory. It's looking better now than it did ayear ago. But I think there is past dependence andhistory, dependence on monetary policy. And so I think the risk management Iwould be doing if I were there would say there is a real we want to avoid.I don't think we want to avoid having inflation shoot up again and having thecredibility challenged.

So I would be leaning more in a hawkishbalance of risk mode than than just hugging the baseline right now to putsort of a bow on that point. If you think about how much moreinvestors have to consider the idea of sticky inflation and Fed officialsthemselves. Can you give us a sense of how much thatpossibility has increased in your view, in the past month or two based on theloosening of financial conditions and, frankly, the Fed's response to it?It. It has increased, certainly.Look, we got really we got five out of six months of really, really good,surprisingly good inflation data and for.

Good reasons, both supply and anddemand. We're I think in some ways I thinkthere's a actually now compared to where we were maybe in January, a betteralignment between markets in the Fed in the sense that, you know, after theDecember meeting, the markets are priced in six or seven cuts, which which was adisconnect with what I thought the Fed would deliver.So on that end, I don't think there's too much of a disconnect now.I think markets understand. They think they're done.The margin that they're going to play with is when to cut and how much to cut,but not to hike.

So I, I don't think there's not much ofa of a disconnect right now. One final question.Could you do the show again in Newport Beach, California?Can we do that in June? Here's me Well, you know, it's above mypay grade, but and I'll treat you to a burger like Iactually You treat me or not treat each other?No, I think we treat each other. We treat each other.I think sort of money and Mike exchanged cards or something like that.Rich, it's good to see you. Thank you.Thank you very much.

The former Fed vice chair RichardClarida Equities right now on the S&P 500 later positive 5.4%.Let's get you an update on stories elsewhere this morning.Six people are presumed dead after the collapse of Francis Scott Key Bridge inBaltimore. President Biden saying he wants thefederal government to pay for the rebuild.But the governor of Maryland telling reporters it's critical they actquickly. This is not just impacting Maryland.This is impacting that farmer in Kentucky.It's impacting that auto dealer in.

Michigan.And so it is imperative that we get this bridge rebuilt.It's imperative that we get the port of Baltimore back up and going.And it's not just about how are we supporting Maryland.This is about how we support the American economy.Meanwhile, Brent could hit $100 this year if Russia's decision to cutproduction isn't balanced out by other countermeasures.It's according to analysts at JPMorgan. The bank saying the actions could seethe price of oil hitting $90 next month and close to triple digits by September.Russia saying its decision to deepen its.

Production cuts were based onexpectations for global oil demand growth.Trump Media and Technology continuing to surge in pre-market trading.The stock ending the day 16% higher after rising as much as 90 as much as59%, I should say. On his first day public yesterday, thestock adding to the former president's net worth on paper.Trump's 60% stake may now be worth more than $6 billion based on SEC filings.However, Trump cannot sell his stake immediately due to a six month lockupagreement, which raises questions, John, about whether this is actual wealth,whether it's a paper wealth, or whether.

He can cash out.What this means. All I know is that to short that stockis incredibly expensive and a lot of people are piling into very risky, I'msure as well on every level. I think the real day on the calendar youshould look for is maybe not the end of the six month lockup, get back intopower and sell it tax free. Right.Is that what you are? You want to if I go back into the taxmitigation policies that you find interesting.Sort of like Jamie Diamond. That's the last remaining attractivething about working in Washington.

This is your pitch to people in the U.S.This is why executives said you can't think of another reason, absolutelycredible. You'd want to sort this out to get thatmoney. So we can't rule against it.President. That's so cynical.What about serving the great country? Yeah.How many people want to do that now, given what's happening in Washington?Jamie Dimon. Think about it.Think about the message that is come from the people who have left in thelast week.

We had a Republican recently talkedabout messaging bills, how we're sick of it.Mike Gallagher, think done. Go back and listen to what MikeGallagher had to say. And I think that's a sad indictment ofhow people feel about serving in Washington at the moment.I really would like to get back to an era, especially not necessarily the highlevel, but rank and file, where it is something of an honor.And that's all that we all can hope for. I'm with you on that point.Up next on this program, if makers facing demand pressures in terms of theEVs, the growth is there and the market,.

Perhaps the consumer moving into the EVsis at a slower pace than what some had dreamed about.But the growth is there, the interest is there.That conversation. Up next. The opening bell 42 minutes away.Equities doing okay on the S&P 500 positive through most of this morning byaround a third of 1% to about 4/10 of 1% under surveillance this morning, makersfacing demand pressures in terms of the evs.The growth is there in the market perhaps at the consumer moving into theEVs is at a slower pace than what some.

Had dreamed about.But the growth is there, the interest is there, consideration is growing.And once people have driven EVs, they are very loyal to that type ofpowertrain. And so we think we will be seeing asteady growth in the market. Here's the latest this morning.Growing demand concerns are forcing automakers to scale back production,with some making a pivot to hybrid vehicles in China.Chesapeake White falling in Hong Kong, trading after the EV maker's earningsmissed estimates amid aggressive price cuts.Competitor Volkswagen saying it expects.

To fall behind in China.Along with our value over volume growth strategy, we are deliberately preparedto give up market share in order to find a sound compromise between margins andvolume. For more popular to see.Volkswagen Group of America president and CEO joins us now.Pablo, good to see you. Good morning.Thank you for coming into the studio. I know it's an important couple of daysfor you and the team here in New York City.I just want to reflect on the events of yesterday in Baltimore.Important hub for automakers.

Can you walk us through the potentialdisruptions for you, the team and the company?Yeah, First of all, regarding yesterday, our heart goes to the families.Yeah, it's quite unfortunate that everybody's pulling back.Looking at this from a business point of view.We are on the side of the sea level. So, you know, when the ships come intoBaltimore, we're not going to be affected by this event.Obviously, we're going to have some disruption because of the trucks, butit's not going to be as disruptive as other automakers.Supply certainly hasn't been the problem.

In this industry.Unfortunately, it's been demand. Can you walk us through what you'reseeing, things we can weigh, saying things strengthened and whether you'reable to lean into what's happened with hybrids and the demand for it inAmerica? Absolutely.So let me start talking about the industry.February, year to date, the demand is very strong as an industry.The North American market, which is Canada, US and Mexico grew 8% inFebruary, year to date versus last year, and we grew 21%.So we're tripling the growth of the.

Market, but still 8% is quite strong.And what we're seeing, the data for March is still strong.Having said that, the ebb has flatten. The curve remains around seven and ahalf, 8% of the total industry. But we as b w we still have 12% of oursales are in the A4 in the electric vehicle space.So we're still having higher growth than the average market.Do you expect to ramp it up, though, more slowly and maybe put a greateremphasis on hybrids? Are you starting to sort of sow theseeds for that right now because you have a couple of years or potentiallymonths to really get that up and.

Running?Yeah, So our factory is highly localized in the US and we have both combustionengines and electric vehicles in Chattanooga, in Tennessee, and we're theonly foreign automaker that qualifies for the $7,500 credit for the consumer,which means that we're localized within the region.So that gives us our flexibility going forward.I think the pace of growth will be slower, but we still grow in the spaceand other powertrains will be a good alternative for the consumers.So the consumers will be able to choose electric vehicles like hybrids, hybridsand combustion engines.

How important was that subsidy to you tonot only build the factory, but also just in terms of your decision of theproduct mix to sell? Well, first, I think the IHRA definitionis a great piece of legislation for the US because it is transforming theindustrial base of the US. So you see all these new factories andbattery factories being built in the US over the next three or four years.So the benefit is not only for us but also for the consumer, you know, by thefact that we're localizing and we're bringing all the jobs of both market andalso the suppliers. You know, we create an ecosystem thatprovides more jobs here, and then the.

Consumer gets a $7,500 credit.If Trump were to come back in power, though, he can rewrite those Treasurylaws, which makes a subsidy which could make the subsidy basically impossible toget. How are you thinking about that kind ofimpact when all this money has been put towards the EV market?Yeah. So we have a long term vision on thesetopics. I mean, we know that and we believe weremain committed to the EV strategy in the long term and the pace will dependon the consumer. Now, is it possible that the rules willchange?.

It's possible, but he would need a vastmajority in the Congress and the Senate to change his loss.And also, when you look at the map where all the factory shall be built, they'renot built only in states that are Democratic or Republican.They're being built all over the US. I think, you know, in the interest ofjobs and growth. In technology.I think it would be wise to maintain this long term vision.Do you think it would be wise to wait until after the election before you makedecisions about your manufacturing footprint in this country?I don't think so.

And I'll give you an example.And these are not only words. We decided to localise the A4 way beforethe Inflation Reduction Act, which goes back to your question.Right. So we believe so much in the transitionto electric vehicles and in localizing our footprint in the US that we madedecisions before and after that. We're going to continue to localize onepush over the last year or so by this president, by this White House, is topush and support union workers. You mentioned Chattanooga.There's at the plant is going to be a vote on whether the workers joined UAW,that specific union.

Can you walk us through what that coulddo to your cost base? Yeah.First of all, we respect the freedom of our workers to choose how they'rerepresented. Having said that, we're constantlytalking to our workers on how to improve, you know, their workingconditions, the salaries and the benefits.It will be up to them how they want to be representedin the future. So we will respect that.And the cost base, would you just assume it would increase off the back of that?I'm not so sure.

I mean, we have a very competitive costbase. Competitive in terms of the employees.We have wages around 23, $23 an hour, which are comparable to Michigan with alower cost of living. So we will see.Pablo, Thank you, sir. Hopefully we can catch up again soon.Appreciate your time. Thanks for the invitation.Scenic San Pablo to see the VW of North America CEO.Let's set up tomorrow. Tomorrow?This is what the program looks like. We'll catch up with Kia, see if theconversation around automobiles will.

Continue.DHL supply chain CEO asking about what joined us to Merck CEO Robert Davis andTiffany Welding and PIMCO. A lot to get into Paramo regardingindustry and global business, especially at a time of so much changed.And really what we've been hearing is consistency is all that really mattersand that, you know, going forward that they can adapt to any possible shift aslong as there's some consistency. The opening bell about 35 minutes away.Equity futures near session highs positive by almost 0.5% from New YorkCity. This was Bloomberg Surveillance.

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