Bloomberg Surveillance 04/10/2024

>> I WOULD NOT ASSUME INFLATIONWOULD BE SUPER STICKY BUT IT WOULD BE BUMPY. >> WE ARE TALKING ABOUTINFLATION BEHAVIOR. WE ARE NOT TALKING ABOUTINFLATION ACCELERATING. >> INFLATION WILL BE STICKY ANDI THINK THAT WARRANTS THE FED RETHINKING ITS INFLATION TARGET.>> THIS IS “BLOOMBERG SURVEILLANCE”WITH JONATHAN FERRO, LISA ABRAMOWICZ, AND ANNMARIEHORDERN. JONATHAN: LIVE FROM NEW YORK CITY, YOURWEEK BEGINS RIGHT NOW.

FOR OUR AUDIENCE WORLDWIDE,THIS IS “BLOOMBERG SURVEILLANCE.”YOUR EQUITY MARKET HAS NOT DONE MUCH OVER THE LAST COUPLE OFDAYS. AROUND 8:30 EXPECTED TO DO SOMETHING.WE HAVE TO BEGIN WITH THE WORDS OF CHAIRMAN POWELL, IT IS TOOSOON TO SEE WHETHER THE RECENT READINGS ARE MORE THAN A BUMP.AT 8:30 WILL WE GET ANOTHER BUMP? LISA:AND HOW MUCH CONSISTS OF A BUMP? WE HAVE HEARD THIS FROMANALYSTS SAYING IN-LINE PRINT WILL BE A BEAT AND YOU WILL GETA RALLY IN MARKETS.

HOW THEY GIVE AN UPSIDESURPRISE DO YOU NEED FOR THIS FEDERAL RESERVE TO RECONSIDERTHEIR DECISION TO CUT RATES IN JUNE BUT THE CUT RATES THREETIMES THIS YEAR? JONATHAN: .3% MONTH OVER MONTH FOR COREINFLATION IS THE ESTIMATE. THE PREVIOUS NUMBER WAS .4%.YOU GO THROUGH THE NUMBERS, VERY FEW PEOPLE ARE LOOKING FORAN UPSIDE SURPRISE THIS MORNING. ANNMARIE:YOU SEE SOME COMING IN WITH LOWER.I GO TO STEPHEN STANLEY AT SANTANDER.THE NUMBER OF ANALYSTS WHAT HE.

SEES AS TRYING TO SPINTOMORROW'S RESULTS. THESE ARE EXPECTATIONS OF ABEAT. WHEN HE LOOKS AT THAT WENT 3%RISE MONTH OVER MONTH, THAT ENDS UP ANNUALLY BEING 3.6%.IT IS HIGHLY UNLIKELY FOR ANYONE AT THE FED, FOR THATNUMBER TO SATISFY THEM. LISA: THE BEARISH BETS ON TREASURIESARE SKYROCKETING AHEAD OF THIS REPORT WHICH SETS THE MARKET UPFOR A MASSIVE SHORT SQUEEZE IF WE GET ANYTHING OTHER THAN AHUGE UPSIDE BEAT. YOU TALK ABOUT MARKETEXPECTATIONS.

HOW BIG DOES THAT UPSIDESURPRISE HAVE TO BE TO FULFILL BEARISH BETS OF PEOPLEEXPECTING RUNAWAY INFLATION. IF WE DON'T GET THAT COULD WEGET A MONSTER RALLY IN BONDS AND A MONSTER RALLY IN STOCKS?JONATHAN: BULLISH BETS ON ENERGY RIGHTNOW. LORI CALVASINA STEPPING WITHENERGY. MIKE WILSON OVERWEIGHT ENERGY.MARK AT J.P. MORGAN, STAY OVERWEIGHTCOMMODITIES. THAT HAS BECOME A CONSENSUSCALL. LISA:.

AND IT HAS BECOME THE HEDGEAGAINST INFLATION. IT IS NOT JUST OIL, IT IS ALSOGOLD. ONE OF THE BIGGEST MYSTERIES ASIT HITS ALL-TIME HIGH. IT IS ALSO IRON ORE, IT IS ALLTHE PRECIOUS METALS. ANNMARIE: WE HERE ANALYSTS AFTER ANALYSTSTALKING ABOUT HOW THEY ARE OVERWEIGHT.STUART KAISER WAS TALKING ABOUT THE FACT THAT OIL NEEDS TOPROVE ITSELF. HOW MUCH OF THIS IS TEMPORARYAND DOES THE FED LOOK THROUGH IT? JONATHAN:.

CRUDE POSITIVE .33%.THE BROADER PRICE ACTION SHAPING UP AS FOLLOWS ON THES&P 500. MILD DAYS OF PRICE ACTION.MONDAY DOWN A LITTLE BIT. TODAY TOTALLY UNCHANGED ON THES&P. JIM REED AT DEUTSCHE BANK, WEHAVE GONE SEVEN CONSECUTIVE SESSIONS WITHOUT A NEW RECORD.THE LONGEST WITHOUT AN ALL-TIME HIGH SINCE JANUARY. LISA:THE ONLY NEGATIVE THING YOU CAN SAY ABOUT A RALLY THAT HAS NOTGONE DOWN VERY MUCH. THERE HAS BEEN REALLYINTERESTING PRICE ACTION UNDER.

THE HOOD.YOU'VE SEEN THE MAGNIFICENT SEVEN UNDERPERFORMING.THE VIDEO WAS FASCINATING. THE FACT INTEL CAME OUT WITH ACHIP THAT MAY OR MAY NOT TAKE OFF.INTEL SHARES, MET, NVIDIA DOWN. THERE IS A FEELING PEOPLE ARETRYING TO HEDGE THE HIGH FLYERS. JONATHAN:YIELDS UNCHANGED, LOWER YESTERDAY ON THE TENURE.AT THE MOMENT FOR .36. COMING UP THIS HOUR DAN MORRISOF BNP PARIBAS. TOBIN MARCUS OF WOLFE RESEARCH,AND BLOOMBERG'S GEORGE FERGUSON.

WITH NEW CONCERNS OVER ATBOEING. WE BEGIN WITH THE TOP STORYCOME INVESTORS WEIGHING TODAY'S INFLATION DATA.DAN MORRIS SAYING “MARCH CPI DATA WILL BE CRITICAL, TELLINGUS WHETHER THE BIG INCREASE IN INFLATION WAS JUST A BLIP ANDWHETHER GOODS INFLATION IS RETURNING.”ARE THESE PUMPS IN THE ROAD OR NEW TERRAIN? DAN: AS POINTED OUT FROM ONE OF YOURPREVIOUS COMMENTATORS, WE ARE STILL TALKING ABOUT A LOWERLEVEL OF INFLATION BY THE END.

OF THE YEAR.WE DO NOT WANT TO GET TOO CARRIED AWAY.NO ONE IS TALKING ABOUT A RE-ACCELERATION IN GROWTH OR AREACCELERATION IN INFLATION OR A FED HIKE AS OPPOSED TO CUTS.IS A QUESTION OF HOW SMOOTH THE PATH IS BUT IT IS GOING IN THERIGHT DIRECTION. EVEN IF WE GET THAT .3% WHICHWOULD BE 3.6 WHICH IS NOT TO PERCENT, THAT IS TOO MUCH.WE EXPECT IT WILL GO DOWN AND THAT IS WHAT WE WANT TO PURPOSEON. JONATHAN: YIELDS HAVE REPRICED HIGHER BYAROUND 50 BASIS POINTS.

YEAR-TO-DATE AT THE FRONT ENDON THE TWO YEAR, ON THE TENURE AS WELL.AS THE BOAT BECOME TOO LOADED IN THE BOND MARKET? DAN:WE ARE LOOKING AT STEEPENERS. IN ANTICIPATION PHENOMENAL REALYIELDS IN THE BELLY OF THE CURVE TO START GOING DOWN.THERE IS A VIEW THAT IF YOU THINK ABOUT POSITIONING, WHERETHE MARKET HAS GONE AT THIS POINT, IT HAS GONE TO THE OTHEREXTREME AND WE THINK THERE IS A POTENTIAL TO MOVE BACK IN THEOTHER DIRECTION. LISA: THIS IS THE REASON SOME PEOPLEARE SAYING IF WE GET IN IN-LINE.

PRINT OR A LOWER-THAN-EXPECTEDINFLATION RATE, IT WILL BE A RIPROARING RALLY IN BONDS ASPEOPLE GO BACK TO THIS IDEA INFLATION IS COMING DOWN.WOULD YOU BE AN ACTIVE BUYER OF DURATION IF WE GET A DOWNSIDESURPRISE? DAN: IT CERTAINLY WOULD HELP IF YOUCAME IN AT TO PUT — IF YOU CAME IN AT .2%.I DON'T KNOW HOW LIKELY THAT IS. THE HEADLINE FIGURE COME ITWILL MATTER WHAT THE COMPONENTS ARE.WE TALK ABOUT RENT, WHICH WAS. MATTER FOR THE PCE — WHICHDOES NOT MATTER FOR THE PCE.

IT WILL BE THE STICKINESS OFSERVICES INFLATION. WITH THE PAYROLLS DATA WE GOTLAST WEEK, AVERAGE HOURLY EARNINGS CONTINUE TO FALL. THE BIG QUESTIONS WILL BE GOODSINFLATION WHICH HAS STARTED TO TURN UP GIVEN THE ISSUES WEHAVE IN SHIPPING IN THE MIDDLE EAST. LISA:IF WE GET SOME SORT OF RALLY IN BONDS WILL THAT BE POSITIVE FORSTOCKS? WILL THAT FUEL A NEW LEG OF THERALLY OR IS THAT A QUESTION MARK AROUND WHY BONDS ARERALLYING AND THE POTENTIAL FOR.

WEAKNESS LATER ON? DAN:IT DEPENDS A LOT ON THE INCREASE OR THE DECREASE.WE KNOW HOW SENSITIVE STOCKS ARE TO MOVES IN REAL RATES.IF IT IS A LOWER RATE AND WE PUT BACK CUTS FROM THE FED, IWOULD BE SUPPORTIVE FOR GROWTH STOCKS.IF IT IS HIGHER INFLATION THAT IS NOT NECESSARILY SO BAD.RATES DO NOT GO DOWN SO MUCH, BUT WE ARE AT THE LEVELS WE AREAT. MORE INFLATION SHOULD MEAN HIGHER REVENUES.THERE IS A SCENARIO WHERE AS LONG AS IT IS NOT WEAK GROWTHDATA, EQUITIES SHOULD BE.

SUPPORTED. ANNMARIE:YOU JUST MENTIONED TRANSPORTATION PROBLEMS IN THEMIDDLE EAST. IS THAT REALLY AN IMPACT ON GOODS IN THE UNITEDSTATES? ISN'T THIS MORE OF A EUROPEANPROBLEM? DAN: WE HAVE NOT SEEN THE DATA GETIN EVEN IF YOU LOOK AT THE EUROPEAN INFLATION DATA WE HAVEALREADY GOTTEN FOR MARCH, WE SHOULD NOT FORGET THAT WHEN WEHAD THAT INITIAL SURPRISE IN CPI INFLATION IN THE U.S.WE THOUGHT IT WAS JUST A U.S. PROBLEM, BUT THEN WE SAW ON THESERVICES SIDE IT SHOWED UP IN.

EUROPE AS WELL IN JANUARY ANDFEBRUARY. THE MARCH DATA OUT OF EUROPEWAS MUCH LOWER. THAT MAY INDICATE WE ARE GOINGTO SEE A DECREASE. WHETHER OR NOT THE GOODSINFLATION SPREADS TO THE U.S. OR MIDDLE EAST IS NOT A HUGEFACTOR. LOW GOODS INFLATION HAS BEEN ABIG PART OF THE DECLINE IN CPI OVER THE LAST YEAR. ANNMARIE:EVEN THOUGH COMMODITY PRICES, THE PRICES OF CRUDE ARETRICKLING DOWN, DO NOT IMPACT CORE, HOW DO YOU DEAL WITH THISSURGE IN COMMODITIES WHEN YOU.

ARE THINKING ABOUT AN UPTICK ININFLATION? DAN: WE LIKE COMMODITIES AND WE AREOVERWEIGHT AND WE APPRECIATE SOME OF THAT IS JUST A HEDGEAGAINST INFLATION. WE KNOW IT IS ALSO A REFLECTIONOF THE GEOPOLITICAL RISKS WE ARE FACING AND NOT SO MUCHBECAUSE OF THE INCREASE IN DEMAND.THAT IS WHAT WE WANT OVER THE MEDIUM TERM, TO THINK PRICESWILL BE SUSTAINABLY HIGHER. FOR NOW WE SEE IT AS ANOPPORTUNITY. JONATHAN: LET'S TALK ABOUT NVIDIA.LISA MENTIONED THE STOCK WAS.

DOWN CLOSE TO LOWE'S.THEN WE HAD NUMBERS FROM TSMC, QUARTERLY REVENUE EXPLODINGHIGHER. THE MAIN CHIPMAKER TO NVIDIA,TO APPLE COME A 60% RISE IN MARCH QUARTER SALES.IS THERE ANYTHING TO WORRY ABOUT IN THAT SPACE IN THESTOCK MARKET? DAN: IF WE THINK MORE BROADLY ABOUTTHE OUTLOOK FOR EARNINGS IN TECH, IF YOU TAKE THE NASDAQAND TALK ABOUT HOW MUCH FORWARD EARNINGS HAVE GONE UP OVER THELAST YEAR, BIG CHUNK OF THAT IS MAGNIFICENT SEVEN, A LOT OF ITIS SEMICONDUCTORS.

TO SOME DEGREE IRRESPECTIVE OFWHAT HAPPENS AROUND SEMICONDUCTORS YOU WANT TO SEEEARNINGS MOMENTUM IN THE OTHER PARTS OF THE MARKET, OTHERPARTS OF THE VALUE MARKET. LISA: WHAT ARE YOU DOING AROUND THAT?ARE YOU REDUCING SOME OF YOUR EXPOSURE TO SOME OF THOSE TECHHIGH FLYERS AND MOVING INTO OTHER AREAS LIKE COMMODITIESAND CYCLICALS? DAN: WE LIKE TECH.WE ARE NEUTRAL ON THE U.S.. IT IS A MATTER WHERE YOU SEETHE BEST RELATIVE OPPORTUNITY. WE ARE MORE INTERESTED IN CHINAIMPACT.

WE ALL KNOW ABOUT THE VALUATIONSTORY. ARE WE AT THE BOTTOM IN TERMSOF THE EARNINGS DOWNGRADES WE HAVE SEEN?IF THAT IS STARTING TO TURN AROUND, THAT IS AN EXAMPLE OF ABETTER PLACE TO TAKE A POSITION WHERE YOU HAVE MORE UPSIDE THANTRYING TO PREDICT WHAT IS GOING TO HAPPEN TO NVIDIA NEXT.JONATHAN: ARE YOU SAYING YOUR MORECONSTRUCTIVE CHINESE TECH THAN U.S. TECH? DAN:WE ARE OVERWEIGHT CHINESE EQUITIES AND MORE OF THELARGE-CAP DOMESTIC SPACE.

JONATHAN: INTERESTING.DAN MORRIS OF BNP PARIBAS. PRAY TO CATCH UP.STRONG NUMBERS — GREAT TO CATCH UP. STRONG NUMBERS FROM TAIWANSEMICONDUCTORS. TOM TZITZOURIS WILL JOIN USLATER. HERE'S A FLAVOR OF WHAT HE WILLHAVE TO SAY. “WASHINGTON IS COMMITTED TO RUNTHE ECONOMY OF FULHAM EMPLOYMENT AT ALL COSTS UNTILTHE ELECTION IN THE FED IS LOOKING FOR EVERY EXCUSEPOSSIBLE TO CUT TO AID THIS.

CAUSE.”IN THE NEXT HOUR BLOOMBERG SURVEILLANCE. LISA:WHICH IS WHAT PEOPLE SAY USUALLY QUIETLY AND NOT WHENTHERE ON AIR, BUT THE SUSPICION THIS FEDERAL RESERVE IS BIASEDTOWARDS KEEPING THE ECONOMY HOTTER THAN KOHLER RUNNING INTOTHE ELECTION. I WILL NOT GOING TO THAT.HE WILL. IT DOES RAISE A QUESTION OF WHY.WHAT GIVES PEOPLE CONVICTION? IS THIS WHAT IS GIVING THEM ASENSE THAT THIS FED WILL CUT, EVEN IF THE DATA IS NOTCOOPERATING? ANNMARIE:.

HE SAID THE QUIET PART THATPEOPLE TELL US BEHIND THE SCENES OUT LOUD.THAT IS WHY INFLATION IS SO IMPORTANT.IF YOU'RE TRYING TO RUN AN ECONOMY THAT IS HOT AND AT THESAME TIME TRY TO QUELL INFLATION .THIS IS WHAT COMES UP IN POLLS. ANNMARIE: INFLATION — JONATHAN:INFLATION DATA AT 8:30. LET'S GIVE AN UPDATE ON STORIESELSEWHERE. HERE IS YOUR BLOOMBERG BRIEFWITH DANI BURGER. DANI: AT LEAST THREE PEOPLE ARE DEADAFTER AN EXPLOSION AT A.

NORTHERN IN EARLY HYDROPOWERPLANT. THE COMPANY SAYS THE FIRE IMPACTED A TRANSFORMER ITWITHOUT PROVIDING FURTHER DETAILS.THEY ARE ITALY'S LARGEST POWER SUPPLIER AND THEY SHUT THEPLANT DOWN IMMEDIATELY FOR SAFETY REASONS BUT LOCAL POWERSUPPLY WAS NOT AFFECTED. FITCH HAS CUT ITS OUTLOOK FORCHINA'S LONG-TERM DEBT FROM NEGATIVE TO STABLE.RISING ECONOMIC UNCERTAINTIES HAVE ERODED FISCAL BUFFERS.ALTHOUGH FITCH SEES GOVERNMENT DEBT INCREASING, IT AFFIRMEDCHINA'S A-PLUS RATING.

MORE TROUBLE FOR BOWING.THE FAA IS INVESTIGATING WHISTLEBLOWER COMPLAINTS THECOMPANY TOOK SHORTCUTS TO EASE PRODUCTION BOTTLENECKS ON THE747 DREAMLINER. THE PLAYMAKER SAYS THE CLAIMSARE INACCURATE AND DOES NOT REPRESENT THE WORK IT HAS DONETO ENSURE THE SAFETY OF THE PLANE.SHARES OF BOEING ARE DOWN THIS YEAR. SCRUTINY OF MANUFACTURINGPRACTICES HAVE BEEN BUILDING SINCE ONE OF THE PLANESEXPERIENCED A MIDAIR ACCIDENT EARLY JANUARY. JONATHAN:THIS COMES WITH A WARNING.

IF YOU ARE FLYING WITH BOEINGTHIS MORNING TURN THE VOLUME DOWN. FACTORY MURDERS MEASURED –FAULTY MEASURED GAPS THAT OCCUR WHEN PIECES OF THE 787 AREJOINED TOGETHER. FATIGUE CAN IMPAIR THESTRUCTURAL INTEGRITY OF MORE THAN 1000 OF THE WIDE-BODY JETSIT SERVICED. THESE ALLEGATIONS ARE SOMETHING.LISA: HE SAID HE HAD SERIOUS ACTS OFRETALIATIONS AGAINST HIM AND THE PREVIOUS WHISTLEBLOWER DIEDOF A SELF-INFLICTED GUNSHOT.

WOUND LAST YEAR. A LOT MOUNTING.JONATHAN: MORE ON BOEING LATER THISMORNING. UP NEXT, U.S. STEEL IN FOCUS. >> THE RELATIONSHIP IS BIGGERAND MORE SIGNIFICANT THAN A SINGLE COMMERCIAL TRANSACTIONAND THAT WILL CONTINUE. JONATHAN:THAT CONVERSATION IS UP NEXT. JONATHAN: IT IS CPI WEDNESDAY.DATA JUST AROUND THE CORNER. EQUITY FUTURES TOTALLYUNCHANGED. MUTED PRICE ACTION MONDAY ANDTUESDAY.

IN BETWEEN, INTRADAY TUESDAYBIG SWINGS. I CANNOT EXPLAIN THEM BUT THEYEXISTED. ON THE 10 YEAR 4.3577. U.S. STEEL IN FOCUS. >> FOR FOUR YEARS IN A ROW THEUNITED STATES AND JAPAN ARE THE NUMBER ONE PART INVESTORS INEACH OTHER'S COUNTRIES. IN 2021 THERE WAS ELECTION INJAPAN AND FOREIGN ENTITIES WERE LOOKING AT BUYING TOSHIBA ANDJAPAN SAID FOR NATIONAL SECURITY INTEREST THAT WOULDNOT BE PERMITTED. THERE IS A CONTEXT.ONE IS THE RELATIONSHIP IS.

BIGGER AND MORE SIGNIFICANTTHAN A SINGLE COMMERCIAL TRANSACTION AND THAT WILLCONTINUE. JONATHAN:THE JAPANESE PRIME MINISTER IN WASHINGTON FOR THE COUNTRY'SFIRST STATE VISIT TO THE U.S. IN NINE YEAR.HANGING OVER THE VISIT, NIPPON STEEL'S TAKEOVER OF U.S. STEEL.”JAPANESE OFFICIALS BELIEVE THEIR BEST PLAY IS TO STAYQUIET AND WORK WITH THE COMMITTEE ON FOREIGN INVESTMENTTO TRY TO SECURE A RECOMMENDATION.AVOID PUTTING BITING ON THE.

DEFENSIVE AND SEE IF THESITUATION IMPROVES AFTER THE ELECTION.” TOBIN JOINS US.A BIG ELEMENT OF THIS IS TO TRY TO SECURE THE VOTE IN PLACESLIKE PENNSYLVANIA. IS THAT WORKING? TOBIN:IT IS NOT WORKING YET. BIDEN IS STILL BEHIND IN THEPOLLS AND ALL OF THE STATES HE NEEDS TO WIN.ALL WITHIN COMPETITION DISTANCE FOR BOTH CANDIDATES.IT HAS NOT WORKED YET BUT IT IS UNDERSTANDABLE THAT BIDEN ANDTHE BIDEN CAMPAIGN ARE LOOKING AT THAT POLITICAL TERRITORYWITH A VERY KENAI.

— WITH A VERY KEEN EYE.JONATHAN: YOU SINCE THE JAPANESE UNDERSTAND OR DO WE RISKISOLATING SOME OF OUR ALLIES? TOBIN: I THINK THEY GET IT.WE HAVE SEEN IN THE RESPONSE FROM THE PRIME MINISTER, THEWAY BIDEN CAME OUT SURPRISINGLY STRONGLY AGAINST THE DEAL A FEWWEEKS AGO, THEY UNDERSTAND THERE IS NO PERCENTAGE INPRESSING HIM ON IT. THE COMPANY IS VERY GUNG HO ONTHE DEAL. YOU ARE SEEING LOTS AND LOTS OFADVERTISING AND LOBBYING FOCUSED ON D.C.TYPES TOUTING THE ECONOMIC.

BENEFITS OF THE DEAL.THEY ARE TRYING TO ENGAGE WITH THE UNION EVEN THOUGH THE U.S.WC IS AGAINST THE DEAL. IT IS NOT AS IF THE JAPANESEHAVE GIVEN UP BUT AT THE GOVERNMENTAL LEVEL THEY ARE NOTMAKING IT THE NUMBER ONE PRIORITY.THE SUMMIT IS FOCUSED ON SECURITY ISSUES AND DEFENSECOOPERATION WHERE THE MUTUAL ISSUES ARE MORE ALIGNED.THEY'LL TRY TO GET A GOOD OUTCOME BUT IT IS NOT AFOREGONE CONCLUSION. ANNMARIE: WHEN IT COMES TO THE REVIEW,THE ADMINISTRATION IS LOOKING.

AT WHETHER THERE IS ACONNECTION TO CHINA. YOU THINK THAT IS WARRANTED?TOBIN: THIS IS ALL DOWNSTREAM OF POLITICS.IF YOU ARE DOING A PURELY NEUTRAL REVIEW WITH NO CONCERNSABOUT POLITICS WHATSOEVER, IF THIS WERE A COMPANY THAT DIDNOT HAVE UNITED STATES IN THE NAME AND HAD AN ICONIC LEGACYTO IT, I DO NOT THINK THERE WOULD BE PROBLEMS. AS WE ARESEEING IN THE SUMMIT MORE BROADLY, JAPAN IS PROBABLY OURMOST IMPORTANT ALLY IN THE INDO PACIFIC, ONE OF OUR MOSTIMPORTANT ALLIES GLOBALLY.

THE JAPANESE CONTROL OF U.S.COMPANIES IS NOT A SECURITY CONCERN.STEEL IS A SPECIAL CASE, BUT I THINK WE ARE SEEING AN EXERCISEIN MITIGATING THE POTENTIAL POLITICAL LIABILITY OF ALLOWINGTHIS “ICONIC U.S. COMPANY” TO BE ACQUIRED BY A FOREIGNENTITY. ANNMARIE: WHEN YOU TALK TO JAPANESEOFFICIALS THEY SAY UNITING THESE COMPANIES WOULD BE AFORCE AGAINST CHINA. ARE WE AT RISK IN WASHINGTON TOCREATE A BOY THAT CRIED WOLF SITUATION WHEN IT COMES TONATIONAL SECURITY CONCERNS?.

TOBIN:YOU HEARD THIS A MOMENT AGO IN THE COOKIE PLATE.IT IS NOT — IN THE CLIP YOU PLAYED.IT IS NOT UNIQUE TO THE U.S. FOR THERE TO BE POLITICALCONSIDERATIONS AND ECONOMIC CONSIDERATIONS TO PROTECTDOMESTIC CHAMPIONS IN VARIOUS INDUSTRIES.IT IS NOT THE IDEAL SITUATION. IT IS NOT WHAT YOU WOULD WANT.I THINK THEY GET IT. IT IS NOT DERAILING THE OTHEREFFORTS TO GET A TIGHTER RELATIONSHIP.THE SUITE OF DELIVERABLES BEING.

ROLLED OUT, BOTH SIDES FEELGOOD ABOUT IN TERMS OF JAPAN'S CONTINUED SHIFT TOWARDS BEING AFULL-SPECTRUM GEOPOLITICAL ACTOR IN THE INDO PACIFIC,UNDERGOING THEIR OWN MILITARY MODERNIZATION AND PREPARING TOCOOPERATE A LOT MORE WITH U.S. IN DETERRING CHINA. LISA:IS GETTING HARDER TO DISTINGUISH POLITICS FROMPOLICY. I WANT TO GET YOUR THOUGHTSAHEAD OF AN ANALYST — AHEAD OF OUR CONVERSATION WITH ANANALYST TO STRATEGAS WILL STEP HE SAID “WASHINGTON IS — THEFED IS LOOKING FOR EVERY EXCUSE.

POSSIBLE TO CUT TO AID THISCAUSE.” WOULD YOU AGREE WITH THISASSESSMENT? IS THAT THE FEELING FROM THECLIENTS YOU SPEAK TO? TOBIN: IT IS A VERY ACTIVE DEBATEAMONG MY CLIENTS AND OTHER FOLKS IN THE D.C.SPACE, THE EXTENT TO WHICH FED DECISION-MAKING IS POLITICIZED.I DO NOT AGREE WITH THE NOTION THAT THE FED IS PUTTING ITSFINGER ON THE SCALE FOR THE SAKE OF AN OUTCOME.I'VE HAVE HEARD THAT TALKING POINT A LOT.

POWELL'S THEIR POLITICALINCENTIVE IS TO WRITE UP INTO THE SUNSET AS THE PERSON WHODEFEATED THIS INFLATION. HE CARES MORE ABOUT HIS LEGACYTHEN HE DOES ABOUT GETTING REAPPOINTED FOR THE POLITICALATTACKS HE WILL FACE FROM BOTH SIDES DEPENDING ON WHEN THEYCUT. IF THEY CUT IN JUNE OR JULY THEY WILL BE CRITICIZED FORCUTTING TOO EARLY OR TOO MUCH. IF THEY CUT IN SEPTEMBER THEYWILL BE CRITICIZED FOR CUTTING TOO LATE BEFORE THE ELECTION. IF HE CUTS IN DECEMBER HE WILLBE CRITICIZED FOR HELPING FRONT.

HE IS DAMNED IF THEY DO, DAMNED IF THEY DON'T HIS CHALLENGE ISTHE APPROPRIATE PATH FOR RATES. I THINK WE ARE SEEING ANAUTHENTIC EFFORT TO MANAGE BOTH SIDES OF THE DUAL MANDATE. LISA:THERE IS A QUESTION OF WHETHER THE FED COMES UNDER ATTACK INTERMS OF ITS LEGITIMACY AND ANOTHER ADMINISTRATION ANDWHETHER IT HAS AN INCENTIVE TO PRESERVE MORE OF THE STATUS QUO.THIS IS ONE OF THE CONSPIRACY THEORIES UNDERPINNING THISWHICH IS THE REASON WE HEAR THIS SO MUCH. TOBIN: RIGHT.

IF YOU GAVE JAY POWELL TRUTHSERUM, WOULD HE PREFER BIDEN TO TRUMP? PROBABLY.HE IS A REGISTERED REPUBLICAN. IT IS NOT AS IF HE IS SOMEONEWHOSE TRACK RECORD WOULD SUGGEST YOU WOULD MOVE HEAVENAND EARTH TO GET BIDEN REELECTED.WHEN WE LOOK BACKWARDS AT THE RECORD OF WHAT FED POLICY HASBEEN IN ELECTION YEARS SINCE NIXON AND BURNS, WE DO NOT SEEEVIDENCE THERE IS A HISTORICAL PATTERN AROUND ELECTIONINTERFERENCE. YOU ARE NO MORE LIKELY TO GETCUTS THAN HIKES IN ELECTION.

YEARS.WE SEE THE DEVIATION BETWEEN THE TAYLOR RULE AND FED FUNDSRATES IN ELECTION YEARS IS MORE HAWKISH THAN IT IS INNONELECTION YEARS. I THINK THERE IS NOT A LOT OFEMPIRICAL TRACK RECORDS TO POINT TO ON THIS AND I DO NOTTHINK IT MAKES SENSE FOR JAY POWELL.HE IS TOWARDS THE END OF HIS CAREER. HE WOULD LIKE TO GETREAPPOINTED, BUT I THINK HE CARES MUCH MORE ABOUT NOTMISMANAGING THE SITUATION AND GOING DOWN IN HISTORY AS THEPERSON WHO ALLOWED A BIG.

REACCELERATION IN INFLATION ANDFAILED AT THE HISTORICALLY IMPORTANT JOB HE IS FACING ATTHIS INFLECTION POINT. IN TERMS OF LEGITIMACY OF THEFIT, THEY WILL FACE OUR POLITICAL ATTACKS NO MATTERWHAT THEY DO. I DO NOT THINK THEY'RE TRYINGTO SOLVE TO THAT. I DON'T BUY THIS.THE THEORY IS OUT THERE. I'M NOT ON BOARD. JONATHAN:TOBIN MARCUS OF WOLFE RESEARCH. SUPER DIPLOMATIC.IT TO HIS POINT IT DOES NOT MATTER WHEN THEY GO, THEY WILLBE CRITICIZED BY SOMEONE. LISA:.

WHAT HE SAID IS THIS FED CHAIRDOES NOT WANT TO GO DOWN IN HISTORY AS ARTHUR BURNS, ASFUELING IN INFLATION SURGE THAT WAS AKIN TO THE 1970'S.JONATHAN: JONATHAN: I DON'T KNOW ABOUT RETIRING.DON'T YOU WANT TO DELIVER MORE MILLION-DOLLAR SPEECHES?IF I COULD DELIVER A ONE MILLION-DOLLAR SPEECH, I'M NOTEVEN HIDING THAT. I AM NOT SURE WHAT I WOULD TALKABOUT. JONATHAN:WE ARE GOING ABSOLUTELY NOWHERE GOING INTO INFLATION DATA.THE S&P UNCHANGED.

LIKEWISE ON THE NASDAQ.ON THE SMALL CAPS AND THE RUSSELL WE SPOT A THEME.GOING ABSOLUTELY NOWHERE. TEN-YEAR AND 30-YOU'RE GOINGSOMEWHERE. UP BY 40 OR 50 BASIS POINTS.JUST ABOUT UNCHANGED AFTER A RALLY YESTERDAY.435.77 ON A TEN-YEAR. TWO-YEAR, 473.86.CRUDE JUST STARTED TO BREAK BACK BELOW $90 ON BRENT. LISA:YOU DID SEE A BIT OF A REPRIEVE IN THE BOND MARKET.PEOPLE ARE SAYING MAYBE WE GOT AHEAD OF OUR SKIS.THERE WAS A HINT OF THAT COMING.

OUT YESTERDAY EVEN WITH ATHREE-YOUR OPTION THAT DID NOT GO THAT WELL.THERE'S ANOTHER TEN-YEAR NOTE OPTION TODAY AT 1:00 P.M.AFTER THE CPI PRINT. I'M CURIOUS WHETHER IT AND FLEX–FLEXES WHEN WE ARE ANOTHER. JONATHAN:IF YOU WANT TO BUY SOME 30-YEARS TOMORROW, $22 BILLIONWORTH OF SUPPLY COMING TO MARKET.COMPARE WHAT'S HAPPENING TO WHAT'S HAPPENING IN PRECIOUSMETALS. THE RALLY HAS BEEN RELENTLESS.IN MARCH, GOLD WAS UP SOMETHING.

LIKE 9%.WE HAD ANOTHER DECENT MOVE IN APRIL. JUST ALL-TIME HIGHS.LISA: THIS GOES BACK TO WHAT MOHAMEDEL-ERIAN WAS TALKING ABOUT. CENTRAL BANKS ARE BUYING.CHINA IS BUYING. THERE'S DIVERSIFICATION AWAYFROM THE DOLLAR. NOT THE END OF AMERICA AS WEKNOW IT, ETC. SOME PEOPLE MIGHT GO THERE.GOOD LUCK. WHETHER IT IS SOME SORT OFINDICTMENT ON THE IDEA OF TREASURIES AS A HAVEN ASSET.JONATHAN:.

WAS THIS ABOUT SANCTIONS ORABOUT TREASURY SUPPLY? HE SAID IT'S ABOUT SANCTIONS.ANNMARIE: HE DID NOT LIKE THE TERMDE-DOLLARIZATION. YOU HEAR THIS A LOT FROM PEOPLE.THEY WANT TO MAKE SURE WHEN THE LOOKING AT CENTRAL BANKSTHAT THIS IS WHY THEY ARE DIVERSIFYING.IF THIS IS WHERE POLICY IS TODAY, WHAT HAPPENS WHEN THEREIS MORE GEOPOLITICAL RISK IN THE WORLD AND THEY CAN GO BACKTO THE SANCTIONS POLICY? JONATHAN:UNDER SURVEILLANCE THIS.

MORNING, TOP STORIES.BOEING'S WORRIES CONTINUE. THE WHISTLEBLOWER SAYS THECOMEDY CUT CORNERS ON THE SIBLEY OF THE 787 DREAMLINER,WHICH MAY DRAMATICALLY REDUCE THE LIFE OF THE PLANE.THE OUTGOING CEO DAVE CALHOUN CALLED TO TESTIFY ON CAPITOLHILL ON APRIL 17. SOMETIMES WE TALK ABOUT AGRILLING AND THEY WILL NOT GET A GRILLING.I THINK THIS GUY WILL GET A GRILLING ON CAPITOL HILL.ANNMARIE: BOEING HAS REPEATED SHOCKINGALLEGATIONS ABOUT THE FAILINGS.

TO APPOINT OF AN APPALLINGABSENT. HE'S WORKED AT BOEING FOR 10YEARS. HE OBVIOUSLY WAS COMMITTED TOTHIS COMPANY. TO COME OUT AND OUTLINEDEVERYTHING GOING WRONG, HE'S CLEARLY CONCERNED.IT FEELS LIKE THIS GRILLING WILL BE MORE BAD NEWS FORBOEING. JONATHAN: NUMBERS FROM DELTA. LISA:THIS IS CONNECTED TO BOEING. IT RAISES THE QUESTION OFWHETHER THEY CAN DELIVER PLANES THAT ARE VERY MUCH IN DEMAND.THE DEMAND IS VERY MUCH THERE.

DELTA BEATING EXPECTATIONS.EXPECTING QUARTER PROFIT AND REVENUE TO EXCEED EXPECTATIONSEVEN MORE. GIVING YOU THIS FROM EDBASTIAN, THE CEO. DELTA EXPRESSED — EXPECTS NOLET UP IN DEMAND. THE PEAKS LOOK QUITE STRONG.THIS GOES TO THE QUESTION OF CONSUMER SPENDING, OF WHETHERTHE CONSUMER IS STRONG. THIS IS CLASSIC DISCRETIONARYSPENDING AND THEY ARE SPENDING IT. THIS IS WHY I HAVE BEEN SOINTERESTED ABOUT DELTA. EVEN WITH ALL THE HANG UPS ANDFUEL PRICES GOING HIGHER THEY.

ARE ABLE TO PASS IT ALONG ANDSTILL HAS THE STEADY DEMAND. JONATHAN:THE STOCK IS POSITIVE IN THE PREMARKET BY SOMETHING LIKE2.9%. I WANT TO TURN TO APPLE CONTINUALLY SHIFTING AWAY FROMCHINA. THEY ARE DOUBLING THE OUTPUT ININDIA. ONE IN SEVEN IPHONES WILL BEMADE IN INDIA, TOTALING $14 BILLION.CHINA REMAINS APPLE'S LARGEST OVERSEEN MARKET.YOU CAN SEE QUITE CLEARLY THEY ARE DIVERSIFYING BIG TIME.YOU SEE IT IN THE NUMBERS. LISA:.

YOU SAW SOMETHING LIKE 14% NOWOF IPHONES PRODUCED IN INDIA, IT GOES TO THIS QUESTION ARETHEY SAYING ONE THING AND DOING SOMETHING ELSE?SAYING THEY ARE COMMITTED TO CHINA, THEY WANT TO REMAINTHERE PLAYING THE ULTIMATE DIPLOMAT.TIM COOK HAS BEEN THAT PERSON. ON THE OTHER SIDE JUST PRODUCETHIS. ANNMARIE: HE'S OFF THE TRIP HE WASN'TCHINA SAYING THEY ARE COMMITTED TO THE COMPANY.THAT 14% IS ONE IN SEVEN. THIS IS THE WHOLE IDEA OFFRIENDSHORN.

WHERE WILL IT BE TENURES ON THELINE? A LOT OF GEOPOLITICS CLOUD THESTORY. JONATHAN: CALLING FOR THE FIGURE TO RISE3.7% YEAR-OVER-YEAR, THE SMALLEST GAIN SINCE APRIL OF2021. FRANCES DONALD EXPECTING THIS.WE EXPECT RISING PRICES TO KEEP HEADLINES CPI ELEVATED EVENESCORT INFLATION SLOWLY MODERATES.WE SEE HEADLINE INFLATION HOVERING AROUND 3% THROUGHOUTTHE YEAR, LOW ENOUGH FOR THE FED TO BEGIN CUTTING INTERESTRATES.

FRANCES IS WITH US HERE TO ASKMY NET. LET'S GET TO THAT. WE STABILIZED AT 3% BUT THEYCAN CUT INTEREST RATES. CAN YOU HELP US UNDERSTAND THATMORE? FRANCES: IT GOES BACK TO WHAT THE FEDSAID TO US. THEY ARE TRYING TO LAND THISECONOMY, A SOFT LANDING. 3% BY STANDARD TAYLOR RULES ANDMOST OF THE WAY THE FED LOOKS AT INFLATION IS ENOUGH TO WANTTO KEEP THOSE REAL RATES FROM CLIMBING.WHAT I MORE INTERESTED IN IS NOT HAVE ANY CUTS WE ARE GOINGTO GET IN 2024 BUT WITH THE.

TOTALITY OF THE EASING CYCLE ISGOING TO LOOK LIKE. FOR MOST INVESTORS WHETHER THEFED STARTS IN JUNE OR SEPTEMBER, EVEN IF THEY CUTTHIS YEAR, IT WILL NOT BE AS RELEVANT AS WHETHER WE ARE IN ASOFT LANDING. IT WILL BE THREE TO FIVEBECAUSE TOTAL PENANCE IT'S A MORE STANDARD CYCLE.I'M IN THE LATTER CAMP. FOR MOST INVESTORS THAT IS FARMORE IMPORTANT THAN SOME OF THE DECIMAL PLACES WE WILL SEETODAY ON CPI. JONATHAN: YOU HAVE SAID IT REPEATEDLY.YOU DON'T GET TO HAVE YOUR CAKE.

AND EAT IT TOO.IF YOU ARE IN THE OTHER CAMP, WHAT IS A STANDARD EASING CYCLE?IT'S BEEN A WHILE. FRANCES: WE SEE THE FED HEADING BACKTOWARDS WHAT THEY WILL CONSIDER NEUTRAL.WE HAVE RAISED THE ESTIMATE FROM 2% TO 3%.THIS IS A CENTRAL BANK THAT WILL CUT HUNDREDS OF BASISPOINTS IF WE ENTER RECESSION. THAT IS NOT WHAT IS PRICED INTHIS STORY. THAT IS WHITE EVERYONE ISTALKING ABOUT THE INFLATION NUMBER BEING SO RELEVANT BUT MYEYES ARE ON THE LABOR MARKET.

AND WHAT IS STARTING TO CRACK.REHIRING ACTIVITY COMING DOWN, WAGE GROWTH DECELERATING ANDSOME OF THE PROBLEMS WITH CONSUMERS.CREDIT CARD THE LINK ONCE HE STARTING TO RISE.INTEREST RATE SENSITIVE POCKETS OF RETAIL SALES LIKE HOUSING,ELECTRONICS, FURNITURE, THOSE ARE DECLINING OVER THE PASTYEAR AND A HALF. THAT IS EVIDENCE OF THE ECONOMYREALLY STARTING TO DETERIORATE. ECONOMIES DON'T BREAK INSTRAIGHT LINES OR BREAK SLOWLY. THE LABOR MARKET STARTS TO GO,IT'S A NONLINEAR FASHION.

THAT'S THE ONE I'M CURRENTLYWATCHING. LISA: WHY IF THERE IS A BREAK THAT ITMEANS INFLATION WILL COME BACK FAR ENOUGH FOR THE FED TO BEJUSTIFIED TO CUT BY HUNDREDS OF BASIS POINTS?THIS HAS BEEN ONE OF THE KEY QUESTIONS GIVEN COMMODITYPRICES, GIVEN RE-SHORING, THE POTENTIAL FOR THINGS LIKETARIFFS. FRANCES: IT DOESN'T. THAT'S THE BIG CHALLENGE.THE CENTRAL BANK WILL PROBABLY HAVE TO MAKE CRITICALCONCESSIONS AND RECOGNIZE THEY ARE NOW AT THE POINT IN THENEXT SIX MONTHS WHERE THE.

WEIGHT OF THE DUAL MANDATE WILLSTART TO BECOME HEAVIER. WHILE WE HAVE ALWAYS SAID THISWAS A GREAT THING FOR THE FED TO HAVE A DUAL MANDATE, FULLEMPLOYMENT, PRICE STABILITY, A LOT OF OTHER CENTRAL BANKS WILLNOT BE IN THAT POSITION. WAGE GROWTH IS COMING DOWN.THE DEMAND SIDE WILL PROBABLY BRING INFLATION BACK DOWN.WE ARE NOT HEADING BACK TO SOME 2% INFLATION.THE FED WILL HAVE TO CHOOSE. IF THEY HAVE MILLIONS OF PEOPLEWHO ARE SUDDENLY OUT OF WORK DO THEY PRIORITIZE THAT OVER THE2% TARGET AND WHATEVER THAT.

MEANS?SOME OF THAT IS SUBJECTIVE CALL. ECONOMICS IS PART ART AND PARTSCIENCE. THE ART COMPONENT AND THEINTERPRETATION OF HOW THE FED WILL RESPOND TO THE DUALMANDATE WILL CREATE AN ALREADY — AND ALREADY IS A HUGEDISPERSION AND FEDERAL RESERVE RATE FORECASTS. LISA:IT LOOKS LIKE A RORSCHACH TEST. YOU CAN READ WHATEVER YOU WANTIN THIS DATA. IT HAS, CONSISTENTLY SHOWINGBOTH STRENGTH IN CERTAIN PLACES AND WEAKNESS IN PLACES YOUMENTIONED.

WE HEARD FROM MOHAMED EL-ERIAN.LISTEN TO WHAT THE COMPANIES ARE SAYING.THIS WAS RECENTLY OUT OF DELTA. IT EXPECTS NO LET UP IN DEMAND.USUALLY THERE IS A LULL AHEAD OF THE SUMMER SEASON.THEY SEE NOTHING OF THE SORT. THEY SEE STRONG TRAVEL BOOKINGSAND PEOPLE PAYING HIGHER PRICES. HOW DO YOU PAIR THAT MESSAGEWITH ON THE MARGINS THE IDEA OF DELAY QUINCY'S PICKING UP ANDSMALL BUSINESSES EXPRESSING CONCERN? FRANCES: THE U.S.ECONOMY IS INCREDIBLY DECENT FOR NIGHT, MUCH MORE –DESYNCHRONIZED, MUCH MORE THAN.

WE HAVE SEEN ON MY CAREER.CEO CONFIDENCE AT BIG COMPANIES IS LOOKING VERY STRONG.THAT'S A RE-ACCELERATION PHASE. LOOK YESTERDAY AT SMALLBUSINESS OPTIMISM OR PESSIMISM. THE GOODS ECONOMY IS DEFLATING.LOW INCOME HOUSEHOLDS AND CONSUMERS ARE INCREDIBLYPESSIMISTIC. WHY? THEY ARE BORROWERS.THESE ARE THE PEOPLE WHO RELY ON THE INTEREST RATES TO HELPTHEM. HIGH INCOME HOUSEHOLDS ARE BENEFITING FROM THE STOCKMARKET ARE DOING REALLY WELL. IT IS NOT SO MUCH THAT ONE VIEWIS RIGHT OR.

WRONG.IS THAT THIS ECONOMY IS NOT OPERATING HOLISTICALLY.THE BEST THING IS THAT THE CHERRY PICK BUT LOOK OF THEHOLISTIC VIEW. MY PERSONAL VIEW IS ONCE THELABOR MARKET STARTS TO DETERIORATE IT WILL NOT MATTERWHERE YOU ARE, WHETHER YOU ARE THE CEO OF A MAJOR COMPANY ARE RUNNING A BODEGA, YOU WILL BERECESSIONARY. WE ARE IN AN AIR POCKET WITH IS A MAJOR DETHINK IN HIS ASIAN–DESYNCHRONIZATION. LISA:.

WHEN YOU LOOK AT THISDESYNCHRONIZATION, HOW BIG IS THE GAP BETWEEN HIGHER ANDLOWER INCOME CONSUMERS? FRANCES: IT IS SIZABLE.THE TOP 20% OF AMERICANS SPENT 35% OF TOTAL EXPENDITURE.THIS IS ONE OF THE REASONS WHY IF THEY ARE BENEFITING THEAGGREGATE ECONOMY IS DOING WELL. WHEN WE LOOK AT THINGS LIKEGDP, WE'VE HAD THESE DISCUSSIONS ON MY TEAM, IT'SPOSSIBLE WE DON'T EXPECT — EXPERIENCE OF GDP RECESSIONBECAUSE HIGH INCOME CONSUMERS HOLD UP THE NUMBER BUT THEY AREPOCKETS THAT FEEL RECESSIONARY.

POLICYMAKERS HAVE TO BE VERYSENSITIVE TO THAT. NOT EVERYONE'S REALITY WILL BETHE SAME. THIS IS GOING TO BE LIKEDOWNTOWN VERSUS RURAL. CALIFORNIA VERSUS NEW YORK.WE WILL SEE A REALLY WIDE DIVERGENCE AND ECONOMICOUTCOMES ACROSS THIS COUNTRY BY INCOMES, GEOGRAPHIES, ANDSECTORS. JONATHAN: SMALL VERSUS LARGE.TERRIBLE OF THE LAST 24 HOURS. FRANCES DONALD.COMPARE WHAT WE ARE HEARING FROM DELTA.

THE CHIEF EXECUTIVE OF DELTAEXPECTING NO LET UP IN DEMAND. THE NUMBERS MOMENT AGO SAYINGADJUSTED. DELTA APPLY CLOSE TO 5%.THIS HAS GIVEN A LIFT TO AMERICAN AND UNITED. LISA:THERE ARE TALKS ABOUT THE INCREASE IN REVENUES WITHHIGHER COMMODITY PRICES. THAT'S ABOUT A THIRD OF THECOST OF THE AIRPLANE INDUSTRY. IT DOES COME FROM OIL PRICES.THE FACT YOU STILL HAVE THE ABILITY TO PASS IT ALONG SPEAKSTO WHAT WE HEARD FROM FRANCES. OK. SCREAMING, RIPROARINGREACCELERATION IN THE TRAVEL.

INDUSTRY WITH DISCRETIONARYSPENDING. YOU LOOK AT SMALL BUSINESSES,OTHER POCKETS, IT IS COMPLETELY DE SYNCHRONIZED –DESYNCHRONIZED. JONATHAN: OPTIMISM FELT OF THE LOWS WEHAVE SEEN AT 11 YEARS. DECADE LOWS.YOU PAIR EMPLOYMENT INTENTIONS, THEY WERE KICKED LOWER AS WELL.COMPARE THAT FROM DELTA. TWO VERY DIFFERENT WORLD.– WORLDS. LISA: WE ARE TALKING ABOUT SMALLBUSINESSES. COMPLETELY BIFURCATED.IF YOU ARE THE FED AND LOOKING.

AT THIS, WHO DO YOU CATER TO?THE REACCELERATION STORIES FROM THE BIG COMPANIES OR SOME OFTHE SMALLER BUSINESSES AND REGIONS THAT ARE GETTING HARDERHIT AND SAY YOU GUYS NEED A REPRIEVE? IT IS A TOUGH CALL.JONATHAN: DELTA UP BY 4.5%. LET'S GET AN UPDATE ON STORIESELSEWHERE WITH DANI BURGER. DANI:RAPHAEL BOSTIC SEES ONE RATE CUT THIS YEAR BUT IS OPEN TOCHANGING HIS MIND IF ECONOMIC CONDITIONS CHANGE. THE U.S.ECONOMY CONTINUES TO SHOW RESILIENCE BUT HE DOES NOTDISCOUNT THE POSSIBILITY RATES.

HAVE TO MOVE FURTHER OUT BUTLEAVING HIMSELF OPTIONALITY. HE ADDED LABOR MARKET CHANGEWOULD NEED CUTTING SOONER. TSMC'S QUARTERLY REVENUE GREWAT ITS FASTEST PACE IN OVER A YEAR THANKS TO THE AI BOOM.THEIR VALUE DOUBLED SINCE OCTOBER OF 2022.IT'S OUTPERFORMANCE ALSO HELPED ENHANCE EXPECTATIONS THAT ITWILL RETURN TO SOLID GROWTH THIS YEAR AFTER SLOWER THANEXPECTED POST-COVID RECOVERY. THEY SAID IN JANUARY THE AIREVENUE IS GROWING AT A 50% ANNUAL PACE.TSMC IS THE CHIPMAKER FOR APPLE.

AND NVIDIA.BYTEDANCE'S REVENUE IS SURGING. THE OWNER OF TIKTOK SAID THEREVENUE SOARED 60% IN 2023, THE FIRST TIME IT'S OUTPACEDTENCENT AND ALIBABA. THE COMPANY FACES AN UNCERTAINFUTURE IN THE U.S.. THE HOUSE PASSED A BILL LASTMONTH TO BAN TIKTOK UNLESS BYTEDANCE SELLS ITS PRIZEDASSETS. THAT IS YOUR BLOOMBERG BRIEF.JONATHAN: SOME STUNNING NUMBERS THERE.UP NEXT, BOEING'S DEEPENING CRISIS.

>> WE WILL APPROACH THISACKNOWLEDGING OUR MISTAKE. >> WE DON'T PUT AIRPLANES INTHE AIR WE DON'T HAVE ONE HUNDRED PERCENT CONFIDENCE IN.JONATHAN: THAT STORY IS UP NEXT. JONATHAN:THIS IS THE VERY DEFINITION OF SNOOZING.EQUITIES GOING NOWHERE. EURO-DOLLAR GOING NOWHERE.THE BOND MARKET GOING NOWHERE. CHECK BACK IN AT 8:30 EASTERNTIME. I IMAGINE WE WILL GET CPI ANDWE WILL START GOING SOMEWHERE. LISA:LITERALLY RIGHT NOW PEOPLE ARE.

JUST SITTING ON THEIR HANDS.THE BETS ARE IN. QA FOR THE CASINO TO OPEN.LET'S GO. JONATHAN: UNDER SURVEILLANCE THIS MORNINGBOEING'S DEEPENING CRISIS. >> I HAVE KIDS, GRANDKIDS, ANDSO DO YOU. THIS STUFF MATTERS. WE WILL APPROACH THIS NUMBERONE ACKNOWLEDGING OUR MISTAKE. >> WE DON'T PUT AIRPLANES INTHE AIR WE DON'T HAVE A 100% CONFIDENCE IN. JONATHAN:BOEING'S 787 UNDER SCRUTINY. AN ENGINEER CLAIMING THEY TOOKSHORTCUTS TO SPEED ASSEMBLY OF THE AIRCRAFT AND THE ISSUESDRAMATICALLY REDUCE THE LIFE OF.

THE PLANE.BOEING CALLING THE ACCUSATIONS INACCURATE.GEORGE FERGUSON JOINS US FOR MORE. CAN YOU TALK ABOUT THEALLEGATIONS AND HOW SERIOUS THEY ARE? GEORGE: GOOD MORNING.THEY ARE JUST EMERGING. WE ARE JUST GETTING OUR ARMSAROUND IT. THEY ARE TALKING ABOUT THEFUSELAGE OF THE 787. PREVIOUSLY WE HAD GOINGDISCLOSE AND WORK WITH THE FAA TO FIX SHIMMING PROBLEMS THEYWERE HAVING. THE BEGINNING OF THIS I'MWONDERING IF THIS IS PART OF.

THAT SAME PROBLEM.WHAT I WILL SAY IS THE 787 IS AN EXTREMELY IMPORTANT AIRPLANETO BOEING. SECOND MOST IMPORTANT AFTER THE737 THIS IS AN AIRPLANE THEY HAVE COLLECTED A LOT OF ORDERSFURTHER LATELY. THEY AT AIRBUS ARE IN THEMARKET PRETTY HARD RIGHT NOW. THEY ARE THE SMALLERWIDE-BODIES. IF THEY CAN PUSH THESE PROGRAMSUP TO HIGHER BUILD RATES, THAT WOULD BE A TAILWIND FOR PROFITSFOR CASH FLOW. AS THE SECOND MOST IMPORTANTAIRPLANE TO BOEING, VERY.

IMPORTANT, VERY CONCERNING.I'M WONDERING IF THIS IS SOMETHING WE HAVE ALREADYVISITED AND THAT IS WHY THE FAA IS JUMPING QUICKLY TO FIGUREOUT WHETHER THIS IS PART OF THAT SHIM PROBLEM BOEING HADPREVIOUSLY. JONATHAN: FACTORY WORKERS WRONGLYMEASURED AND FILLED GAPS WHEN THEY ARE JOINED TOGETHER.THE PROCESS CAN CREATE SIGNIFICANT FATIGUE AND THECOMPOSITE MATERIAL AND IMPAIR THE STRUCTURAL INTEGRITY OF1000 WIDE-BODY JETS AND SERVICE. IF YOU ARE WAKING UP AND SAWTHIS PLAN GOING YESTERDAY.

AFTERNOON AND YOU'RE AN AIRLINEWITH SOME OF THESE PLANES AND SERVICE, HOW DO YOU REACT THISMORNING? GEORGE: VERY CONCERNING.WHAT I'M HEARING AND WHAT HAS BEEN RELEASED SO FAR IS ACHINGIN EFFECT LONGEVITY DOWN THE LINE.OPERATIONS ARE NOT AFFECTED. DO YOU DRIVE ON BUT YOU ARECONCERNED ABOUT AN ASSET YOU PROBABLY PAID $130 MILLION FOR.YOU ARE CONCERNED ABOUT THE LONG-TERM ABILITY TO USE THEAIRPLANE. YOU HAVE ANOTHER BOEING QUALITYPROBLEM POTENTIALLY ON YOUR.

HANDS.YOU WOULD HATE TO HAVE THAT BUT IT COULD HAPPEN. LISA:IT RAISES THE QUESTION ABOUT NEW ARTISTS — ORDERS WHENDEMAND IS GOING TO THE ROOF. DELTA EXPECTATIONS BEAT WALLSTREET'S FORECASTS. THEY TALK ABOUT SECOND-QUARTERCOMING IN ROBUST AND NO SIGN OF SLOWDOWN.TYPICAL FOR THIS TYPE OF SEASON. HOW MUCH CAN WE INSPECTAIRPLANE TICKETS TO GO UP AND PRICES TO GO UP SIMPLY BECAUSEOF THE LACK OF DELIVERIES OF NEW PLANES, LACK OF CAPACITY,AN INCREDIBLE AMOUNT OF DEMAND?.

GEORGE:THERE'S A DEBATE IN THE MARKET PLACE RIGHT NOW.IF THERE IS A LACK OF AIRPLANES, IF THAT WILL FILTERTHROUGH INTO THE MARKETPLACE. FOR SURE DELTA WOULD GAIN FROMTHE PROBLEMS THAT BOEING. YOU ARE NOT GETTING AIRPLANESAS FAST AS YOU WOULD LIKE AND YOU CANNOT COMPETE AS MUCH WITHTHEM. IT COULD HELP THEM. WHAT I WILL SAY, DELTA'SEARNINGS WERE NICE. IF YOU LOOK AT THEIR YIELDS ITIS THE PRICE PAID FOR MILE FLOWN BY PASSENGER, THE YIELDSWERE DOWN YEAR-OVER-YEAR.

IF YOU LOOK AT THE BIFURCATIONOF THAT, IF YOU LOOK AT THE BASIC ECONOMY CUSTOMER, THEINCOME FROM THEM GREW 4% AGAINST CAPACITY THAT GROUP –NOT CAPACITY BUT AGAINST TRAVEL THAT GREW 9%, PASSENGER MILES,ALL THE MILES THAT REFILLED. THAT GREW 4% FOR THE BASICTRAVELER. IT GREW 10% FOR THE PREMIUMTRAVELER. WHAT I'M TRYING TO TELL YOU IS,IT LOOKS LIKE THE BASIC TRAVELER THAT MIGHT BE TOO MANYSEATS IN THE MARKETPLACE, IF YOU LOOK AT DELTA'S DOMESTICYIELDS, PRICE PAID FOR MILE.

FLOWN BY TRAVELER, THOSE WEREFLAT. WE ARE NOT SEEING FARES RISESIGNIFICANTLY. IN DECEMBER THEY GUIDED FORWARD.THE GUIDE WAS AN OPERATING MARGIN BELOW LAST YEAR'SOPERATING MARGINS. WHILE THE PROPHET LOOKED GOODAND BEAT EXPECTATIONS, I'M SEEING HIGHER LOAD FACTORS OFDELTA AND MAYBE FARES FOR THE BASIC TRAVELER ARE NOT AS GOOD. THEY ARE FLAT-ISH AND BETTERFOR THE PREMIUM TRAVELER. LISA: THIS IS FASCINATING CONSIDERINGWHAT FRANCES DONALD SAID.

THERE IS NO BETTER MICROCOSMTHAN AIRLINES AND FLYING. SOME PEOPLE ARE PUT IN THE BACKAND THEY HAVE TO BOARD LASTED YOU DON'T HAVE ROOM TO PUT YOURBAGS, THEN PEOPLE LOOK FOR AND GET INCREDIBLE MEALS AND HAVEGREAT SPACE. YOU PAY UP FOR IT. ARE YOU SAYING PEOPLE IN THEBACK ARE ACTUALLY BECOMING MUCH MORE PRICE-SENSITIVE AND AREHAVING A HARDER TIME JUSTIFYING HIGH COSTS AND SEEING LESSREVENUE? THE PEOPLE IN THE FRONT AREDOING FINE AND THAT IS WHAT YOU ARE SEEING.A LOT OF HAIR LENTIL COUNT ON.

THE PEOPLE IN THE FRONT MORE.GEORGE: THAT IS WHAT IT LOOKS LIKE TOME. THIS BODES WELL FOR UNITED ANDAMERICAN. IF YOU HAVE PREMIUM SEATS, YOUCAN SELL THEM AT GOOD TICKET PRICES.THOSE FOLKS ARE WILLING TO PAY FOR COMFORT.IF YOU HAVE ECONOMY SEATS, IT WILL BE MUCH MORE CHALLENGING.A LOT MORE PRICE SENSITIVITY. IT GOES TO THAT TWO SPEEDECONOMY. ANNMARIE: IT SOUNDS LIKE THEY AREOPERATING IN A MORE EFFICIENT.

WAY AND NOT GROWING.HOW DOES DELTA GROW FROM HERE? TO THEY OFFER MORE PREMIUM FORTHE HIGH-END CONSUMERS? GEORGE: WE ARE SEEING THAT ACROSS THEINDUSTRY. IF YOU CAN PUT PREMIUM IN ANAIRPLANE, SOME OF THE ULTRA LOW COST CARRIERS ARE OFFERINGTAKING THE MIDDLE SEAT AND BLOCKING IT OUT TO CREATE MOREPREMIUM AT A HIGHER PRICE POINT FOR THE SEATS.THAT IS ONE OF THE WAYS YOU CAN GIVE PREMIUM IN.IF YOU LOOK AT DELTA LOAD FACTORS, THEY WERE NICE DURINGTHE QUARTER. 83%.

THE AIRLINES ARE PUSHINGGETTING THE AIRPLANE AS FULL AS POSSIBLE.IF YOU ARE NOT GETTING THE EXACT TICKET PRICE YOU WOULDLIKE, IF IT'S SOFTER, MAKE SURE YOU FILL THE AIRPLANE MORELIKELY HAVE SEEN WILL BE TRAVEL. AIRPLANES SEEM TO BE FULL EVERYTIME WE PULL AWAY FROM THE GATE. THAT'S ANOTHER STRATEGY FORIMPROVING REVENUE AND IMPROVING PROFITABILITY.YOU ARE PUTTING CLOSE TO THE SAME COSTS AGAINST THE HIGHERREVENUE BASE FOR THE WHOLE PLANE. JONATHAN: THE PRE-UPDATE.GEORGE FERGUSON OF BLOOMBERG.

INTELLIGENCE.DELTA UP BY ALMOST 5%. NOBODY ON THE PLANE GETS A GOODMEAL. NO ONE ON THE PLANE. LISA: RELATIVELY SPEAKING, YOU SIT INTHE BACK WITH A BAG OF CHEEZE-ITS. JONATHAN:I RATHER HAVE THOSE THAN THE SLOP THEY SERVE AT THE FRONT OFTHE PLANE. JETBLUE, GREAT FOOD. AND AIR ITALIA. LISA:I SEE SOME OF THE VERY SMALL VIOLIN OVER THERE. JONATHAN:JUST IN CASE ANYONE IS FLYING BUSINESS AND THEY AREINTERESTED, WHAT WE HEARD WAS REALLY CRITICAL.YOU CAN EXTEND THAT TO THE.

ECONOMY.FLYING IN THE FRONT AND FLYING IN THE BACK ARE TWO DIFFERENTWORLDS. LISA: IT IS BASICALLY A TIEREDECONOMY FOR EVERYONE TO SEE. IF YOU'RE SPECIAL PRIVILEGE,COME ON IN. IF NOT, YOU GOTTA CHECK THATBAG. YOU DON'T HAVE ROOM FOR THATBAG. YOUR KIDS — EH. THEY HAVE VERY DIFFERENTREALITIES FINANCIALLY. JONATHAN: THIS IS A TREND, THE PUSHTOWARDS PREMIUM AND HIGHER MARGINS. LISA:IS THE Y INTERNATIONAL TRAVEL.

HAS BEEN MORE THE GREETED.THE CARRIERS THAT ARE LISTED MYSTIC AND MORE INTERNATIONALHAVE DONE BETTER. INTERESTING TO SEE HOW THEBIFURCATED ECONOMY IS PLAYING OUT IN REAL TIME IN THEEARNINGS AND HOW THEY ADJUST. JONATHAN:DELTA DOING BETTER THAN GOOD. COMING UP NEXT, AMY WU SILVERMAN, MANDEEP SINGH ALONGSIDE TOM TZITZOURIS. THIS IS BLOOMBERG. ♪ >> THIS MOVE AND COMMODITIESHAS BEEN YEARS IN THE MAKING.

>> THE MOVIE GOT AN OIL WASTELLING FROM AN INFLATION PERSPECTIVE. >> THAT WILL CONTINUE TO PUSHCERTAIN KINDS OF COMMODITY PRICES, SPECIFICALLY ON COPPER. >> WE UPDATED OUR VIEW ON GOLD.THERE IS NOW TO A RISK ON INFLATION. >> THE WORLD IS CHANGING ANDAWAY THE MARKETS ARE NOT LOOKING AT. ANNOUNCER:THIS IS “BLOOMBERG SURVEILLANCE” WITH JONATHAN FERRO, LISAABRAMOWICZ AND ANNMARIE HORDERN.

JONATHAN:INFLATION DATA 90 MINUTES AWAY. GOOD MORNING, GOOD MORNING.THE SECOND HOUR OF “BLOOMBERG SURVEILLANCE” BEGINS NOW.S&P 500 BARELY POSITIVE. A READ ON U.S. INFLATION.HOW STRONG IS THE U.S. ECONOMY? THIS IS FROM ED BASTIAN OFDELTA SPEAKING TO BLOOMBERG. EXPECTING NO LET UP IN DEMAND.LISA: THIS STEMS FROM WHAT WE HEARDFROM GEORGE FERGUSON. IT IS SUCH A BIFURCATED ECONOMYAND SOMEBODY DIFFERENT WAYS. SPLINTERED IN TERMS OF WHO HASMONEY AND WHO WAS SPENDING AND.

WHO DOESN'T.WHAT DOES THE FED PAY ATTENTION TO?IS CPI GOING TO CALL THEIR HAND WHEN THEY LOOK AT THE WEAKNESSWE ARE SEEING IN SMALL BUSINESSES WITH CONSUMER TOLINCOLN SEES AND THE OTHER METRICS PEOPLE ARE POINTING TO?JONATHAN: DELTA AIRLINES IS MAKING MONEY. THE ESTIMATE IS 223. ANNMARIE:IT'S PEOPLE SITTING IN THE FRONT VERSUS PEOPLE IN THE BACK.I GO BACK TO THE SMALL BUSINESS SURVEY. A CHIEF ECONOMIST SAIDINFLATION ONCE AGAIN TOP OF THE.

ISSUE TO MAINSTREAM BUSINESSES.THAT GOES INTO THE CPI REPORT TODAY. LISA:THIS RAISES THE QUESTION ABOUT WHETHER INFLATION WILL CALL THEFED'S HAND. POCKETS OF STRENGTH AND POCKETSOF WEAKNESS. ARE THEY GOING TO BE PAYINGMORE ATTENTION TO THE INFLATION SIDE OF THE MANDATE, OR IS THEPRIORITY ON THE STRENGTH OF THE ECONOMY AND THE IDEA OFEMPLOYMENT REMAINING RESILIENT FOR LONGER?THAT IS WHAT THE MARKET IS GRAPPLING WITH.IT SEEMS LIKE THEY THINK IT IS.

A FED THAT'S MORE HEAVILYWEIGHTED TO THE EMPLOYMENT. JONATHAN:STEVE HAS BEEN SANGHA PEDLEY THE FEDERAL — STEVE HAS SAIDREPEATEDLY THE FED WILL WANT TO CUT. HOW LONG BEFORE YOU STOPCALLING THEM BUMPS IN THE ROAD? LISA: I LOVE THAT COMMENT.IS BUMP THE NEW TRANSITORY INSE TERMS OF FOR A FAILED CONCEPT.THEY ARE SET UP FOR THE IDEA OF INFLATION RUNNING HARDER.WHAT IS THE BIGGEST SURPRISE TO THE MARKET?WHAT IS THE POTENTIAL BIGGER REACTION?IF THERE IS AN UPSIDE SURPRISE.

OR DOWNSIDE SURPRISE?I THINK IT IS A DOWNSIDE SURPRISE.EVERYONE WILL SAY THIS IS GUINNESS USE FOR THE FED TO GO.THAT'S AMAZING. THIS IS THE ALL CLEAR TO THEM,EVEN IF INFLATION IS RUNNING HARDER THAN EXPECTED.THAT IS THE BALANCE TO RISK, TO RALLY FURTHER. JONATHAN:WE HAVE BEEN TALKING ABOUT HOW SHORT THINGS ARE IN TREASURIESAT THE MOMENT. IF YOU WANT THE ESTIMATE, WECAN PUT THEM ON THE SCREEN. 0.3%.THE MEDIAN ESTIMATE WAS 0.4%.

EQUITY SCORES LOOK LIKE THIS ONTHE S&P 500. FUTURES POSITIVE. ON MONDAY, WE WERE DOWN ALITTLE BIT AND THEN UP A LITTLE ON TUESDAY AND THAT UP A LITTLEON WEDNESDAY. REALLY MUTED PRICE ACTION GOINGINTO THIS INFLATION DATA. TEN-YEAR, 435.57.YIELDS GOING NOWHERE. THE EURO UNCHANGED AGAINST THEDOLLAR. COMING UP THIS HOUR TO DISCUSS,AMY WU SILVERMAN ON WHY THE LEFT TAIL IS WAKING UP.MANDEEP SINGH WITH A BYTEDANCE REPORT. TOM TZITZOURIS ON WHATWASHINGTON AND THE FED ARE.

ALIGNED ON.THAT'S A CONVERSATION YOU DO NOT WANT TO MISS.WE BEGIN WITH STOCKS HOLDING STEADY IN THE UNITED STATESAHEAD OF CPI DATA LATER THIS MORNING. AMY WU SILVERMAN SAYSENTHUSIASM IS BEGINNING TO FADE. THE LEFT TAIL IS STARTING TOWAKE UP. WE ARE REFERRING TO THE BED FORDOWNSIDE — BID FOR DOWNSIDE PROTECTION. AMY: GOOD MORNING.JONATHAN: HOW ARE YOU INTERPRETING THISSHIFT? LAST TIME WE SPOKE IT WAS ADIFFERENT STORY. AMY:.

MIGHT I ADD IT WAS ACTUALLY THEPEAK OF ENTHUSIASM WHEN WE LOOKED AT THE CALL DEMAND ONNVIDIA AS A PROXY FOR AI ENTHUSIASM.WE WENT TO THE 100TH PERCENTILE TO ABOUT 40TH PERCENTILE NOW.WHAT IT TELLS YOU IS THIS ENTHUSIASM IS STILL THERE BUTIT'S WANED SUBSTANTIALLY. AS YOU MENTIONED IN THE QUOTE,THE LEFT TAIL IS PICKING UP. WE ARE SEEING THE OPTIONSMARKET SAY MAYBE THERE IS SOME THING TO HEDGE OUT THERE.TO BE CLEAR, WE HAVE NOT SEEN THAT SINCE 2022. JONATHAN:IS THIS ANTICIPATION OR THE.

PRICE?SINCE WE LAST SPOKE, NVIDIA WAS DOWN BY 11%.THE PRICE HAS MOVED. WHAT DO YOU THINK THEY AREANTICIPATING? AMY: SOMETIMES THE QUESTION IS, ISTHIS AN INDICATOR OR SITUATION OF THE TAIL WAGGING THE DOG?IN OTHER SITUATIONS WHERE NVIDIA HAS SOLD OFF OR AI HASTAKEN A PULLBACK THE ENTHUSIASM HAS NOT WANED.TO ME WHAT IS DIFFERENT IS THE POSITIONING HAS STAYED PRETTYSTABLE IN THE LAST FEW YEARS. THIS IS THE FIRST TIME WE HAVESEEN PRICE ACTION CHANGE AND.

FOLKS SAY I WILL NOT JUMP INTHE POOL AGAIN. TO ME THAT NUANCE IS IMPORTANT.LISA: IS THIS BEARISH OR BULLISH?YOU CAN SAY THIS IS ON THE MARGINS NOT THAT GREAT FOR THEHIGH FLYERS AND AI. IF YOU'RE SEEING IT BROUGHT NOWAND PEOPLE ACTUALLY GETTING MORE CONFIDENT IN THE REST OFTHE SECTORS, IT'S OVERALL POSITIVE.IS THAT WHAT YOU ARE SEEING? AMY:THE PROBLEM IS THAT IS REALLY, KATE IT. WE ARE NOT SURE.WHEN YOU SEE THE MARKET BROADEN.

OUT WE EXPECT TO SEE THISTRANSLATION TO SOMETHING LIKE THE PROXY OF THE MARKETBROADENING OUT. YOU PROBABLY SEE THAT CALLDEMAND TRANSFER OVER. WE HAVE SEEN THAT A LITTLE BITBUT ACTUALLY WHAT WE HAVE SEEN MORE OF IS THE DOWNSIDE PICKINGUP. ENTHUSIASM HAS WANED. THAT HAS NOT HAPPENED IN THEPAST AND WE HAVE NOT SEEN THAT TRANSFER.THAT IS WHAT I'M WATCHING FOR IN TERMS OF THIS GOING TOCONTINUE. THE OPTIONS MARKET IS MORECONCERNED THAT IT'S MORE THAN A.

GENERAL PULLBACK. LISA:THIS IS A HIGHLY COMPLEX TIME, ESPECIALLY TOWARDS CPI COMINGOUT IN A LITTLE LESS THAN 90 MINUTES.WHAT DO YOU THINK OF MARKET IS BETTER POSITIONED FOR?AN UPSIDE SURPRISE OR DOWNSIDE SURPRISE?IS THE MARKET PREPARED FOR INFLATION RUNNING TOO HOT ORCOOLING RAPIDLY WITH POTENTIAL FOR SOME WEAKER GROWTH? AMY:THIS IS THE FIRST TIME THE MARKET IS MORE PREPARED FOR THEDOWNSIDE RATHER THAN THE UPSIDE, IN TERMS OF THE MARKETITSELF SELLING OFF.

LIKE A PRINT BEING HOTTER THANEXPECTED. WHAT I THINK IS INTERESTING ISIT IS NOT JUST THAT. THE MARKET MAGNITUDE FROM CPIIS THE HIGHEST IT HAS BEEN. WE MEASURE THAT THROUGH THESTRADDLE PRICING AND OPTIONS ITSELF.THE MAGNITUDE OF THE MOVE IS ONE OF THE LARGEST WE HAVE SEENOUT OF ALL THE PRINTS WE HAVE HAD. ANNMARIE:AND THE OPTIONS MARKET, PEOPLE ARE HEDGING WITH GOLD, CORRECT?IS IT JUST INFLATION OR ARE PEOPLE BUYING INTO THAT FOROTHER REASONS? AMY:.

ANOTHER INTERESTING PART OF THEMARKET. WE HAVE BEEN TALKING ABOUTPRIOR TO THIS LEFT TAIL WAKING UP ONE THING WE SAID WAS WEKNOW PEOPLE ARE WORRIED. WHERE IS THE WORRY BEINGEXPRESSED? WE HAVE SEEN IT IN GOLD ANDENERGY DUE TO GEOPOLITICAL RISKS. I THINK THE ASIAN BANK NARRATIVE IS SOME OF IT BUT IDO THINK IT'S AN OUTLET FOR EXPRESSING INFLATION CONCERNS.WHEN YOU SEE THAT HISTORIC PICKUP AND CALL SKEW YOU ARESAYING IF YOU OWN GOLD THE.

PAYOUT IS AT A LEVEL THAT'SEXTREMELY ATTRACTIVE RELATIVE TO HISTORY.WE CONTINUE TO SEE THAT CLIMB. IT'S AN OUTLET THAT'SEXPRESSING IT ON THE LEFT TAIL HAS NOT BEEN WORKING IN THEMARKET ITSELF. JONATHAN: HOW CONSENSUS IS THE LONGENERGY STORY BECOME? OVERWEIGHT ENERGY, OVERWEIGHTCOMMODITIES. THAT NOTE. AMY: THIS IS A TRAIN PEOPLE HAVEGONE ON BUT IT'S HARD TO PRICE THAT UNKNOWN COMING FROM THEGEOPOLITICAL RISK. THIS IS SOMETHING INVESTORSSTRUGGLE WITH.

LAST THURSDAY'S PRICE ACTIONWAS A GOOD EXAMPLE OF THAT. IF WE GET INTO AN ESCALATINGSITUATION WITH IRAN, HOW DO WE PRICE THAT?HOW DO WE PRICE THE UNKNOWN UNKNOWNS.I THINK THAT CONTINUES AND YOU HAVE THE VALUATION ARGUMENTTHAT CONTINUES TO HOLD TO, WHICH IS WHY PEOPLE CONTINUE TOSTICK WITH IT. LISA: WE ARE SEEING — I'M SEEING ALOT OF PEOPLE BUYING 125, WINTER 35 CALLS ON OIL.HOW HIGH ARE PEOPLE EXPECTING THIS PEAK IN THE SUMMER TO GET?AMY:.

A GOOD ANALOGY IS I ALSO SEEPEOPLE BUYING 30, 40 STRIKES ON VIX ITSELF.DO THEY THINK WE ARE GOING TO GET THERE? NO.IF WE DO, THE PAYOUT IS REALLY ATTRACTIVE.YOU GET THAT CONVEXITY IMMEDIATELY.IF WE GET SOME SITUATION THAT IS UNANTICIPATED, WE KNOW THETAIL EVENTS ARE RELATIVELY IN EXTENSIVE FOR EXTREME THEATTRACTIVE PAYOUTS. LISA: ONE THING I HEAR FROM YOU WASTHAT THERE HAS BEEN A SHIFT, WHETHER WITH AI STOCKS OR WITHJUST THIS PREPARATION FOR.

DOWNSIDE FROM THIS HOTTER THANEXPECTED CPI PRINT, WHICH PEOPLE ARE ANTICIPATING.WHAT DOES THIS TELL YOU ABOUT INFLECTION POINTS BASED ON YOURHISTORY WHEN YOU SEE DERIVATIVES TRADING? AMY:I KEEP HARPING ON THIS. THIS IS THE FIRST TIME THEDERIVATIVES MARKET HAS SAID SOMETHING DIFFERENT WHEN WEHAVE SEEN MOMENTUM GO THIS WAY. I THINK I WAS HERE RIGHT PRIORTO MARCH 18 WHEN THE NVIDIA CONFERENCE WAS.I SAID THERE WERE THESE CLEARING EVENTS WERE EITHERMOMENTUM CONTINUES OVER AND.

STOPS. WHEN WE SEE THIS SHIFT INMOMENTUM FROM THE OPTIONS MARKET ITSELF, THAT ISTYPICALLY A REALLY INTERESTING LEADING INDICATOR.WE HAVE NOT GOTTEN THAT. THAT IS THE ONE DIFFERENCEBETWEEN NOW AND OVER A MONTH AGO. JONATHAN: THOUGHTFUL STUFF.AMY WU SILVERMAN. I HEARD BASICALLY ECONOMISTSARE LOOKING FOR 0.3% BUT THE MARKET IS POSITIONED FOR 0.4%.LISA: ALL THE SHORTS ARE GOING TO GETSQUEEZED OUT. THIS IS A UNIQUE MOMENT AS WEHEARD FROM AMY.

THIS IS THE FIRST TIME INRECENT MEMORY THAT THE MARKET IS MORE PREPARED FOR AN UPSIDESURPRISE THAN A DOWNSIDE SURPRISE THAT COMES WITH ITFROM THE CPI PRINT RATHER THAN AMY DOES. JONATHAN:WHICH IS WHY WE HAVE SAID IN-LINE MIGHT BE THE NEW BEATWHEN IT COMES TO INFLATION AND THE WAY THE MARKET IS SET UP.EQUITY FUTURES POSITIVE 5.1% ON THE S&P 500 –.1% ON THE S&P500. DANI: — STABLE TO NEGATIVE.RISING ECONOMIC UNCERTAINTY HAS ERODED FISCAL BUFFERS.ALTHOUGH THE GOVERNMENT DEBT IS.

INCREASING, IT DID AFFIRMCHINA'S A-PLUS RATING. SIGNS THAT APPLE IS PUSHINGBEYOND CHINA. BLOOMBERG REPORTED THE COMPANYASSEMBLED $14 BILLION WORTH OF IPHONES IN INDIA AND HIS LASTFISCAL YEAR, DOUBLE THE PRODUCTION FROM THE YEAR PRIOR.SOURCES SAY THE TECH GIANT NOW AS MUCH AS 14% OR ABOUT ONE INSEVEN OF ITS MARQUEE DEVICES IN INDIA. MORE TROUBLE FOR BOWING. THE FAA IS INVESTIGATINGWHISTLEBLOWER COMPLAINTS THAT THE COMPANY TOOK SHORTCUTS TOEASE PRODUCTION BOTTLENECKS ON.

THE 787 DREAMLINER.THE PLAYMAKER SAYS THIS IS NOT REPRESENT THE WORK IT IS DONETO ENSURE THE SAFETY OF THE PLANE.SHARES OF BOEING SO FAR THIS YEAR ARE DOWN 30%.SCRUTINY OVER MANUFACTURING PRACTICES HAD BEEN BUILDINGSINCE THE MID AIR IN EARLY JANUARY. THAT IS YOUR BRIEF.JONATHAN: PRETTY CONCERNING STUFF.EARLY RUN, PROMOTING THE INTERVIEW WITH TOM TZITZOURIS.IF YOU'RE JOINING US, LISTEN TO THIS LINE.WASHINGTON COMMITTED TO RUNNING.

THE ECONOMY AT FULL EMPLOYMENTFORECAST UNTIL THE ELECTION AND THE FED IS LOOKING FOR EVERYEXCUSE POSSIBLE TO CUT AID. THESE ARE THE KIND OF THINGSPEOPLE WHISPER. THEY HAVE QUITE CONVERSATIONSABOUT. THE CYNICAL PEOPLE AMONGST US.LISA: THIS IS AN ACTIVE CONVERSATIONIN TERMS OF POLICY. YET THERE IS THIS ULTIMATEQUESTION, WHERE IS THE MANDATE NOW?KEEPING INFLATION DENTED TO 2% — DOWN TO 2%.IN TERMS OF EMPLOYMENT THAT IS.

AN IMPORTANT ONE.THAT IS WHERE THE MINDSET HAS SHIFTED. JONATHAN:WE'LL HAVE A CONVERSATION LATER THIS HOUR. UP NEXT, THE BIDENADMINISTRATION TAKING ON CHINA. >> CHINA'S WHOLE STRATEGY IS TOISOLATE THE PHILIPPINES. ISOLATE AUSTRALIA WITH ECONOMICORIGIN. ISOLATE JAPAN. OUR STRATEGY IS TO FLIP THATSCRIPT AND MAKE THE ISOLATED PARTY CHINA. JONATHAN:LIVE FROM NEW YORK THIS MORNING, GOOD MORNING. ♪.

JONATHAN:ONE HOUR, 15 MINUTES AWAY FROM INFLATION DATA IN AMERICA.THE EQUITY MARKET DEAD FLAT GOING INTO IT.FUTURES JUST ABOUT POSITIVE BY .1%.YIELDS LOWER BY A SINGLE BASIS POINT. THINGS ARE WARMING UP.434.97. IT'S BEEN SO QUIET SO FAR THISWEEK. HE WILL PICK AT 8:30 EASTERNTIME. ON SURVEILLANCE THIS MORNING,THE ADMINISTRATION TAKING ON CHINA.

>> CHINA'S WHOLE STRATEGY IS TOISOLATE THE PHILIPPINES. ISOLATE AUSTRALIA WITH THEIRECONOMIC ORIGIN. ISOLATE JAPAN. OUR STRATEGY IS TO FLIP THATSCRIPT AND MAKE THE ISOLATED PARTY CHINA.THEY ARE THE ONES THAT HAVE ISOLATED IN THE SOUTH CHINA SEAAS IT RELATES TO THE PHILIPPINES.THEY ISOLATED WHEN IT COMES TO USE ECONOMIC ORIGIN TO COERCEAUSTRALIA TO CHANGE THEIR POSTURE.THEY BECOME THE ICE LATER PARTY. JONATHAN:PRESIDENT BIDEN LOOKING TO.

CRACKDOWN ON CHINA'SISOLATIONIST TACTICS, HOSTING THE PRIME MINISTERS OF JAPANAND THE PHILIPPINES TONIGHT BEFORE A SUMMIT TOMORROW. I WANT TO GO THROUGH THIS LINEFROM THE AMBASSADOR. OUR STRATEGY IS TO FLIP THESCRIPT AND MAKE THE ISOLATED PARTY CHINA.HOW IS THAT GOING DOWN IN CHINA? DANI: — ENDA:IT WOULD BE A BIG ASK ISOLATE CHINA.HERE IN WASHINGTON WITH JAPAN AND THE PHILIPPINES IT'S ALLABOUT COORDINATION AND.

COOPERATION AT THE SECURITYSTAGE. THAT'S A HANDFUL OF NATIONS.ASIA IS MUCH BIGGER THAN THE PHILIPPINES AND JAPAN ANDAUSTRALIA. THERE IS PLENTY ACCORDING GONEON CHINA'S SIDE. IT IS FAR TOO EARLY TO SAYTHERE IS ISOLATION GOING ON AS BEST — AT BEST THEY LOOKFAIRLY MODEST. IT'S ABOUT COOPERATION.THEY WILL BE SOME ADDITIONAL COOPERATION ON U.S.NAVAL BASALS REPAIRED OR MAINTAINED AND JAPANESESHIPYARDS.

MORE CORONATION AROUNDTECHNOLOGY AND AI. IT'S ALL ABOUT BUILDING UP THISDRUMBEAT OF SUPPORT AGAINST CHINA'S CLAIMS OVER TAIWAN ANDTENSIONS IN CHINA. — IN THE SOUTH CHINA SEA.THAT IS COORDINATION. ISOLATING CHINA IS ANOTHERSTORY ALTOGETHER. ANNMARIE: IF YOU LOOK AT DEFENSE, THISCOMES ON THE HEELS OF NAVAL EXERCISES BETWEEN THEPHILIPPINES, JAPAN AND THE UNITED STATES.THAT WAS A HUGE WARNING SIGN TO CHINA.IS THIS THEIR DIPLOMATIC WAY OF.

PUSHING BACK EVEN MORE ONCHINA, ESPECIALLY IN THE SOUTH CHINA SEA? ENDA:IT VERY MUCH IS. THERE WAS A WHITE HOUSESTATEMENT MAKING A POINT THEY WANT TO SEND A SIGNAL THATCHINA NEEDS TO KNOW WHERE THEIR LIMITS ARE FOR ITS AGGRESSIONAND ITS CLAIMS IN THE EAST AND SOUTH CHINA SEA.THOSE DRILLS VERY UNUSUAL WITH AUSTRALIA, THE PHILIPPINES,JAPAN AND THE U.S. SENDING A CLEAR SIGNAL.AS THE TALKS WITH JAPAN AND WITH THE PHILIPPINES TOMORROW,IT'S ALL ABOUT CREATING THIS.

IDEA, THE OPTICS THERE IS ANALLIANCE AND PUSHBACK AMONG ALLIES AGAINST CHINA'S CLAIMSIN THAT PART OF THE WORLD. CHINA IS SELF DOES HAVE ITS OWNALLIES IN THE REGION. CHINA REMAINS THE MOST POWERFULECONOMIC FORCE IN THAT REGION. IT IS NOT LIKE WHATEVER COMESOUT OF THESE TALKS TODAY AND TOMORROW IS GOING TO RESULT INCHINA NECESSARILY TAKING A STEP BACK. ANNMARIE:RAHM EMANUEL TALKED ABOUT THIS NO MULTILATERAL APPROACH.HOW DOES THE UNITED STATES DO THAT WHEN THE PRESIDENT HASCOME OUT IN OPPOSITION OF.

NIPPON S TEEL TAKING OVER U.S.STEEL EVEN THOUGH JAPAN SAYS IT'S ONE WAY TO FIGHT CHINA?ENDA: THIS IS THE STEEL ELEPHANT INTHE ROOM. THERE'S POLITICS AND ECONOMICSHERE. THE ECONOMICS ARE, THE U.S.IS ASKING ALLIES TO DO MORE TO RESTRICT TECHNOLOGY INTO CHINAAND HELP IT IN HIS PUSHBACK AGAINST CHINA. YOU HAVE JAPAN TRYING TO BUYTHAT STEEL PLANT IN THE U.S. AND THE PRESIDENT GIVING HISDISAPPROVAL OF IT.

IT HAS NOT BEEN BLOCKED OUTRIGHT BUT HIS DISAPPROVAL WHICH IS UNUSUAL.WHAT SIGNAL DOES THIS SEND ABOUT THE U.S.ATTITUDE TOWARDS FOREIGN INVESTMENT AMONG ALLIES?THE POLITICS ARE ALSO PRETTY REAL.THIS IS A SENSITIVE SECTOR, THE STEEL SECTOR, IN A SENSITIVEELECTORAL STATE. PENNSYLVANIA. THERE IS NO DOUBT POLITICS HASTRUMPED WHAT IS GOING ON HERE. THE QUESTION REMAINS HOW MUCHMORE DAMAGE DOES IT DUE TO THE U.S. STANDING IN THE WORLD OFFREE-TRADE?.

CHINESE STATE MEDIA ARE DININGOUT ON IT. THERE'S A VIEW THAT THE PRIMEMINISTER HAS SAID HE DOES NOT PLAN TO RAISE THIS WITHPRESIDENT BIDEN TODAY. LISA: WE TALKED ABOUT THE CONCEPT OFISOLATING CHINA AND HOW IT'S BEING RECEIVED.SOME OF RAHM EMANUEL'S FIERY WORDS.YOU SEE APPLE JUST QUIETLY SHIFTING PRODUCTION OUT OFCHINA AND INTO INDIA. AT THE SAME TIME THEY DON'TREALLY SELL IN INDIA BECAUSE INDIA IS FLOODED WITH CHEAPCHINESE PHONES THAT REALLY.

DOMINATE THE MARKET.HOW MUCH HAS THIS BECOME PART OF THE ISSUE FOR THE UNITEDSTATES THAT CHINA IS FLOODING THE MARKET GLOBALLY WITH CHEAPGOODS THAT IT WANTS TO SELL NOT JUST OF THE U.S.BUT CROWDING OUT COMPETITION ELSEWHERE? ENDA:IT SEEMS TO HAVE BECOME THE TOPIC OF THE MOMENT.THE MAIN MESSAGING FROM SECRETARY YELLEN'S TRIP LASTWEEK WAS ALL ABOUT THE IDEA THAT CHINA IS MAKING TOO MUCHEXCESS PRODUCE AND DUMPING IT ON GLOBAL MARKETS AT GOODPRICES.

DURING THAT SPEECH JANET YELLENMADE THE POINT IT WAS NOT JUST A THREAT TO U.S.FACTORIES AND U.S. WORKERS. IT WAS A THREAT TO WORKERSAROUND THE REST OF THE WORLD TO DRUM UP SUPPORT.WE HAVE THE BIG IMF WORLD BANK MEETING HERE NEXT WEEK ON THEFINANCE MINISTERS WILL BE IN WASHINGTON, D.C.I WOULD BE INTERESTED TO SEE WHAT KIND OF SUPPORT WHICHCOUNTRIES WAY IN BEHIND U.S.-BUT COMPLAINED THAT CHINAIS NOW STOKING A NEW CHINA SHOCK WITH THE EXPORT OF ITSEXCESS CAPACITY AROUND THE.

WORLD.SO FAR THE ARGUMENT HAS NOT REALLY LET UP OR TAKEN OFFGLOBALLY. IT IS MOSTLY U.S.-LED. LISA: IT RAISES THE QUESTION OFWHETHER COUNTRIES HAVE TO CHOOSE ALLIANCES, WHETHER TO GOWITH THE UNITED STATES AND THE CONCEPT OF AVOIDING GOODS THATARE CHEAPER, BUT FROM CHINA TO GETTING OVER THE UNITED STATES,OR WHETHER THEY CAN MOVE TO THEIR OWN MUSIC AND IF THEYWANT CHEAPER GOODS AND IMPORT THEM FROM CHINA, GO FOR IT.ENDA: THIS IS THE BIG ECONOMIC TRADE-OFF.NO DEATH THAT CHINA HAS BEEN A.

SOURCE OF CHEAPER LABOR,CHEAPER MANUFACTURING, LOWER ENVIRONMENT OF STANDARDS.THAT IS WHY THE WORLD'S FACTORY BASE IS BASED THEIR.CONSUMERS END UP WITH CHEAPER CLOTHING AND GOODS, CHEAPERSTEEL. WHEN IT COMES TO MAKING CHOICESCOUNTRIES IN THE GLOBAL SOUTH ARE NOT IN THE MOOD FOR MAKINGA CHOICE BETWEEN EITHER THE U.S. OR CHINA RIGHT NOW.THEY ARE HAPPY TO DO BUSINESS. WE SAW THE COMMENTS FROM THEARGENTINIAN PRESIDENT. COMPANIES WILL DO PRESIDENTWOULD CHINA AS THEY WISH.

IF YOU'RE LOOKING TO THE BINARYLENS OF WITH THE U.S. OVER AGAINST ON THE ECONOMICFRONT, THAT IS NOT YET HOW IT'S PLAYING OUT. JONATHAN:TOTALLY MISSED THE BOAT. SOMETHING SEEMS SO STALE TO MEOVER THE LAST WEEK. THERE IS NOTHING FRESH, NOTHINGNEW IN THIS WHATSOEVER. LET'S DISSECT THE LINKAGE AGAIN.CHINA WANTS TO ISOLATE AUSTRALIA AND JAPAN.WE WANT TO FLIP THE SCRIPT TO MAKE CHINA ISOLATED.DO YOU REMEMBER TPP, TRANSPACIFIC PARTNERSHIP?THAT INCLUDED JAPAN, AUSTRALIA.

WHO DID NOT INCLUDE? CHINA.WASN'T AT THE PLANT EIGHT YEARS AGO.ARE WE TRYING TO REFRESH THAT ALL OVER AGAIN? ENDA:QUITE RIGHT. THERE'S A LOT OF REPETITION.IT IS TRUE OF THE OVERCAPACITY DEBATE. YOU MENTIONED TPP.THAT WAS SOLD BY THE U.S. ADMINISTRATION AT THE TIME AS AGRANT BARGAIN TO BUILD A TRADING NETWORK IN THEASIA-PACIFIC WITHOUT CHINA. IT WAS DISCARDED BY PRESIDENTTRUMP. HERE WE ARE TODAY. WHILE ACCOUNTS IF YOU LOOKWHAT'S HAPPENING OVER THE PAST.

FOR YEARS CHINA HAS GROWN ITSEXPORT BASE. IT HAS GROWN ITS ECONOMICTRADING CLOUT AROUND THE WORLD. IT CONTINUES TO COURT THEGLOBAL SOUTH. AS THE U.S. BUILDS ITS ALLIANCES AND PUTSON THE PORTRAYAL OF THE ALLIANCE WITH JAPAN AND THEPHILIPPINES, CHINA IS BUILDING ITS OWN ALLIANCES AND ITS OWNTRADING NETWORKS. IT IS NOT AS SIMPLE AS SAYINGCHINA IS BEING ISOLATED. THEY ARE CONTINUING TO BUILDTHEIR ALLIANCES. JONATHAN: GOOD TO CATCH UP WITH YOU.THE FORMER PRESIDENT TRUMP BLEW.

UP TPP WHEN HE CAME TO OFFICE.NOTHING NEW ABOUT ANY OF THIS. WHAT IS NEW? HARDLY ANYTHING.EIGHT YEARS AGO, WHAT HAPPENED? THE ELECTORATE SAID NO AND YESTO DONALD TRUMP AND ULTIMATELY NO ONE CAN CAMPAIGN OF THESEISSUES ANYMORE GOING INTO NOVEMBER. ANNMARIE: IT IS WHY THIS NIPPON STEELDEAL WILL LIKELY GET BLOWN UP. MAYBE WE WILL NOT GET ANY SORTOF CONSENSUS ON WHAT TO DO WITH THE STEEL UNTIL AFTER NOVEMBER5. JONATHAN: STRONG WORDS WITH BACK IT UPWITH POLICY. LISA:.

THAT LEADS TO THE EXPECT OFTARIFFS THAT WILL PROBABLY COME BEFORE THE ELECTION.HOW MUCH DAYLIGHT IS THERE BETWEEN THE TWO CANDIDATES ANDHOW THEY GET AHEAD OF SOMETHING THAT SEEMS ALMOST LIKE ANINEVITABILITY? JONATHAN: BYTEDANCE'S PROFITS SURGING 60%IN 2023. JON: ABOUT 60 MINUTES AND 30SECONDS. EQUITY FUTURES NOW ON THE S&PPOSITIVE BY .1%. UNCHANGED ON THE NASDAQ,POSITIVE BY A QUARTER OF A PERCENT ON THE RUSSELL.

WE HAVE — WE ARE CLOSE TO 4.8%ON THE TWO YEAR. ON THE 10 YEAR, AROUND 4.4%. PERHAPS ENCOURAGED BY WHAT'SDEVELOPING IN COMMODITIES, BRENT AND WTI.BRENT CRUDE $89.97. MORE OF A SENSE OF EASE IN THEMIDDLE EAST IN TERMS OF SOME RESOLUTION OR LACK OF ANESCALATION. THERE IS A NEW CONSENSUS TRADEWITH COMMODITIES AND OIL. IF THAT'S THE CASE, HOW MUCHDOES THIS HAVE FUEL TO GO FURTHER?.

>> OVERWEIGHT COMMODITIES. LORI CAMPESINOS STICKING WITHENERGY. THE MIDDLE EAST IS QUIET.WE HAVE SILENCE OVER THE WEEKEND.WHAT WERE WE WAITING FOR? A RESPONSE FROM IRAN. GAUGING THE PROSPECT OF ACONFRONTATION BETWEEN ISRAEL AND IRAN. I THINK CRUDE SOLD OFF BUT IT'SCONSTRUCTIVE. WE HAVE THE PROSPECT OFCONFRONTATION BETWEEN THOSE.

COUNTRIES. >> NETANYAHU HAS SAID HE HAS ADATE IN MIND OF WHEN HE WANTS TO GOING TO IRAQ — GO INTORAFAH. THIS STORY IS FAR FROM OVER. >> $89.92 ON BRENT.ON WTI, $85.73. JUST UNDER AN HOUR AWAY FROMTHE U.S. CPI REPORT. THE MEDIAN ESTIMATE IS CALLINGFOR 0.3% MONTHLY RISE, A SLIGHT TICK DOWN FROM A MONTH AGO.YOU HAVE THE SURVEY AND OUR SURVEY AND WHAT WE PRICE FOR.WE HAVE EXPLAINED THE.

DIFFERENCE. >> PRICED FOR AN UPSIDE SURPRISE AROUND 0.4%, THE I– THE IDEA THAT THIS INFLATIONARY STORY — DOES THISSET UP THE MARKET FOR A MUCH BIGGER REACTION IF WE GET ADOWNSIDE SURPRISE OR AN IN-LINE NUMBER THAN WE WOULD OTHERWISEEXPECT? OR ARE WE LOOKING AT IF WE GETTHAT THE NARRATIVE SHIFT WE HEARD FROM AMY SILVERMAN THATCOULD BE A PIVOT POINT? >> I LOVE STEPHEN STANLEY ATSANTANDER BECAUSE HE BRINGS UP.

GOVERNOR WALLER'S POINT BECAUSETHEY WILL NEED TWO CONSECUTIVE MONTHS OF THAT BENIGN INFLATIONSTORY. THAT GETS UP TO THE JUNE DATE. ANALYSTS ARE STARTING TO SPINTHE RESULTS, THIS IDEA OF .3% MONTH OVER MONTH IS BASICALLYGOOD, EVEN THOUGH WE WOULD HAVE TO SEE THAT BEFORE THE FEDCONSIDERS. >> THIS IS WHY IT'S A LOSE-LOSEFOR THE FED. IF THEY HAVE TO WAIT, THEY GETACCUSED OF WAITING TOO LONG. IF THEY ARE TOO CLOSE TO THEELECTION, IT'S POLITICS.

THIS IS THE PROBLEM. >> BASICALLY, IF THEY ARE DOINGAN OK JOB AND THERE'S NOTHING DRAMATIC TO TALK ABOUT, PEOPLENEED TO DO SOMETHING WITH THEIR DAY, SO YOU HAVE PEOPLEANALYZING THEMSELVES INTO A TIZZY. THAT IS POTENTIALLYPROBLEMATIC. THAT'S ALSO WHAT'S GOING ON TOA DEGREE. >> DELTA SHARES RISING IN THEPREMARKET, REPORTING FIRST-QUARTER EARNINGS.ALSO COMING OUT WITH STRONG GUIDANCE FOR THE SECOND QUARTERON THE BACK OF INCREASED.

BUSINESS TRAVEL AND STEADYLEISURE DEMAND, UP CLOSE TO 4%. SOME STRONG WORDS COMING FROMTHE CEO. >> BASICALLY SAYING THEY DON'TSEE ANY END IN SIGHT TO DEMAND. EVEN THOUGH YOU TYPICALLY SEE ALULL IN TERMS OF TRAVEL AHEAD OF THE SUMMER, YOU ARE NOT.THEY ARE EXPECTING THE HIGHER END OF THE ESTIMATES.IT INDICATES THE STRENGTH IN THE UNDERLYING CONSUMER BUTALSO WHAT WE WERE TALKING ABOUT WITH GEORGE FERGUSON, THE FACTTHAT PEOPLE ARE DOING WELL. >> IS THE PEOPLE AT THE FRONTOF THE BUS, THE PLANE, THAT'S.

BASICALLY PROPPING UP ALL OFTHIS WHEN IT COMES TO THE REVENUE AND PROFIT THIS AIRLINEIS MAKING, AND POTENTIALLY WE SEE UNITED SAID TO COME OUT,THEIR STOCK BEING PUSHED HIGHER. >> LET'S TALK ABOUT WHO ISMAKING MONEY, BYTEDANCE REPORTING A PROFIT SURGE OF 60%LAST YEAR. UNDERSCORING THE STRENGTH OFTHE APP. THE COMPANY FACING AN UNCERTAINFUTURE IN THE U.S. THE HOUSE PASSING A BILL TO MAKE TIKTOK BE SOLD BYBYTEDANCE UNLESS CONDITIONS ARE.

MET. MANDEEP SINGH.STRONG NUMBERS FROM BYTEDANCE. DECENT NUMBERS OUT OF ASIA WHENIT COMES TO TECH. WHAT IS BEHIND IT? >> DIFFERENT STORY IN THE CASEOF BYTEDANCE. IT IS THE STRENGTH OF THEIR APPAND HOW THE AD SPENDING IS BOUNCING.I DON'T THINK IT HAS TO DO WITH THE TIKTOK U.S.BUSINESS AS MUCH AS THE DOMESTIC BUSINESS. IN THE CASE OF TSMC, IT COMES.

DOWN TO EVERY IPLAYER — EVERYPLAYER. THEY HAVE PRICING POWER ANDHAVE NOT FLEXED IT AS MUCH AS NVIDIA HAS ON THE CHIP THEY ARESELLING. IN THE CASE OF TSMC, THEY HAVETALKED ABOUT A 50% KICKER FOR THEIR AI BUSINESS OVER THE NEXTFIVE YEARS. THIS IS A COMPANY EVERY HYPERSCALER WOULD GO TO. AND I THINK YOU HAVE CLEAR –HAVE A CLEAR LINE OF SIGHT IN TERMS OF HOW THIS BUSINESSCOULD GROW. >> TSMC HAS A WORKINGRELATIONSHIP WITH NVIDIA AND.

APPLE.CAN YOU READ INTO THESE NUMBERS AND STRENGTH ELSEWHERE AS WELL? >> IN THE CASE OF APPLE, YES.IT BODES WELL FOR A REFRESH CYCLE.WE DON'T HAVE CLARITY ON WHAT THEY ARE DOING ON THE AI SIDE.BUT CLEARLY THE DATA CENTER SPENDING IS HOLDING UP NICELY.WHEN YOU LOOK AT THE NUMBERS THAT GOOGLE AND AMAZON ANDMICROSOFT HAVE TALKED ABOUT IN TERMS OF THEIR CAPEX GOING UP,THAT ALL IS GOING TOWARDS BUYING NVIDIA CHIPS AND GOINGDIRECTLY TO TSMC TO MAKE THE.

ROUND, WHICH IS WHAT GOOGLEINDICATED. >> THERE'S A LARGER QUESTIONTHAT WAS INTRODUCED YESTERDAY WHEN INTEL CAME OUT WITH THEIDEA OF ANOTHER AI CHIP, WHICH IS HOW SATURATED IS THIS MARKET?IS THIS SOMETHING NVIDIA CAN DOMINATE AND OTHERS CAN GROW ORIS THE ENTRY OF NEW PLAYERS PROBLEMATIC? >> I CAN TELL YOU THE MARKET ISCONSTRAINED. WE HAVE GATHERED THAT FROM ANUMBER OF PARTICIPANTS WHO KEEP SAYING NVIDIA CHIPS ARE INSHORT SUPPLY, THE H100 AND A100.

SO GIVEN THE SUPPLYCONSTRAINTS, I WOULD SAY THIS YEAR, YOU ARE TALKING ABOUTINTEL MAKING A DENT. GOOGLE IS MAKING THEIR OWN CPU.THAT'S GOING TO HURT INTEL. INTEL IS THE DOMINANT PLAYERWHEN IT COMES TO THE CPU MARKET. EVERY HYPER SCALER IS MAKINGTHEIR OWN CPU. THAT HURTS INTEL AND AMD.IT HELPS THE BUILDING BLOCK COMPANIES, BUT NOT THECHIPMAKERS IN THE CPU SPACE. >> WITH TSMC, HOW MUCH OF ACLUTCH TO THEY HAVE. WE HAVE TALKED ABOUT SEEINGPRODUCTION IN OTHER PLACES.

IS THAT NOT HAPPENING? >> THEY ARE AND THEY AREDIVERSIFYING. I WOULD ARGUE THEY STARTED ANEW FAB IN JAPAN. THAT'S ALIVE. IT'S MANUFACTURING CHIPS.SO THAT DIVERSIFICATION PLAY IS HAPPENING.IN THE U.S., IT IS STILL SLOW. THEY ANNOUNCED A NEW ROUND OFFUNDING FROM THE CHIPS ACT. THEY CLEARLY STILL HAVE THESECRET SAUCE WHEN IT COMES TO THE ADVANCEMENT OFMANUFACTURING. INTEL TOUTED THE PERFORMANCE OFTHEIR CHIP YESTERDAY BUT HAVE.

NOT ANNOUNCED A LARGE COMPANYBUYING CHIPS FROM INTEL. THAT'S THE PROOF POINT THATINTEL NEEDS TO GIVE TO CONVINCE INVESTORS THEY ARE UP THERE,COMPETING WITH NVIDIA. >> I WOULD LIKE TO TALK ABOUTBYTEDANCE. IT'S THE FIRST TIME IT'SOVERTAKEN TENCENT WHEN IT COMES TO REVENUE AND PROFIT.YOU LOOK AT THE U.S. BUSINESS. THEY WANT TO GROW IT TENFOLD.THIS WILL BE LUCRATIVE. HOW EXISTENTIAL IS A GIVEN THEPOLITICS ROOM TIKTOK? >> I WOULD BE SURPRISED IFTIKTOK IS ABLE TO GET INTO.

E-COMMERCE IN THAT BIG OF AFASHION UNDER THE CURRENT OWNERSHIP. WE ARE TALKING ABOUT MORETRANSACTIONAL DATA AND I CANNOT SEE REGULATORS ALLOWING THAT TOHAPPEN. >> WHAT IS STOPPING? >> THEY HAVE TO BILL A DELIVERYBUSINESS. YOU THINK ABOUT AMAZON GOESABOUT FULFILLING THE E-COMMERCE SIDE OF THINGS.TIKTOK DOES NOT HAVE ANYTHING LIKE THAT.THEY HAVE TO PARTNER WITH A.

LARGE E-COMMERCE PLAYER.FOR THAT TO HAPPEN, I CANNOT IMAGINE ANY COMPANY ANNOUNCINGA PARTNERSHIP WITH TIKTOK. >> MAYBE WE WILL HAVE TO WAITUNTIL NOVEMBER. IT SOUNDS LIKE THERE'S NO –THERE'S NOW A CEILING ON HOW MUCH TIKTOK COULD GROW. >> IN THE U.S.OUTSIDE THE U.S., THEY HAVE APPS THEY CONTINUE TO SEEHEALTHY USER GROWTH. THEY ARE DOING WELLDOMESTICALLY. SO WHEN YOU LOOK AT COMPANIESLIKE BY — LIKE BYTEDANCE, YOU.

HAVE TO DO A SUM OF THE PARTSANALYSIS. >> APPRECIATE THAT.MANDEEP SINGH. EQUITIES POSITIVE BY 0.1% ONTHE S&P. INFLATION DATA 50 MINUTES AWAY.HERE IS YOUR BLOOMBERG BRIEF WITH DANI BURGER. >> AT LEAST THREE PEOPLE AREDEAD AFTER AN EXPLOSION AT A NORTHERN ITALIAN HYDROPOWERPLANT. THE COMPANY SET A FIRE IMPACTEDA TRANSFORMER WITHOUT PROVIDING FURTHER DETAILS.ITALY'S LARGEST POWER SUPPLIER.

SHUT THE PLANE DOWN IMMEDIATELYFOR SAFETY REASONS. RAPHAEL BOSTIC STILL SEES JUSTONE RATE CUT THIS YEAR BUT SAYS HE'S OPEN TO CHANGING HISOUTLOOK OF CONDITIONS CHANGE. HE GAVE HIMSELF FOROPTIONALITY, SAYING THE U.S. ECONOMY CONTINUES TO SHOWRESILIENCE, SO HE CANNOT DISCOUNT THE POSSIBILITY THATRATE CUTS HAVE TO MOVE FURTHER OUT. BMW SALES OF FULLY ELECTRICVEHICLES JUMPED 41 PERCENT IN THE FIRST QUARTER.MERCEDES REPORTED EV SALES THAT.

FELL 8% IN THE FIRST QUARTERWHILE TESLA REPORTED ITS FIRST YEAR ON YEAR SALES DROP SINCE2020. EV IS MADE UP ROUGHLY 50% OFBMW'S TOTAL DELIVERIES LAST YEAR WITH THE FIGURE EXPECTEDTO RISE TO 20% IN 2024. >> GOOD PIECE OF NEWS.THANK YOU. THERE HAS BEEN BAD NEWS IN THATSPACE. I HAVE BEEN CHEERING THIS QUOTEALL MORNING. WASHINGTON COMMITTED TO RUN THEECONOMY AT FULL EMPLOYMENT AT ALL COSTS UNTIL THE ELECTIONAND THE FED LOOKING FOR EVERY.

EXCUSE POSSIBLE TO CUT.UP NEXT, THE FED IN POLITICS. >> IF THEY CUT IN JUNEOR JULY, THEY WILL BE CRITICIZED FOR CUTTING TOOMUCH, IN SEPTEMBER, CRITICIZED FOR CUTTING TO CLOSE TO THEELECTION. >> THAT DEBATE NEXT. >> 46 MINUTES AWAY FROM CPIDATA IN AMERICA. 0.3% IS THE ESTIMATE IN AMEDIAN SURVEY. THE PREVIOUS RATE 0.7%.EQUITY FUTURES POSITIVE. UNDER SURVEILLANCE, THE FEDGETTING PULLED IN THE POLITICS.

>> PALA'S POLITICAL INCENTIVE ISTO GO INTO THE SUNSET AS THE PERSON WHO DEFEATED THISINFLATION. THEY WILL BE CRITICIZED. >> LESS THAN ONE HOUR AWAY FROMTHE MARCH CPI REPORT, INVESTORS LOOKING INTO INSIGHT INTO THEFED'S PATH FORWARD. “WASHINGTON IS COMMITTED TO RUNTHE ECONOMY AT FULL EMPLOYMENT AT ALL COSTS UNTIL THE ELECTIONAND THE FED IS LOOKING FOR EVERY EXCUSE POSSIBLE TO CUT TOAID THIS CAUSE.” TOM, GOOD MORNING TO YOU.

WHAT TELLS YOU THE FED ISLOOKING FOR EVERY EXCUSE POSSIBLE TO CUT TO AID THECAUSE OF THE WHITE HOUSE? >> BECAUSE WE ARE STILL AT FULLEMPLOYMENT, INFLATION IS STILL WELL AWAY FROM TARGET, AND THEFED IS ALREADY TALKING ABOUT CUTS.AND ON THE SPEAKING CIRCUIT, YOU HAVE FED LEADERS TALKINGABOUT RATE CUTS, THE NEED TO SLOW BALANCE SHEET REDUCTION.THAT'S INDICATIVE OF WANTING TO EASE SOONER RATHER THAN LATER. >> DO YOU THINK THAT'S AMISTAKE?.

WHY IS IT POLITICAL BIAS? >> IT'S A MISTAKE IF WECONTINUE TO BE AT FULL EMPLOYMENT AND MISS ON THEINFLATION MANDATE BECAUSE IT'S UNPRECEDENTED TO BE EASINGAGGRESSIVELY WHEN YOU ARE ALREADY AT FULL EMPLOYMENT ANDINFLATION IS TOO HIGH. BY DEFINITION, THAT'S A POLICYMISTAKE. BUT DO THEY KNOW SOMETHINGDIFFERENT OR IS IT A POLITICAL BIAS? WE DON'T KNOW THAT.WE DON'T KNOW IF THEY ARE SEEING SOMETHING THAT'S MAKINGTHEM CONCERNED.

THEY COULD BE CONCERNED ABOUTFINANCIAL STABILITY, WHICH IS NOT POLITICALLY BIASED, BUT HASPOLITICAL RAMIFICATIONS. THERE'S A LOT THAT COULD BEWORRYING THEM THAT IS NOT POLITICAL BIAS BUT ISSUSPICIOUS. >> TO BE CLEAR, YOU HINT THISIS A POLITICAL BIAS BECAUSE HE CANNOT FIND THE JUSTIFICATIONIN THE DATA. IS THAT YOUR CONCLUSION? >> THAT'S WHAT WE HAVE TOCONCLUDE. THAT IS THE MOST SIMPLECONCLUSION.

THERE'S ANOTHER POSSIBLECONCLUSION, THAT WE HAVE A TREASURY DEFICIT THAT ISGARGANTUAN. IT WILL BECOME PROGRESSIVELYMORE DIFFICULT TO DIGEST. THAT CAUSES NOT JUST POLITICALCONSEQUENCES BUT FINANCIAL INSTABILITY.WE KNOW WELL THAT IS THE REVERSE REPO FACILITY SHRINKSTOWARD ZERO AND T-BILL ISSUANCE RAMPS UP, YOU WILL STARTPULLING MONEY OUT OF BANK RESERVES.IF THE FED DOESN'T EASE INTO THAT, THERE'S PURE LIQUIDITY.YOU CANNOT RUN TO TRILLION.

DOLLARS DEFICITS YEAR AFTERYEAR. THERE'S A STABILITY RISK THATCOULD BE MOTIVATING THE FED AS WELL. >> I LOVE IT.POTENTIAL POLITICAL MOTIVATION BY THE FEDERAL RESERVE OR BIAS.TWO, THIS POTENTIAL THE DEFICIT IS HANGING OVER THEIR HEAD ANDTHEY WANT TO AMELIORATE SOME OF THAT.WHAT ABOUT THIS ARGUMENT THAT YOU ARE SEEING POCKETS OFWEAKNESS IN SEGMENTS OF THE POPULATION, THAT YOU ARE SEEINGSMALL BUSINESS CONFIDENCE COME.

IN AT THE LOWEST LEVEL GOINGBACK MORE THAN 11 YEARS, THAT YOU ARE SEEING DELINQUENCIESPICKUP, CERTAIN SEGMENTS HIT HARD? >> I AGREE WITH THAT.THAT'S WHY THEY SHOULD NOT HAVE RAISED RATES.THEY SHOULD HAVE RUN OFF THE BALANCE SHEET AT A QUICKER PACE.BECAUSE WHAT YOU ARE DOING IS YOU HAVE SEEN THE FED — FEDFUNDS RATE. PART OF THE REASON INFLATIONHAS REMAINED PERSISTENT IS BECAUSE THEY HAVE NOT USED THEBALANCE SHEET AGGRESSIVELY.

ENOUGH AND THE WORLD'S LARGESTVENDOR HAS NOT SEEN ANY CONSTRAINTS ON IT.IF THEY USED THE BALANCE SHEET MORE AGGRESSIVELY, THERE WOULDHAVE BEEN LESS STRAIN ON MAIN STREET AND MORE ON THE BIGSPENDERS. >> WERE SAYING THEY SHOULD HAVEDISCIPLINED THE GOVERNMENT BY NOT HELPING THEM? >> UNDERSTANDING WHERE THEEXCESS AGGREGATE DEMAND IS COMING FROM.IT'S COMING FROM HIGH NET WORTH INDIVIDUALS, AFFLUENTHOUSEHOLDS, GOVERNMENT SPENDING.

THE WAY TO RIGNET IN –THE WAYTO REIN THAT AND IS PUT PRESSURE ON BORROWING COSTS. THEY CARRY THEIR INVENTORY WITHBANK LINES OF CREDIT. THEY HAVE SEEN IT GO FROM 3% TO10%. PURE BOTTOM UP COST PRESSUREFOR THESE GUYS. IF YOU LOOK AT LARGE COMPANIES,THEY SEE THEIR BORROWING COSTS RISE 200 BASIS POINTS MAYBE.IN SOME CASES, NEGATIVE. YOU ARE LOOKING AT NEGATIVEBORROWING COSTS ON. SO THERE HAS NOT BEEN ENOUGHTIGHTENING.

>> WHAT IS MORE IMPORTANT,FISCAL OR MONETARY POLICY? >> IN TERMS OF THE LABORMARKET, FISCAL POLICY. WE ARE LOOKING AT STIMULUSCOMING OUT AGAIN IN 2024 LIKELY TARGETED TOWARDS THE MIDDLE ORTHIRD QUARTER OF THE YEAR. THAT'S MORE IMPORTANT FOR THELABOR MARKET BECAUSE IT'S DESIGNED TO KEEP THE CONSUMERSPENDING. TALKING ABOUT FINANCIALMARKETS, MONETARY POLICY IS MOST IMPORTANT.MONETARY POLICY IS BEING BLURRED BY THE AMOUNT OF CASHTHE TREASURY HAS BEEN PUMPING.

INTO THE ECONOMY. SO WE ARE IN A LIQUIDITY AIRPOCKET AS HOUSEHOLDS AND BUSINESSES PAY THEIR TAXES.PEOPLE ARE PULLING BANK RESERVES, MONEY MARKET FUNDS.THAT'S PULLING LIQUIDITY OUT OF THE MARKET.THAT'S ONE REASON WE HAVE SEEN THE EQUITY MARKETS AND BONDSOFF. IS THAT RESULTS IN A CASH HORDEBY THE TREASURY THAT WILL COME OUT THIS YEAR, LIQUIDITY WILLMATTER. AND IF THE FED EASES INTO THETREASURY CASH PUSH, YOU ARE.

LOOKING AT AN OCEAN OFLIQUIDITY COMING INTO FINANCIAL MARKETS FROM MAY UNTIL ELECTIONDAY. >> IF WE COULD TALK ABOUT THEELECTION, THIS IDEA THAT THE FED WANTS TO AID THE COURSE OFWHAT WE ARE SEEING, POTENTIALLY KEEPING BIDEN IN THE WHITEHOUSE, HOW MUCH CONSENSUS DOES POWELL NEED IF HE WANTS TO MAKETHAT CUT? >> I WOULD STOP SHORT OF SAYINGTHEY WANT TO KEEP BIDEN IN THE WHITE HOUSE.I THINK THEY WANT TO KEEP FINANCIAL STABILITY FOR MANYREASONS, ONE OF WHICH IS IT.

CREATES POLITICAL STABILITY,BUT THEIR PRIMARY MOTIVATION IS STILL FINANCIAL STABILITY.I DON'T THINK THEY CARE ABOUT THE WHITE HOUSE OR SENATE.THEY WANT TO STABILITY THAT COMES WITH A STABLE TREASURYMARKET. THAT COMES WITH HUGE POLITICALRAMIFICATIONS. I FORGET THE SECOND QUESTION. >> HOW MUCH CONSENSUS DOESPOWELL NEED? BECAUSE THE STAKES ARE HIGH ANDIT WILL BE SEEN BY MANY THROUGH THE LENS OF POLITICS.

>> HOW MUCH DO THEY NEED?THEY ALREADY HAVE PROOF THEY HAVE NOT TIGHTENED ENOUGH.WILL TODAY'S CPI GIVE THEM PROOF THEY CAN CANNOT CUT THREETIMES THIS YEAR? I BELIEVE IF WE GET A HOT CPI,IF THAT COMES IN .4% OR HIGHER MONTH OVER MONTH, THAT SHOULDTAKE THE JUNE RATE CUT OFF THE TABLE.IT SHOULD TAKE AN ANNOUNCEMENT FOR A TAPER STARTING IN JUNEOFF THE TABLE AS WELL. THAT SHOULD BE ENOUGH.BUT I DON'T KNOW IF THAT'S ENOUGH FOR THE DOVES IN THE FEDTO CONTINUE TO PULL BACK AND.

SAY WE HAVE TO WAIT ANOTHERMONTH. BUT THAT SHOULD BE ENOUGH.THAT SHOULD BE ENOUGH FOR POWELL TO SAY WE HAVE TOO MUCHINERTIA TO THIS INFLATION. IT IS STILL TOO STICKY. IF THERE'S BEEN ONE CASUALTY OFTHE FED OVER THE LAST DECADE — I WOULD STOP SHORT OF SAYINGTHEIR POLITICAL INDEPENDENCE HAVE BEEN SACRIFICED, BUT ITHINK THERE FOCUS ON A DUAL MANDATE OF FULL EMPLOYMENT ANDPRICE STABILITY HAS BEEN SACRIFICED BECAUSE OF AN EXCESSFOCUS ON FINANCIAL STABILITY,.

WHICH IS NOT ONE OF THEIR LEGALMANDATES, AND IS PROBABLY THE LEAST ACHIEVABLE OF THESEPHILOSOPHICAL MANDATES. THEY REALLY CANNOT ACHIEVEFINANCIAL STABILITY BUT THERE'S BEEN SUCH A LASER FOCUS ON ITFROM A REGULATORY STANDPOINT TO SIMPLY A MONETARY POLICYSTANDPOINT, KEEPING THE FINANCIAL MARKETS STABLE. >> THESE ARE SOME BIGSTATEMENTS. IF THE FED IS WILLING TO DOTHAT, YOU ALSO BELIEVE THE TREASURY SUPPLY COULD BE AFINANCIAL STABILITY RISK AS.

WELL? COULD YOU TELL ME WHAT TO DO ATTREASURIES? >> WE WAIT FOR THE CPR NUMBERBECAUSE THAT WILL TELL US WHICH DIRECTION THE FED WILL GO INTHE NEXT FEW MONTHS AND TELL US WHERE IT IS NOT REAL GROWTHGOING TO BE? THAT'S THE REAL BENCHMARK.THAT'S THE FIRST POINT. WHAT DO YOU DO WITH TREASURIES? THEY ARE THE GOLD THAT BACKS OFTHE FINANCIAL SYSTEM. YOU CANNOT LIQUIDATE THEMCOMPLETELY.

SO YOU CANNOT MIGRATE AWAY FROMTHEM ENTIRELY. YOU HAVE TO BE TACTICAL. WE ARE IN AN ENVIRONMENT WHERE,DEPENDING ON YOUR MANDATE, DEPENDING ON WHAT YOU DO, YOUHAVE TO HOLD TREASURIES BUT YOU DON'T HAVE TO HOLD DURATION.SO YOU CAN MOVE IN AND OUT OF DURATION.WE START TO SEE FIVE AND 10 YEAR TREASURIES APPROACH WHERENOMINAL GROWTH IS, THAT'S A GOOD BUYING OPPORTUNITY. >> CONTROVERSIAL AT TIMES.THANK YOU. SOME BIG CALLS.

>> TALKING ABOUT WHY THE FEDWANTS TO CUT SO BADLY AND HOW THIS HAS RAISED QUESTIONS OFWHAT COULD BE BEHIND THAT. IN TERMS OF THE CONCLUSION FORTHE INVESTMENT THESIS, I WONDER HOW MUCH HE IS ON THE SAME PAGEAS BOB PRINTS, BASICALLY SAYING NOT CASH BUT SHORT-TERMTREASURIES. WHAT'S THE MOTIVATION TO LEAVETHAT IF YOU ARE GETTING YIELD? UNCLEAR WHEN THEY WILL GO LOWERAND RISK OFF. >> HERE'S THE LINEUP. LISA, JAMES, STEVE, DAVID,WITH STEVE AND DAVID HAVING.

DIFFERENT VIEWS ON WHAT THE FEDSHOULD BE DOING AND HOW THEY VIEW INCOMING INFLATION DATA.THAT'S COMING UP. >> I AM LOOKING FORWARD TOANOTHER FACE-OFF. DAVID TALKING ABOUT HOW THIS ISREAL, STEVE MORE ON THE SAME PAGE AS TOM. >> CPI JUST AROUND THE CORNER.34 MINUTES AWAY. EQUITY FUTURES POSITIVE.THE SCORES IN THE BOND MARKET LOOK LIKE THIS.THE 10-YEAR YIELD LOWER BY TWO BASIS POINTS. ♪.

>> WE ARE IN AN ECONOMY THATSTILL HAS A LOT OF INFLATIONARY PRESSURE. >> I WOULD NOT ASSUME INFLATIONNUMBERS WOULD BE SUPER STICKY BUT WOULD CERTAINLY BE BUMPY. >> STILL LOOKING FORDISINFLATION TO CONTINUE. >> WE ARE TALKING ABOUTINFLATION BEHAVING. WE ARE NOT TALKING ABOUTINFLATION ACCELERATING. >> INFLATION WILL BE STICKY.AND I DO THINK THAT THAT WORKS OVER THE LONG-TERM TO THE FEDRETHINKING ITS TARGET.

>> THIS IS BLOOMBERGSURVEILLANCE WITH JONATHAN FERRO, LISA ABRAMOWICZ ANDANNMARIE HORDERN. >> THIS IS WHAT IT'S ABOUT.THE THIRD HOUR OF BLOOMBERG SURVEILLANCE BEGINS NOW.INFLATION DATA 30 MINUTES AWAY. , PREVIOUSLY — THE ESTIMATE0.3%, PREVIOUSLY 0.4%. CHAIRMAN POWELL WITH THIS.TOO SOON TO SAY WHETHER THE RECENT READINGS ARE JUST A BUMP.>> WE WILL GET A SENSE OF HOW THE MARKET IS SHIFTING.IT SEEMS THERE'S AN INFLECTION POINT.I WANT TO MAKE A CORRECTION.

IT'S BEEN THRILLING OVER THEPAST 48 HOURS. WE HAVE GOTTEN TREASURYAUCTIONS, DELTA EARNINGS. THAT'S WHERE WE ARE AT. NO ONE CAN REALLY GET AHEAD OFTHIS BASED ON THE FACT THAT WE DON'T HAVE AN UNDERSTANDING OFTHE FED, THEIR REACTION FUNCTION, AN UNDERSTANDING OFAN ECONOMY THAT'S THE MOST CONFUSING I HAVE EVER HEARD OF. >> LET'S GET TO THE MARKETBOARD AND LOOK AT EQUITY FUTURES.I BELIEVE ON THE S&P YESTERDAY.

WE WERE POSITIVE BY 0.14%.MONDAY, -5.1%. HUGE, MASSIVE MOVES. >> DELTA MOVING IN PREMARKET.I'M LOOKING FORWARD TO THIS HOUR. DAVID KELLY.I LOVE HIS NOTE. IT WAS A LITTLE BIT OF A HUMBLEBREAD. HE TALKS ABOUT WHAT IT MEANSFOR MONETARY POLICY. DOES THE PRINT TODAY SUPPORTTHAT IN TERMS OF THE FED CUTTING BEFORE OTHERS SAY THEYNEED TO? >> NOTHING HUMBLE ABOUT IT.GOOD FOR HIM. WONDERFUL.

>> 28 MINUTES AWAY FROM THATINFLATION NUMBER. LISA SHALETT ON HER OUTLOOK,STEVE ON MY RATE CUTS ARE NOT GUARANTEED, AND DAVID KELLYONLINE THE TIMING OF CUTS IS CRUCIAL.CPI DATA JUST AROUND THE CORNER. LISA SAYING THIS.INFLATION HAS REMAINED STICKY. FOR THE FED, THE HOT DATA ISNOT SIMPLY A RISK TO ESTIMATES. IT SHINES A LIGHT ON ITS LONGBIAS TOWARDS CUTTING RATES. LISA JOINS US FOR MORE.WHERE DOES THAT BIAS TO CUTTING RATES COME FROM?WHAT'S IT ABOUT?.

>> OUR PERSPECTIVE HAS BEENTHAT FOR A LONG TIME THEY HAVE BEEN FOCUSED ON MANAGINGLIQUIDITY. WE KNOW, AS SOME OF YOUR PRIORGUESTS TALKED ABOUT, LIQUIDITY HAS BEGUN TO FINALLY DRAIN OUTOF THE SYSTEM. THIS HAS BEEN A 2.5 YEAR PERIODWHERE FINANCIAL CONDITIONS HAVE REMAINED EXTRAORDINARILYACCOMMODATIVE AND I THINK THEY WANT TO CUT SO THEY GET TO QT,THE TAPERING OF QT. THEY HAVE TRIED TO KEEP ANORDER TO THINGS. THAT'S WHAT THIS IS ABOUT,MANAGING LIQUIDITY IN THE.

ECONOMY, THIS IDEA OF AMPLEVERSUS ABUNDANT THAT THEY KEEP TALKING ABOUT, THEY DON'T WANTTO HAVE A 2018 CORRECTION IN THIS MARKET. >> ARE FINANCIAL CONDITIONSTIGHT OR EASY? I DON'T KNOW. IS FED POLICY THAT TIGHT?WHERE ARE WE? >> WE ARE 100% EASY.YOU DON'T SEE MARKETS LIKE THIS. YOU DON'T SEE CREDIT SPREADSWHERE THEY ARE. YOU DON'T SEE AUCTIONS GOINGOFF WITHOUT A HITCH UNLESS THERE ARE EASY FINANCIALCONDITIONS.

>> THAT SAID, THEY ARE TIGHTFOR SOME PEOPLE, WHICH IS WHAT WE HEARD FOR SMALLER BUSINESSESAND WHAT WE HEAR WHEN WE LOOK AT DELINQUENCIES.HAVE YOU EVER FOUND THE ECONOMY THIS CONFUSING? >> NO.ONE OF THE THINGS THAT HAS HAPPENED, AND WE CAN TRACE ITBACK AS LONG AS THE PAST 15 YEARS OF WHAT ZERO INTERESTRATES HAVE WROUGHT, WHICH IS AN EXTRAORDINARY DIVERSIONSBETWEEN THE HAVES AND HAVE NOTS. SO WHEN YOU THINK ABOUT IT, FORTHE WEALTHIER 40% OF THE.

ECONOMY, HIGH RATES ARE ACTUALLY INCOME PRODUCING, ANDTHAT'S BEEN STIMULATIVE. FOR THOSE WHO NEED CREDIT, ITHAS BEEN A HEADWIND. AND I THINK THAT DIVERGENCE ISGETTING BIGGER AND BIGGER, WHICH IS WHY PEELING APART INDECODING THE ECONOMY HERE IS TOUGH, BECAUSE IF YOU ACTUALLYLOOK AT CONSUMER CONFIDENCE IN THE AGGREGATE, IT LOOKS LIKEIT'S DRIFTING UP, BUT WHEN YOU LOOK AT CONSUMER CONFIDENCE BYINCOME COHORT, THE LOWER TWO THIRDS ARE SUFFERING AND SAYINGTHERE'S INFLATION.

THERE ARE HIGHER RATES.MY CREDIT CARD PAYMENTS ARE GOING UP. >> WHICH GOES TO WHAT YOU DOFROM AN INVESTMENT STANDPOINT GIVEN THE FACT THAT THE FED HASTO MAKE A CHOICE. DO THEY TRY TO CURTAIL SOME OFTHE GAINS IN MARKETS OR DO THEY TRY TO THROW A BONE TO SOME OFTHE LOWER INCOME SECTORS WHO ARE STRUGGLING?IF THEY ERR ON THAT SIDE AND CUT RATES, ARE THEY GOING TOTURBOCHARGE WHAT'S BEEN BENEFITING THE UPPER CLASS FORTHE PAST YEAR OR LONGER THAN.

THAT? >> YES AND YES.I THINK THAT'S WHY THEY HAVE BACKED THEMSELVES INTO A CORNER.I THINK THIS LACK OF STABILITY IS GOING TO BE WITH US FOR AWHILE. AND I DON'T THINK THEY HAVE ACLEAR STRATEGY FOR HOW TO MANAGE IT. >> SOME WORDS AND PHRASES YOUHAVE USED. VIGILANCE, MAXIMUM ACTIVEMANAGEMENT, REDUCE EXPOSURE TO THE CONSUMER.WHY DO YOU THINK MARGINS WILL.

BE CHALLENGED SOON? >> IF WE PEEL THINGS APART, YOUKNOW, THE OVERALL MARGIN EXPANSION OF THE MAG SEVEN LASTYEAR WAS SPECTACULAR. IT REALLY DROVE THE AGGREGATEMARKET CAP WEIGHTED INDEX, REBOUNDED MARGINS.UNDERNEATH THAT, MARGINS ARE BASICALLY WHERE THEY WEREPRE-COVID, WHICH SUGGESTS WE ARE “NORMAL,”BUT WE ARE NOT EXPANDING IT. THE QUESTION WE HAVE FOR THATCOHORT, THE NON-MAG SEVEN COHORT, IS WHERE IS MARGINEXPANSION GOING TO COME FROM?.

IT LOOKS BASED ON THE INFLATIONDATA LIKE COSTS ARE GOING UP. MANUFACTURED INPUT COSTS AREGOING UP. WE KNOW THE PPI HAS BEEN GOINGUP. SO THAT'S A PRESSURE. IT'S NOT CLEAR TO US THAT WHILEWE MAY SAY THAT WAGE GROWTH IS DECELERATING, IT IS STILL OVER4%, AND SO OUR CONTENTION IS, WITHOUT A LOT OF TOPLINE GROWTHIN THE ECONOMY, WHICH WE MAY GET FOR SOME CYCLICAL SECTORS,IT'S GOING TO BE HARD TO GET MARGINS GOING. >> CAN IT BE MADE UP WITHBETTER TOPLINE GROWTH?.

IS THERE A BETTER WAY TO PLAYHIGHER NOMINAL GDP IN AMERICA, OUTSIDE OF THE CONSUMER? >> YES.OUR CONTENTION HAS BEEN THE BEST WAY TO PLAY WHAT WE ARESEEING NOW, A REBOUNDING GLOBAL GROWTH AND MANUFACTURINGGROWTH, IS WITH CYCLICALS, INDUSTRIALS, ENERGY, MATERIALS,FINANCIALS, POTENTIALLY AWAY FROM SOME OF THE MORE GENERALRETAIL OR CONSUMER DISCRETIONARY NAMES. >> YOU POINT TO THE FACT THATTHERE ARE MORE UPSIDE TO –.

UPSIDE SURPRISES COMING FROMOUTSIDE THE U.S. ARE YOU LIKING EMERGING MARKETSAND AREAS THAT ARE TYPICALLY MORE LEVERAGED TO A MOREPOSITIVE CYCLE EVEN THOUGH WE MIGHT NOT BE HEADING TOWARD ONE?>> ABSOLUTELY. ONE OF THE THINGS WE SPEND THEMOST TIME EDUCATING CLIENTS ON NOW IS THE EXTENT TO WHICH WEARE SEEING ALL-TIME HIGHS OUTSIDE THE U.S., TELLING THEMTHE STORY ABOUT WHAT'S GOING ON IN JAPAN, ABOUT THE REBOUND ININDUSTRIAL PRODUCTION IN GERMANY AFTER GERMANY'SLANGUISHED FOR THE LAST 18.

MONTHS.IT'S AN INTERESTING STORY. EUROPEAN MARKETS HAVE RESPONDEDAND WE THINK THERE IS MORE JUICE IN THAT LEMON.EMERGING MARKETS AS WELL. EVEN IN CHINA COME AS NEGATIVEAS PEOPLE WANT TO BE ON CHINA — CHINA, AS NEGATIVE AS PEOPLEWANT TO BE ON CHINA, DOES LOOK LIKE THERE'S IMPROVEMENT THAT'SPOSITIVE. >> ARE YOU MOVING MORE HEAVILYINTO EUROPE, INTO JAPAN, EVEN CHINA, AND OUT OF THE U.S.?IS THAT THE WAY YOU ARE PLAYING THIS?.

>> WE ARE TRYING TO REBALANCEAND BE DIVERSIFIED AS PART OF THE AGGRESSIVE ACTIVEMANAGEMENT. LET'S BE MAXIMALLY DIVERSIFIEDAND TAKE ADVANTAGE OF SOME OF THESE EMERGING TRENDS, WHICHINCLUDES NOT JUST MOVING BY SECTOR BUT MOVING BY GEOGRAPHY. >> YOU MENTIONED CHINA.ARE YOU TOURING OR IS IT A DESTINATION? >> CHINA CANNOT BE ADESTINATION FOR OUR CLIENTS HERE. I THINK THE VOLATILITY OFPOLICY AND GEOPOLITICS IS TOO.

HOT. SO WE HAVE BEEN FAVORING AN EMX CHINA PERSPECTIVE. WE THINK THERE ARE GOODOPPORTUNITIES IN PLACES LIKE BRAZIL, MEXICO, INDIA. >> TALKING ABOUT INDUSTRIALS,ENERGY, WHAT EXPOSURE IS IT? IS IT THE COMPANIES YOU LIKE ORDO YOU LIKE THESE MATERIALS? >> WE ARE OWNING BOTH.WE BELIEVE INFLATION WILL BE STICKIER.WE HAVE OWNED THE UNDERLYING COMMODITIES.THAT'S BEEN A DECENT TRADE AND.

WE THINK WILL REMAIN ONE SOLONG AS GLOBAL GROWTH IS IMPROVING.WE ALSO WANT TO PICK COMPANIES THAT ARE GOING TO BEATESTIMATES . GIVEN WHERE VALUATIONS ARE,IT'S OUR PERSPECTIVE THAT THE ONLY WAY THIS MARKET KEEPSGOING IS IF YOU HAVE THAT EARNINGS ACHIEVEMENT ANDSURPRISE. WHERE ARE THE EXPECTATIONS MOSTBENIGN OR NOT STRETCHED? IT'S ACTUALLY IN SOME OF THESEMORE CYCLICAL SECTORS WHERE PEOPLE WERE NOT BETTING ONACCELERATION AND GDP, AND.

THAT'S BEEN THE SURPRISE. >> HOW ARE YOU GOING TO PLAYTHE CPI DATA? >> WE CANNOT PLAY A PRINT.OUR BEST GUESS IS THAT IT'S BEEN TELEGRAPHED THAT WE AREGOING TO SEE YET ANOTHER ACCELERATION IN THE ONE-MONTH,THREE-MONTH AND SIX-MONTH INFLATION PRINTS, THREE POINT4% HEADLINE LOOKS ABOUT RIGHT TO. AND OUR GUESS IS THAT THE MARKET AGAIN IS POSITIONED FORTHAT NUMBER. I DON'T THINK WE ARE GOING TOGET A HOTTER NUMBER THAN THAT,.

BUT, YOU KNOW, WE WILL HAVE TOSEE. >> GREAT TO SEE YOU IN PERSON. >> GREAT TO SEE YOU. >> LISA SHALETT OF MORGANSTANLEY. I WANT TO ISSUE A QUICK CORRECTION. WE HAD A FULL SCREEN EARLIERATTRIBUTED TO FRANCE'S DOMINO BUT SHOULD HAVE BEEN ATTRIBUTEDTO ANNA WONG. ULTIMATELY WE SEE IN YOUINFLATION AROUND — WE SEE ANNUAL INFLATION AROUND 3% ONTHE.

>> IT'S BASICALLY SPEAKING TOTHIS BELIEF THAT THE FED WANTS TO CUT.WE GOT THAT FROM ANDREW HOLLING HORSE AT CITIBANK.WE COULD GET A FED CUTTING RATES. >> SOMEONE AT MORGAN STANLEYSAID SOMETHING SIMILAR. MAYBE THE BAR IS LOWER YOUTHINK FOR THE MONTH OF JUNE TO GET THAT. EQUITY FUTURES UP POINT 2.5% ONTHE S&P. AN UPDATE ON STORIES ELSEWHERE.

>> DELTA EARNINGS — DELTASHARES ARE UP IN THE PREMARKET TRADE AFTER A HIGHER FORECASTAND EARNINGS BEAT. THE CEO EXPECT NO LET UP IN THEMAN. IT ALSO HELPED LIFT SHARES OFUNITED AND AMERICAN AIR. DELTA IS THE FIRST MAJOR U.S.CARRIER TO GIVE A PREVIEW OF THEIR CURRENT QUARTER.MORTGAGE RATES TOP 7% FOR THE FIRST TIME IN A MONTH.HOME PURCHASE APPLICATIONS FELL BY THE MOST SINCE MID FEBRUARY.DESPITE THAT, THE OVERALL INDEX MADE A SLIGHT GAIN THANKS TOREFINANCING ACTIVITY.

THE DATA COVER MORE THAN 75% OFALL RETAIL RESIDENTIAL MORTGAGE APPLICATIONS IN THE U.S.GODIVA'S PARENT COMPANY IS RAISING PRICES FOR CHOCOLATE ASTHE PRICE OF COCOA SORES. THEY ARE STILL FINALIZING PRICEPLANS BUT THEY SAY THEY EXPECT GLOBAL PRICE INCREASES IN THEHIGH SINGLE DIGITS. THE COMPANY EXPECTS OCCASIONALCUSTOMER PULLBACK. TOTAL UNITS MOVED WILL BEDECLINING. COCOA PRICES HAVE MORE THANDOUBLED SO FAR THIS YEAR. THAT YOUR BLOOMBERG BRIEF.

>> IMPORTANT NEWS. THANK YOU.NEXT, GOLD TRADING NEAR ALL-TIME HIGHS. >> THE OTHER IMPACTS THAT WEARE SEEING WILL BE DIFFERENT AND THE GREATEST FORCE ISCENTRAL BANKS TRYING TO DIVERSIFY THEIR RESERVES. >> THAT NEXT.FROM NEW YORK CITY, GOOD MORNING.INFLATION DATA 16 MINUTES AWAY. >> INFLATION DATA AT 8:30EASTERN. THE S&P 500 POSITIVE BY 0.2%,YIELDS COMING IN A TOUCH, DOWN.

TWO BASIS POINTS. UNMOVED. CRUDE POSITIVE BY .7%.UNDER SURVEILLANCE, GOLD TRADING NEAR ALL-TIME HIGHS. >> THE OTHER IMPACTS WE ARESEEING ON THINGS LIKE GOLD ARE DIFFERENT.THE BIGGEST FORCE THERE ARE CENTRAL BANKS TRYING TODIVERSIFY THEIR SOURCES OF RESERVES.I THINK THIS DIVERSIFICATION STORY WILL CONTINUE.WE HAVE GONE THROUGH THIS. IF YOU LOOK OVER THE LAST 100YEARS IN TERMS OF THE PLACE OF.

GOLD IN CENTRAL BANK RESERVES,IT HAS GONE UP AND DOWN THROUGH TIME. I DON'T THINK IT WILL BELONG-TERM. >> HERE IS THE LATEST. GOLDFLIRTING WITH RECORD HIGHS AS INVESTORS AWAIT DATA. JAMES STEEL SAYING GOLD KEEPSRALLYING EVEN THOUGH FED OFFICIALS HAVE NOT MADE BULLISHCOMMENTS AND OTHER FACTORS IN THE FINANCIAL MARKET ARE NOTGOLD FRIENDLY. IT COULD HIT SOME HEADWINDS.MOMENTUM BUYING IS OVERWHELMING OTHER FACETS OF THE MARKET.JAMES IS WITH US FOR THE FIRST.

TIME IN A LONG TIME.GOOD MORNING TO YOU. GOOD TO CATCH UP.LET'S TALK ABOUT WHAT'S HAPPENING HERE AND WHAT USED TOHAPPEN. WHEN YOU SEE YIELDS MOVING THISWAY, WHAT IS HAPPENING? WHAT IS THE RELATIONSHIPBETWEEN THE TWO? >> WE HAVE SEEN A DISCONNECT.FIRST, YIELDS HAVE BEEN POSITIVE FOR SOME TIME, MANYMONTHS, A COUPLE YEARS. THE GOLD MARKET HAS BEEN ABLETO RESIST THAT. THE DISCONNECT HAS CARRIED OVER.AND WE HAVE HAD A LOT OF –.

RECENTLY, THIS YEAR, WE HAVEHAD A LOT OF BUYING COMING IN AS A SAFE HAVEN AND HEDGEAGAINST EQUITIES. ASSET MANAGERS, PORTFOLIOMANAGERS, HAVE NO CHOICE BUT TO BE IN EQUITIES, BUT THEY HAVE ACHOICE IF THEY WANT TO HEDGE AND HOW THEY HEDGE.GOLD IS A STANDOUT IN THAT REGARD. IT'S A GOOD DIVERSIFIER ANDHEAD FOR PAPER ASSETS — AND HEDGE FOR PAPER ASSETS.IT'S SENT THIS MARKET TO ALL-TIME HIGHS.THE DOLLAR HAS BEEN PRETTY FIRM.

AND YIELDS HAVE BEEN FIRM. >> CAN WE GET TO GEOPOLITICS?THE PHYSICAL CENTRAL BANK BUYING AND WHAT UNDERPINS THAT.WHAT IS THAT STORY ABOUT? >> FIRST OF ALL, YOU NEEDDOLLARS. WE ARE RUNNING A SUBSTANTIALDEFICIT AND HAVE DONE FOR SOME TIME, SO MANY CENTRAL BANKSHAVE ADEQUATE DOLLAR RESERVES THAT THEY CAN DEVOTE TO SOMEBUYING OF GOLD IF THEY WISH. CENTRAL BANKS ARE LIMITED AS TOWHAT THEY CAN BUY. THEY ONLY HAVE A FEW FIXEDINCOME INSTRUMENTS THEY CAN BUY.

AND A FEW FOREIGN CURRENCIES.THEN A PARTICULAR WANT TO BE — I'M NOT SAYING THEY DO ORDON'T, BUT IF THEY WANTED TO BE OUT OF THE DOLLAR MODESTLY,REDUCE HOLDINGS SLIGHTLY FROM 65% TO 63%, BUT DID NOT WANT TOGO INTO THE EURO OR THE YEN, GOLD IS MARVELOUS.YOU CAN GET OUT OF THE DOLLAR WITHOUT BEING IN ANOTHERCURRENCY. LIKE WITH FINANCIAL RISK, GOLDHAS PROVEN TO BE A GOOD ASSET TO OWN DURING PERIODS OFELEVATED GEOPOLITICAL RISK. GOLD HAS ACTUALLY BEEN GOINGHIGHER SINCE THE DAY AFTER THE.

HAMAS ATTACKS.IF YOU LOOK AT THE MARKET, WE DECLINED FROM MAY OF LAST YEARUNTIL OCTOBER 6. AS IT BECAME CLEAR WE WERE NOTGOING INTO A RECESSION AND THE FED WAS NOT GOING TO CUT RATESAND WE CAME OUT OF THE DEBT FIASCO AND BANK STRESSSITUATION EASED, THE GOLD MARKET DROPPED RIGHT UNTILTHERE WAS — UNTIL THOSE ATTACKS. IF YOU LOOK AT THAT ENDGEOPOLITICAL INCIDENTS AROUND THE WORLD, IT MAKES IT LIKELYTHAT NOT ONLY A CENTRAL BANK WOULD BUY BUT OTHERS WOULD ASWELL.

>> YOU ARE MAKING THAT A LOTLESS TRAUMATIC AND OTHERS WHO WOULD COME ON, SAYING — LESSDRAMATIC THAN OTHERS WHO COME ON, SAYING OTHER THINGS.ARE YOU SAYING THIS IS ON THE MARGINS, THEY HAVE FILLED THEIRCOFFERS WITH DOLLARS AND IT'S PRETTY MUCH DONE? >> KNOW, BUT I'M TRYING TO FINDSOME MODERATE LEVEL IN BETWEEN. CENTRAL BANKS ARE MAJOR BUYERS AND THEY ARE BUYING IT OVER THEAVERAGE OF THE LAST 15 YEARS. 2022, ALMOST ONE OUT OF EVERYTHREE OUNCES OF GOLD MIND.

ENDED UP IN A CENTRAL BANK.THAT'S ENORMOUS. THAT'S ALMOST 1100 TONS.THE YEAR BEFORE THAT, IT WAS MORE LIKE 450 TONS.LAST YEAR, I THINK IT WAS 1037 TONS.WE ARE LOOKING FOR MORE LIKE 800 TONS THIS YEAR.BUT THAT'S STILL WELL ABOVE THE LEVELS.WE ARE SAYING MAYBE NOT AS HIGH IN THE LAST COUPLE OF YEARS BUTHIGHER THAT WE HAVE SEEN HISTORICALLY.BUT I THINK WHAT MANY OF YOUR OTHER COMMENTATORS ARE POINTINGTO, AND I WOULD AGREE, ONCE.

CENTRAL BANKS START ON A POLICYCOURSE, IT'S USUALLY MULTI-YEAR. WHEN THEY SOLD GOLD, AND IREMEMBER WHEN THEY DID — MY HAIR WAS GOLD AT THAT TIME,BACK IN THE 1990'S — THEY SOLD FOR ALMOST 20 YEARS WHEN THEYDID SELL. OVER 15 YEARS. SO ONCE THEY START, AND CENTRALBANKS ALSO, IN THE LAST COUPLE YEARS, PUBLISHED A LOT OFPOLICY PAPERS ON WHY A CENTRAL BANK WOULD WANT TO OWN GOLD.THAT WAS ANOTHER INDICATOR THEY WERE GETTING INTERESTED. >> AFTER THE FREEZE ON RUSSIANASSETS, WE SAW CENTRAL BANKS.

BRING BACK WITHIN THEIR CONTROLPHYSICAL GOLD. DOES THAT SET THE DIRECTIONTHAT POTENTIALLY WE WILL SEE MORE OF THAT IN TERMS OF THESANCTION POLICIES COMING OUT OF THE U.S.? >> BARRY EICHENGREEN, I BELIEVE– I'M ALMOST SURE IT WAS HIM, IN A PAPER THAT HE WROTE, SAIDTHE THREAT OF U.S. SANCTIONS WOULD BE ANINDUCEMENT FOR SOME CENTRAL BANKS TO BUY GOLD. >> WOULD YOU CATEGORIZE THAT ASDE-DOLLARIZATION OR IS THAT TOO.

HARSH? >> IT IS SLIGHTLY TOO HARSH. AT HSBC, WE ARE IN THE CAMPTHAT THE DOLLAR WILL REMAIN THE WORLD RESERVE CURRENCY FOR THEFORESEEABLE FUTURE, BUT THAT IS NOT TO SAY THAT THEY NEED ASMANY DOLLARS AS THEY HAVE NOW. SO THE POINT BEING, YOU KNOW,U.S. DOLLARS 59% OF FOREIGN EXCHANGERESERVES, DOWN FROM THE 60'S A NUMBER OF YEARS AGO.YOU DON'T HAVE TO GO INTO ANOTHER CURRENCY.YOU COULD GO INTO GOLD AND.

THAT'S WHAT MANY OF THEM ARECHOOSING. >> I THINK YOU HAVE REMINDED ALOT OF BRITS AT THE HOME OF THE BROWN BOTTOM IN THE LATE 1990'S.JAMES STEEL OF HSBC, THANK YOU. GOOD TO SEE YOU.AN UPDATE ON INFLATION. IN SIX MINUTES, INFLATION DATADROPS. MIKE MCKEE, WHAT ARE YOU LOOKING FOR? >> CONTINUED DISINFLATION ON ASHORT-TERM BASIS WITH THE MONTHLY HEADLINE AND COREDROPPING A LITTLE BIT, BUT BECAUSE OF ENERGY PRICES ANDBASE AFFECTS, THE.

YEAR-OVER-YEAR NUMBER FOR CPIHEADLINE IS EXPECTED TO RISE TO 3.4% FROM 3.2%.THAT WOULD BE A DISAPPOINTMENT TO SOME.CORE EXPECTED TO GO DOWN YEAR-OVER-YEAR.THAT MIGHT MAKE THE FED HAPPY. WE SEE A LOT OF TWEETS FROMPEOPLE SAYING THIS IS THE MOST IMPORTANT CPI OF OUR LIFETIME.MAYBE NOT. OF THE YEAR, MAYBE. IT'S GOING TO TELL US SOMETHINGABOUT WHAT THE FED IS THINKING. AS IT GOES INTO MAY AND JUNE, ARISE PROBABLY MEANS JUNE MAY BE OFF THE TABLE.MAYBE IT COMES ON.

>> HOW HIGH IS THE THRESHOLD TOSHIFT THE FED GIVEN THE FACT THAT WE HAVE GOTTEN A NUMBER OFHIGHER-THAN-EXPECTED INFLATION RATE OVER THE PAST — INFLATIONREADS OVER THE PAST FEW WEEKS? >> IF IT GOES UP SIGNIFICANTLY,IT DOES HAVE AN IMPACT. CPI DOES NOT USUALLY COME IN.IT CAN'T SURPRISE BUT WHEN IT DOES IT IS BY .1%.A LOT OF THAT IS DOWN SURROUNDING.EVERYONE IS LOOKING AT THREE DECIMAL PLACES ON THE CPINUMBERS. IT'S GOING TO TAKE A LOT FORSOMETHING LIKE THAT TO HAPPEN.

>> SIT TIGHT.THE INFLATION DATA FOUR MINUTES AND 25 SECONDS AWAY.WE WILL CATCH UP WITH STEVE, DAVID KELLY.THOSE TWO REACTING TO THE NUMBERS AS MIKE MCKEE REACTS.THE S&P 500 POSITIVE BY 0.1%. YIELDS LOWER. >> INFLATION DATA 20 SECONDSAWAY. THE S&P 500 POSITIVE BY 0.16%.THE NASDAQ 100 UP 0.13%. TO THE BOND MARKET.WE LOOK LIKE THIS. YOUR TWO YEAR DOWN TWO BASISPOINTS.

YOUR 10-YEAR DOWN NOT EVEN ASINGLE BASIS POINT AT 4.3577%. MIKE MCKEE WITH THE DATA. >> WE ARE LOOKING FOR THE CPIDATA TO DROP. IT SEEMS TO BE SLOWER THAN ITHAS BEEN. WE ARE GETTING SOME NUMBERS INAND WE ARE ON THE HIGH SIDE BY .4% FOR HEADLINE AND CORE ON AMONTH OVER MONTH BASIS. THAT PUSHES THE YEAR-OVER-YEARNUMBER FROM 3.2% TO 3.5% FOR THE HEADLINE. FOR THE COURT, WE GO TO 3.7% –3.8%. NO CHANGE.

DISAPPOINTING RESULT IN TERMSOF THE HEADLINE NUMBERS. WE WILL SEE WHAT WE CAN FIND INTERMS OF WHAT PUSHED THE NUMBERS UP.FOOD PRICES WERE NOT A PROBLEM, UP JUST .1%.GASOLINE UP 1.7%, SO THAT'S NOT A MAJOR ISSUE.AND WE ALWAYS WANT TO CHECK USED CARS AND TRUCKS.THEY FELL BY 1.1%. SO THERE'S SOMETHING ELSE HERETHAT'S PUSHING IT UP. LOOKS LIKE SHELTER COSTS AREUNCHANGED, UP .4%. I WILL TAKE A DEEPER DIVE INTOTHIS AND SEE IF WE CAN FIND OUT.

THE PROBLEM. >> YOU CAN GUESS.ANOTHER BUMP IN THE ROAD. EQUITY FUTURES ON THE S&P-0.9%, DOWN ACROSS THE BOARD. NASDAQ DOWN BY MORE THAN 1%.THE SMALL CAPS NEGATIVE BY MORE THAN 2%. THE BOND MARKET.YIELDS UP BY 12 BASIS POINTS. NEW HIGHS FOR THE YEAR ON THETWO YEAR YIELD, 4.87%. YIELDS HIGHER.YOU CAN IMAGINE THE DOLLAR STRONGER. THE EURO AGAINST THE DOLLAR,1.806%. DOLLAR STRONGER.

ARE THEY GOING TO CALL THISANOTHER BUMP IN THE ROAD? HOW LONG BEFORE WE STARTCALLING IT NEW TERRAIN? >> YOU ARE GOING TO HAVE THEPEOPLE LIKE RAPHAEL BOSTIC TALKING THAT WAY.MAYBE CHRIS WALLER AS WELL. BECAUSE THEY WERE ALREADYCONCERNED INFLATION HAD NOT CONTINUED TO GO DOWN AS THEYWERE EXPECTING. NOW THIS CPI SEEMS WORRISOMEBECAUSE IT CONTINUES THE TREND OF THE PAST TWO MONTHS.THERE WAS A THAW THAT JANUARY WAS AN OUTLIER, MAYBE FEBRUARYWAS AN OUTLIER, BUT NOW YOU.

HAVE THREE MONTHS AND I THINKPEOPLE WILL START TO SAY THAT'S A TREND. >> WHICH RAISES THE QUESTION OFHOW MUCH WILL WE START TO MOVE TOWARD THE RAPHAEL BOSTIC OFTHE WORLD AND THE NEEL KASHKARI VIEW OF JUST CUTTING ONCE THISYEAR AND HAVING THE MESSAGE BE WE MIGHT GO BEFORE THE ELECTIONSEASON BUT DON'T EXPECT US TO MOVE AGAIN. >> THAT'S GOING TO BE A TRICKYTHING FOR THEM TO PULL OFF BECAUSE IT GIVES TOO MUCH OF ATIMING TO IT.

THEY DO NOT WANT TO BRING THEELECTION INTO IT. I DON'T THINK ANYONE WILLCHANGE THEIR PUBLIC VIEW ON HOW MANY CUTS THIS YEAR OR GO TONONE BETWEEN NOW AND MAY 1 BECAUSE IT'S COMING UP QUICKLYAND WE WILL GET MORE REPORTS BEFORE THE JUNE MEETING, BUTTHEY MIGHT START DIALING BACK THIS NUMBER AND MARKETS ARECERTAINLY GOING TO START PRICING IN A TWO-CUT YEARRATHER THAN THREE CUTS. THEY WILL PROBABLY GO DOWN TOONE CUT. BUT TO SAY WIND WOULD PROBABLYPUT THEM IN DANGER — IN.

DANGEROUS TERRITORY. >> MIKE MCKEE, STAY CLOSE.0.4% IS THE NUMBER. THE ESTIMATE IN OUR SURVEY,0.3%. STRIP OUT FOOD AND ENERGY ANDITS 0.4%. THE MEDIAN ESTIMATE 0.3%.EVERY TIME WE HAVE SEEN THIS, THE FED HAS CALLED IT A BUMP INTHE ROAD. FOR THE EQUITY MARKET, IT MIGHTBE MORE. S&P 500 FUTURES DOWN -.9%,NASDAQ DOWN 1%, THE SMALL CAPS STRUGGLING, DOWN 2%.TREASURIES DOWN AND YIELDS ARE.

UP. 14 BASIS POINTS ON THE TWO YEAR, PREACHING — YEAR,APPROACHING 4.9%. >> YOU CAN SEE THIS BEING BLEDOUT IN THE BOND MARKET. YOU NOW SEE ONLY TWO CUTSPRICED INTO THE MARKET IN TERMS OF FORWARD EXPECTATIONS.YOU TAKE A LOOK AT THE CURRENCY MARKET.I'M INTERESTED IN HOW THIS PUTS PRESSURE ON OTHER COUNTRIES ANDCENTRAL BANKS. YOU SEE THE EURO BREAKING DOWN AND THE YEN CROSSING THAT 1.52%MARK.

>> THE DOLLAR STRONGER AGAINSTEVERYTHING IN G10. TO BREAK THIS DOWN, STEVE ANDDAVID. STEVE HAS BEEN TALKING ABOUTTHE FED WANTING TO CUT BUT THE DATA IS NOT COOPERATING STEVEHAS BEEN TALKING ABOUT THE FED WANTING TO CUT BUT THE DATA ISNOT COOPERATING. ? >> THE DOOR YOU HEARD WAS THESLAMMING DOOR ON THE JUNE RATE CUT.JAY POWELL PRESUMABLY WANTS TO ACHIEVE CONSENSUS.HE'S ONLY HAD EIGHT MEETINGS AT A 51 IN WHICH THERE'S EVEN BEENDISSENT, SO HE WILL TRY TO.

CONVINCE THE COMMITTEE, BUT HECANNOT CONVINCE THE COMMITTEE OF SOMETHING IT DOES NOT WANTTO BELIEVE ON AVERAGE, SO HE'S NOT GOING TO BE ABLE TO GETCONSENSUS AROUND A JUNE RATE CUT.I DON'T KNOW IF HE WOULD EVEN WANT TO PUSH ONE AT THIS STAGE.UNLESS THERE'S SOMETHING WEIRD IN THIS DATA, I WOULD LOVE TOSEE WHAT PUSHED THIS. IT SOUNDS HIGH.IT STEFAN LEE MORAN PLAY THAN THE FED ONCE.I STILL THINK THEY OUGHT TO NORMALIZE OVER TIME.

>> IT'S TOO SOON TO SAY WHETHERTHE RECENT READINGS REPRESENT MORE THAN A BUMP, SAID SHERYAHN POWELL — SAID CHAIRMAN POWELL. >> I THINK THEY ARE CREATING APROBLEM FOR THEMSELVES IN TERMS OF THE PROMISES OF RATE CUTSAND INABILITY TO EXECUTE ON THEM.FORWARD GUIDANCE HAS LOCKED THEM INTO SOMETHING BECAUSETHEY WANT TO DO SOMETHING THE DATA IS NOT ALLOWING.I THINK THEY WANT TO CHANGE IT. WHETHER THEY WILL BECOMES ANINTERESTING QUESTION.

I THINK THERE'S ENOUGH DOVES ONTHE COMMITTEE THAT IT WILL BE DIFFICULT TO SELL.AS MIKE MENTIONED, THEY ARE MORE LIKELY TO HOLD STATUS QUOAND ALLOW THE MARKETS TO DO THE EFFECTIVE ADJUSTMENT FOR THEM. >> I'M STRUCK BY THE FACT THATCORE INFLATION CAME IN HOTTER THAN EXPECTED AS WELL ASEVERYTHING ELSE WHEN WE ARE SEEING OIL PRICES AND MOREBROAD COMMODITIES INCREASE, WHICH CREATES THIS QUESTION OFHOW MUCH MORE COULD INFLATION RISE?FROM YOUR PERSPECTIVE, STEVE,.

DO YOU THINK THIS DATA RAISESTHE PROPOSITION OF A HARD LANDING BECAUSE IT FORCES THEFED TO STAY HIGH EVEN IF YOU SEE SOME WEAKENING ON THEMARGINS? >> THE ANSWER IS SIMPLE. I DEFINED IT AS A HOT LANDING,AN ENVIRONMENT IN WHICH THE ECONOMY SLOWS BACK TOWARDS 2.3,WHICH IS STILL ABOVE THE REVISED TREND.BUT CBL RAISED ITS UNDERLYING RATE OF GROWTH IN THE ECONOMYTO 2%. SO MY 2.3% NUMBER IS ABOVETREND STILL.

THAT GIVES YOU A TIGHT LABORMARKET ENVIRONMENT AND SUGGESTS IT WOULD BE HARD TO GETINFLATION TO THE 2% LEVEL. COULD INFLATION WIND UPSETTLING SOMEWHERE AROUND 3% AS OPPOSED TO 2%? YES.IT STILL KEEPS THE INFLATION PERCOLATING. >> CHECK OUT THIS MARKET MOVE.THE RUSSELL GETTING SLAMMED, DOWN MORE THAN 3%.ON THE S&P 500, DOWN MORE THAN 1%.DAVID KELLEY MOMENTS AGO, THE SOUND OF THE DOOR SLAMMING SHUTON A JUNE RATE CUT.

0.4% IS THE ESTIMATE.MIKE MCKEE IN WASHINGTON DC. YOU HAVE HAD TIME TO CHEW OVERTHESE NUMBERS. WHAT IS UNDERPINNING THIS ONE? >> THERE IS NOT ANY HUGE JUMPIN ANY CATEGORY EXCEPT MOTOR VEHICLE INSURANCE, UP 2.8%.IT DOES NOT HAVE A HUGE WEIGHT BUT FIGURES IN THE CORESERVICES. WHAT YOU ARE SEEING IS A LOT OFSLIGHT INCREASES IN A LOT OF DIFFERENT AREAS. RENT UP .5% AFTER .4% LASTMONTH.

THE OWNERS EQUIVALENT RENT, THEHOUSING COMPONENT, UNCHANGED AT .4%.THAT'S STILL AN UPWARD WEIGHT ON THE OVERALL NUMBERS.WE ARE SEEING THE SAME SORTS OF THINGS THROUGHOUT THIS..7% GAIN FOR APPAREL. THINGS THAT GO OVER 1%, VERYLITTLE. BUT A LOT OF THINGS MOVING UP.1% ORDERED .2% DURING THE MONTH — OR .2% DURING THEMONTH PUSHING THINGS HIGHER. THAT WOULD SUGGEST A BROADERBASE FOR INFLATION THAN JUST A FEW OUTLIERS LIKE WE HAVE SEENIN THE PAST. >> THANK YOU. I'M.

LOOKING NOW AT SUPER COURT,SOMEONE NOTING THAT IT'S AT 4.8%, NOT WITH THE FED WANTS TOSEE. DAVID KELLY, I KNOW YOU HAVEBEEN BIG ON THE DISINFLATION, THE IMMACULATE DISINFLATION,THIS IDEA THAT WE WERE GOING TO GET A LANDING AND NATURALEFFECTS WOULD TAKE HOLD. DO YOU QUESTION SOME OF THATNOW? >> WHAT MIKE WAS SAYING MAKESME FEEL BETTER ABOUT THE SITUATION. THAT 2.8% AND AUTO INSURANCE –IN AUTO INSURANCE IS PROBABLY.

NOT A REAL MEMBER.I KNOW RATES ARE UP BUT DON'T BELIEVE THE NEGOTIATED AUTOINSURANCE RATES MONTH-TO-MONTH ARE ACTUALLY GOING UP THAT MUCHAT THIS STAGE. I ALSO DON'T BELIEVE WE WILL BESEEING 20.6% ON AUTO INSURANCE A YEAR FROM NOW.AND DIFFERENCE ARE UP, THEN THE OWNERS EQUIVALENT — AND IFRENTS ARE UP, THAN THE OWNERS EQUIVALENT IS AS WELL.BUT THE YEAR-OVER-YEAR INFLATION WE ARE SEEING ISCOMING FROM AUTO INSURANCE AND THE GOVERNMENTS MEASURE OFSHELTER COSTS AND BOTH OF THOSE.

ARE SMOOTH, BADLY MEASUREDTHINGS, WHICH SHOULD COME DOWN OVER TIME.I WILL ADMIT THIS IS TOO MUCH FOR THE FED AND THEY WILL NOTWANT TO LOOK INTO MORE DETAILS TO FIND A REASON TO CUT HEREBUT IT DOES NOT MAKE ME WORRIED. IN THE LONG RUN, INFLATION ISCOMING DOWN. >> YOUR RESPONSE? >> IT'S AN INDEX AND YOU TAKEIT AS WHAT IT IS. A LOT OF THESE COMPONENTS ARENOT SEASONALLY ADJUSTED. THEY ARE AGGREGATED.THERE'S LOTS OF COMPONENTS IN.

THE CPI.THE FACT THAT SOME COMPONENTS GO ONE WAY AND SOME THE OTHERIS WHY WE HAVE AN INDEX. I DON'T LOOK INTO THE DETAILS.I WILL LOOK AT THE MAJOR AGGREGATES AND COMPONENTS ANDTHEY ARE TELLING ME INFLATION IS NOT DOING WHAT THEY WANTEDON AVERAGE AND THIS IS A PROBLEM FOR THEM.THEY LAID OUT A SCENARIO AND ACTUALLY LOWERED THE BAR AT THEMARCH MEETING TO CUTTING RATES AND THE ECONOMY IS NOT EVENMEETING THAT LOWER BAR FOR THEM. THIS BECOMES AN ONGOINGQUANDARY FOR THEM BECAUSE THEY.

HAVE CREATED A FINANCIAL MARKETENVIRONMENT THAT'S TO ACCOMMODATIVE — THAT IS TOOACCOMMODATIVE FOR WHAT THEIR ENVIRONMENT IS.THEREFORE THEY HAVE CREATED A PROBLEM FOR THEMSELVES BECAUSETHEY — BECAUSE THERE FORWARD GUIDANCE HAS MADE THE LABORMARKET TIGHTER THAN IT WOULD HAVE NORMALLY BEEN IF THEY DIDNOT HAVE THIS GUIDANCE. THE DOTS ARE A BAD CONCEPT.THEY LEAD THE MARKET IN A DIRECTION IT SHOULD NOT GO.THIS HAS BEEN A MISTAKE SINCE IT WAS CREATED BY JANET YELLEN.NOBODY HAS BACKED AWAY FROM IT.

I HOPE WHEN THEY REVIEW IT,THEY REALIZE THIS IS A DUMB THING AND THEY WALK AWAY. >> DO YOU AGREE?TO THE DOTS CREATE THIS PROBLEM? >> I DON'T REALLY HAVE APROBLEM WITH THE TRANSPARENCY. I DO HAVE A PROBLEM WITH OVERLYACTIVE MONETARY POLICY. YOU WERE TALKING ABOUT HOW THEIR MONETARY POLICY HAS — YOU THINK YOU SLAM THE DOORAGAINST JUNE? WHERE DO YOU THINK THE FEDSHOULD HAVE TO STEP IN?.

>> I WOULD RATHER THAN GET GOING SLOWLY AND SEND THEMESSAGE, PLEASE PAY NO ATTENTION, WE ARE NOT EASING,JUST NORMALIZING. I WOULD LIKE THEM TO MESSAGETHAT WAY. I THINK THEY OUGHT TO TRY TOGET TO NORMAL BEFORE THEY NEED TO BECAUSE SOMEDAY WE WILL BESITTING AROUND THIS TABLE AND THE FED WILL BE AT A HIGH LEVELAND SUDDENLY THE FLOOR HAS FALLEN OUT, SOME SHOCK ORSOMETHING, SO WE ARE FACING THE POSSIBILITY RECESSION.THEN THE FED SAYS WE HAVE LOTS.

OF AMMUNITION.WE CAN CUT RATES FAST. I HAVE NEVER SEEN THAT WORK OUT WELL. IF THE FED HAS TO CUT RATES INAN AGGRESSIVE, RESPONSIVE WAY, IT ALWAYS HURTS THE ECONOMY.OBVIOUSLY THIS DATA DOESN'T HELP THEM. LISA:YIELDS CONTINUING TO CLIMB. ALMOST PUSHING UP TOWARD THE 5%LEVEL. 4.9 .3% THE HIGHS OF 2024.ALSO WATCHING THE RUSSELL 2000. YOU SAY A HOT LANDING.THAT RAISES THE QUESTION OF WHAT THIS WILL LOOK LIKE IF YOUSEE SOME OF THE SMALLER.

COMPANIES CONTINUE TO BEPRESSURED GIVEN THE FACT THAT THE FED LOST THEIR EXCUSE TOCUT IN JUNE. THAT WAS THE DOOR OF — THESOUND OF A DOOR SLAMMING ON THE JUNE RATE CUT. >> THE REALITY IS SMALLERCOMPANIES GET SQUEEZED BECAUSE THEY DON'T HAVE THE PRICINGPOWER BUT WAGES COST MORE. THIS IS SOMETHING THE FED THINKTHEY ARE ATTEMPTING TO DO, TO CREATE AN ENVIRONMENT WHERE –LONGER-TERM, THERE ARE GLOBAL DEFLATIONARY STORIES.THE PROBLEM.

IS THERE'S A LOT OF DOMESTICCYCLICAL INFLATIONARY STORIES. THIS IS A BATTLE THAT'S BEENGOING ON. BUT THE REALITY OF THE SITUATION IS THE DOMESTICCYCLICAL DOMINATES MORE THAN THE GLOBAL DEFLATIONARYOVERTIME. THE OTHER THING IS THE FEDKEEPS MISSING THE IMPORTANCE OF FISCAL POLICY IN THIS EQUATION.IT'S NOT ONLY MONETARY POLICY THAT CONTINUES TO STIMULATE THEECONOMY. IT'S FISCAL POLICY. THEREFORE THE FED'S CONCEPT OFWHAT THEIR NEUTRAL RATE IS, THE NATURAL RATE THEY ARE LOOKINGFOR, IS INCORRECT.

R-STAR IS SUBSTANTIALLY HIGHER.THE LEVEL OF RATES THAT NEEDS TO BE IN THE ENVIRONMENT TOBRING INFLATION DOWN IS SUBSTANTIALLY HIGHER THAN THEFED IS ASSUMING. I BELIEVE THE MARKET PRICES THEDOTS. THE MARKET TAKES A LOOK ANDSAYS THEY ARE THIS AND THIS IS WHAT WE PRICE AND.THE FORWARD STRUCTURE OF RATES INCHES ABATES THE DOTS ANDTHAT'S A PROBLEM. >> LET'S TALK ABOUT THE PRICEOF FISCAL POLICY. WE ARE TALKING ABOUT A 20 BASISPOINT MOVE ON A TWO YEAR YIELD.

WE TOOK OUT 4.8% AND 4.9%.WE ARE UP 14 ON THE TENURE. FOUR POINT 5% ON THE U.S.10 YEAR THIS MORNING. PAST THAT THROUGH THE FOREIGNEXCHANGE. THE DOLLAR STRONGER AGAINSTABSOLUTELY EVERYTHING. THE EURO BROKE LOWER..AND IF YOU ARE JUST JOINING, WE SAID EARLIER — THIS ONE ISLOUD. THE ESTIMATE WAS 0.3%. YOU HAVE HAD MUCH TIME MORE NOW.HOW DIFFICULT DOES THIS MAKE LIFE FOR CHAIRMAN POWELL NEXTTIME WE HEAR FROM HIM? >> IT MAKES IT A LITTLE BIT OFA PUBLIC DIFFERENCE BUT I DON'T.

THINK IT WILL MAKE AS MUCH OF ADIFFERENCE INSIDE THE FED IN PART BECAUSE OF WHAT BOTH DAVIDAND STEVE WERE SAYING ABOUT THE IDEA THAT THIS IS NOT DRIVEN BYA PARTICULAR THING BUT BY SEVERAL BROADER CATEGORIES.WHEN YOU LOOK, AND THIS GIVES VERY NERDY, BUT THIS IS WHEREWE ARE THESE DAYS, A LOT OF PEOPLE LOOKING AT THE THREEDIGIT NUMBERS FOR THE CHANGES, AND WE SEE HEADLINE GO DOWN FROM THREE — FROM 4.0% TO3.78 PERCENT AND A SLIGHT RISE IN THE CORE FROM THREE .58% TO3.59%.

IT DOES NOT SUGGEST INFLATIONIS REVERSING TREMENDOUSLY BUT SUGGEST WE HAVE STALLED OUT.THAT'S GOING TO BE THE INTERESTING THING FOR FEDOFFICIALS TO ADDRESS. IT PROBABLY MEANS FEWER RATECUTS BECAUSE THEY ARE NOT MAKING PROGRESS SO IT'S GOINGTO BE HIGHER FOR LONGER. >> I WANT TO TALK ABOUT THATWITH DAVID KELLY. THIS IS AN EMAIL I GOT. CORE CPI OVER — MONTH OVERMONTH GETS ROUNDED UP TO .4%. LOWER, YOU COULD ROUNDED DOWNTO .3%.

DOES THAT MAKE A DIFFERENCE INANY WAY? >> NO.I THINK THE OTHER THING IS ANY INFLATION BETWEEN 2% AND 3% IREGARD AS BASICALLY OK. I THINK THE FED IS A LITTLE TOOFOCUSED ON GETTING PRECISELY 2%, JUST AS THEY WERE IN THEIRLAST DECADE TRYING TO RAISE RATES UP TO 2%. I THINK GETTING INFLATION DOWNTO 2%, THEY ARE LITTLE TOO FORCEFUL ON THAT.I DON'T WORRY MUCH ABOUT THAT. WHAT I LOOK AT IS TWO THINGS.ONE, WE HAVE LOTS OF DEMAND BUT.

WE HAVE TREMENDOUS LABOR SUPPLY.WE WERE AT A 15 YEAR HIGH ON THE LABOR FORCE PARTICIPATIONRATE. WE HAVE MASSIVE IMMIGRATION,WHICH IS GENERATING LABOR SUPPLY.WAGE GROWTH YEAR OVER YEAR SINCE ITS LOWEST LEVEL SINCEJUNE 2021. LONGER-TERM, INEQUALITY,COMPETITION, THE LACK OF — WE'VE HAD VIRTUALLY NO STRIKESSO FAR. THE LACK OF ANY UNION PRESSURETO PUSH UP WAGES SUGGESTS THIS IS A FUNDAMENTALLYDISINFLATIONARY ECONOMY.

THERE ARE CYCLICAL FORCES THATARE MAKE IT — ARE MAKING IT SLOWER COMING DOWN.BUT I AM FINE WITH INFLATION COMING DOWN. JON:YOU HAVE SAID THIS DISINFLATIONARY TREND HADNOTHING TO DO WITH THE FEDERAL RESERVE.WHEN YOU TALKED ABOUT THE LABOR MARKET, YOU TALKED ABOUT FORCESTHAT HAD NOTHING TO DO WITH THE FEDERAL RESERVE.WHY DOESN'T THAT PLAY INTO WHAT ONE FED GOVERNORS SAVING, WHICHIS WHY DO ANYTHING AT ALL? >> YOU ARE STARTING AT THEWRONG PLACE.

IF THE FED WAS AT A NEUTRALLEVEL, I THINK THE NEUTRAL LEVEL IS A LOT HIGHER THAN2.6%, BUT IF THEY WERE AT 4%, THEY SHOULD FOCUS ON THEIR GOLFGAME. THEY DON'T HAVE AS MUCH — IMPACT ON THE ECONOMYDAY-TO-DAY AS THEY THINK. THEY HAVE BEEN TRYING TO SLOWTHE ECONOMY DOWN AND FAILED. IT'S CLEAR THEY ARE IN A ROUGHSTREAM WITH A TINY PADDLE AND ARE NOT MOVING THE BOAT AT ALLREALLY. WHAT THEY CAN DO WITH A LOT OFTHIS ACTIVE MONETARY POLICY IS DISRUPT MARKETS, MISPRICEDASSETS.

LAST DECADE, WE MISPRICEDHOUSING TERRIBLY AND NOW A LARGE CHUNK OF YOUNGERAMERICANS CAN NEVER BUY A HOUSE BECAUSE HOME PRICES ARE TOOHIGH. WE HAVE MISPRICED A LOT OF SPECULATIVE ASSETS, MEME STOCKSAND MEGA CAP STOCK OF SOME KINDS AND CRYPTOCURRENCIES.ALL THESE THINGS WERE FUNDED BECAUSE THE CARRYING COSTS WEREZERO. I WISH THE FED WOULD PAY MOREATTENTION TO WHAT THEY DO TO FINANCIAL MARKETS WITH THEIRMANIPULATION OF INTEREST RATES AND NOT WORRY TOO MUCH ABOUTWHAT THEY ARE DOING TO THE.

ECONOMY. JON:CAN WE PLAY THE WILL GAME? WHAT DO YOU THINK THEY WILL DO? >> I THINK THEY WILL SKIP INJUNE AND PROBABLY — AT THE MOMENT, I THINK THEY PROBABLYSET UP FOR SEPTEMBER OR DECEMBER, TWO RATE CUTS THISYEAR. >> I TOTALLY DISAGREE WITH WHATDAVID SAID IN TERMS OF WHAT'S DRIVING THIS AND MONETARYPOLICY RETURNING TO SOME NATURAL OR NEUTRAL RATE.THE FEDERAL RESERVE WAS TRYING TO STIMULATE THE ECONOMY WHENTHERE WAS A DEBT OVERHANG.

IT WAS WEIGHING HEAVILY ON THEECONOMY AND THE FED WAS DOING WHAT IT WAS SUPPOSED TO DO,OFFSETTING THAT OVERHANG LOW. KOBE CLEANED OUT THAT DEBTOVERHANG — COVID CLEANED OUT THAT DEBT OVERHANG.THE ECONOMY HAS BACK ITS ANIMAL SPIRITS.THEREFORE THE FEDERAL RESERVE NEEDS TO BE TAMING BACK BYKEEPING THE LEVEL OF SHORT-TERM INTEREST RATES HIGH ENOUGH NOTTO ALLOW THE ECONOMY TO GET TO EXCESSIVE IN ITS GROWTH RATE TOCREATE A SUBSTANTIALLY HIGHER RATE OF INFLATION THAT THENGETS EMBEDDED IN THE SYSTEM.

THIS IS THE MISTAKE THE FEDERALRESERVE MADE IN THE 1960'S THAT CREATED THE 1970'S AND I THINKTHEY HAVE LEARNED FROM THAT AND I HOPE THEY HAVE REALIZED NOTTO SUCCUMB TO THE IDEA THAT THERE IS SOME NATURAL ORNEUTRAL RATE WE HAVE TO GET BACK TO.IF MONETARY POLICY GETS BACK TO SOME LEVEL, WE ARE FINE.THEY HAVE TO FIGHT AGAINST THE ANIMAL SPIRITS CREATED FROM ANECONOMY THAT HAS HEALTHY BALANCE SHEETS, LOCAL PRINTDEBT BURDENS — LOW CORPORATE DEBT BURDENS, AND A LABORMARKET FEEDING THE ENGINE OF.

THE CONSUMER ECONOMY. >> I THINK YOU ARE TALKINGABOUT WALL STREET ANIMALS AND NOT MAIN STREET AND WILL. >> I HATE TO TELL YOU A LOT OFIT HAS THE SAME EFFECT. THE COMPANY STRIVES THE SHAREPRICES, KEEP THEIR EMPLOYEES. ALL THOSE THINGS MATTER.IT MATTERS WHAT HAPPENS IN TERMS OF MAIN STREET. >> WE JUST DISAGREE.I DON'T THINK MONETARY POLICY IS AS EFFECTIVE AS YOU THINK.

>> LET'S TALK ABOUT WHERE WALLSTREET MEETS MAIN STREET. WE WILL HAVE A WALL STREETRESPONSE TO THIS AND ARE SEEING IT NOW.THERE WILL BE A ONE-TWO PUNCH BECAUSE WE SEE THE PRICE ACTIONNOW AND AT 1 P.M. WE WILL GET AN OPTION OF 10YEAR NOTE THAT WILL TEST THE APPETITE OF MARKETS.HOW VULNERABLE IS THIS MARKET TO A REAL UPSET THAT WILL DISRUPT SOME OF THESE EASYMONEY CONDITIONS AND HAPPY TALK WE HAVE BEEN HEARING ALL YOUR?.

>> THESE MOVES TEND TO BEPARTIALLY REVERSED BY THE END OF THE DAY.I UNDERSTAND THE 10 YEAR OPTION IS COMING AT IT WILL PROBABLYBE A RESULT OF IT. BUT THE MORE IMPORTANT TOUNDERSTAND IS WHAT THIS SAYS TO THE AVERAGE CEO IN THIS COUNTRYIS INFLATION IS HOT. WHY AM I NOT RAISING PRICES?I MAY BE GETTING SQUEEZED ON MY MARGINS.I HAVE TO GET DOUBLE-DIGIT EARNINGS.I HAVE A TIGHT LABOR MARKET. INFLATION IS UP.WHY DON'T I JUST RAISE MY.

PRICES? THAT BECOMES THE SELF CREATING– THE SELF-FULFILLING PROPHECY OF CREATING THE INFLATIONARY.RUBBER MEETS THE ROAD BECAUSE IF I'M SITTING IN THAT OFFICEAND MY STOCK IS GETTING IT, HOW DO I DRIVE UP — GETTING HIT,HOW DO I DRIVE UP MY STOCK PRICE? >> THIS FEEDS INTO THISQUESTION THAT A LOT OF PEOPLE ARE EXPECTING MARGIN EXPANSION.WHERE IS IT GOING TO COME FROM? IT'S GOING TO COME FROM SOME OFTHESE PRICE INCREASES.

IS THAT ONE OF THE THESESUNDERPINNING SOME OF THE RALLY WE HAVE SEEN IN EQUITIES? >> I HOPE NOT BECAUSE IT WOULDLEAD TO HIGHER INFLATION IF CEOS DO THAT AND THEY SAY NOWIS THE TIME TO RAISE PRICES OR WORKERS SAY NOW IS THE TIME TODEMAND A WAGE INCREASE. WE WOULD NOT HAVE COME DOWN TO3.5% ON THE CPI IF BUSINESSES WERE ABLE TO DO THIS ANDWORKERS WERE ABLE TO DO THAT. WHEN WE GET THE DATA AND LOOKCAREFULLY HERE, WE ARE STILL GOING TO BE IN A SITUATIONWHERE 80% OF THAT IS THE.

GOVERNMENT'S MEASURE OF SHELTERCOSTS AND AUTO INSURANCE. ENERGY, FOOD, GOODS, EVERYTHINGELSE, IS NOT INFLATIONARY. WE HAVE A COMPETITIVE ECONOMY.EVERYBODY WANTS TO RAISE PRICES BUT ARE SCARED TO.

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