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tv   Bloomberg Surveillance  Bloomberg  May 25, 2022 6:00am-7:00am EDT

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>> we happen to be an bad inflation situation. >> rates are going up with slowing growth in that combination is pretty deadly. >> maybe in the near term we get a little pause because the fed will probably follow the forward curve up. >> it's important for the fed to rein in inflation as soon as
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possible. >> this is bloomberg surveillance. tom: good morning, we are in davos, switzerland, the world economic forum on a wednesday. a somber davos but a far more somber america. lisa: after one of the most deadly shootings at a school in the nation's history, yet another one, how many times do we have to do this? we are talking about the big issues and how investors rearrange money, what about the social aspects that led to this kind of outcome? tom: we have someone who's challenged modern economics and social thinking and she spoke of it and said these repetitive
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processes are there and we are looking for the courage to finally exit. lisa: 18 children have lost their lives as a result of the shooting and one teacher as well as the gunman step markets are still turning as they try to figure out what the road ahead is. you are seeing the global economy reflected in number of data points yesterday step you are seeing softening and that praising in on the margins. tom: i thought at the end of our show yesterday, it was more than softening. i noted that oil is $115 per barrel. lisa: those products are getting to such heights that they are crimping consumers ability. lisa: maybe we will get to stay
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here. people are trying to game out the situation and the social unrest stemming from higher food prices. we will have a host of incredible guests to talk about all these things. ian bremmer will join us and he has some fascinating things from eurasia group about covid and the waves that will not make a dent in the u.s. check -- china will be shut down for a little longer. how much does she focus on the s in the wake of this shooting. tom: a lineup and we are looking forward to speaking to dr. yurgen. last night, the roosevelt room in the white house was not filled for this. it was built for diplomacy and
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for important government meetings. last night, the president of the united states from the roosevelt room. >> we are in gods name is our backbone? the courage to deal with and stand up to the lobbyists? it's time to turn this pain into action step for every parent, for every citizen of this country. tom: joe biden from last night . annmarie, we have seen this before. what will change in the east room this afternoon? >> the president in the eastern will talk about public safety and signing a law about it. what will change across america is very little in the sense that we have been here before. this is the deadliest attack on a school since the sandy hook elementary school shooting in 2012. there is parkland, there was
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santa fe and there is also mass shootings in las vegas, san bernardino. there is so many that i can't even explain how many there have been. while there is lots of debate in america about the right to own guns, there is public support about making sure that everyone goes through universal background checks. there has been legislation passed in the house to do this stuff last march, the issue is that they didn't think they could get it through the senate given that only 60 votes were needed and that made it 50-50. lisa: has there been any soul-searching in the loosest gun laws in the nation? >> there are some states, nine or 12 of them including the district of columbia that have these laws and there is
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bipartisan support including from senator rubio brought this bill up to have individuals close to maybe someone who owns a gun who they think is experiencing violent behavior could get their guns taken away. a lot of individuals campaign on making sure that in these states like texas that they have easier access to guns. we should note that there is going to be an nra convention this weekend in that very state of texas. tom: we spoke to the senator from south to go to the other day, the former governor. he and i were reminiscing about trips to south dakota. you go out there with the romans of past guns of america like a 12 gauge shotgun. that's not what we are talking
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about here. i don't know the list of guns used yesterday but the answer is military hardware applied to the killing of children. is there any discussion in the senate of distinguishing between guns? >> this is something that has been brought up a lot of times in the house alongside the universal background checks step we've had up ban on some of these assault style rifles in the past. there was loopholes the gun rights advocates have said that manufacturers would tweak them slightly so they would be able to get through. in the senate, this is not a discussion now. there is one thing that happened last night which senator schumer set up legislative calendar to bring that hr eight and universal background check and also another legislation, a bill that passed in the house that
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would allow an expansion of how long the background checks can go forward. the process of that gun transaction does not go through and you have to wait for the background check to be fulfilled stop senator schumer is trying to push this through but potentially, it will be a political vote so that they make sure at this moment in american history where there is a lot of anger about gun violence that senators are on the books but it doesn't look at this moment that he has the senators to pass that. tom: it's an american disease. we will get full coverage when the president speaks this afternoon. lisa: i believe he is speaking at 4 p.m. tom: i don't know anyone more well if i to talk about this then the woman from the shores of manhattan. that would be you. lisa: there is an incredible
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cultural divide in america and it's a running tension at davos where it's a celebration of flat -- capitalization and globalization were many nations are moving away from that. how do you unite two views to have a discussion in a more moderate way? tom: right now, david riley joins us from bluebay asset management. i've got to go to bonds and look at the price decline in bonds. there are those beginning to consider duration and considering the courage to acquire fixed income. do you have that courage this morning? >> i don't have the courage to go out right long in terms of corporate fixed income. you are right, one of the very important shift we are seeing in the market in recent weeks is
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that when risk assets sell off, then bonds have been rallying and yields have been falling. i think it's hard to take a big directional that on rates right now. we still have inflation at high levels. we have a lot of uncertainty as to what the path of the inflation will be. i don't think we can really anticipate as yet any kind of dovish rhetoric or potential calls whether from the fed or other central banks. the level of volatility is such that i don't think it makes sense to make big directional bets. lisa: let's get into the relative value opportunities. the fed funds rate could be 1.5% next year or north of 5%. what are the relative values you see? >> that highlights the extent or
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the wide distribution along growth and inflation outcomes. because of that, i think we will continue to see very high levels of volatility. relative value is between german bruins versus u.k. guilds. i think the u.k. is in stagflation. it has a situation where inflation is high and going double digits but also a pickup in terms of wage growth and inflation expectations. i do actually think there is relative value to be had between the bones and the guilds. -- between the boones - bunds and the guilds.
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i think we saw the u.s. 10 year fall another 20 points, then i think i would be inclined to go the other way and start rebuilding a short position. i don't think you can do that right now. long duration in credit is an interesting play right now. lisa: what is your cash allocation at the moment? >> it's pretty high across most of our strategies. we are at about 6% which is generally higher than we would normally run and that reflects a defensive positioning towards this given the macro situation we face. tom: i've got to ask about your assessment of the bank of england. these central bank's of a certain character. is the bank of england on message? >> no, i think the bank of
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england is quite confused. it has the highest inflation in the g7 which is set to move higher and at the same time, is the biggest hit for many years to u.k. household incomes coming from primarily higher energy prices. the bank of england has warned about a potential recession. i think the messaging is confusing and they need to address inflation and set that signal stronger. otherwise, we could see quite a significant pressure on u.k. assets, particularly sterling. tom: thank you so much. he nails it, the messaging in davos is confusing. lisa: i think that's accurate even the potential for potential risk and how do you know that down. that is emphasized yesterday by
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getting a few data points including disappointing housing data and suddenly people are thinking the fed will back away. tom: well were the -- where will the bar market be in january? lisa: where will we be? tom: state with us, wonderful guests to join us in an annual visit with daniel jurgen. this is bloomberg. ♪
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>> in the first two weeks of may, the consumer spent 10% more than they did last may on top of paying taxes. there are 8% more transactions. tom: bank of america chief executive officer, i thought he
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was fired up. lisa: he was talking about how the consumer still looks calm which is a blessing and a curse for the federal reserve that has to parse through that strength and what it takes to end it. tom: the repeat video of mr. moynihan is worth watching and captures the spirit and the choice that some of these banks have. we welcome all of you to davos, switzerland. i did a lamb and goat check and i think they are in the barn. maybe they will come out after the torrential rain step someone who was written about the torrential rain of the world landscape is daniel jurgen at s&p global. in this more somber davos, we must speak to him about the commanding heights that codify a
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good three years ago. in commanding heights, you spoke about the journey of communism. what is the journey of putin? >> we are at the end of an era and is bracketed by davos become -- because we so the opening up of the soviet satellites with the world connie in the global economy. that's now fragmenting. back to a more fragmented and less globalized world. lisa: how much finger-pointing has there been from germany and their move away from russia in terms of independence on oil? >> the german economic minister said it was a mistake in the last few years. it really is a big change. do you get the sense there is a cohesive plan to move away and
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substitute those supplies or do you think the plan is still lacking? >> it's an on cohesive plan. the u.s. wants to embargo russian crude oil and cannot get hungry on boards of the keep postponing it but individual countries will cut back and what putin has done has undercut what is his base market and that's what russia will not be an energy superpower anymore. tom: september 12, 2001, george will wrote about this. robert gates has spoken of our holiday from history is over. it -- general mark kimmitt says our holiday from history is over. you more than anyone in the modern urea -- your have written about this. if the holiday from history is over, what will we do? >> we have moved from the wto
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consensus to great power compensation. i think it's fragmented globalization. it's a problem for companies if they play by the playbook of globalization but that doesn't work anymore and the world is fragmented. tom: you do a beautiful job of counseling between the elites and the people. the part on brazil was brilliant. the great theme is the police are disassociated from the broader middle-class, higher inflation which rushes the middle class. what is your prescription for institutions to reconnect to the middle class? >> it's not a simple thing, inflation is so undercutting of society and build so much anger. you are dealing with inflation but at a time when world energy is disruptive, food and 70% of the cost of food is energy.
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i think these will be -- i think it's trouble ahead and you will see social instability in countries. lisa: is it appropriate that china is not here being that there economy has such an influence? >> they are not here because of covid and you have to go back and quarantine. russia you understand that the absence of china's more significant. lisa: probably more of the reason why there is so much uncertainty. a number of reports came out and if we keep getting these waves of covid in china remains in lockdown, you have a different parameter of risks in terms of the downside to growth. what is your view on that? >> it means you get the supply chain problems in that adds to the disruption and inflation. that's what continues to unfold.
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covid is a d globalizing factor in the world. tom: there is certification by the philippine congress of mr. marcos junior. you know the name for many years ago in a huge dip date with a resounding win in the philippines. some would say this as an autocratic tendency, a turn to hypocrisy that maybe we see in hungary. how does a liberal society fight against the trend of autocracy? >> i think it is being repeated and a lot of countries. once people are in power for eight or 10 years, you are in a different game and we've seen that with russia. tom: but we are all on the chinese party congress where its president xi for life. >> that's a central meeting because it will set the worse
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for china for some time to come step they are struggling with party control at the same time maintaining a vibrant economy. lisa: do you the conversation is moving away from fossil fuels and is taking on a new geo-lyrical significance -- geopolitical significance? >> it means there is much more concerned about access to fossil use and investment in the preemptive investment there has been. a lot of the discussion i have heard is you are going to need more investment resources and you cannot count on a smooth path ahead. the biggest problem now was it's a more discordant discussion than in the past. tom: global wall street doesn't give a dam about international relations. his $150 rent feasible? >> it could happen as we see the
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market tight now and the chinese get out of covid and demand goes, there will either be a political response -- lisa: for where to gasoline prices go with refined goods? >> we are not only having a problem with oil but also read mining stuff we had a global refining system and that's being disrupted as well as a result of putin. tom: we are out of time but thanks for being with us. i can't say enough and a read of quote the commanding heights" we come in handy now. coming up, ian number will join us with the eurasian group. this is bloomberg. ♪
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tom: good morning, from the world economic forum in davos.
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there will be a january meeting here. time to put jonathan ferro on assignment. we are sort of mid-davos this morning. lisa: everyone is pretty exhausted because it's been a working davos and that's what everybody says in terms of trying to make the most of the proximity of these governments as well as the chief executive officer in the company. tom: difficult news on the war in ukraine this morning. kailey: it's quiet and it doesn't look like there's a lot of conviction out there with futures positive than negative no positive again. we go nowhere in the bond market. where you are seeing more action
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is in foreign exchange. beneath the surface of the equity market, there is a warning on advertising with a small bounce this morning. it's a bigger move for nordstrom. it caters to the higher end consumer and it goes to show you the contrast between those at the high and low and. toll brothers is higher as well. they actually cut their delivery outlook for the full year with executives warning of a moderation in demand after the unprecedented pace of the last two years. how that is weighing on housing is interesting to contrast that
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commentary with the data out of the u.s. yesterday. tom: thank you so much. within the sphere of international relations, one of the moments was 20 years of go with farid zakaria with the post-american world. he says there is a revolutionary moment and a required read is ian bremmer, the power of crisis. he joins us this morning. i thought fareed zakaria was dead on about the moment we are in and the power of crisis except it's not crisis. >> crises. tom: they are upon us. >> why are you shaking your head. tom: she shakes her head on a daily basis. the many crises we have now, which matters? >> ukraine is the one that
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matters to everyone here. for the last three months, the focus has been ukraine. the confrontation is between russia and nato. the potential for negotiations to bear fruit is zero for the first time in history we have forcibly decoupled a g20 economy from the world economies. that's a big deal especially for traffic and globalization. his purely because of the act russia has taken and it's not just a cold war between russia and nato there are elements of a hot war. people are rather disconcerted about that. lisa: our people focused on the right thing? they have said the bigger news is that china is not here because of covid and that has a substantive impact on the economy. should we be more focused on a decoupling there? >> because we are not doing a
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significantno, decoupling there. everyone yesterday was asking about the biden-taiwan thing. he has already said that. china is the most important rising power in the world. the fact is, u.s.-china relations are interdependent and they are more stable. russia has completely subverted a 30 year peace dividend that europe has enjoyed. i am a new yorker but also, we are in europe so this is truly a generational change. that's what we should be focused on. lisa: how much of the issues of supply chain and a widening divide and the quality of life? >> the number of times i have heard from people in the last three months that says you are focused on ukraine because your white people and don't care about afghanistan. there is a point to that argument but the fact is, the
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poorest people in the world will be more vastly impacted by the ukraine crisis. lisa: how much is this an existential threat of europe? we are in europe and people are focused on that so how much are people concerned about the trickling out into a bigger challenge? >>, char they concerned that gas from russia through ukraine to europe could be cut off at any moment by the russians or the europeans or the ukrainians or by a nonstate terrorist? the vulnerability that comes from the strategic mistake made by europeans to allow themselves to become as dependent as they have on energy from russia is an enormous vulnerability now. furthermore, the fact that a country like ukraine has a big delegation is fighting for their survival and to avoid being wiped off the map by the
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president of russia and they are doing that fighting in part so the poles don't have to. the europeans feel that but not all of them. the germans do, the polls due, it matters. don't underestimate how much of a change this reflects for a europe that for 30 years felt like national security did not matter for them. tom: how do we support them? some say is every nation for itself. 800 miles of the finnish border down to erdogan and that huge span of the new eastern front. how does america respond? >> $40 billion is one way.
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i will bring back the biden-taiwan thing. when he says the united states will defend taiwan, what he is saying is not changing the policy. he feels like we are defending ukraine not because there are boots on the ground or a no-fly zone but the americans defending ukraine and you when you talk about the level of sanctions and you freeze half of russia's global assets, when you literally cut them off from the g7 and you support ukraine's with intelligence and money and arms, the reason the government still exists is because of the courageousne of ukrainianss fighters but it's what america any -- any american allies are doing. tom: is an advantage for mr. pruden the new character of -- mr. putin the new character of our new isolationism?
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>> if trump gets the nomination for the republican presidency and he says why are you sending $40 billion to the ukraine's? why is this our fight? his son is been tweeting that over the past few days. i think the view will be different. lisa: we just saw the u.s. treasury department agree to the exemptions. >> i'm surprised they didn't do that a month ago. lisa: how much of a liability is that the u.s. is weaponizing the financial rows of the country that hasn't before? >> i think the united states is showing that some redlines actually matter. maybe not obama's redline on syria but maybe not bushes line --
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lisa: is that how it's being perceived by the rest of the world? >> it depends who you are talking to. certainly that affects how china thinks about taiwan. the dollar is being weaponized but where else can you go? what are the credible alternatives? there is a significant challenge to the global reserve status. lisa: do you see any kind of move away from the u.s. and increase the fragmentation we are seeing of the alliance between china and russia and even saudi arabia? >> no, i think the chinese are angry i understand why stop they have a similar worldview as vladimir putin. are we seeing them break american sanctions? we are seeing them provide military support to the russians? no, we see china that is being
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antagonized and annoyed. it's symbolically important, economically useless. lisa: the single thing i got wrong is the end of yeltsin. >> the likelihood of vladimir putin being removed is externally unlikely until it happens. the fact is, pruden is quite popular in russia and not just because they control information but they believe they've been humiliated by the west for four decades and pruden says we won't have. that's populism. it putin leaves, that feeling of resentment and antagonism toward the west, it will be someone from the national security council. tom: how many times did you rewrite " the power of crisis."
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>> the last two days were very significant. tom: thank you so much. will continue forward on this somber day for america. from davos, stay with us on radio and television. ♪ ritika: authorities say a shooter went from classroom to classroom at a texas school in 19 children were killed with adults as well as children and the gunman was shot and killed by law enforcement and president
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biden demanded action to curb the violence. the ukraine president says there are no prospects unless russia pulls troops back to their preinvasion positions. he vows ukraine will fight until moscow gives up all the territories it occupies. china has put the blame on their economy on covid. there gdp has dropped to 4.5%. it will be downplayed while jobs become the priority. british prime minister boris johnson has received a long awaited report on lockdown parties and he is bracing for a wave of criticism. many of the events should not have been allowed to happen. he is addressing the matter before the house of commons.
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and the british parliament has approved the sale of chelsea football club. a russian billionaire was forced to put the team up for sale in the wake of russia's invasion. this is bloomberg. ♪
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>> my main concern is to work to avoid recession. i think it's still possible. we have a very low growth in the european union that i think with the interplay between monetary policy and fiscal policy, we can avoid recession. lisa:lisa: the public officials
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tap dance through the crises at davos. the eu economy commissioner there. if you could go wide to camera number two, i want to show you what davos is really like. when you get ready for the next set, you listen to lisa abramowicz talk about boys. it is painful because you come over here and you don't leave behind america. lisa: i have no idea what's going to come out of your mouth. we are talking about our children, not some boy crazy discussion. tom: the surveillance world wants to know if they will survive till you get home?
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lisa: they will but it speaks to the blurring of lines between work and home. tom: joining us now is nila richardson. the trends are international but the speaking of recession and brian moynihan of bank of america making it clear. what is the official call of your group? >> i think the fundamentals in the u.s. are still ready strong. whenever the fed starts raising interest rates, the specter of inflation goes from the back burner to the front burner. i also think 10 years of economic expansion has told our senses. -- has dolled ever senses. it doesn't employ -- it doesn't imply that recession will be with us for long. there are some countries that have serious challenges and the purpose of davos is to go beyond
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the domestic and recognize that what happens abroad doesn't stay abroad, it comes back home. lisa: what's the most notable thing you have discussed at davos? >> i think the tension around deglobalization. with all the concerns and crises in the world, when it comes to everything, even my perspective which is domestic like the labor market, you cannot stay local. not even with labor. if you look at the trend that is moving the jobs market, over the next 10 years, its demographics and digitization. those are not local phenomenon. lisa: we are talking about secular changes amid these crises whether it's the rhenium war or the shutdowns over in china. people are honing in on
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dataflow, soft data, will that be reflecting the hard data to move away from these scenarios? >> no, the risks are accelerating i think every country has experienced the pandemic slightly differently. there is no guarantee that there won't be turbulence for everybody. we are hoping there won't be crashes but heartland things are inevitable. lisa: where do you expect a hard landing to come? >> in places where the crisis is most acute. i know we spent a lot of time talking about monetary policy. i know it comes from the real economy.
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tom: i quoted from the new york times in the paper this morning, 50% of renters in new york now pay over 50% of their income for their monthly rent. adp knows this better than anybody. the middle class is flat on their backs. is there a lc prescription you see in washington to assist them as we come off this high nominal gdp? >> the operative word in this question is now. i would say the decade-long challenges are more evident. new york city has a subsidized rent in a way that most of america doesn't have. it is a key challenge in there used to be a housing platform around this but that platform was dismantled during the great
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recession and it hasn't been completely restored. tom: how alone is brian moynihan? he has a set of initiatives for people making under $100,000. is he alone or is that a new trend? >> he is not alone. there is a trend and i think we will see that continue. there is only so much raising wages will do to address the chronically low housing supply. tom: it must do something. >> in the short term that is valuable but in the long-term, it requires investment at a local level which is a challenge in this country. lisa: when will we see an appropriate level of wage gains? people are now saying the wage gains are to problematic because
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they are fueling inflation. what is the appropriate rate we are looking for? >> if you look at the people who have experienced the greatest wage gains, that's the lowest core of people getting paid right now. they are actually making year over year wages of 8.3% year on year. they are keeping up with inflation, is closer to 3%. you have to look at not just the rate of change but the levels. the 8% represents less than two dollars an hour and it doesn't even fill your gas tank step that's important. tom: that's the best comment we have heard so far. are you looking at three quarters or three years in wage growth? >> i think three years.
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even with 10 years of expansion, it took a long time to see anything other than wage stagnation. it took a long time to see an acceleration of wages at the low end, 10 years. if you fast-forward that in three years, i hope you see stronger wage gains but it's not happening now. tom: we will continue on jobs. we have a jobs day in early june? lisa: yeah, and a couple of weeks. tom: and fed meeting as well. that was really him. care what the optimism is, the middle class is flat on their backs. we are going to continue with the market up and quieter than they were yesterday afternoon step coming up, christopher
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harvey, wells fargo. this is bloomberg. ♪
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>> we happen to be in a very bad inflation situation. >> with rates going up with slowing growth, the combination is deadly.

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