>> the data has turned. you are starting to see soft data, hard data, all to the south side. >> we think it is all going to stall in the second half. >> i'm more worried about inflation coming back. >> the question into 2024 will be can we stop the ballooning before the economy tips into contraction? >> i think that is an optimistic scenario for the economy, it allows for a reset. >> this is bloomberg

surveillance with tom, jonathan ferro and lisa abramowicz. jonathan: for our audience worldwide, this is bloomberg surveillance. alongside tom keene and lisa abramowicz, i am jonathan ferro. on the week last week, five weeks of gains on the s&p 500. we are not finished with friday, so let's talk about it. if that was chairman powell pushback, this bond market steamrolled him. tom: it is a sleepy preholiday, the only thing anything was -- the only thing anyone was talking about was florida state. we carried for the risk on field. publishing on twitter, a general risk on field or environment. jonathan: powell was more balanced -- balanced event hawkish which given the current bank drop might as well be dovish. lisa: i have that quote right

here because i read that and it was perfect. chair powell heart is no longer in the optionality. we are all psychologists trying to analyze the mindset. tom: you see the 10 year real yield below 2%. we are moving at light speed, this november shock that we had continues. this is a complete risk on moment. jonathan: last month on the month, last week on the week, we had a 41 basis point move forward off of the back of some of the fed speak as we push into friday. the estimate so far in our survey is more hundred 80000 and we need to talk about jobs and one name specifically, spotify. up in the premarket. they are going to cut headcount by about 17%. that is more than just a cut. tom: similar to general motors,

they are both facing real yield. executives have to shift from the free money of the last number of years, spotify mentions it in their comments, they are in a new financial regime. every company all the way down the food chain. lisa: i wonder how much this is going to be the popular excuse to cut jobs, talking about the economy. they still say they are not immune to the fact that rates are going up and the economy is slowing. at what point is this signal and noise at a company that has 10,000 employees? jonathan: a little deal out there we need to talk about. alaska air buy hawaiian holdings. you can look at the move on hawaiian" that one. i think that is 182% higher. tom: on radio, the decimal point

isn't there. this is tiny. i have flown both and i think a lot of people have alstom but they are tiny and stephen citigroup was great on this. guess what? it is a 66% discount to other recent transactions looking at selective ratios. this is like desperation transaction. lisa: i'm grateful they're connecting the ring of fire. i went on a rabbit hole about the ring of fire. jonathan: care to explain? lisa: there is this entire circle in the world, of volcanic action and alaska and hawaii are both part of that and there are a lot of similarities. jonathan: is russia part of the deal? another deal potentially. earlier this year we had a

massive deal from american oil and exxon. a smaller one from ox en crown rock. -- oxy and crown rock. this would value crown rock potentially. it may be a deal of value of more than $10 billion including debt. tom: saturday or so they decided they saw the occi jet twice. occidental, some good things here. they took on -- that was very successful and this is a very different transaction. this is a sidebar of some republican politics by the principal owner of crown rock. it is this roll up. look at energy underperformance in november. jonathan: you've got to get that scale. we will come back to the if we

get some news. let's start with the scores on the s&p 500. down by .2% on the s&p. i know yields are higher i five basis points but there it is. lisa: wind is the start to signal something negative or equities? this whole week feels like a drum to friday, in labor market news we get the october -- report. the adp that no one cares about until they do. jobless claims friday. in central banking news you'll be happy to note that the fed is in a quiet period heading into the next meeting. christine lagarde today at 9:00. it is going to be the bank of canada in terms of central banking news and their rate decision and to me, they have been a leader, so i think this could be telling in terms of the balance of risks side. jonathan: i never know whether

to take it seriously or not. lisa: canada has been important. tom: are we doing auctions later? lisa: tuesday we get isf services. thursday, change in households. friday, the university of michigan getting up there. jonathan: i would say things like do we cover canadian data in the central bank decision and i was told by a bunch of -- that we don't care about canada and that is my take away. lisa: nobody cared about canada except that they recently have looked at it as a leading indicator. it is a quiet week on central banks. tom: let's get to our distinguished guests. jonathan: do you want to do bama and sfu? lisa: i was watching lennon

football and you guys are watching bama. jonathan: i get all of these complains about european football, i don't understand the rules and then i find out in college football, there is a committee that can decide that even if you are unbeaten for the season, another team is better than you. bama beat georgia and that is a big win. tom: i thought chuck todd over on nbc is a very -- was a very eloquent fellow. it is an absolute outrage. jonathan: more on that later. tony, you say this and i think it is interesting. the big call for us going into the year-end is there is no big call to make. explain that a little bit more? tony: when you look at the kitchen behind me, that comes from my teenagers who used to come in and they would do something that i thought was

outrageous and they would say chillax. identifiable catalyst off of that october 27 market. real catalyst. you had a bond market spiking to 5% of the 10 year with a treasury refunding coming up, a fed meeting coming up and a payroll data point coming up all in the same week, but the move we've had is pretty much meeting the parameters of what happens in the fourth quarter. what happens after three negative consecutive months of august, september and october. we had a great rally and now it is kind of a chillax. lisa: what do you make of the fact that you might be saying that but a lot of this has been driven by the bond market, people hearing what they want to hear and psychoanalyzing what jay powell really means rather than looking at what he is saying? tony: a month ago, the bears are

totally right, the bond market was telling you inflation is going to spike and the economy is too hot and that was wrong. am i supposed to believe that now that the bond market is collapsing, that is telling us something is correct? the problem in the marketplace here is the market has a move. we moved to that we have a narrative that is now based on the move. when the prior moves were wrong, i think your psychoanalysis word is great. i have not changed or argued that we will see a recession and at some point, what you think we are at that point, inflation is not the problem. the core pce pete in february of 2022. that's accelerate into the downside, inflation is not the problem. tom: your call is to get out of

stocks. how do you execute that call? do you have to wait for the mber recession? how do you claim dwyer recession to sell microsoft or apple or whatever? tony: we have to define the market. we have all of these stupid sayings whatever they are. the top 10 stocks currently account for about 35% of the s&p 500 which makes sense with a historic level of concentration. to say that when you say sell the market or by the market, it is important for people like me to categorize what they are talking about. in a world where on october 27 you had the russell 2000 down 33% and the bank index down 51%, that is discounting some degree of a recession already. obviously the top 10 stocks are not, so at this point, a recession would be further worsening in the unemployment rate and i think we are there.

my buddy over at m km has a good one where within nine months, -- the whole positive story here has been about the consumers because employment is full. if it's not, it is short changes. tom: his dogs are very chillaxed. tony dwyer, i want to look at nominal gdp. are you looking for subpar revenue growth? a driver to tepid stocks given recession? tony: i am and we have been. if you look at the actual trajectory of revenue, it is coming down. we are still at a double-digit margin but again, that is because of the top 10 stocks. last august when inflation ran -- when inflation is ramping, and everyone got bought, that is

the time to be super negative. now it is the time where we are looking for the opportunities because the average stock is gotten so beaten up throughout the last two years that a significant sustainable drop in yields is the only thing we can see that will kill the zombie. jonathan: gold, 2135 in today's session, pulled back sense but what is gold? tony: gold is the worst thing i'm calling. to me, unless you hit somebody in the head with it, i don't know what you can do with it stop it is not like you can shave off bits and spend money with it. every technician in the world sees the breakout to a new high, it is clear, what we found is that momentum can continue and typically when -- i wouldn't chase it but i have seen the gold move in a different direction based on interest rates and based on currency moves, so it is very difficult

to really -- it is telling me -- i'm very cautious about the markets telling me something. what was it telling me in october 27 with stocks? i think we just have to -- once you've had a big move, chillax, wait for that next extreme for the next move. jonathan: we are so chill, tony. tony dwyer of canaccord genuity, thank you. across the headlines on stock -- on spotify. they're going to optimize office space. we can talk about those headlines in a moment. spotify is still positive. from new york city this morning, good morning. ♪

>> i want to make it clear. the right number of civilian casualties is zero and it is clear many thousands have been killed and many more have been wounded and now more than one million are displaced. we know the all that is a tragedy. we grieve for all those families. that is why we continue to work with our israeli counterparts to get them to be as careful, precise and deliberate as possible in their targeting. jonathan: john kirby speaking on face the nation on cbs over the weekend. a subtle shift by this administration. this quote hereby the vice president of united states,

kamala harris. president biden and i have been clear with the israeli government in public and private . as israel defends itself, it matters how. they estates is unequivocal, intertech -- international human to terry and law has to be respected. too many innocent palestinians have been killed. the skill of the civilian suffering and the images coming from gaza are devastating. tom: and increased over the weekend. a massive shift from previous weeks. let's focus on this tragedy. i got on the map. you have a 24 mile coastline and i'm not sure i understand the geography, the demography of north and south gaza around the pregnant question. pushing south, where do they go? into the sea? lisa: a roving target as they dropped leaflets.

a question of whether there are talks about an additional pause in fighting. the u.s. is trying to double down and reignite some of those talks between hamas and israel. again, it feels like nothing is getting that resolved in the bigger question now is what is the ultimate goal and how clearly does israel and palestine -- tom: i think i saw a number of headlines which as they look at this to be a long event and i'm not sure what that means. to me, what they are doing is speaking to the u.s. and to our allies about their belief and it was harsh. jonathan: i feel like we have to preface everything a conversation about this with the following. it is so complicated. the objectives for israel have not changed. the emphasis has shifted from this administration because the apparent division within the government, between the state department and within the political party and the party in congress, cc that shift of

emphasis from kamala harris over the weekend and also the talk of a postwar gaza and what that looks like and how many resources we need and what needs to be strengthened after you've destroyed hamas if you can. i think we need to begin with a shift in emphasis by this administration over the weekend. tom: our shift is to talk to people well informed on this. we are thrilled to bring in julie norman. the codirector of ucl center on u.s. politics but all of her academics is on the incredibly difficult idea of terrorism. is hamas still a viable terrorist organization? julie: israel is obviously trying to debilitate hamas militarily. they have said they want to oust hamas completely. as many others have pointed out, hamas is very much a resistance movement but also a political party. they have their wing that

carried out the attacks on october 7 as well as other attacks throughout the last several decades. they still operate in many forms and even if their military capacity is debilitated, much of what motivates many of their members and much of armed resistance will still continue and that is something israel is going to have to grapple with as something the u.s. is reminding them of in trying to think ahead to the day after and what some kind of endgame might be. tom: the endgame, i'm not even there yet. i'm trying to consider the weekend. please interpret for our viewers and listeners how we move on from the atrocious headlines of the weekend. where are we in seven days? julie: this next several days and weeks are going to be very decisive and very difficult for the last -- the previous weeks, we have seen various types of incursions and many civilians, they were told to flee to the south of gaza which most of them

dead. this next wave of the incursion that we are inspecting will take place in that south gaza area where people have already relocated. there was messaging to civilians over the weekend to move out of certain areas but many people don't have access to those messages. much of it was very confusing and it is not clear where people can or should go without being targeted. i think for gazans and civilians, this is an extra early difficult time and the operation for israel's defense force if they move forward with what appears to be planned, it is difficult operating this kind of situation. lisa: i want to talk about this subtle shift in tone from the administration. we've been hearing response to a lot of pushback from within the administration. how material do you think that shift is in terms of policy? julie: we have heard this messaging from the white house, almost from the week or two after the attacks. it was more subtle at first, or behind closed doors and has

become increasingly public. those initial calls for restraint from the white house were not really taken into account in the initial phase of the incursion in the north and it is unclear if they will have an effect in this next incursion in the south that i'm not even sure if washington is aware of how much leverage they do or do not have with israel on this and as we pointed out, there has been a lot of change and talk, but in terms of actual real policy and support for israel, that remains very strong from this administration and from the white house and i don't see that changing in the future. lisa: what is the message from the fact that we have not seen a major incursion from hezbollah? that drone that was shot down by u.s. warships, but has not gotten involved. what do you make of the fact that is not gotten as slated despite the fiery rhetoric -- gotten escalated despite the fiery rhetoric? julie: the confrontation has

still been located within gaza. the northern border with israel and as -- and hezbollah has been intense with cross-border firing and we have seen escalations in the red sea and even attacks on u.s. presence in iraq. but i do think is a very concerted effort from the u.s. and allies and even from actors like iran to not escalate this out-of-control. iran and their proxies are doing things to show that they are part of this, to kind of be in the headlines to some degree but they could be escalating this much more. i think they are aware of the u.s. determines measures that are there, the u.s. definitely has been clear in their messaging that this gets out of control, they will lean into this very hard. right now i think the situation is still very tense and it could still spiral upwards there seems to be this consensus of let's try to keep the region as stable as possible and look at crux of this conflict where it is most located now in gaza. jonathan: thank you for the

update, julie norman of the ucl center on u.s. politics. more headlines for spotify, the first headline, waking up this morning, spotify to cut 17% of jobs. cutting costs costs money. this is what you hear from spotify as they now say this, an operating loss of $93 million to 180 million euros. they had seen a profit of 37 million, so that is a change. your favorite headline this morning, to optimize office space footprint. lisa: i love that. instead of saying we will cut office space. they say we will optimize the footprint in light of the eliminations of staff roles. hmmm anyways can you say we need to lower costs? we are going to cut staff, where going to cut office space and look forward and how much is this covering would otherwise have been a pretty disappointing corridor -- disappointing quarter?

tom: this goes to streaming for me. has it been giving away a free lunch for x number of years? rig going to raise the fee and disney is doing it and others and the kids don't want to pay the raised fee so a have to kumutha readjust what they are doing. lisa: the kids don't care. the parents of the ones saying we are not going to pay. spotify is good. jonathan: did you get your spotify wraped? -- wrapped? lisa: were you excited to see it? jonathan: for sure. i think it was 13,000 minutes. tom: mariah carey? lisa: wasn't mostly music? ♪

it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. we have been able to reach over 100 million people impacted and affected, and at risk of hiv. the rocket fund takes all of the work that we're doing, all over the world,

and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. jonathan: here is the note. goldilocks forever. question mark? equities look like this. five weeks of gains on the s&p, the longest week going back to june. we are down about a quarter of 1% on the s&p. downey third of 1% on the nasdaq. not a down week since october. off the back of a monster move in the bond market.

forget november and focus on just last week. the two-year on the week down 41 basis points. it is up six this morning. i said at the start if that was chair powell pushback, he got steamrolled by this bond market on friday. lisa: it was more balance than hawkish which given the current back draft might as well have been dovish. he typically said we are still looking at balanced risks and people said your heart just isn't in it and we are going to move in the other direction now we're looking at a 50% chance of a rate cut come march. tom: we will get into it with a good guest but the basic is the math and the answer is we are getting weaker inflation faster, not only here but in europe as well. if this was just the u.s., i would say ok but this thing feels global. jonathan: that is what was hard about the move elsewhere and you have to have the other side of the trade to understand it.

even with that move that you saw in bonds, foreign exchange looks like this. the euro was the weaker currency against the dollar, because we had a big downside on cpi and there is a conversation now about rate cuts from the ecb. tom: i'm going to go back to nominal gdp and i don't know what that is going to do for the dollar but i'm looking at this global slowdown that everyone is muddling in and for some way, a global slowdown has -- is beneficial, stocks up. jonathan: lonely term growth expectations. i'm not sure they are on board with that. lisa: let's be very clear. the point of it, goldilocks forever, question mark.

nobody is expecting the fed or a policy makers to cut rates six times next year but no one is willing to push back against it. is it time to pushback now or is it too early? tom: i'm sitting on a sunday afternoon and john calls me, hysterical about florida state. we're talking about for the state and i said bank of america derivatives sent out this great chart and with all the dynamics that we've got, there isn't like an overbought effervescence. there is a greenspan's exuberance. jonathan: what does that have to do with floor to stay? tom: it didn't. i had to calm you down -- with florida state? tom: it didn't. i had to calm you down. jonathan: israel expanding military operations against hamas with another ground invasion expected. the u.s. navy responded to a number of attacks against commercial ships operating in the red sea. no cattle tease reported.

but the u.s. it rebels backed by iran were to blame. lisa: we do see tensions continuing to escalate, the military presence on both sides of lebanon and israel's border has been increasing but it has all been tit-for-tat, not pushing things too far. that is telling. with the political sphere really being dominated by just popular opinion more than anything else. jonathan: we are joined in about 45 minutes from washington, d.c.. 6:30 is incredible he early for someone in washington, d.c.. alaska cfo calling the deal quote, pro-competitive and

proconsumer. tom: this is an administration that has sent to the airline business, enough. this has all sorts of asterix around it were someone pluses it. jonathan: when has it been in acquisition were someone has said is procompetitive and proconsumer? lisa: that is dear regulators. do you know that in alaska there were more people with pilots licenses then those with drivers licenses? jonathan: i did not know that. tom: bramo war stories like when she went to greenland. lisa: puddle jumping, instead of having a car, instead of -- you have a prop plane. tom: have you been out on the tundra? jonathan: i wouldn't have

believed it. lisa: it's true! it's the way to travel around, it sort of shows the importance of the ecosystem. jonathan: private planes. lisa: let's move on. jonathan: two pieces of price action. expectations for fed rate cuts fueling big gains in both gold and bitcoin. gold touching 2100 overnight. bitcoin topping 41,000. investors increasingly convinced the fed will begin cutting rates next year even as the fed chair set friday this, it would be premature to conclude with confidence that we have achieved a sufficiently restricted start -- status or speculate when rates might ease. tom: i guess some of it is etf effervescence. bloomberg has a cottage industry on that but the trade no one is

talking about is -- gold when you had -- against japanese yen. stupid gold is up 72% off the pandemic blue. lisa: i love tony dwyer's honesty. he's like i don't get it. what is driving this? does this mean inflation? is this a slower growth call? some people are saying it's because if you get less from your cash you might be less inclined to invest in cash with interest -- interest producing revenues. what rationale can people come around to explain this move? tom: 24 years old in a meeting with john templeton. jonathan: carry-on plays. -- carry on please. tom: he channeled tony dwyer. he said gold, i don't get it. dwyer, templeton, it is good company. we are in good company right now.

george sarah vallas is head of fx research at which a bank. george, there is this speed towards very weak inflation and abrupt disinflation. how do we play that in foreign-exchange? george: i think it is all going to be about these policy gaps, which central bank is going to cough first, or is it going to be symmetric? the way i think we are being set up for next year is that the ecb is most likely to go first. we looked at the most recent inflation data. i would argue that ecb should be cutting next week. inflation, core inflation of the last three months is running below 1%, so we are not that far away from having to start thinking about deflation risks when we are discussing europe. the economy is also near stagnation. the market is right for price

points to be easing but perhaps versus the u.s. it is getting quite ahead of itself. jonathan: you have some aggressive calls on both central banks and you have a call on the federal reserve stop i think 170 basis points of cuts starting in june of next year, that is surly not consensus. could you explain to us why you think a week start in june but go a lot deeper than people think? george: echoes back to the recession versus soft landing debate and if you look at what the markets pricing at the moment, we have fed funds going to around reasonable estimates of slowing. the market is perfect he price for a soft landing. if we are looking at next year, the strongest i would have is this bond equity correlation which has been very positive. higher bond prices and higher equities at the same time. that is very unlikely to last

because you are either into a soft landing and you can't price fed funds anymore or you going to recession and you can certainly price or cut but it is not going to be possible for equities to rally. the last three to four months have been great from an asset perspective because you had the bonds and equities going up at the same time. that is going to be difficult to repeat itself or next year. lisa: that is on the u.s. side. i want to get you to a lot of it when you're talking about your belief that the ecb should cut next week. you think the eurozone is facing deflation and that that risk is rising will stop what do you think will be the follow-up response if the ecb goes ahead and does that? do you think they will engineer a soft landing on that they could avoid the significant downturn? george: i think it is important to distinguish between growth and inflation. it is the perfect definition of a soft landing because what you

have is growth has slowed down and we are debating maybe we get one or two points of negative gdp that as long as the ecb cuts , and i need to be careful of what i say, i think they should be cutting next week, i don't think they will. and i think it's because they were on their way late into the speak -- late on their way into the speak. europe is going to be in a relatively ok place where the economy soft lands and inflation comes back down to 2% or potentially below, but that is actually a pretty good outcome. it is also put a negative outcome for the exchange rate but given how quickly inflation is coming down, it is not a bad thing for the moment -- not a bad thing for europe at the moment. lisa: -- tom: strong yen off of some form of policy change in japan, a way for people to make big figures fast. do you buy it? george: there are two ways to

get a strong yen. one is at the bank of japan finally starts a proper hiking cycle and what i mean by that is they can start hiking every meeting. that looks pretty unlikely, especially as the rest of the world is moving into easing cycles. i would say that is the least likely outcome but if you are in an environment where the other central banks are starting to cut because inflation has come down, then you can get yen strength because it will be the outlier so to speak on the way out, as it was the -- as it was on the way and. i would be more inclined to think about yen strength from the global perspective rather than the domestic perspective. jonathan: what do you think? george sarah vallas at which a bank, thank you very much -- at deutsche bank, thank you very much. tom: this is the should and could. lisa: the fact that he said that even if they do it by march or

april, they are still in line to orchestrate some sort of soft landing which raises the question, which economy is going to outperform? europe or the u.s.? everyone assumes it will be the u.s. because of technology. tom: i was going back and forth and i was reminding -- of the bank of japan abject failure somewhere in the middle to thousands, where they try to raise rates and had to go oops. it is the same thing here. oops. jonathan: relative to expectations. lisa: that would affect the market positioning maybe. in absolute terms, i'm guessing that is going to be tough given the tech outperformance in the u.s.. jonathan: relative to expectations of the economy, that is already happening. great disappointment looked up to where we were maybe just a few months ago in the states. lisa: this is what a lot of people have attributable either euro has outperformed at least in november and why it did rise as much as it did against the dollar even though there was this everything rally in the

u.s. it wasn't just a rate differential but the european economic data was coming in better-than-expected. disinflation was happening. next year, how much is this set up to repeat, given what people's expectations are? tom: i don't have a strong opinion. i just think november is a shock and we are starting right in on november continuing. that is the heart of the matter. jonathan: i so someone right this weekend that i think the outlooks for note -- for this weekend, just taking november and extrapolating that trend out. lisa: what else can they do? jonathan: they reset q1 which is what we always seem to do. equities negative on the s&p. a beautiful morning in new york city. ♪

>> is all about the human condition. more people are living longer.

we have cut childhood death in half. climate is this negative thing that is slowing down that progress. in mitigation, we want to make sure that the temperature doesn't get too high and adaptation, we want to make sure that the l effects that whatever we can't mitigate, that it doesn't reverse this incredible rate of human improvement. jonathan: that was bill gates speaking with francine lacqua on the sidelines of cap 28. always on the sidelines, never quite at the event. lisa: not necessarily on the panel. jonathan: great piece in the financial times and i know you have read this. the real impact of the esg backlash in the financial times this morning. tom: brook masters really walking through it and they featured larry fink and of black rock. it is fascinating to see the

great, the good and the worthy in dubai wrapped around what does it mean for climate finance? at the middle, it is in massive turmoil right now. jonathan: a great majority taking on a great majority, a good slice of this in the united states, look at what is happening in dubai. i see this gathering of what they see as the establishment, telling them how to live their lives after living in private jets in the middle east and flying thousands of miles to tell us all to consume less oil and fossil fuels. tom: what i would suggest is that there is one chart in the ftr article, the difference between europe and america massive is the operative word. i was stunned at the esg investment impulse versus in america. lisa: there is a new tone moving

from the high hopes and dreams and going more to the reality of it and that is what i felt more from the rhetoric and frankly some of the pledges, particularly from the oil-producing nations, less so from the unit states which has been accelerating production. tom: 13 million barrels plus a day in the united states of america. tom: will that be a campaign issue? right now, we are going to look at the climate affairs of dubai. this with the world bank in transition. what is so important here is the corporate work with nestle and mastercard and general electric. a conversation with the president of the world bank, in dubai. >> thanks so much tom.

your previous career, now you're at the world bank. let's talk in the first few months of your role. you have made climate finance a priority. you talk to us about where you have seen progress and whether you think this is a turning point for this discussion? >> it is very important because the reality is, we have the hottest year on record, clearly that has to change. you have to fight the climate issue without money coming to -- it is one of the most important things. i picked up the impression around the world that dealing with poverty cannot be by itself. you have to deal with climate and pandemic fragility. that is why we change the mission to include little bullpen -- livable planet as -- in addition to eradicating poverty. it is to make a commitment that we will get to 45% of our financing annually toward climate by 2025. not 10 years from today. that is $40 billion a year

working on climate finance. >> how do you adjust your balance sheet to ensure that? >> raising capital along the way thanks to the framework that the g20 got us going with. we are also doing things like looking at whether we can securitize parts of the balance sheet, the existing balance sheet and free up some capital and then partnerships. you can also get partnerships and i'm greatly -- great partners with the other multinational groups. people will work with us. there are multiple ways to go at this but at the end of the day, the much bigger issue is even if i do all of that, even if the other alter national banks do it they can, and governments do all they can, do need the private sector, you need technology and numbers. >> that is what you've been spending the past few days talking about. this is your first talk. can you talk to us, give us a sense of what it's like in the room, where there is consensus

and where there are gaps within the private sector and collaboration? >> the private sector issue, solar and wind power per unit is cheaper than fossil fuels. that is proven. they know it takes longer and they know they have some higher capex because you can't just build the installed capacity. the understand that. why is it that they aren't burning down the doors of countries to go do this? one, does the country have the capacity to absorb the kind of projects coming in and can we connect the grids? secondly and much more critical is the two kinds of risks that private-sector investors don't like, they don't understand and they don't understand foreign exchange risk in the emerging markets. political risk we can help with. we have one institution that we have approval to use them for

every multinational development bank and they can use our back office to issue guarantees. we need to scale that. it is the fx risk that is much harder. >> how do you get around that? >> people kept -- people keep talking about local currency markets is the way to do it but the reality is developing the currency market to be able to do this well can take five to 10 years. we don't really have five or 10 years. we need to find insurance like and we -- re-subsidize the costs through our balance sheet around financing? can we do things with others -- there is an institution that was created to help take some of the fx risk in these markets. can we scale them up? can we do creative swaps where we have a lower price -- fx risk is the hardest part. >> when we talk about the

progress at the end of cap 28, what's that look like for you? there have been a number of initiatives and pledges. what does progress look like in the next 20 days? >> the first one was getting that 45% of financing that we talked about. in that 50% of mitigation, we don't only do emission avoidance, we also adopt a resilient infrastructure, that is very important. the second big one is methane. methane is 80 times more toxic than carbon dioxide. it only gets 2% of climate financing. but we are doing is we have products on the ground, livestock management and we are scaling those and saying we are going to get to 15 countries in 18 months and most of these products will take out 10 million tons of methane. the third is africa.

600 million people in africa don't have access to electricity. we have a project approved by our board, $5 billion in financing with a u.s. price guarantee. $10 billion through governments and the private sector. we will connect 100 million people in seven years to power, solar power, including the grids that need to be existing to make this happen at scale. the fourth one is warranty coverage. the only way you transfer resources at scale from the developed world to the developing world, is -- >> there is a lot of criticism about carbon markets. >> people felt the credits that were coming were not genuine. you picked on the topic that is very important. verifiable credit -- credible credits of integrity is how these markets work.

-- project for the world bank. starting with cointreau, going to 15 by the end of next year. i think these countries will generate 24 billion credits next year itself. i'm certifying the environmental integrity through a jurisdictional order. also verifying the social integrity that most of the money they earn will go to the communities and the people in that area. when you do things like that, do them with consistency, you will create the right kind of carbon markets for tomorrow. today you are only getting five dollars a credit. >> still a lot to go but glad to have you here. ajay banga with the world bank. thank you so much. jonathan: thank you so much. we've got to go. coming up, dan morris in the next hour.

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♪ >> the data has turned. you are starting to see soft data, hard data come inflation data also present to the downside. >> for the u.s. economy next year, we think growth will stall in the second half. not a particularly great outlook. >> i am worried about inflation coming back. >> the question into 2024 will become i can we stop the cooling before the economy dips into contraction? >> even though we have a

recession recall the first half of the year, i think that is an optimistic scenario for the economy and allows a reset. >> this is "bloomberg surveillance." jonathan: five weeks of gains on the s&p 500. live from new york city this morning, good morning to our audience worldwide. this is "bloomberg surveillance" on bloomberg tv and radio. session those down a third of 1% on the s&p. let's talk about friday. monster move in the bond market. on the week, 41 basis points lower on a two-year maturity. a bit of pushback from chairman powell. tom: it continues this morning. it's a little bit of a pushback, but a 10 year yield below 2% right now, 2.02%, by research note this morning, carl heinberg, a blistering note to europe as george just talked about, deflation is possible. jonathan: the conclusion of the

street right now for so many people is that fed is dead. that weekly move on the two-year last week, the biggest weekly move back to march. back to march, the conclusion was the fed is dental but also, it was the fed is done for all the wrong reasons. they have broken something. here we are about 10 months later and we are talking but the federal reserve being done for all the right reasons. lisa: not only done with rate hikes but actively cutting rates by march. the market is pricing in a better chance that not that they will actively cut rates even though they are not expecting some significant downturn, which raises a couple questions. is the global disinflation wave the same in the u.s. as it is in europe? also, can we get that or are we going to see a rollover? can you relaxed and lead into the incredible rally and say i will take the rest of the year off? jonathan: so chill. so chill. this conversation about rate cuts is happening on a week we

are looking for this in payroll support. 180,000 is the median estimate of our survey. unemployment expected to stay at 3.9%. you have the chairman saying we are in restricted territory and a market pricing rate cuts. the labor market could see 180,000 this friday. tom: this is the second time you brought this up and we did not sit on it. we will sit on it right now. we are nowhere near a labor slowdown, but there is a school of thought out there led by david kelly and j.p. morgan who made clear we can get there quickly, get the three month moving average under 100,000. that will change things fast. jonathan: here is a company going negative. spotify cutting 17% of jobs. the leadership over at spotify looking for the streamer to be a whole lot leaner. lisa: something like 1500 people. they will also optimize their office space footprint i

believe. basically trying to trim costs by reducing the amount of space they have to pay for at a time when they otherwise were facing some negative expectations. we have to emphasize this is coming with revenues that were clearly challenged. jonathan: without a doubt it always amazes. getting away from an office space, that costs money. between $93 million to $108 million and they have seen a robert previously -- a profit previously of $37 million. tom: six plus to put 17, that is 25%. the jobs cut, gm buries it. six headlines down, gm is talking about $2 billion of cost cuts. they are cutting costs in a new world. jonathan: i am confused what happened last week and became more confused when you hear more from ford.

gm is saying off of the labor contract aside with the uaw, the additional cost of 575 per vehicle and ford saying it is upwards of 900. you can drive an f-150 through that range. that is massive. that is massive. tom: he has been here for two or three years. lisa: two or three years, i know. but i agree with you. there are some real questions about the transparency around how these arvest are viewed. jonathan: let's move on. why do you forget how long i lived there for? come on. it has been a blast. the s&p down. 4.2453. lisa: today is the start of the drumbeat. we have the october jobs report

tomorrow. wednesday, adp. friday's jobs report, to be the bigger question is what will the market respond to, an upside surprise or a downside surprise? central banks have gone quiet except for 9:00 a.m. and we will hear from christine lagarde, but the fed is quiet ahead of next week's meeting. we get the financial stability report. i am focused on the bank of canada. there rate decision is on wednesday. it is interesting whether they signal the idea of rate cuts and the idea of disinflation without economically this. in consumer spending, ism services tomorrow, thursday change and household worth for the u.s. i want to see whether we see an ongoing uptick in the economics of price index for the u.s. we have recently seen that shifted little bit. if it does, do we think we are due for some sort of reexport russian?

-- reexport inflation? what is interesting to me is over the past couple months, the bank of canada has actually been a front runner in terms of signaling how the mood will shift in other central banks. jonathan: perhaps longer. lisa: perhaps longer. there is a question, is the backdrop of inflation diverging meaningfully between the two regions in a way where you cannot look to the other central banks and see these? i don't know the answer but it is interesting to watch because there are no other central banks left to watch. tom: it is a team effort. jonathan: dan morris joins us now. i hope he is still there. let's get to it in the equity market. massive move in stocks over the last month or so. given the repositioning and the rally, is the path of least resistance still for the rally to continue?

>> from here, the three scenarios ahead of us, status quo, things do not change with this perfect soft landing that will be nice. alternatively to be good a blowout on payrolls or a tweak, and how did the markets react? in those scenarios, it is probably more risk to equities because if we get a week number and instead of a soft landing, we start worrying about a recession, equities will not look so good. if conversely it is a very strong number, some of this rally in real rates will come back and that will hurt as well. the risk seems more concentrated than equities. tom: corporations will adapt is the theme. right now, there is a disbelief they will not adapt into 2024. i don't believe it. with the tentacles of bnp paribas are, how do you see how corporations will adapt to the new 2024?

daniel: the thing i would highlight in terms of the adaptability, i agree when we talk about u.s. corporations, so they will. just a back to what happened during lockdowns. 20 million people missing jobs and that we know employment is higher than it was before, so you have seen the adaptability in the extreme form. certainly they will try to anticipate what will happen. i think that is the challenge for equity assets in particular, being able to assess what will be a slowing growth environment even if it is still in the end a positive growth number. that is tricky. 31 things to be accelerating and that is easy or a recession is easy because we know how that works. this slowing growth is harder, and i think we will see those swings in sentiment is the market goes between recession or the fed cutting sooner. lisa: i want to develop what you said a little more than equity space a bigger risk of friday. are you saying right now that

equities are priced to perfection in this goldilocks spear that can i continue and friday is very well the catalyst to that regardless whether it is an upside or downside surprise? daniel: i guess you are looking at what the next biggest data point will be. we have basically a growth number. we have already had the ism and manufacturing that was weak so that is feeding into the slowdown, but if we get another week growth number, that is the rest that goes towards a recession scenario. we have to wait a while until we get more inflation data, so this will be the next key growth number. at the same time, we want to remember labor market data is lagging, so this tells us what will happen over the next three months, questionable, but that does not mean the market will not read up to it. lisa: what is more likely, an upside surprise or downside surprise? daniel: if we get a stronger growth number and some of this

rally in rates, particularly the rates reverses, i think that is a reasonable scenario, but you wonder how far it will go. we have had a big rally in the nasdaq. that comes off a bit but you have done well this year. i think the bigger risk is to the downside if we start worrying about the recession scenario because then the bottom is probably slower than we are now particularly after the rally. jonathan: good to hear from you. dan morris of bnp paribas. constructive are you going into next year. canadians right in. irrelevance of canadian presentation on the bloomberg cruise while the excursion is planned. lisa: i think the people are planning for us. jonathan: we have been laughing about cruise lines all year and a cruise liner is the number three top performance talk on the s&p 500 this year. tom: it is. somebody just dumped a new boat in the water, which is bigger than the one you were on. jonathan: crazy.

tom: 42 floors. jonathan: royal caribbean cruises up 104% this year. tom: it is on the edge of nvidia. the one person i want to talk about in canada is the guy from blackrock. jonathan: david would be so upset. tom: david rosenberg in toronto as well. can the bank of canada bring back the montreal canadiens? there is a good producing mining segment. canada for generations has had a productivity less efficient and surprisingly diminished from the united states efficiency. those will be the two overlays that will be the difference. jonathan: the housing market is different as well. tom: why different. if -- way different. jonathan: if you are just joining us, five weeks of gains on the s&p this week.

4.2549. last week, a whole lot lower across the curve. tom: you watched the highlights? jonathan: i don't watch no football at all. lisa: i watched the highlights. tom: they look great. thank you for emailing that or whatever, but mohammed mentioned it as well. jonathan: it is about liverpool. you should know that. tom: what is it about the kit? lisa: everybody hates manchester city. i did not watch them. i watched the highlights. i watch them the way tom keene watches them. tom: thank you. jonathan: did not like the gray jerseys. tom: i like the brown. come on. jonathan: would you like the email address? tom: it interview the guy forget it was a hugely successful interview. jonathan: if you want to come on and have a conversation. tom: they look like, you know, a

roadshow in paris or something. lisa: when can i talk about that? jonathan: ok, majors coming up shortly. a big shift in the emphasis from this administration over the weekend regarding israel. strong words from the vice president. tom: i would see a huge shift in the news on gaza. jonathan: that competition is around the corner. stocks are pulling back. it is a reversal of last week. lastly, stocks up, this morning, stocks down. six basis points on the 10 year. on the two-year this morning, up seven. from new york city this morning, good morning. ♪ (sfx: stone wheel crafting) ♪

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>> as israel defends itself, it matters how. the united states is unequivocal, international military law must be respected. too many innocent palestinians have been killed. frank lee, the scale of civilian suffering and the images and videos coming from gaza are devastating. jonathan: that was vice president, the harris speaking at cop28 over the weekend. the first line really set it up as israel defends itself, it matters how. it is a shift in emphasis over the weekend. tom: little shift in emphasis but a real emphasis in the

geography of moving north and south down the miles of coastline. we had been your earlier and looked at the map, where is the video from? four miles from the gate to egypt if you will. that horrific video we showed the previous hour. we are showing it on tv. that was 4.4 miles from the exit point in egypt. lisa: there was a lot of discussion around what strategic defeat and, and it goes to the question about how and the imagery coming out. what is the devastation needed for israel to achieve its goal and how much will that be increasingly important for the u.s. administration and other allies, and how do you achieve that? there are increasing questions about what the influence of the u.s. is internally with israel at a time where there is a lot disagreement within israel but about the golden how to get there and about what necessarily takes place afterwards. tom: tangential to this besides

american navy and other forces at risk was in the red sea over the weekend. yemeni, i will say drones, they were showing devastation for those on the radio, but in the red sea, the united states of america is shooting i believe yemeni drones out of thin air. you don't do that with a total gauge shotgun. there is a lot going on there. jonathan: the united states and this of ministers and want to talk about the endgame. what is next? what is the endgame? tom: exactly right. jonathan: asking for significant resources from the international unity to rebuild gaza after all of this and try to strengthen the palestinian authority as well. report from the palestinian people to try to get some legitimacy from the international community. tom: i think you are dead on. you heard it from the vice president, a human rights centric approach by a large part of the american force looking at

this. joining us on this is our bloomberg washington correspondent annmarie hordern. yielded, there are almost two separate conversations going on. enlighten us on what the israeli conversation is this morning that washington needs to listen to. what are the israelis say? annmarie: we have heard a lot from israeli officials over the weekend as well, and anytime you try to talk about the next day after or even some new york times reporting about intelligence failures, they do not want to discuss it right now as they are in the midst of a war. they say what the international community does not recognize, we are still in the aftermath, which was our 9/11, our 9/11 moment, and we want to make sure that never happens again, so when you talk to israelis, they don't really want to go beyond the next 24 hours. they are focused right now at the task at hand, which is very different to jon's.

that is not where the international community is. there is discussion about comes next. israel has said they want to make sure the gaza strip is secure. there will likely be some sort of buffer zone set up, but the u.s. has come out and said they do not want to see a reoccupation of israeli forces in gaza. tom: i can in roosevelt style and churchill talking but what comes next in the scope of a six or seven year war. annmarie hordern, to that point, the geography speaks as they move from north to south in the video we showed earlier, the devastation, four or five miles from rafa and the egyptian gate if you will. where do all of these people go? is there a path for these people to take? annmarie: al jazeera is reporting a community near the rafah gate 10 civilians have died and hundreds wounded. that is according to their reporting off of an israeli airstrike.

it's is the exact question i asked admiral kirby on friday. israel had come out and said to all of the palestinian civilians to please flee to the south because we are going to have airstrikes around gaza city. now they are going after -- please flee to the south because they will get the north. now you have tens of hundreds -- hundreds of thousands of palestinians that moved to the south, and i asked the admiral, where do they go? his answers were that they told his wheel they do not support southern operations unless they factor in all the civilians, and a second point is they urged yet again to make sure how civilians are safe and pursue operations that account for civilians. but that was his answer. there is no direct geographical place that they are telling palestinians to go, so it feels like and where many progressives are talking about, these individuals, these people are trapped. lisa: this is the reason why it is important to put a little

more color around vice president kamala harris's and careful and caution. secretary of defense lloyd austin coming out and saying that the lesson is you cannot win urban warfare unless you protect civilians. he went on to say that if you drive them into the arms of the enemy, you are placing tactical victory with strategic defeat. what is the discussion more broadly about international pressure on hamas also to release hostages to potentially get back to the negotiating table they better offer given the fact that there has been increasing pressure on israel? they have hardened their stance. where is the tit for tat in terms of pressure? annmarie: right now, the qataris are at the negotiating table trying to bring both sides together. the united states says the truce ended up failing or it stopped, the tactical pauses they had, because on hamas, and it was due to hamas not releasing the names of the hostages the evening before.

there is still a number of hostages, at least about eight americans the u.s. of minister should believes still with hamas. i asked admiral kirby about this again and he said he would be remiss to say if they knew exactly where they were at exactly their condition, so the situation is incredibly complicated but there is a ton of international pressure on israel as well to make sure they can try to get more hostages back not just of the international community but also israelis. the majority of those individuals there are israelis. when it comes to hamas, that is international pressure all around. do they really care about international pressure unless potentially maybe it is coming from tehran or lebanese hezbollah? jonathan: let's finish with things at home. it is normal to have division in any government on massive issues. some people would say, i would say it is healthy. how unhealthy is the division emerging within this administration over this war? annmarie: this administration as

well as the democratic party. we heard from someone yesterday on cnn in the state of the union saying we cannot have hierarchies when it comes to crimes, when it comes to warfare. this can be a problem for the president. i think it is why you see a tougher tone. it started with secretary of state antony blinken's third visit to tel aviv. we heard from lloyd austin over the weekend and vice president kamala harris. within the democratic party in congress, there are those that want to put strings attached to israeli aid. within the administration, you are seeing leaked reports and cables out of the state department that they do not agree with the administration's full throttle support of israel as the civilian toll of palestinians is north of 15,000. jonathan: thank you, i appreciate it. the arguments you will see on two fronts, israel and ukraine, they will be huge over the new year.

tom: mike on twitter nails this. i mentioned yemeni drones and he says, be careful, it is not yemeni drones, it is who see -- is houthi arms, but it speaks to americans in harm's way. we are not removed from this conflict because we are floating out in the mediterranean and the red sea. lisa: it has become a massive political division that we have seen, the device of this within the democratic party is something that will be transformative in a pretty massive way. jonathan: happy talking december about every thing going on now. the market ignoring what is happening in washington. nothing to talk about. early next year, a big reality check. lisa: very much so with deadlines for the budget. jonathan: from new yo, is bloomberg. ♪

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jonathan: equities on the s&p 500 pulling back by a third of 1%. light and negative to kick off this trading week of gains. five weeks of it. on the s&p, we are down, on the nasdaq down half of 1%. let's turn to the bond market, offering some support to this equity market for the last month. this morning across the curve particularly the front end, up by six. last week down aggressively. chairman powell, did he or didn't he try to push back last week? because if he did come of this bond market was not listening. lisa: he did without conviction.

he was trying to say a party line that was not with any heartfelt meeting he was going to push, which the market took as an undying dovish call for rate cuts starting in march. jonathan: next week, they have to do something about this, don't they? they have a summary of economic predictions. they have the dot plot for 2024 to signal they will not anytime soon except in the dot plot right now currently is rate cuts. lisa: there is but it is later next year and not many. it is definitely 100 basis points of rate cuts we are looking at next year. do they push back against that, and if they do, does anyone care? i will have a chance to pushback but people were not buying it. jonathan: yes make two calls. on the two-year, just made one call. on the euro against the dollar, you have to make two policy calls. we talked about the ecb coming sooner than the federal reserve.

the euro down to 108.68. tom: from deutsche bank, they were aggressive saying maxine lagarde and company will get out front and do what the bundesliga bank is worried about. jonathan: he said they should cut next week. that does not mean he thinks they will cut rates next week but he things they should. tom: i think we will go to the jobs report on friday and the answer is you get a shock down that really changes the debate, but to the morgan stanley and goldman sachs parody or rather i should say divide, it is all about the labor economy claims on thursday. 222,000, that is a fully employed number. jonathan: payroll on friday as well, looking for an appointment south of 4%. median estimates about 180. can change going into the number. under surveillance this morning, israel expanding its campaign against southern gaza with another ground offensive expected.

aiming for hamas leadership is another truce between the two sides appears out of reach. u.s. forces getting involved after reports of attacks on free commercial ships traveling in the red sea. no casualties were reported, but u.s. officials say houthi rebels backed by iran are to blame. consolidation grows in the u.s. oil market. the deal is expected to be valued at more than $10 billion. i'm mark is one of the largest private oil and gas producers in the permian basis. chevron agreed to take over hess. tom: this is a kid out of texas tech, a chemical engineer out of texas tech that worked for exxon and he did like you see in the movies, went out on his own and bought up half of west texas when north texas to my don't know where it is on the map, but the answer is it is a lot of money. lisa: clearly. jonathan: the little nugget in our story this morning and i am

sure some of you have heard this before but the fact that the permian yields more oil than iraq annually on the opec committee cartel is just amazing. lisa: this goes to something rbc capital was talking about, the analyst over there, that we have moved back into an oil market determined by supply and not demand shocks necessarily, and you take a look at the u.s. and some other non-opec members, and they are basically offsetting a lot of the cuts to production you are seeing from the other opec-plus members, so when you take a look at that, two questions. one, antitrust is interesting, and how awkward does it make it for u.s. energy officials to go to cop28 and talk about reducing fossil fuel emissions and taking the high road on that when the u.s. is accelerating production at a rate that is exactly counter to what we are seeing in the middle east. jonathan: the number in front of me on the bloomberg, $13.2 million -- 13.2 million barrels a day.

that is produced in this country every single day. tom: do we have a national energy policy? jonathan: they don't speak about it or that piece of it anyway. tom: they say there isn't and that is what you are quoting the numbers. it is a really interesting debate. what else do we have? jonathan: looking to join the rush to weight loss drugs. agreeing to pay $3.1 billion for someone developing. they had to stop a decade after patients quit due to nausea. the weight loss market is inspected to reach $100 billion by the end of the decade, and the year-to-date gains in pharma , no vat at eli lilly have it and they are up big time and everyone else is struggling to touchup. tom: the heart of the matter is, who will pay for it? you have been very good about this.

diabetes and heart disease and that, but is this a new government program we will have two/out 8000 a year for a drug -- to slosh out $8,000 a year for a drug? lisa: in one of these drugs have been around for a long time, the technology of them, and they have not found much of you side effects, which raises this question, at what point does it become national policy to reduce health care costs? yes, that means insurance will pay for it and health care costs will go down in other ways. it will get really interesting tomorrow which is what everyone is willing to bid up for this. tom: there is the drugs and the bramhall method which is to run 15 miles a day. jonathan: that is one method. this is also about addiction and we are only scraping the surface around the addiction side of all of this. this use case can go beyond obesity perhaps alcoholism. maybe even gambling addiction as well. the use case for these drugs is

only starting to be explored. this can make a big change. what strikes me, we talked about this before, you have to use it indefinitely. indefinitely. so cost needs to come down drastically to make that work. tom: we will have to see. we'll continue to study this. and we do this with a doctor who is truly world-class. thrilled to have sam with a sigh bloomberg. right now, this is a joy. sitting with us in new york is our guest. in the heart of your note is what i thought about the most this weekend, and we go to lawrence mcdonald with a great insight this year, the cash on the sidelines, it is jaw-dropping. when yields come down, do they all exit the money market fund to buy apple? >> i don't think they all exit the money market fund to buy apple but there is an awful lot of yield left in the corporate credit markets and high-yield and even individual loans, maybe

in equities that will definitely be bought, and you don't need to see all of that money come out of money market funds we have had $1 trillion to into retail money market funds this year alone. just a drop in that bucket is absolutely going to dry up spreads tighter. tom: you are pro in the world. these are questions lisa should be asking right now. where in the spread market is the thing that identifies a tip point when the money moves? winnie: one thing i am looking for is front and retail flows. they have been absolutely abysmal and corporate credit this year. historically the mother is a strong bid for the front end because that is where there is actual yield, but right now, catches where you get the yield and you have a flat yield curve so organized go to the front end of corporate credit? once we start to see those flows start to accelerate, i think you have a good forward signal you are going to have a wholesale bid for direction extension and spread products. lisa: of the high yields and investment grade bonds markets

been insulated by the credit markets in a sense that the high-yield investment grade are both much better quality and more transparent than the massive world of private credit that has grown up and ballooned, and does it recent and real-time? winnie: you don't historically think of investors in private credit and the smaller bid market caps as the same as in the investment-grade universe, but you see all of the institutional cash going into the world of private credit, and i think it is interesting that you have seen all of that cash being raised while at the same time you have seen very steady institutional demand for u.s. investment grade with a very sticky long and spread -- long end spread so you are seeing a tandem bid that says in the caribbean private credit feels ok right now. if i can add yield to portfolios but also what the core bid in the long end of the investment-grade spread curve. jonathan: the fed starts hiking

in spring of 2022 and you have credit spreads going back to spring 2022. next year, what is behind that? with recession, without recession, with rate cuts, without rate cuts? winnie: we expect there will be rate cuts beginning in march. we expect four of them. that is market consensus at this point but when i was telling clients that in october, people were looking at me like i have multiple heads so we are sticking with that trade and will add more rate cuts at this point and we think of this bumpy landing. it will not all be goldilocks or easy but we think there is a path for inflation to continue to come down for the consumer to soften up a little bit, for the fed to actually stay in quite restrictive territory with real humans and real policy rates being positive, but with credit markets began to perform quite well in that environment with the exception of those really lower rated highly leveraged triple seized leveraged loans, that is where the real pressure and drumming cost will remain. jonathan: how unusual is it to

see the unemployment climb only a little bit, and when would you know that maybe this is not the right call and to back away from it? winnie: it is very unusual but the past three years happen highly unusual to get we still have management teams very focused on how we can keep labor force is in good shape to meet whatever demand, and also, we cannot always equate recessions or economic slowdowns to the covered pandemic or the gsc. you can see this more typical slowdown, more normalization in terms of run rate of demand. lisa: so in other words you think the default cycle will be pretty small because rates will come down so much that basically the risk will not be as significant as it is now? winnie: i think it will be a very manageable default cycle, and the market has become increasingly good at pricing in for defaults and knowing where to anticipate those things. the big issue is that we have looser covenant structures, the new trend of return on creditor violence, so emotion of

positions that way, and we still have a lot of cash on the sidelines in terms of private, so if you have these leveraged loan issuers and little bit under pressure, that is more cash that will probably get kicked in and extend the default cycle a bit further. jonathan: thank you. appreciate the clarity on some big issues. constructive almost on the edge of bullish there going into next year even with this conversation potentially about recession and rate cuts and all of the above. lisa: that is straight up bullish. i think you can go there if you talk about spreads pressing. we are getting a sense in the economy. credit has not -- if credit is a leading indicator, and says let's go. jonathan: not screaming recession, not at all. good morning to you. negative by a third of 1%. it yields down by five or six

basis points. and a ton to look forward to this week. payroll friday just around the corner. the estimate is 180,000. tomorrow, taking a visit to apollo, catching up with our friends, and a whole lot more. tom: this is incredibly well-timed, and i get major credit to you for providing leadership here in putting this together for us. jim with us in london a cup of coffee ago, but it is just an incredibly important time to speak to them not to defend private markets but to save moving forward, how do private markets fit into global wall street? lisa: and how much they are taking over the functioning of a lot of banks, not necessarily with any disagreement from the big ask. the big banks are saying we cannot afford to be in those businesses anymore but we will work with you. tom:. i have you with that

michael spence -- i agree with that. michael spence would say we got the banks out of the business because of the screw ups of 2007 and 2008. with that, someone else had to pick up the slack. like kkr last week, the wonderful interview of sonali. jonathan: how retirement investment will change in the years to come. tom: more conservative, more traditional than the fancy back-and-forth of private equity. lisa: they can afford to be. tom: is there coffee? jonathan: i have been told a rumor that we get breakfast. caviar breakfast. lisa: caviar breakfast? not caviar. ♪ what do you see on the horizon? uncertainty? or opportunity. whatever you see,

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>> a lot of the optimists have been hanging their hat on the strength of the consumer and the consumer has remained strong. there is obviously appetite to spend come appetite to travel.

you're seeing the consumer get out there and spend their money in stores and online. right now, the market is in this place where we are not sure if we will have a cyclical expansion or not. we have not confirmed in one direction or another, and we are waiting to see. jonathan: that was the head of investment strategy, and america has been spending with a record cyber monday. we had the busiest day in u.s. history in american airports, and we have a deal this morning to talk about u.s. airlines. alaska air agreed to by hawaiian holdings. the price action stacking up as follows. hawaiian holdings absolutely surging, flying even. what is wrong with that? lisa: the driver of the efflandt gap -- f1 back in the gap, this is fantastic. i love it. jonathan: i am done.

pick up. tom: this airline transaction, we are looking at it right now, understanding alaska air is small and hawaiian airlines even smaller. looking at united, delta, and american airlines is the senior research analyst. why did this happen? is this too many dinosaurs meeting? what is the y versus united, delta, american? >> we think the why is to forget this is a continuation of consolidation we have seen in the past for the industry, but also during the pandemic, we did not have the consolidation we probably should have had. we had the government stepping into save the airline industry, and unfortunately, they could not save everybody, so now you are getting a washout. i think for alaska and hawaii specifically, it really will

help them cross the bridge to the other side of the river so to speak where they will be able to survive as the consumer brand. tom: away from the financial part, where is the flight that really is going to add value? is it lax to hawaii, something jon has taken a million times? what is the flight where you thought the synergy could happen? helane: it is more hawaii to the mainland. for people who come to -- first of all, hawaii is very remote, i think it is one of the most remote places on earth and one of the hardest to get to. and so for people who live in the islands, they tend to go either inter-island or to the west coast. they don't reach too much in the mainland. if they want to, it is usually more than a one stop fling. for alaska, it gives them the

opportunity to be bigger i think the combined airline will have over 300 aircraft. revenue will be about $13 billion or $14 billion. united, those are $50 billion revenue companies. these are small. they serve a purpose. people fly. they both deliver a great product. you are not really changing a whole lot, unlike with jetblue and spirit where you are changing more. not to say that a merger should not occur, but when looking at airlines again to your point before, hawaiians have brought 180% premarket. that is primarily because under five dollars, the market is telling you these companies cannot survive and we have a lot of airlines in that under five dollars trading range right now.

and so we are seeing that consolidation that should have probably already occurred. jonathan: direct, newark, hawaii, united. tom: no way, you can fly directly from new work to honolulu? jonathan: you can fly direct on united. tom: i did not know that. jonathan: yes, you did. let's get to the important stuff. the alliance between jetblue and american airlines crushed forget what will they allow? what will they not allow? we can see this morning alaska are making a very clear statement that they don't think this is anticompetitive. they are come from entry businesses. the overlap is only 12 routes. can you frame for us what is allowed and what isn't? helane: i think this justice department does not like anything big and it is not like these guys are going to be big. jetblue and spirit -- spirit is the fifth largest. alaska and hawaii and will be right in there five or six or

something like that. not like we are going to take over the fourth-largest spot. jetblue and spirit are 9% on a combined basis. this is even smaller. i suspect that if they look at this on -- i don't know the right word -- just a way they should, not with a jaded eye where they are looking at it, does this deal makes sense? this should come away with yes, this transaction makes sense. lisa: if they approve this transaction, do they have to approve spirit and jetblue? helane: spirit and jetblue is where it belongs. closing arguments start tomorrow. should take until the end of the week i would think if even that long, and the judge renders his decision. the one-word answer is yes, they should just move on and go fight other battles. lisa: how much will this be

consolidation of aircraft, workers, operations, and how much will be the actual geography of these places? people go to hawaii in the wintertime and alaska in the summertime, and they can offset each other. helane: exactly. two things to think about. they are both kind of bucket list trips. from the mainland, especially the east coast, it is 15 hours nonstop on the united flight out of newark, hawaiian flight out of jfk. they used to flight out of boston. that flight i think came back post-pandemic. so they do fly here on a nonstop basis, but those are 15 hour flights so those are bucket list trips if you are coming from the east coast. in terms of operations, they said last night they are going to operate the two separately. one operating certificate but two separate brands, sort of the way hotel chains do it. you have 14 or 15 brands under one major holding company. same thing here.

they will operate hawaiian separately and alaska separately because both companies really have great brands and are well-liked by the people who fly them a lot. jonathan: just to wrap things up to get your topic, the airlines have bounced recently but are still selling 27% from what we did in the summer -- from the altitude we get in the summer. did you like that? we have the busiest day on record for u.s. airports a couple sundays ago, ending stocks over the last few months more recently have valid, but it has been difficult since the july peak. jonathan: people have been worried about a consumer recession, etc., so our best idea for 2023 was united at our best idea for 2024 is delta. jonathan: why the change? helane: for two reasons. it has mostly worked, but they are embarking on a $60 billion 10 year program and we don't

think delta will be quite as aggressive. we think delta will be smaller than that. at one point, they have to replace the 717. but is a much smaller program. delta has a similar footprint to united. they are just a little bigger domestically than united. united is 50-50. domestic and a national, delta is more like 60/40, so we just pivoted a little bit to delta. the balance sheet, the order book, those are a couple of the reasons why. jonathan: appreciate the update. best idea for next year delta airlines. pretty even split around airlines. no bias on "bloomberg surveillance." delta analyst about topic for next year. lisa: there are a couple things. they backed off on the point changes into the lounge.

dr. is nice but i also think they are and american express, nation. how much are they becoming a financial company? tom: he is going to hawaii and staying at the monaco or president obama stated. lisa: a lefty placed -- a lofty place. jonathan: actually, netanyahu. tom: how about that landing? jonathan: that is rough. tom: rough. jonathan: but it starts doing that as it is coming in and all you see is a red cliff. [laughter] jonathan: it was romantic and beautiful and scenic until it really wasn't. have not been back. i don't think i am going back anytime soon. tom: you and me at the moana. jonathan: very clear, beautiful island. no. small planes for me, no. no thank you, not for me.

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when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> i think certainly we are at the end of the tightening cycle. >> the economy will stall later next year the economy will stall later next year. tightening is clearly coming

through. >> markets got into his head that no hikes equal cuts and i don't think that's quite right. >> 2024 is a recalibration of monetary policy. >> we are certain the market is facing uncertainty. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, everyone. on radio and television, a monday to carry on from last week with markets a little shakier. after a friday that just shocked with the 10 year real yield under 2% we have to recalibrate into the jobs report. jonathan: it 40 basis point move and we said repeatedly this morning, if you think chairman powell was pushing back, he got steamrolled by the bond market friday. they believe the market can cut for all the right reasons. will the labor market hold up? look to friday. based on these estimates it will.

3.9% unemployment and payrolls growth. tom: there is a lot of footwork on this. to me, maybe with the consumers the way they are, we are not going to see a recession. maybe not the gloom slow down they get you to the bear market call. jonathan: we were warned about this going into the weekend. the unexplainable euphoria, maybe that's a mistake. you did something over the weekend i quite like. the economist of the year? tom: i think people care. there is a lot but the economist of the year is the guy that delivered optimism and a belief in the american experimentout of this terrible pandemic , guiding renaissance macro. he wrote a brilliant essay with nuances carrying forward as

optimism. jonathan: if 2023 was about the hard work of stabilizing the economy, 2024 is about enjoying the fruits of that labor. lisa: this is something that is a tension point. if you enjoy the fruits of that, that means disinflation, a return to maybe 2% but how? this is the biggest question, how is that given the increasing optimism around the numbers we've got and the fact that people are still spending money? is that disinflation warranting five rate cuts currently priced into the u.s. market next year? tom: i read mike wilson's note carefully. he said forget about the bull market but the answer -- is there a bear market call now, i couldn't find it except for one guy at jp morgan. i don't think he's in the new building they are building. jonathan: 4200 for the downside

from jp morgan, that's the call. tom: there are different parts of jp morgan. jonathan: this is the research team. the call stacks up whether you disagree with the number, the logic makes sense. jp morgan is saying the bet in the market is an imperfect soft landing. they are pushing back against what's price because they don't think it will be that great. lisa: dan morris said because of the tailwinds for equities when it comes to that, the idea that when it comes to the payrolls report, if you get an upside surprise it will be bad for equities in a downside surprise will be bad for equities because they are pricing in goldilocks at a number that is in line with expectations. tom: it's backed up by the 10 year inflation. i didn't think we would get so abruptly under 2%. we backed up to 2.04%.

we are waiting to see if we get more dovish and. a huge turnaround for bonds. jonathan: the two-year at the moment is 2.61. pick about how much lower compared to october, 5.26 on the two-year. on the 10 year in october through 5% now back down to 4.26 even with the six basis point move this morning. houseware and equities are negative 0.3%. what do you do with the euro. it's 10867. forget the fed call, you've got to pair it with an ecb call. deutsche bank said based on the data now, they should be cutting next week at the ecb. doesn't mean they will but he things they should. the call last week thinks we go back to parity on the euro next year. tom: i agree you got to parse together the major banks even

bank of japan in that soap opera. it's one thing to talk economics finance and investment in another to say this is what you should do. i've got to go to your wonderful paragraph on the magnificent seven. you've got some enthusiasm but you brilliantly show that 28% of market cap and yet they only deliver 17% of earnings. why do we own them up to our eyeballs? >> that is the nature of growth. multiples are certainly higher and in the last several years, they have proven to be truly defensive as well as the bull run coming from that. it's really hard to argue yourself out of the magnificent seven at this point. all sorts of problems in terms

of active managers with hunters of them on our platform. to the extent that we are trying to diverge from the index, you have problems because they are so big in there. my remarks said you need the magnificent seven but it has not gotten anyone anywhere. focusing on that is not the place to be. tom: are you tilting into helping people with a balanced portfolio active or passive investment? >> we are believers and have a lot of research on active and passive investing that both need to be in the portfolio. that's not as fun evan answer but the bottom line is that passive investing has gotten to be so low that the average investor is difficult to outperform on a regular basis. we know there are certain style

festers that work. there are strategies that work and if you are sticking only with passive and you are in an advisory relationship, you want to outperform the fees that are attached and outperform test but we think both need to be in the portfolio. certain asset classes might be better for active than others. lisa: i'm looking at a bond market that has a mystery baked into it which is the that the fed, can they cut rates four times next year? do you lean against what some people call the euphoria of a soft landing, the goldilocks forever we heard from max kentener. it's getting so hard >> you you are wrong. it happens with a lag in you talk about it broadcast like this and the expectation is that you're talking about something happening at any moment. the fact of the matter is, we

have an increase in interest rates that haven't hit the economy yet. we have indications from proxies for short rates that it's actually tighter than the fed funds rate would suggest. i think the market has a decent chance of slowing down next year but it doesn't mean it's a massive crash. i don't advocate chasing after stocks not being balanced in the way you go to the market. we see that on our platform. look at the big winners of the year, the s&p 500 etf's and qqq, where folks are trying to make sure they don't lose out but balance in that way in engaging with the market is appropriate. i think we will see some impact. i also think inflation may not take a break. it tends to come in waves. disinflation would be great but i don't think we are able to make that call yet. jonathan: do you think we might

be confusing a composition on the economics eiffel test cycle with one of the profit cycles? we have a discussion about an economic recession when we've had the profits recession already, do you think we have? >> that's a very good point. most of this has been the case. there are questions around productivity and does ai step in and make it possible for companies to keep doing well? we seem to have turned the curve on that in this last season. next year presumably, we do well but of course, when you think about credit tightening the way it is and continuing to tighten and the bifurcation you are seeing with large-cap and small-cap growth, it's not just about where interest rates are, it's about if a fund is enough

cash to handle their operations and don't need to go to credit markets and don't need to be turning over debt in a situation where debt will be much more expensive. i think all those things come to bear. there is an argument to be made that we have had the earnings recession but that doesn't mean there is not more for corporate teams to contend with next year. if you need to go to credit markets to fund your operations for example. jonathan: thank you. the difference between the conversation about an economic recession that might be in the future against a profits recession that may be in the past. tom: it's about what you do and she alluded to the fact so many people have missed this market. we are talking about the great november and things are great into december and its double digit lending and spx is up double. and yet when i talk to people, they are not feeling to good feeling. lisa: where is the profit

recession. the one in tech is over but other sectors have been beaten up like banks. i don't know that we ever had a profit recession there. in small caps, you continue to see pain there there is the question of where does the recessed hit -- what is the recession hit? they could still the -- the markets can still go up. tom: the nasdaq 100, the top seven stocks are like 38 or 41% of the index. it's absurd. jonathan: this market is upside down sometimes. thanks on the s&p last week were up 4% up the back of a 40 basis point move at the end of the yield curve. we came into this year understanding the relationship with bonds and bank stocks with yields up good and yields down bad. lisa: i can't explain it right now. people point to the yield curve that maybe it was less inverted and people say higher yields are

good but at what pace? higher yields that two quick rates, that's typical for banks holding onto big portfolios of treasuries. jonathan: he if you're just joining us, negative 0.3% on the s&p 500. tom: on friday, the wall street journal featured the bloomberg total return index as a good measurement of bonds priced up, yield down. i went to the bloomberg total return index this morning and i looked at how far we need to go up to get back to the good times and the draw down in price, we need to go up 14% which i will say three years of coupon to get back. there is a lot of total return we need to do to get back to the good feeling we had in bonds after the losses. jonathan: we had a lot last month. tom: a nice job but there's an -- but there's a long way to go. jonathan: we will have that conversation in the next hour.

the year ahead coming up we will talk about. there might be some pushback for the move we saw in the bond market last week. lisa: i think a lot of people are starting to think about it. nobody really believes it but when you push back against it or do you write it longer. jonathan: the title of max's note is still goldilocks forever. lisa: what will make it stop? jonathan: i am with you. lisa: do you feel goldilocks? jonathan: do i feel it? from new york, this is bloomberg. ♪ at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise

across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today.

>> very important because the reality is that we had the hardest year on record and we are aiming for a little break here and clearly this has to change. when you've got big climate issues, you've got to write it without money coming in so it's one of them most important things. i picked up the impression that dealing with poverty cannot be by itself. have to do with climate and pandemics. that's why we changed our mission to include a livable planet. tom: the newly minted president of the world bank in a good conversation with bloomberg in dubai. it is a gathering of the elite

as they discuss climate change. it's front and center. your thoughts as we go to cop 28 on an annual basis? lisa: we heard about people talking about that 2% increase that people said was the point of no return. there is a greater commitment from the opec plus nation to possibly cut some of their missions and there was a question around new energies like carbon capture. curious what can evolve there but it can't offset producing admissions. tom: some of the nuances that are out there but the overwhelming theme is the united states, china and use of coal. david turk joins us now with the u.s. deputy energy secretary. thank you so much for joining

us. you do so with your service to the nation of 6, 7 and eight jobs in climate. the immovable fact is we are trying to do something about coal. my latest reading is china's really not doing something about coal. what is the departments timeline in america to diminish coal usage? >> first of all, thanks for the time and i appreciate you being -- being with you today. we've got to look across the board, is not just call but natural gas and oil and all the sources of emissions we have to have a plan to build the new clean energy. this is what we've got in the u.s., historic levels of funding through pieces of legislation through legislation and the and we are building out our clean energy future like never before. it's staggering we are doing. tom: a huge difference between a

complete climate commitment in europe to the fractured battle you fight every day in the united states. to look at coal is one example particularly with the chinese just ignoring the debate on coal from everything i read. what is the administration's path to shut down or diminish coal usage across america? >> we've seen dramatic declines in coal in our country. that's projected to continue going forward. it's because we have cheaper and better alternatives. we have solar and wind. the solar penetration in our country, the wind, other clean energy technologies, they are simply cheaper and better so the market is reacting. lisa: i'm looking at wti crude at $73 and $.46.

is this a good time to start refilling the strategic petroleum reserve? >> we have been. we will be opportunistic and take every advantage when the price at the right level to make a good deal for taxpayers. we will refill so we are refilling as much as we can and we been doing that for the last several months and at this price level, we will keep doing it. lisa: it's been about 3 million barrels per month and the energy has made this. do you plan to accelerate this as prices continue to fall? >> that is the physical limit of how much we can buy back. we've some lifetime extensions. we have four separate facilities for our strategic petroleum reserve so we will be doing at least 3 million barrels and we hope we can bring more capacity online at these price levels to buy as much as we can to refill to make sure we got that available when we needed in the future. we will buy as much back as we

possibly can but there are physical constraints given the way the caverns are set up. lisa: we've been talking about the consolidation in the shale patch with a number of companies. the latest came this morning. is this a good thing from an energy department standpoint? >> a lot of decisions that are made in the energy sector in our country are private sector decisions along those lines. we are certainly seeing that happen as well. one good thing we've certainly seen is a focus for many companies including at the climate conference on reducing methane emissions. this is something we've been after for quite some time. our epa college recently announced big news in terms of the new regulatory structure. they want to do the big biggest no-brainer on climate by reducing methane emissions a we are stepping up on that and we are seeing some companies step up on that beyond what they are

required to do in the u.s.. tom: there is real traction on that. you were an advisor fresh out of virginia two senators biden and senator conrad. you had 18 jobs and energy and you arguably have republicans and democrats having more experiments than anyone reading today. how did we get to be in opec-sized oil nation? all of a sudden, we are as big as any of those countries out there in the middle east. how did we get to this hydrocarbon success that america is today? >> thanks for the compliment. i will make sure my mom sees this. that's a nice complement. i think the short answer is we are a private sector market and unless you have federal laws or restrictions, the private sector will do what they will do and they found a lot of profit and a lot of opportunity including and

especially in shale in our country. jonathan: tom: what do you say to the critics of the biden administration that does not private sector centric? -- that it is not private sector centric? >> look at the numbers and look at where the production levels are at. we need to also focus on the emissions coming from the oil and gas that, not only in the u.s. been around the world. one disappointment of the climate conference is why we made progress on methane emissions, i don't think there is as much focus is there needs to be on oil and gas, the emissions produced when the oil and gasoline goes into the atmosphere area scope three emissions are 10 times the amount of scope one and two for many oil and gas companies. we need more focus on scope three emissions and we need a credible plan for dealing with those emissions. lisa: doesn't make it awkward for the u.s. to have a leadership position at reducing emissions given the fact that

u.s. production has increased to a record pace even if it's cut in places like saturday -- saudi arabia? >> i feel incredibly proud to be part of this historic biden administration it comes to climate change. we are seeing her emissions decrease in the u.s. 3% in 2023 despite gdp growth, healthier than just about every other country in the world. with the historic pieces of legislation, what we are doing in this administration's we are expected in these few short years of policy to double our emission reductions by 2030, over 40% reductions just from the actions from this administration. that's an impressive record and we need to do more. all countries around the world need to do more given the climate challenges we face and we are seeing it in our world today. jonathan: thank you so much, the

deputy energy secretary. democrats and republicans are the people that drive the conversation and they may disagree around the table but you have guys coming out of these academic schools that have 10 jobs in the same theme. lisa: the concept of reducing emissions and the complications along the way underscores some of the conversations in dubai. tom: there is a conversation about a jobs report and we will dive into that but it will be with michael mckee. the vix is 13.27. bloomberg surveillance. ♪

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tom: bloomberg surveillance, good morning. the vix is 13.20 eight and the spx is -16, the nasdaq down half a percent. yields are higher off of the friday festivities maybe that's a reversal, some trend into the opening to say the least. euro-swiss is like the 10 year real yield, showing strong swiss franc off of what we saw friday.

i get back to the idea of some real movement fretted a change the landscape. lisa: bny mellon thinks the ecb will cut rates before the federal reserve. you have to wonder if this national bank is looking at this and saying the strong currency has been a problem. this has been attention point so keep watching the space. tom: these are the global tension points that are out there. futures art -17. lisa: it's been an incredible week. i think of the drumbeat to factory kicking of durable goods orders today. no one cares about adp and bank ceos will testify before the senate tuesday and i hope they asked them about what they see going forward in terms of consumer spending. thursday his weekly jobless claims and that is the drumbeat, the u.s. jobs report friday

which people say could make it or break it depending on the number. people will wind up saying it's all about the fed meeting. tom: michael mckee joins us to get us started on a clearly eventful week. is the jolt survey going to affect us tomorrow? why does jolt matter? mike: it's has started a little bit less. right now, we expecting the number of job openings to have fallen a little bit. it's a week of a lot of members that will lead wall street to sort of give us these two satirical version of angels dancing on the head of a pin. every little number will give somebody some reason to think

things are going one way or another. it's been a week now since chris waller said the u.s. economy is starting to give. that sort of let the floodgates open in the bond market. when you look at the numbers we will get this week, we are expecting a better ism services number, higher adp numbers, higher jobs numbers. there are caveats to all of those but it's not like the economy is falling off a cliff. tom: let's look at governor waller who did research at the bank of st. louis and then claudia sums on the veracity of the data, is her recession queen and she is young to something that we cannot trust data this week? mike: i don't think we can't trust the data. there are a lot of reasons the data may not be quite as reliable as they were, having to

do with response rates and the way the economy has changed in terms of technology. the data will be what the fed uses. you can say the data may be wrong but then they are wrong for the fed decision-making and unless you have the right answer -- it goes back to the jack welch thing of seeing the bls manipulate the numbers and it didn't affect anything that he was incorrect. lisa: i think there has been a notable shift in terms of fed officials not pushing back against the market sentiment. it was written that jay powell was more balanced than hawkish. do we have a federal reserve that they don't care of the market rallies because they had weakness in the pipeline? mike: they do see the economy slowing down and they know we

have an issue coming up with real rates. we will see what happens. you can see that financial conditions have tightened a little bit after last week. we will see that go up and down. the biggest thing going forward will be the fed meeting -- jay powell is important but we will get the new projections. in september, they said they would cut rates in 2024. the idea that the market is pricing in rate cuts is not wrong. is just a question of timing and magnitude. that will depend on the data. tom: thank you so much. it's a busy week for michael mckee. joining us now with macro policy perspectives is constance hunter, senior advisor with decades perspective on your central bank. the basic idea is if we trust

the data. we are out of a pandemic, maybe we are beyond a pandemic, does all this data haven't asterisk next to it or do you believe it's legitimate? >> it's something that is talked about a great deal at the statistical agencies. i am on the federal statistics economic advisory committee. we have a meeting this friday and one of the agenda items is this exact subject of how is the rate compared to pre-pandemic. hackable use other data sources and have the statistical agencies involved but have the robustness in the data of the random sampling. you want to make sure you're getting an appropriate sample. tom: with your work in nyu and columbia, the world has changed. we have cell phones and many people don't have whole phones.

when we do these statistics, are we counting america or are we missing parts of america that make us look at the statistics and say they are suspect? >> are we counting enough that we can then use statistical methods to make assumptions about the economy and the population overall with the proper distributions? some of what we are talking about is the response rates of companies sending in survey data to the fed or to the fiscal agencies, some of which is the fed. we had a great deal of labor market news during the pandemic and people moved jobs so the stability of the actual individuals and companies turning in these surveys has seen a lot of tumult and that has caused some of this response to the rates. it's all important but what we do is we have an exercise where

we scrub the earnings and we look at various things like hiring intentions, firing intentions, we are triangulating all the time to see if we can corroborate the official data. in a sense, that's what the fed is doing as well. lisa: how much you see a distance between a big company and smaller companies with the anecdotes we keep hearing about? >> that's where you see the liquidity conditions take a bite is smaller companies with different access to credit. perhaps they were not able to go to the capital markets when rates were very low and see a bigger maturity wall coming or just need access to credit for operations. this is where the financial conditions take a bite is the smaller companies. when thinking about the economy overall and thinking about hiring plans, it is the smaller companies that are feeling a greater pinch and looking more

to either slowing plans or layoffs. lisa: one company said they are cutting 17% of staff earlier this morning and set economic growth has slowed dramatically and capital has become more inspected. spotify is not an exception to these realities. you may say they are making excuses that is specific to the business but do you expect this to be the beginning of a host of comments like this based on the commentary you are hearing as you scrub those earnings? >> we aren't seeing a big jump in firms saying they are planning to lay off workers. we are about 5.4% on that. that's relatively low. when you look at a company like spotify coming have to think about how these companies react during the pandemic. a lot of them over hired and really stepped up during the pandemic and now they are rightsizing their businesses for

a more trend level growth as opposed to the blockbuster growth we saw during the pen -- during the aftermath of the pandemic. lisa: do you think we could see a jobful recession that could give us an unemployment rate that doesn't rise much more but ongoing disinflation that brings us down to the fed target? >> that is precisely our base case. we are looking at 4.1% unemployment by the end of next year. inflation is very much in line with the 2% target across the measures, both cpi, pce and core pce. tom: how ex-post is the fed right now? post-pandemic, there is exposed, after the fact. >> the fed is fighting a really important perception about jay

powell and it has fallen out of the conversation last week but coming into thanksgiving, there was a strong conversation about look at these prices and look at where they are relative to the beginning of the pandemic, look at the annualized rate relative to the beginning of the pandemic versus the month over month has come down. wall street economists are looking at the month over month rate and we are translating that that relates to a 2.2% annualized rate, we're on a good path. if you are a person where you are subject to money illusion where you have somewhat rational response to price changes relative to your income, you also anchor to certain things that have gone up in price and you don't anchor in a smooth way. they have a perception issue with main street versus wall street and making sure expectations are anchored. that's an important part of their checklist now. tom: thank you so much,

constance hunter. what i learned is we will have a different view friday around 8:32 a.m. there is a lot of data coming out. lisa: it will be interesting to see how we can extrapolate the idea of a jobful recession or the id will not get layoffs because people are still hoarding labor. you also have a lot of industries influx. it's a big question and that's what i most curious about. do you see a decline in hiring but not an increase in unemployment filings? could that be what people are looking toward? tom: what's interesting to me is the regional dynamics and you see it in rent and housing where the west is pretty soft. futures deteriorated. we went from -15 down to -22 which is half of 1% down. lisa: coming up, we will be

parsing out how much we can carryover from november into december. it feels like people want to push back against the move we saw last week, particularly in the longer-term term yield space given the fact that they don't really buy that the fed will cut so aggressively next year and inflation may remain somewhat elevated. they don't really have the conviction to do so. that's the feeling in the market. tom: it will be interesting to see. i think there is a lot of fed gazing but it's about the data dependency we've talked about. i look at the data dependency as wind is the job market cracked? the optimist of the year nailed this, how lonely was he? the labor market hasn't cracked. there is no other way to describe it. lisa: even though spotify said it was cutting 17% of its staff, other people might have said -- tom: they are on their third

tranche so it's really up to 25%. lisa: some people would say this is the beginning of something broader because they casted as a larger economic story. is it that or simply they over hired? is it the tech overstaffed story? tom: possibly maybe i was wrong that the green zombie rollup was not as big as last year but maybe it will happen this year. look at alaska and hawaii and hawaiian airlines. two airlines that basically cannot survive. they are many dinosaurs. i don't know. stay with us, number surveillance. ♪ ♪

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we need to rethink... next level moments, need the next level network. [speaker continues in the background] the network with 24/7 built-in security. chip? at&t business. in the u.s. we see millions of cyber threats each year. that rate is increasing as more and more businesses move to the cloud. - so, the question is... - cyber attack! as cyber criminals expand their toolkit, we must expand as well. we need to rethink... next level moments, need the next level network. [speaker continues in the background] the network with 24/7 built-in security. chip? at&t business. >> we expect rate cuts for the next year and the data to slow and a recession by the second

quarter next year but not yet. the market is getting ahead of itself and you are seeing a massive compression which is interesting because that's not something you typically see at this point in the cycle. lisa: the real yields spread the impression and the idea that we are seeing that move in yield space. it has to do with that which has been underpinning a lot of the risk on feel throughout the market. tom: mohamed el-erian featured that earlier. he thinks he is up early but he's only getting out of bed at 10:00 a.m. because he's in england. lisa: it's like people in d.c. get up too late. tom: dr. larry and said it's a risk on feel.

lisa: there is a type potentially between hawaii and alaska airlines. hawaiian holdings are up 81%. we are talking about $13 and $.65 for the share price. we heard from alain becker earlier that when the share price falls, the low is a signal it is not a viable airline unless it ties up with somebody else. tom: she sees a regulatory distinction between this and others out there. these are smaller entities including the acquirer. lisa: she said by the logic they should approve this merger, they should approve the spirit of jetblue. i wanted to point out that i think it's interesting spotify shares are up 6.4% after

announcing 1/5 of their work force will be laid off. are there broader implications? tom: i don't know what it means other than it's about streaming and the rest. warner discoveries trying to sell a movie/music catalog and can get it done because of valuations. that's the misko -- that's the mix of apple music. is it a moneymaking business. that's the arch debate into next year? lisa: how much can you get people to pay. td securities said it seems like people have gotten ahead of themselves. they were talking about november as an incredible year ahead of macro strategy at academy securities an incredible year that may not be repeatable in the coming year. how much you lean against the moves we saw last week? >> i'm starting to lean against

treasuries a little bit. i think for 20 is a little low given the data. 10 year real yields are around 2% or the five year breakevens are back to around 2%. if last month's fed meeting is about the market doing the work for the fed, this meeting will be the work is done. rates cut ahead of themselves and i think we've seen for the last couple of weeks this move where the russell 2000 disruptive stocks have outperformed and i think that continues into year end. tom: you are so good at use of cash. bloomberg reports on the sale of the zuckerberg's of a large amount of facebook shares. it's a little bit smaller than what you have in meta-but they are out now with some news on that. i think this gets to use of cash and dividend increase.

executives may be unloading their stock after this case, 172% surge. help me with where we are in use of cash if we see people like the zuckerberg selling shares? >> i think we have had this phenomenal run with the magnificent seven and the leadership has been narrow. since november, nvidia earnings were telling as well. their earnings were probably fine and the stock went down but markets rallied. the disruptive stocks are doing well and spotify is up today for various reasons. i think you will see regional banks continue to do well and commercial real estate and all the small caps, things that people have left behind because people are wondering where to put cash. those look interesting and have some momentum coming into year end. tom: let's bring the two together. will we see bond issuance to

support equity ownership? whether is the miracle of the supper burgs and facebook with meta up, it's almost a jumble into next year. >> yeah, i think we will see more bond issuance and we've been talking to some of our corporate issuers and recommend they get ahead of this. you can save some money on 10 years and credit spreads have done well. issue some bonds and support your equity. i think we could see some m&a activity start picking up. you've had the stability reason be long enough i think you get some interesting transactions coming into the new year. tom: the phrase from 12 months ago, it's almost a toxic brew of risk on is where we are. lisa: that's the reason why a lot of people might say it's going to fast but it's hard to lean against.

mark zuckerberg is selling meta-stock for the first time in two years. this comes after the incredible run up and you are seeing the shares in premarket trading down about 1.5%. what do you lean against? you think treasury rates of gone too far. many people are starting to pick that up which is maybe why you see a retracement today. on the equity side, are you hearing anyone lean against some of the tech names that have gone incredibly far so far this year? >> i'm not sure of many people are leaning against it but it's a fairly crowded trade but i would be comfortable being short qqq versus long on the russell 2000. i think trades like that are well-positioned for the next few weeks and i think we want to turn bearish on this market. maybe we get to 4650 on the s&p 500 maybe the russell 2000 can run another 5% but if the economic data comes in as weak as it needs to be to support the

10 year, i think equities will roll over a little bit but that's probably not this week or next week, closer to early january. lisa: how would the russell 2000 outperformed the s&p and that scenario? when you think about weaker economic growth, it supports the bond call. why then would the smaller companies do the best? >> people have been avoiding those stocks all year long and crowded into the other stocks so it will be about what's crowded. if you get nervous about the economy, people will say we need to cut our risk. if you don't own the russell 2000, you will's you -- you can't sell the russell 2000. that's the crowded trade and that's where people piled into two if we get nervous about the economy, that will sell off harder because that's where people are overweight. tom: where is 604012 months from now? -- 64 -- 60/40 12 months from

now? >> that keeps going. i think you want to be probably underweight treasuries right now on that 60/40 and more toward the front end because the next move should be slightly higher. you still want to play around and you want these balanced portfolios and you want to see what we can do outside. for the first time in multiple years, i like chinese stocks. long-term, i don't want to invest in china but for a trade, they are fair. tom: thank you for your comments. nobody is talking about use of cash. 12 months ago it was religion and 24 months ago it was gospel. this use of cash in the different ways it can move, what ceos do and what principal owners do and what companies decide to do with the cash that's out there i think is underplayed right now. lisa: are you talking about

corporate investment or individuals? tom: both individuals. i'm fascinated to see if the nine gibson seven -- if the magnificent 72 bond issuance. there are the zuckerberg stepping in after the stock is up 172%? that's out of the piggy bank. lisa: does he see something we don't? maybe you are seeing meta shares down 2%. perhaps people sensing that he things it's a good time to cash out. what would spur a significant move? tom: we will have more on that so look to bloomberg technology for further discussion of this news on the zuckerberg's selling meta stock. friday, jobs day, this is bloomberg, good morning. ♪

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jonathan: live from new york city this morning, the countdown to the open starts right now >> everything you need to get set for the start of u.s. trading, this is bloomberg, the open with jonathan ferro. ♪ jonathan: live from new york, coming up, equity markets on a five week winning streak as bond markets steamroll jerome powell's caution. we